SECURITIES AND EXCHANGE COMMISSION
Form S-1
Universal Technical Institute, Inc.
8200
86-0226984
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(IRS Employer
Identification Number)
10851 North Black Canyon Road, Suite 600
Robert D. Hartman
Copies to:
Frank M. Placenti, Esq.
Chad A. Freed, Esq. Bryan Cave LLP Two North Central Avenue, Suite 2200 Phoenix, Arizona 85004 Telephone: (602) 364-7000 Facsimile: (602) 364-7070 |
William J. Whelan III, Esq.
Cravath, Swaine & Moore LLP Worldwide Plaza 825 Eighth Avenue New York, New York 10019 Telephone: (212) 474-1000 Facsimile: (212) 474-3700 |
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If delivery of the prospectus is expected to be
made pursuant to Rule 434, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
The registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until the registrant shall file a further
amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or
until the Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant
to such Section 8(a), may determine.
SUBJECT TO COMPLETION,
DATED OCTOBER 3, 2003
Shares
Common Stock
Prior
to this offering, there has been no public market for our common
stock. The initial public offering price of our common stock is
expected to be between
$ per
share and
$ per
share. We intend to apply to list our common stock on the New
York Stock Exchange under the symbol UTI.
We
are
selling shares
of common stock and the selling stockholders are
selling shares
of common stock. We will not receive any of the proceeds from
the shares of common stock sold by the selling stockholders.
The
underwriters have an option to purchase a maximum
of additional
shares from the selling stockholders to cover over-allotments of
shares.
Investing
in our common stock involves risks. See Risk Factors
beginning on page 9.
Delivery
of the shares of common stock will be made on or
about ,
2003.
Neither
the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Credit Suisse First Boston
Banc of America Securities LLC
The date of this prospectus
is ,
2003.
TABLE OF CONTENTS
You should rely only on the information
contained in this document or to which we have referred you. We
have not authorized anyone to provide you with information that
is different. This document may only be used where it is legal
to sell these securities. The information in this document may
only be accurate on the date of this document.
Dealer Prospectus Delivery
Obligation
Until ,
2003 (25 days after the commencement of the offering), all
dealers that effect transactions in these securities, whether or
not participating in the offering, may be required to deliver a
prospectus. This is in addition to the dealers obligation
to deliver a prospectus when acting as an underwriter and with
respect to unsold allotments or subscriptions.
Proposed Maximum
Title of Each Class of
Aggregate Offering
Amount of
Securities to be Registered
Price(1)(2)
Registration Fee
Common Stock, $0.0001 par value per share
$
125,000,000
$
10,113
(1)
Estimated solely for the purpose of calculating
the registration fee pursuant to Rule 457(o).
(2)
Including shares of common stock which may be
purchased by the underwriters to cover over-allotments, if any.
The information in this
prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and we are not
soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
Underwriting
Proceeds to
Price to
Discounts and
Proceeds
Selling
Public
Commissions
to UTI
Stockholders
$
$
$
$
$
$
$
$
Jefferies & Company, Inc.
Thomas Weisel Partners LLC
SunTrust Robinson Humphrey
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101
101
F-1
PROSPECTUS SUMMARY
This summary highlights information contained
elsewhere in this prospectus. This summary does not contain all
of the information that you should consider before investing in
our common stock. You should read the entire prospectus
carefully before making an investment decision, especially the
risks of investing in our common stock discussed under
Risk Factors. Unless the context otherwise requires,
the terms we, us, and our
refer to Universal Technical Institute, Inc., our predecessor
entities and our subsidiaries. Unless otherwise indicated,
industry data are derived from publicly available sources, which
we have not independently verified.
Universal Technical Institute, Inc.
Overview of Our Business
We are a leading provider of post-secondary
education for students seeking careers as professional
automotive, diesel, collision repair, motorcycle and marine
technicians. We offer undergraduate degree, diploma and
certificate programs at seven campuses across the United States,
and manufacturer-sponsored advanced programs at
22 dedicated training centers. For the nine-month period
ended June 30, 2003, our net revenues were
$141.6 million, a 34.3% increase over the nine-month period
ended June 30, 2002, and our average undergraduate
enrollments were 10,228 full-time students, a 25.3% increase
over the nine-month period ended June 30, 2002.
We work closely with leading original equipment
manufacturers (OEMs) in the automotive, diesel, motorcycle and
marine industries to understand their needs for qualified
service professionals. By staying current on the equipment and
technology employed by OEMs, we are able to continuously refine
and expand our programs and curricula. We believe that our
industry-oriented educational philosophy and national presence
have enabled us to develop valuable strategic relationships that
provide us with a significant competitive strength and support
our market leadership. We are a primary provider of
manufacturer-branded technician training programs for Audi of
America; American Honda Motor Co., Inc.; American Suzuki
Motor Corp.; BMW of North America, LLC; Ford Motor Co.;
Harley-Davidson Motor Co.; International Truck and Engine
Corp.; Jaguar Cars, Inc.; Kawasaki Motors Corp., U.S.A.;
Mercedes-Benz USA, LLC; Mercury Marine; Porsche Cars of
North America, Inc.; Volkswagen of America, Inc.; Volvo Car
Corp.; and Yamaha Motor Corp., USA.
Through our campus-based undergraduate programs,
we offer specialized technical education under the banner of
several well-known brands, including Universal Technical
Institute (UTI), Motorcycle Mechanics Institute and Marine
Mechanics Institute (collectively, MMI) and NASCAR Technical
Institute (NTI). Our undergraduate programs are designed to be
completed in 12 to 18 months and culminate in an
associates degree, diploma or certificate, depending on
the program and campus. Tuition ranges from approximately
$17,000 to $31,000 per program, primarily depending on the
nature and length of the program. All of our undergraduate
programs are accredited and eligible for federal Title IV
financial aid. Upon completion of one of our automotive or
diesel undergraduate programs, qualifying students have the
opportunity to enroll in one of the manufacturer-sponsored
advanced training programs that we offer. These training
programs are manufacturer-specific and are offered in a facility
in which the OEM supplies the cars, equipment, specialty tools
and curriculum. Tuition for these advanced training programs is
paid by each participating OEM in return for a commitment by the
student to work for a dealer of that OEM upon graduation. We
also provide continuing education and retraining to experienced
technicians at our customers sites or in our training
facilities.
We have provided technical education programs for
over 35 years. Our management team is led by Robert
Hartman, John White, Kimberly McWaters and Jennifer Haslip. They
have a combined 75 years of operating experience with our
company.
1
Market Opportunity
We believe that the market for qualified service
technicians is large, growing and increasingly underserved. In
2000, the U.S. Department of Labor estimated that there
were approximately 840,000 working automotive technicians in the
United States, and that this number was expected to increase by
18% from 2000 to 2010. These estimates also indicate that the
other industries we serve have similar growth trends.
Furthermore, the National Auto Dealers Association cites a
current shortage of approximately 60,000 automotive technicians.
This increasing need for technicians is due to a variety of
factors, including rapid technological advancement in the
industries our graduates enter, a continued increase in the
number of automobiles, trucks, motorcycles and boats in service,
as well as an aging workforce that generally requires retraining
to keep up with technological advancements and maintain its
technical competency. As a result of these factors, there will
be approximately 55,000 new job openings each year from
2000 to 2010 in the fields we serve, according to data collected
by the U.S. Department of Labor. In addition to the
increase in demand for newly qualified technicians,
manufacturers are increasingly outsourcing their training
functions, seeking preferred education partners that can offer
high quality curricula and that have a national presence to meet
the employment and advanced retraining needs of their national
dealer networks.
Competitive Strengths
We believe that we are well positioned to
capitalize on these market opportunities as a result of the
following competitive strengths:
2
Growth Strategy
We have a long history of providing high quality
educational programs to our students, helping many of them to
secure attractive positions in their chosen fields of specialty.
Our goal is to maintain and strengthen our role as a leading
provider of technical education services. We intend to pursue
the following growth strategies to attain this goal:
3
Our principal executive offices are located at
10851 North Black Canyon Road, Suite 600, Phoenix,
Arizona 85029, and our telephone number is
(602) 216-7600. We currently plan to move to new executive
offices in October 2003, at which time our new address will be
20410 North 19th Avenue, Suite 200, Phoenix,
Arizona 85027 and our new telephone number will be
(623) 445-9500.
4
Industry-Oriented Business
Model.
We
work extensively with leading automotive, diesel, collision
repair, motorcycle and marine equipment manufacturers, dealers
and suppliers to determine the present and future needs of the
end-markets our graduates enter and to tailor our educational
programs to best serve those constituents. As a result, we
believe that our graduates have the opportunity to work for the
most desirable employers in their chosen fields due to the
quality of their education and their commitment to careers as
professional service technicians. In turn, we believe that the
higher quality employment opportunities available to our
graduates drive increased enrollments at our campuses and
training centers.
Unique Manufacturer-Based Programs.
We work closely with OEMs to
develop brand-specific education programs. Participating
manufacturers typically assist us in developing course content
and curricula, and provide us with equipment, specialty tools
and parts at no charge. In addition, the manufacturer pays the
full tuition of each student enrolled in our advanced training
programs. Our collaboration with OEMs enables us to provide
highly specialized education to our students, resulting in
improved employment opportunities and the potential for higher
wages for graduates. We are a primary provider of such programs
for Audi of America; American Honda Motor Co., Inc.; American
Suzuki Motor Corp.; BMW of North America, LLC; Ford
Motor Co.; Harley-Davidson Motor Co.; International Truck
and Engine Corp.; Jaguar Cars, Inc.; Kawasaki Motors Corp.,
U.S.A.; Mercedes-Benz USA, LLC; Mercury Marine; Porsche
Cars of North America, Inc.; Volkswagen of America, Inc.; Volvo
Car Corp.; and Yamaha Motor Corp., USA.
Strategic Relationships.
In addition to our
curriculum-based relationships with OEMs, we develop and
maintain a variety of complementary relationships with OEMs,
parts and tools suppliers, enthusiast organizations and other
industry participants. Currently, these relationships include
BEL-RAY Company, Inc., Dana Corporation, Dodge Motorsports,
DuPont Automotive Finishes,
Hot Rod
Magazine, National
Association for Stock Car Auto Racing (NASCAR) and Snap-on
Industrial, among others. These relationships provide us with a
variety of strategic and financial benefits, including equipment
sponsorship, new product support, licensing and branding
opportunities, and selected financial sponsorship for our
campuses and students. We believe that these relationships
improve the quality of our educational programs, reduce our
investment cost of equipping classrooms, enable us to expand the
scope of our programs, strengthen our graduate placements and
enhance our overall image within the industry.
National Presence.
Since our founding in 1965, we
have grown our business and expanded our campus platform to
establish a national presence. Through the UTI, MMI and NTI
brands, our undergraduate campuses and advanced training centers
currently provide us with local representation covering several
geographic regions across the United States. Supporting our
campuses, we maintain a national recruiting network of over
190 education representatives who are able to identify,
advise and enroll students from all 50 states.
Consequently, unlike competitors with single- or regional-campus
models, we are able to effectively reach a national pool of
potential students and to provide qualified professionals to our
various end-markets on a broad geographic basis.
Superior Recruiting Strategy.
We employ an integrated marketing
and recruitment strategy that we believe enables us to
effectively target and recruit both traditional post-secondary
students and working adults. Our field-based education
representatives provide a local presence to prospective students
at high schools across the country. Additionally, our
campus-based education representatives respond to media-driven
inquiries from adults across the United States who are
interested in returning to school. We support our education
representatives recruiting efforts with a national
multimedia marketing strategy that includes television,
enthusiast magazines, direct mail and the Internet.
Open New
Campuses.
We
continue to identify new markets that we believe will complement
our established campus network and support further growth. We
believe that there are a number of local markets, in regions
where we do not currently have a campus, with both pools of
interested prospective students and career opportunities for
graduates. By establishing campuses in these locations, we
believe that we will be able to supply skilled technicians to
local employers, as well as provide educational opportunities
for students otherwise unwilling to relocate to acquire a
post-secondary education. Additional locations will also provide
us with an opportunity to expand our relationships with OEMs by
providing a graduate population with greater geographic reach.
Increase Recruitment and Marketing.
We plan to hire additional
education representatives to enhance our recruitment coverage in
territories where we are currently active in recruiting students
and to expand into new regions and cities. We estimate that in
our 2003 fiscal year, our field-based education representatives
made approximately 9,000 high school visits and
approximately 360,000 student contacts. In addition, during
the same period, we estimate that our campus-based education
representatives addressed approximately 150,000 inquiries from
prospective students. We believe that additional education
representatives, combined with increased marketing spending,
will increase our national presence and enable us to better
target the prospective student pool from which we recruit.
Expand Program
Offerings.
As the industries we serve become more
technologically advanced, the requisite training for qualified
technicians continues to increase. We continually work with our
industry customers to expand and adapt our course offerings to
meet their needs for skilled technicians. We also intend to
increase the number of specialized or manufacturer-specific
electives we offer in our undergraduate programs, such as our
Hot Rod U
high performance series and our
Ford-certified elective.
Seek Additional Strategic
Relationships.
We actively seek to develop new
strategic relationships with leading OEMs, dealership networks
and other industry participants. Securing such relationships
will enable us to further drive undergraduate enrollment growth,
diversify funding sources and expand the scope and increase the
number of the programs we offer. We believe that these
relationships are also valuable to our industry partners since
our programs provide them with a
steady supply of highly trained service
technicians and are a cost-effective alternative to in-house
training. Therefore, we believe that these relationships will
also provide us additional incremental revenue opportunities
from retraining OEMs existing employees.
Consider Strategic Acquisitions.
We may selectively consider
acquisition opportunities that, among other factors, would
complement our program offerings, benefit from our expertise and
scale in marketing and administration and could be integrated
into our existing operations.
The Offering
Unless specifically indicated otherwise or unless
the context otherwise requires, the information in this
prospectus (i) gives effect to
a -for-one
stock split of our common stock which will occur immediately
prior to the closing of the offering; (ii) assumes the
exchange, at the initial public offering price set forth on the
cover of the prospectus,
of shares
of our series A preferred
stock, shares
of our series B preferred stock
and shares
of our series C preferred stock into an aggregate
of shares
of our common stock, which exchange is expected to occur
immediately prior to the consummation of the offering;
(iii) assumes the redemption of all
remaining outstanding
shares of our series A preferred stock, series B
preferred stock and series C preferred stock, which
redemption will occur concurrently with the consummation of the
offering; (iv) gives effect to the automatic conversion of
all outstanding shares of our series D preferred stock
into shares
of common stock, which conversion will occur concurrently with
the consummation of the offering in
5
The number of shares of common stock that will be
outstanding after the offering is based on the number of shares
of common stock outstanding as of September 30, 2003. This
number does not include:
6
Common stock offered
shares
by us
shares
by the selling stockholders
(or shares
if the underwriters exercise the over-allotment option in full)
Total offering
shares
(or shares
if the underwriters exercise the over-allotment option in full)
Common stock to be outstanding after the offering
shares
New York Stock Exchange symbol
UTI
Use of proceeds
We intend to use the net proceeds from the sale
of shares by us:
to repay all outstanding indebtedness
under our term A and B loan facilities, which was
approximately $31.6 million as of September 30, 2003;
to redeem, for approximately
$ million,
the portion of our outstanding series A preferred stock,
series B preferred stock and series C preferred stock
that will not be exchanged by their holders into shares of our
common stock immediately prior to the consummation of this
offering;
to pay all accrued but unpaid
dividends on our series A preferred stock, series B
preferred stock, series C preferred stock and series D
preferred stock, which were approximately $11.6 million as
of September 30, 2003; and
for working capital and general
corporate purposes, which may include expanding our marketing
and recruiting efforts, opening new campuses, developing new
courses and programs and potential acquisitions.
We will not receive any of the proceeds from the
sale of shares of our common stock by the selling stockholders.
Dividend Policy
Following the consummation of this offering, we
do not expect to pay any dividends on our common stock for the
foreseeable future.
Risk Factors
You should carefully read and consider the
information set forth under Risk Factors and all
other information set forth in this prospectus before investing
in our common stock.
shares
of common stock issuable upon the exercise of stock options
outstanding as of September 30, 2003 pursuant to the
management 2002 stock option plan;
an aggregate
of shares
of common stock reserved for future issuance under our 2003
stock incentive plan; and
an aggregate
of shares
of common stock reserved for future issuance under our 2003
employee stock purchase plan.
Summary Financial and Other Data
The following table sets forth our summary
historical consolidated financial and operating data as of the
dates and for the periods indicated. The summary historical
consolidated statement of operations data for each of the years
in the three-year period ended September 30, 2002 have been
derived from our audited consolidated financial statements,
which are included elsewhere in this prospectus. The interim
summary historical consolidated statement of operations data for
the nine months ended June 30, 2002 and 2003 and the
summary interim historical consolidated balance sheet data as of
June 30, 2003 have been derived from our unaudited interim
consolidated financial statements included elsewhere in this
prospectus. In our opinion, the unaudited interim consolidated
financial statements have been prepared on the same basis as our
audited consolidated financial statements and include all
adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of the results for the unaudited
interim periods. The results for any interim period are not
necessarily indicative of the results that may be expected for a
full fiscal year.
The following table also sets forth summary
unaudited pro forma consolidated balance sheet data, which
give effect to the transactions described in footnotes 1 and 2
of the following table. The unaudited pro forma consolidated
balance sheet data are presented for information purposes only
and do not purport to represent what our financial position
actually would have been had the transactions so described
occurred on the dates indicated or to project our financial
position as of any future date.
You should read the following summary financial
and other data in conjunction with Selected Historical
Financial Data and Managements Discussion and
Analysis of Financial Condition and Results of Operations
and our consolidated financial statements included elsewhere in
this prospectus.
7
8
Nine Months Ended
Year Ended September 30,
June 30,
2000
2001
2002
2002
2003
(unaudited)
(dollars in thousands, except per share data)
$
92,079
$
109,493
$
144,372
$
105,428
$
141,642
48,523
59,554
70,813
51,710
66,551
33,893
38,332
51,541
36,607
48,198
82,416
97,886
122,354
88,317
114,749
9,663
11,607
22,018
17,111
26,893
11,877
10,674
6,254
5,349
2,809
847
970
(2,214
)
933
14,917
10,792
24,084
(431
)
820
5,228
3,777
8,944
(1,783
)
113
9,689
7,015
15,140
(34,437
)
(8,536
)
(1,316
)
(36,220
)
(9,739
)
9,689
7,015
15,140
(1,166
)
(1,166
)
(2,872
)
(1,729
)
(3,434
)
$
(37,386
)
$
(10,905
)
$
6,817
$
5,286
$
11,706
Year Ended September 30,
Nine Months Ended June 30,
2000
2001
2002
2002
2003
(unaudited)
(dollars in thousands, except per share data)
$
(955.44
)
$
(341.99
)
$
2,212.96
$
1,715.86
$
3,790.86
$
(955.44
)
$
(341.99
)
$
1,901.48
$
1,488.39
$
2,532.07
3,088
3,081
3,081
3,081
3,088
3,088
3,081
4,654
4,286
5,737
$
3,887
$
4,533
$
4,951
$
3,167
$
4,476
6
6
7
6
7
5,866
6,710
8,277
8,163
10,228
As of June 30, 2003
Pro Forma as
Actual
Pro Forma
(1)
Adjusted
(2)
(unaudited)
(dollars in thousands)
$
31,215
$
4,086
47,911
20,782
(2,585
)
(29,313
)
95,442
68,313
58,765
32,004
67,813
71,486
(83,137
)
(87,390
)
(1)
The pro forma data give effect to (i) the
repayment in July and August 2003 of $15.8 million of our
term loans under our senior credit facilities, (ii) the
retirement in August 2003, at a 10% discount, of a subordinated
convertible promissory note having a principal amount of
approximately $7.0 million, (iii) the repayment in
August 2003 of a promissory note having a principal amount of
approximately $4.0 million that was issued to a related
party and the subsequent remittance to us by that party of
approximately $4.0 million in satisfaction of the principal
amount of, and accrued interest on, a subscription note
receivable and (iv) the payment in September 2003 of a
$5.0 million dividend to our common stockholders and
holders of our series D preferred stock. These payments
were made using available cash on hand.
(2)
The pro forma as adjusted data adjust the pro
forma data to reflect (i) our sale
of shares
of our common stock in this offering (at the initial public
offering price of
$ per
share), (ii) the application of the net proceeds of this
offering as described under Use of Proceeds,
(iii) the exchange at the initial public offering price set
forth on the cover of this prospectus
of shares
of our series A preferred
stock, shares
of our series B preferred stock
and shares
of our series C preferred stock, which is expected to occur
prior to the consummation of the offering, and (iv) the
automatic conversion of all outstanding shares of our series D
preferred stock into shares of common stock, which will occur
concurrently with the consummation of the offering in accordance
with the provisions of our certificate of incorporation. See
Description of Capital Stock.
(3)
Working capital is defined as current assets less
current liabilities.
RISK FACTORS
Investing in our common stock involves risks.
Before making an investment in our common stock, you should
carefully consider the following risks, as well as the other
information contained in this prospectus, including our
consolidated financial statements and the related notes and
Managements Discussion and Analysis of Financial
Condition and Results of Operations. Additional risks and
uncertainties not currently known to us, or risks that we
currently deem immaterial, may impair our business operations.
Any of the risk factors described below could significantly and
adversely affect our business, prospects, financial condition
and results of operations. As a result, the trading price of our
common stock could decline and you may lose all or part of your
investment.
Risks Related to Our Industry
Failure of our schools to comply with the
extensive regulatory requirements for school operations could
result in financial penalties, restrictions on our operations
and loss of external financial aid funding.
In our 2002 fiscal year, we derived approximately
65% of our net revenues from federal student financial aid
programs, referred to in this prospectus as Title IV Programs,
administered by the U.S. Department of Education, or ED. To
participate in Title IV Programs, a school must receive and
maintain authorization by the appropriate state education
agencies, be accredited by an accrediting commission recognized
by ED and be certified as an eligible institution by ED. As a
result, our schools are subject to extensive regulation by the
state education agencies, our accrediting commission and ED.
These regulatory requirements cover the vast majority of our
operations, including our educational programs, facilities,
instructional and administrative staff, administrative
procedures, marketing, recruiting, financial operations and
financial condition. These regulatory requirements also affect
our ability to acquire or open additional schools, add new, or
expand our existing, educational programs and change our
corporate structure and ownership. The state education agencies,
our accrediting commission and ED periodically revise their
requirements and modify their interpretations of existing
requirements.
If our schools failed to comply with any of these
regulatory requirements, our regulatory agencies could impose
monetary penalties, place limitations on our schools
operations, terminate our schools ability to grant
degrees, diplomas and certificates, revoke our schools
accreditation or terminate their eligibility to receive Title IV
Program funds, each of which could adversely affect our
financial condition and results of operations and impose
significant operating restrictions upon us. In addition, the
loss by any of our institutions of its accreditation necessary
for Title IV Program eligibility, or the cancellation of
any such institutions ability to participate in
Title IV Programs, in each case that is not cured within a
specified period, constitutes an event of default under our
senior credit facility agreement. We cannot predict with
certainty how all of these regulatory requirements will be
applied or whether each of our schools will be able to comply
with all of the requirements in the future. We have described
some of the most significant regulatory risks that apply to our
schools in the following paragraphs.
Congress may change the law or reduce
funding for Title IV Programs, which could reduce our student
population, net revenues or profit margin.
Congress periodically revises the Higher
Education Act of 1965, as amended, and other laws governing
Title IV Programs and annually determines the funding level for
each Title IV Program. During 2003-2004, Congress is expected to
devote significant attention to reauthorizing the Higher
Education Act, which will likely result in numerous changes to
the law. Any action by Congress that significantly reduces
funding for Title IV Programs or the ability of our schools or
students to receive funding through these programs could reduce
our student population and net revenues. Congressional action
may also require us to modify our practices in ways that could
result in increased administrative costs and decreased profit
margin.
9
If our schools do not maintain their state
authorizations, they may not operate or participate in
Title IV Programs.
A school that grants degrees, diplomas or
certificates must be authorized by the relevant education agency
of the state in which it is located. Requirements for
authorization vary substantially among states. State
authorization is also required for students to be eligible for
funding under Title IV Programs. Loss of state authorization by
any of our schools from the education agency of the state in
which the school is located would end that schools
eligibility to participate in Title IV Programs and could cause
us to close the school, which could adversely affect our results
of operations and reduce our cash flows.
If our schools do not maintain their
accreditation, they may not participate in Title IV
Programs.
A school must be accredited by an accrediting
commission recognized by ED in order to participate in
Title IV Programs. Loss of accreditation by any of our
schools would end that schools participation in
Title IV Programs and could cause us to close the school,
which could adversely affect our results of operations or
financial condition and reduce our cash flows.
We are subject to sanctions if we fail to
correctly calculate and timely return Title IV Program funds for
students who withdraw before completing their educational
program.
A school participating in Title IV Programs
must correctly calculate the amount of unearned Title IV
Program funds that has been disbursed to students who withdraw
from their educational programs before completing them and must
return those unearned funds in a timely manner, generally within
30 days of the date the school determines that the student
has withdrawn. If the unearned funds are not properly calculated
and timely returned, we may have to post a letter of credit in
favor of ED or be otherwise sanctioned by ED, which could
increase our cost of regulatory compliance and adversely affect
our results of operations. With respect to our 2002 fiscal year,
two of our institutions made late returns of Title IV Program
funds in excess of EDs prescribed threshold but were not
required to post letters of credit because we had already posted
a letter of credit for a greater amount as a result of our
failure to satisfy EDs financial responsibility formula.
Our schools may lose eligibility to
participate in Title IV Programs if the percentage of their
revenue derived from those programs is too high, which could
reduce our student population, net revenues and results of
operations.
A for-profit institution loses its eligibility to
participate in Title IV Programs if, on a cash accounting
basis, it derives more than 90% of its revenue from those
programs in any fiscal year. In our 2002 fiscal year, under the
regulatory formula prescribed by ED, none of our institutions
derived more than approximately 81% of its revenues from
Title IV Programs. If any of our institutions loses
eligibility to participate in Title IV Programs, that loss
could reduce our student population and adversely affect our net
revenues and results of operations.
Our schools may lose eligibility to
participate in Title IV Programs if their student loan default
rates are too high, which could reduce our student population,
net revenues and results of operations.
An institution may lose its eligibility to
participate in some or all Title IV Programs if its former
students default on the repayment of their federal student loans
in excess of specified levels. Based upon the most recent
official student loan default rates published by ED, none of our
institutions has student loan default rates that exceed the
specified levels. If any of our institutions loses eligibility
to participate in Title IV Programs because of high student
loan default rates, that loss could reduce our student
population and adversely affect our net revenues and results of
operations.
10
If we or our schools do not meet the
financial responsibility standards prescribed by ED, we may be
required to post letters of credit or our eligibility to
participate in Title IV Programs could be terminated or limited,
which could reduce our student population and net revenues and
adversely affect our results of operations.
To participate in Title IV Programs, an
institution must satisfy specific measures of financial
responsibility prescribed by ED or post a letter of credit in
favor of ED and possibly accept other conditions on its
participation in Title IV Programs. Currently, due to our
failure as a parent company to satisfy EDs financial
responsibility formula, we have posted a letter of credit in the
amount of $7.6 million for all of our schools. In addition,
all of our schools are provisionally certified and are required
to credit their students accounts before requesting and
receiving Title IV Program funds on behalf of their
students, and certain of our schools are required to comply with
additional reporting requirements. Based on our financial
statements for our 2002 fiscal year, we also failed to satisfy
EDs financial responsibility formula for that year. As a
result, when the existing letter of credit expires in November
2003, we expect ED to require us to renew that letter of credit,
at a higher amount, representing 10% of Title IV Program
funds received by our institutions in our 2002 fiscal year. We
anticipate that we will have to increase the amount of that
letter of credit by approximately $1.8 million with respect
to our 2002 fiscal year. We may be required to increase the
amount of the existing letter of credit or post additional
letters of credit in the future. Our obligation to post one or
more letters of credit, our inability to obtain a required
letter of credit or other limitations on our participation in
Title IV Programs could increase our costs of regulatory
compliance and reduce our student population and net revenues
and adversely affect our results of operations.
We are subject to sanctions if we pay
impermissible commissions, bonuses or other incentive payments
to individuals involved in certain recruiting, admissions or
financial aid activities.
A school participating in Title IV Programs may
not provide any commission, bonus or other incentive payment
based on success in enrolling students or securing financial aid
to any person involved in any student recruiting or admission
activities or in making decisions regarding the awarding of
Title IV Program funds. The law and regulations governing
this requirement do not establish clear criteria for compliance
in all circumstances. If we violate this law, we could be fined
or otherwise sanctioned by ED.
If regulators do not approve a school
acquisition, the acquired school would not be permitted to
participate in Title IV Programs, which could impair our ability
to operate the acquired school as planned or to realize the
anticipated benefits from the acquisition of that
school.
If we acquire a school, we must obtain approval
from ED and applicable state education agencies and accrediting
commissions in order for the school to be able to continue
operating and participating in Title IV Programs. An
acquisition can result in the temporary suspension of the
acquired schools participation in Title IV Programs
unless we submit a timely and materially complete application
for recertification to ED and ED issues a temporary
certification document. If we were unable to timely re-establish
the state authorization, accreditation or ED certification of
the acquired school, our ability to operate the acquired school
as planned or to realize the anticipated benefits from the
acquisition of that school could be impaired.
If regulators do not approve or delay their
approval of transactions involving a change of control of our
company or any of our schools, our ability to participate in
Title IV Programs may be impaired.
If we or any of our schools experience a change
of control under the standards of applicable state education
agencies, our accrediting commission or ED, we or the affected
schools must seek the approval of the relevant regulatory
agencies. Transactions or events that constitute a change of
control include significant acquisitions or dispositions of our
common stock or significant changes in the composition of our
board of directors. Some of these transactions or events may be
beyond our control. Our failure to obtain, or a delay in
receiving, approval of any change of control from ED, our
accrediting commission or any state in which our schools are
located could impair our ability to participate in Title IV
Programs and
11
We have received confirmation from our
accrediting commission that this offering will not be a change
of control under its standards. We have sought a determination
by ED that this offering will not be considered a change of
control under its regulations. For some of the states in which
our schools operate (including Illinois and Texas), the offering
will be considered a change of control. In each of those states,
the affected school is required to obtain the reaffirmation of
the schools state authorization by the relevant state
education agencies. If any of our schools fails to obtain such
reaffirmation, our results of operations will be adversely
affected.
Budget constraints in states that provide
state financial aid to our students could reduce the amount of
such financial aid that is available to our students, which
could reduce our student population and adversely affect our
results of operations.
A significant number of states are facing budget
constraints that are causing them to reduce state appropriations
in a number of areas. Those states include California, which is
one of the states that provide financial aid to our students. We
expect that California and other states may decide to reduce the
amount of state financial aid that they provide to students, but
we cannot predict how significant any of these reductions will
be or how long they will last. If the level of state funding for
our students decreases and our students are not able to secure
alternative sources of funding, our student population could be
reduced and our results of operations could be adversely
affected.
Regulatory agencies or third parties may
conduct compliance reviews, bring claims or initiate litigation
against us.
Because we operate in a highly regulated
industry, we are subject to compliance reviews and claims of
non-compliance and lawsuits by government agencies and third
parties. If the results of these reviews or proceedings are
unfavorable to us, or if we are unable to defend successfully
against third-party lawsuits or claims, we may be required to
pay money damages or be subject to fines, limitations, loss of
federal funding, injunctions or other penalties. Even if we
adequately address issues raised by an agency review or
successfully defend a third-party lawsuit or claim, we may have
to divert significant financial and management resources from
our ongoing business operations to address issues raised by
those reviews or defend those lawsuits or claims, which could
materially and adversely affect our results of operations.
A high percentage of the Title IV
student loans our students receive are made by one lender and
guaranteed by one guaranty agency.
In our 2002 fiscal year, one lender, Sallie Mae,
provided more than 95% of all the federally guaranteed
Title IV student loans that our students received, and one
student loan guaranty agency, EdFund, guaranteed more
than 95% of those loans made to our students. Sallie Mae is
one of the largest lenders of federally guaranteed Title IV
student loans in the United States in terms of dollar
volume, and EdFund is one of the largest guaranty agencies in
the United States. If loans by Sallie Mae or guarantees by
EdFund were significantly reduced or no longer available and we
were not able to timely identify other lenders and guarantors to
make or guarantee Title IV Program loans for our students,
there could be a delay in our students receipt of their
loan funds or in our tuition collection, which would reduce our
student population and adversely affect our results of
operations.
12
Budget constraints in Illinois or other
states may affect our ability to obtain necessary authorizations
or approvals from those states to conduct or change our
operations.
In August 2003, due to state budget constraints,
the State of Illinois eliminated the positions of all employees
in the office of the Illinois state education agency that
authorizes and oversees private business and technical schools,
including our school in Illinois, and that office has ceased to
function. Our school in Illinois is currently authorized by the
State of Illinois to operate through June 2004. It is not clear
how the elimination of the state employee positions in Illinois
will affect the ongoing operations of our school in Illinois,
including the implementation of any changes in operations for
which the school is required to obtain approval of the Illinois
state education agency, such as a change of control, the opening
of a new campus, the introduction of new programs or the hiring
or placement of new education representatives. Due to state
budget constraints in other states in which we operate, such as
Texas and California, it is possible that those states may
reduce the number of employees in, or curtail the operations of,
the state education agencies that authorize our schools. A delay
or refusal by any state education agency in approving any
changes in our operations that require state approval could
prevent us from making such changes or could delay our ability
to make such changes, which could adversely affect our business
or results of operations.
Risks Related to Our Business
Failure to effectively manage our growth
could adversely affect our business.
We have experienced a period of significant
growth since 1998. Our continued growth may strain our
management, operations, employees or other resources. We may not
be able to maintain or accelerate our current growth rate,
effectively manage our expanding operations or achieve planned
growth on a timely or profitable basis. If we are unable to
manage our growth effectively while maintaining appropriate
internal controls, we may experience operating inefficiencies
and our results of operations could be adversely affected.
Failure on our part to maintain and expand
existing strategic relationships and develop new strategic
relationships with our industry customers could impair our
ability to attract and retain students.
We have an extensive set of strategic
relationships that we believe affords us a significant
competitive strength and supports our market leadership. These
types of relationships enable us to further drive undergraduate
enrollment, diversify funding sources, expand the scope and
increase the number of programs we offer and reduce our costs
and capital expenditures. These relationships also provide
additional incremental revenue opportunities from retraining the
employees of our industry customers. Our success, therefore,
depends in part on our ability to maintain and expand our
existing strategic relationships and to enter into new strategic
relationships. Certain of our existing strategic relationships,
including those with American Suzuki Motor Corp., Dodge
Motorsports, Harley-Davidson Motor Co., Kawasaki Motors
Corp., U.S.A., Mercury Marine and Yamaha Motor Corp., USA, are
not memorialized in writing and are based on oral
understandings. As a result, the rights of the parties under
these arrangements are less clearly defined than they would be
were they in writing. Additionally, certain of our existing
strategic relationship agreements, including those with Audi of
America, BMW of North America, LLC, Jaguar Cars, Inc. and
Volkswagen of America, Inc., expire within the next six months.
The reduction or elimination of, or failure to renew (either at
all or on terms favorable to us), any of our existing strategic
relationships, or our failure to enter into new strategic
relationships, could impair our ability to attract and retain
students. As a result, our market share and net revenues could
decrease.
Failure on our part to effectively
identify, establish and operate additional schools or campuses
could reduce our ability to implement our growth
strategy.
As part of our business strategy, we anticipate
opening and operating new schools or campuses. Establishing new
schools or campuses poses unique challenges and requires us to
make investments in management and capital expenditures, incur
marketing expenses and devote other resources that are
different, and in some cases greater, than those required with
respect to the operation of acquired schools.
13
Our success depends in part on our ability
to update and expand the content of existing programs and
develop new programs in a cost-effective manner and on a timely
basis.
Increasingly, prospective employers of our
graduates demand that their entry-level employees possess
appropriate technological skills. These skills are becoming more
sophisticated in line with technological advancements in the
automotive, diesel, collision repair, motorcycle and marine
industries. Accordingly, educational programs at our schools
should keep pace with those technological advancements. The
expansion of our existing programs and the development of new
programs may not be accepted by our students, prospective
employers or the technical education market. Even if we are able
to develop acceptable new programs, we may not be able to
introduce these new programs as quickly as the industries we
serve require or as quickly as our competitors do. If we are
unable to adequately respond to changes in market requirements
due to financial constraints, unusually rapid technological
changes or other factors, our ability to attract and retain
students could be impaired and our placement rates could suffer.
We may not be able to retain our key
personnel or hire and retain the personnel we need to sustain
and grow our business.
Our success to date has depended, and will
continue to depend, largely on the skills, efforts and
motivation of our executive officers and other key personnel,
who generally have significant experience with our company and
within the technical education industry. Our success also
depends in large part upon our ability to attract and retain
highly qualified faculty, school directors, administrators and
corporate management. Due to the nature of our business, we face
significant competition in the attraction and retention of
personnel who possess the skill sets that we seek. In addition,
key personnel may leave us and subsequently compete against us.
Furthermore, we do not currently carry key man life
insurance. The loss of the services of any of our key personnel,
or our failure to attract and retain other qualified and
experienced personnel on acceptable terms, could impair our
ability to successfully manage our business.
If we are unable to hire, retain and
continue to develop and train our education representatives, the
effectiveness of our recruiting efforts and our results of
operations would be adversely affected.
In order to support revenue growth, we need to
hire new education representatives, retain and continue to
develop and train our education representatives, who are our
employees dedicated to student recruitment. Our ability to
develop a strong education representative team may be affected
by a number of factors, including our ability to integrate and
motivate our education representatives; our ability to
effectively train our education representatives; the length of
time it takes new education representatives to become
productive; restrictions on the method of compensating education
representatives imposed by regulatory bodies; the competition we
face from other companies in hiring and retaining education
representatives; and our ability to effectively manage a
multi-location educational organization. If we are unable to
hire, develop or retain our education representatives, the
effectiveness of our recruiting efforts and our results of
operations would be adversely affected.
Competition could decrease our market share
and net revenues.
The post-secondary education market is highly
competitive. Some traditional public and private colleges and
universities, as well as other private career-oriented schools,
offer programs that may be perceived by students to be similar
to ours. Most public institutions are able to charge lower
tuition than
14
We may be required to reduce tuition or increase
spending in response to competition in order to retain or
attract students or pursue new market opportunities. As a
result, our market share and net revenues may be decreased. We
cannot be sure that we will be able to compete successfully
against current or future competitors or that competitive
pressures faced by us will not adversely affect our business,
financial condition or results of operations.
Our financial performance depends in part
on our ability to continue to develop awareness and acceptance
of our programs among high school graduates and working adults
looking to return to school.
The awareness of our programs among high school
graduates and working adults looking to return to school is
critical to the continued acceptance and growth of our programs.
Our inability to continue to develop awareness of our programs
could reduce our enrollments and impair our ability to increase
net revenues or maintain profitability. The following are some
of the factors that could prevent us from successfully marketing
our programs:
An increase in interest rates could
adversely affect our ability to attract and retain
students.
Interest rates have reached historical lows in
recent years, creating a favorable borrowing environment for our
students. Much of the financing our students receive is tied to
floating interest rates. Therefore, any future increase in
interest rates will result in a corresponding increase in the
cost to our existing and prospective students of financing their
studies, which could result in a reduction in our student
population and net revenues. Higher interest rates could also
contribute to higher default rates with respect to our
students repayment of their education loans. Higher
default rates may in turn adversely impact our eligibility for
Title IV Program participation, which could result in a
reduction in our student population and net revenues and
adversely affect our results of operations.
Seasonal and other fluctuations in our
results of operations could adversely affect the trading price
of our common stock.
In reviewing our results of operations, you
should not focus on quarter-to-quarter comparisons. Our results
in any quarter may not indicate the results we may achieve in
any subsequent quarter or for the full year. Our net revenues
normally fluctuate as a result of seasonal variations in our
business, principally due to changes in total student
population. Student population varies as a result of new student
enrollments, graduations and student attrition. Historically,
our schools have had lower student populations in our third
fiscal quarter than in the remainder of our fiscal year because
fewer students are enrolled during the summer months. Our
expenses, however, do not generally vary at the same rate as
changes in our student population and net revenues and, as a
result, such expenses do not fluctuate significantly on a
quarterly basis. We expect quarterly fluctuations in results of
operations to continue as a result of seasonal
15
We may be unable to successfully complete
or integrate future acquisitions.
Although we are not presently considering any
significant acquisitions, we may consider selective acquisitions
in the future. We may not be able to complete any acquisitions
on favorable terms or, even if we do, we may not be able to
successfully integrate the acquired businesses into our
business. Integration challenges include, among others,
regulatory approvals, significant capital expenditures,
assumption of known and unknown liabilities and our ability to
control costs. The successful integration of future acquisitions
may also require substantial attention from our senior
management and the senior management of the acquired schools,
which could decrease the time that they devote to the day-to-day
management of our business. If we do not successfully address
risks and challenges associated with acquisitions, including
integration, future acquisitions could harm, rather than
enhance, our operating performance.
In addition, if we consummate an acquisition, our
capitalization and results of operations may change
significantly. A future acquisition could result in the
incurrence of debt and contingent liabilities, an increase in
interest expense, amortization expenses, goodwill and other
intangible assets, charges relating to integration costs or an
increase in the number of shares outstanding. These results
could have a material adverse effect on our results of
operations or financial condition or result in dilution to
current stockholders.
We have recorded a significant amount of
goodwill, which may become impaired and subject to a
write-down.
Our acquisition of the parent company of MMI in
January 1998 resulted in the recording of goodwill. Goodwill,
which relates to the excess of cost over the fair value of the
net assets of the business acquired, was approximately
$20.6 million at June 30, 2003, representing
approximately 21.6% of our total assets.
Goodwill is recorded at fair value on the date of
the acquisition and, under SFAS No. 142, Goodwill and
Other Intangible Assets, is reviewed at least annually for
impairment. Impairment may result from, among other things,
deterioration in the performance of the acquired business,
adverse market conditions, adverse changes in applicable laws or
regulations, including changes that restrict the activities of
the acquired business, and a variety of other circumstances. The
amount of any impairment must be recognized as an expense in the
period in which we determine that such impairment has occurred.
Any future determination requiring the write-off of a
significant portion of goodwill would have an adverse effect on
our financial condition and results of operations.
Our management has no experience in
managing a public company.
Our management team has historically operated our
business as a privately-owned corporation. The individuals who
constitute our management have never managed a publicly-traded
company. Our management may not successfully or efficiently
transition to the management of a public company which will be
subject to significant additional regulatory oversight and
reporting obligations under federal securities laws. In
particular, these new obligations will require substantial
attention from our senior management and divert their attention
away from the day-to-day management of our business, which could
adversely impact our results of operations.
We cannot predict our future capital needs,
and we may not be able to secure additional
financing.
We may need to raise additional capital in the
future to fund our operations, expand our markets and program
offerings or respond to competitive pressures or perceived
opportunities. We cannot be sure that
16
Following the consummation of the offering,
we do not anticipate declaring or paying cash dividends on our
common stock in the foreseeable future.
Following the consummation of this offering, we
do not anticipate declaring or paying any dividends on our
common stock in the foreseeable future. We currently anticipate
that we will retain all of our future earnings, if any, to fund
the operation and expansion of our business and to use as
working capital and for other general corporate purposes. Our
board of directors will determine whether to pay dividends in
the future based on conditions then existing, including our
earnings, financial condition and capital requirements, the
availability of third-party financing and the financial
responsibility standards prescribed by ED, as well as any
economic and other conditions that our board of directors may
deem relevant.
Terrorist attacks and the possibility of
wider armed conflicts may adversely affect the U.S. economy
and may disrupt our provision of educational
services.
Terrorist attacks and other acts of violence or
war, such as those that took place on September 11, 2001
and the war between the U.S.-led coalition forces and Iraq,
could disrupt our operations. Attacks or armed conflicts that
directly impact our physical facilities or ability to recruit
and retain students could significantly affect our ability to
provide educational services to our students and thereby impair
our ability to achieve our expected results. Furthermore,
violent acts and threats of future attacks could adversely
affect the U.S. and world economies. Finally, future
terrorist acts could cause the United States to enter into a
wider armed conflict that could further impact our operations
and result in prospective students, as well as our current
students and personnel, entering the armed services. These
factors could cause significant declines in our student
population and adversely affect our results of operations or
financial condition.
Risks Related to the Offering
The price of our common stock may fluctuate
significantly, and you could lose all or part of your
investment.
Volatility in the market price of our common
stock may prevent you from being able to sell your shares at or
above the price you paid for your shares. The market price of
our common stock could fluctuate significantly for various
reasons which include:
17
In addition, in recent years, the stock market
has experienced extreme price and volume fluctuations. This
volatility has had a significant impact on the market price of
securities issued by many companies, including companies in our
industry. The changes frequently appear to occur without regard
to the operating performance of these companies. The price of
our common stock could fluctuate based upon factors that have
little or nothing to do with our company, and these fluctuations
could materially reduce our stock price.
If our share price is volatile, we may be
the target of securities litigation, which is costly and
time-consuming to defend.
In the past, following periods of market
volatility in the price of a companys securities, security
holders have often instituted class action litigation. If the
market value of our common stock experiences adverse
fluctuations and we become involved in this type of litigation,
regardless of the outcome, we could incur substantial legal
costs and our managements attention could be diverted from
the operation of our business, causing our business, results of
operations or financial condition to suffer.
There is no existing market for our common
stock and we do not know if one will develop to provide you with
adequate liquidity.
There has not been a public market for our common
stock. We cannot predict the extent to which investor interest
in our company will lead to the development of an active trading
market on the New York Stock Exchange or otherwise or how liquid
that market might become. If an active trading market does not
develop, you may have difficulty selling any of our common stock
that you buy. The initial public offering price for the shares
will be determined by negotiations between us and the
representative of the underwriters and may not be indicative of
prices that will prevail in the open market following this
offering. Consequently, you may not be able to sell shares of
our common stock at prices equal to or greater than the price
paid by you in this offering.
Future sales of our common stock in the
public market could lower our stock price.
We may sell additional shares of common stock in
subsequent public offerings. We may also issue additional shares
of common stock to finance future acquisitions. After the
completion of this offering, we will
have outstanding
shares of common stock. This number
includes shares
that we are selling in this offering, which may be resold
immediately in the public market. The
remaining shares,
or %
of our total outstanding shares, are restricted from immediate
resale under the federal securities laws and the lock-up
agreements between our current stockholders and the underwriters
described in Underwriting, but may be sold into the
market in the near future. These shares will become available
for sale at various times following the expiration of the
lock-up agreements which, without the prior consent of Credit
Suisse First Boston LLC, is 180 days after the date of this
prospectus, subject to volume limitations and manner-of-sale
requirements under Rule 144 of the Securities Act of 1933.
After this offering, several of our existing
stockholders,
owning shares
of our common stock, are expected to be parties to a
registration rights agreement with us. Under that agreement,
certain of those stockholders,
owning shares
of our common stock, will have the right, after the expiration
of the lock-up period, to require us to effect the registration
of their shares. In addition, if we propose to register, or are
required to register following the exercise of a
demand registration right as described in the
previous sentence, any of our shares of common stock under the
Securities Act, all the stockholders who are parties to the
registration rights agreement will be entitled to include their
shares of common stock in that registration. We cannot predict
the size of future issuances of our common stock or the effect,
if any, that future issuances and sales of shares of our common
stock will have on the market price of our common stock. Sales
of substantial amounts of our common stock (including shares
issued in connection with an acquisition), or the perception
that such sales could occur, may adversely affect prevailing
market prices for our common stock.
18
Anti-takeover provisions in our certificate
of incorporation, our bylaws and Delaware law could discourage a
change of control that our stockholders may favor, which could
negatively affect our stock price.
Provisions in our certificate of incorporation
and our bylaws and applicable provisions of the Delaware General
Corporation Law may make it more difficult and expensive for a
third party to acquire control of us even if a change of control
would be beneficial to the interests of our stockholders. These
provisions could discourage potential takeover attempts and
could adversely affect the market price of our common stock. Our
amended and restated certificate of incorporation and amended
and restated bylaws, which will be in effect at the time this
offering is consummated, will:
Our executive officers, directors and
principal stockholders will continue to own a large percentage
of our voting stock after this offering, which may allow them to
control substantially all matters requiring stockholder
approval.
Immediately after this offering, our executive
officers, directors and principal stockholders will, in the
aggregate, directly or indirectly hold
approximately %
of our outstanding shares. Accordingly, in the event that all or
some of these stockholders decided to act in concert, they could
control us through their ability to determine the outcome of the
election of our directors, to amend our certificate of
incorporation and bylaws and to take other actions requiring the
vote or consent of stockholders, including mergers, going
private transactions and other extraordinary transactions, and
the terms of any of these transactions. The ownership positions
of these stockholders may have the effect of delaying, deterring
or preventing a change in control or a change in the composition
of our board of directors.
We will have broad discretion in applying a
portion of the net proceeds of the offering and may not use
those proceeds in ways that will enhance our market
value.
We have significant flexibility in applying the
portion of the net proceeds we receive in the offering that will
remain after the repayment of all outstanding indebtedness under
our senior credit facilities, the redemption of all of our
series A preferred stock, series B preferred stock and
series C preferred stock that will not be exchanged for
shares of our common stock and the payment in cash of all
declared but unpaid
19
You will suffer immediate and substantial
dilution.
The initial public offering price per share is
substantially higher than the pro forma net tangible book value
per share immediately after the offering. As a result, you will
pay a price per share that substantially exceeds the book value
of our assets after subtracting our liabilities. At the offering
price of
$ ,
you will incur immediate and substantial dilution in the amount
of
$ per
share. We also have outstanding stock options to purchase shares
of our common stock at a weighted average exercise price of
$ per
share. To the extent these options are exercised, there will be
further dilution.
20
student dissatisfaction with our programs and
services;
diminished access to high school student
population;
our failure to maintain or expand our brand or
other factors related to our marketing or advertising practices;
and
our inability to maintain strategic relationships
with automotive, diesel, collision repair, motorcycle and marine
manufacturers and suppliers.
our quarterly or annual earnings or those of
other companies in our industry;
the publics reaction to our press releases,
our other public announcements and our filings with the
Securities and Exchange Commission;
changes in earnings estimates or recommendations
by research analysts who track our common stock or the stocks of
other companies in our industry;
new laws or regulations or new interpretations of
laws or regulations applicable to our business;
changes in accounting standards, policies,
guidance, interpretations or principles;
changes in general conditions in the U.S. and
global economies or financial markets, including those resulting
from war, incidents of terrorism or responses to such events;
sales of common stock by our directors and
executive officers; and
the other factors described in these Risk
Factors.
authorize the issuance of blank check preferred
stock that could be issued by our board of directors to thwart a
takeover attempt;
classify the board of directors into staggered,
three-year terms, which may lengthen the time required to gain
control of our board of directors;
discourage, delay or prevent a change in control
by prohibiting us from engaging in a business combination with
an interested stockholder for a period of two years after the
person becomes an interested stockholder, unless such a
transaction has met certain fair market value
requirements;
prohibit cumulative voting in the election of
directors, which would otherwise allow holders of less than a
majority of stock to elect some directors;
require super-majority voting to effect
amendments to certain provisions of our certificate of
incorporation or bylaws, including those provisions concerning
the composition of the board of directors and certain business
combinations;
limit who may call special meetings of both the
board of directors and stockholders;
prohibit stockholder action by written consent,
requiring all actions to be taken at a meeting of the
stockholders;
establish advance notice requirements for
nominating candidates for election to the board of directors or
for proposing matters that can be acted upon by stockholders at
stockholders meetings; and
require that vacancies on the board of directors,
including newly-created directorships, be filled only by a
majority vote of directors then in office.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking
statements, which include information relating to future
events, future financial performance, strategies, expectations,
competitive environment, regulation and availability of
resources. These forward-looking statements include, without
limitation, statements regarding: proposed new programs;
expectations that regulatory developments or other matters will
not have a material adverse effect on our consolidated financial
position, results of operations or liquidity; statements
concerning projections, predictions, expectations, estimates or
forecasts as to our business, financial and operational results
and future economic performance; and statements of
managements goals and objectives and other similar
expressions concerning matters that are not historical facts.
Words such as may, will,
should, could, would,
predicts, potential,
continue, expects,
anticipates, future,
intends, plans, believes,
estimates, and similar expressions, as well as
statements in future tense, identify forward-looking statements.
Forward-looking statements should not be read as
a guarantee of future performance or results, and will not
necessarily be accurate indications of the times at, or by,
which such performance or results will be achieved.
Forward-looking statements are based on information available at
the time those statements are made and/or managements good
faith belief as of that time with respect to future events, and
are subject to risks and uncertainties that could cause actual
performance or results to differ materially from those expressed
in or suggested by the forward-looking statements. Important
factors that could cause such differences include, but are not
limited to:
Forward-looking statements speak only as of the
date the statements are made. You should not put undue reliance
on any forward-looking statements. We assume no obligation to
update forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting
forward-looking information, except to the extent required by
applicable securities laws. If we do update one or more
forward-looking statements, no inference should be drawn that we
will make additional updates with respect to those or other
forward-looking statements.
21
our failure to comply with the extensive
regulatory framework applicable to our industry;
failure on our part to maintain and expand
existing strategic relationships and develop new strategic
relationships;
our success in updating and expanding the content
of existing programs and developing new programs in a
cost-effective manner or on a timely basis;
risks associated with the opening of new campuses;
industry competition;
our ability to continue to execute our growth
strategies;
general and economic conditions; and
other factors discussed under the headings
Risk Factors, Managements Discussion and
Analysis of Financial Condition and Results of Operations,
Business and Regulatory Environment.
USE OF PROCEEDS
The net proceeds from the sale of
the shares
of common stock offered by us will be approximately
$ million,
based on an estimated initial public offering price of
$ per
share (the mid-point of the range set forth on the cover page of
this prospectus) and after deducting the underwriting discounts
and commissions and estimated offering expenses payable by us.
We will not receive any proceeds from the sale of the shares to
be sold by the selling stockholders.
The primary purposes of the offering are to
create a public market for our common stock, obtain additional
equity capital and facilitate future access to public markets.
We expect to use the net proceeds from the offering:
We plan to use the remainder of the net proceeds
of the offering for working capital and general corporate
purposes, which may include expanding our marketing and
recruiting efforts, opening new campuses, developing new courses
and programs and potential acquisitions. We have no current
plans, agreements or commitments for, and are not currently
engaged in any negotiations with respect to, any such
transaction. Management will have broad discretion in the
allocation of the net proceeds remaining after the allocation of
net proceeds for the uses specified in the prior paragraph.
Our senior credit facilities consist of a
revolving credit facility, a term A loan facility and a
term B loan facility. The term A loan facility and the
revolving loan facility mature on March 31, 2007, and the
term B loan facility matures on March 31, 2009. Each
facility under our senior credit facilities bears interest at a
variable rate based upon LIBOR or prime rate, at our option. At
June 30, 2003, the weighted average interest rate on our
borrowings under the senior credit facilities was 4.4%.
Following the application of the proceeds from this offering, we
expect that our senior credit facilities will consist of only a
revolving credit facility. Because our working capital
fluctuates based on our seasonal needs, the borrowings under our
revolving credit facility may vary.
Depending on future events, we may determine at a
later time to use the net proceeds for different purposes.
Pending their use, the proceeds of the offering will be invested
in short-term, investment grade, interest-bearing securities.
DIVIDEND POLICY
Following consummation of this offering, we do
not anticipate declaring or paying any dividends on our common
stock in the foreseeable future. Instead, we currently
anticipate that we will retain all of our future earnings, if
any, to fund the operation and expansion of our business and to
use as working capital and for other general corporate purposes.
Our board of directors will determine whether to pay dividends
in the future based on conditions then existing, including our
earnings, financial condition and capital requirements, the
availability of third-party financing and the financial
responsibility standards prescribed by ED, as well as any
economic and other conditions that our board of directors may
deem relevant. In addition, our ability to declare and pay any
dividends is currently restricted under the credit agreement for
our senior credit facilities.
22
to repay all outstanding indebtedness under our
term A and term B loan facilities, which was
approximately $31.6 million as of September 30, 2003;
to redeem, for approximately
$ million,
the portion of our outstanding series A preferred stock,
series B preferred stock and series C preferred stock
that will not be exchanged by their holders into shares of our
common stock immediately prior to the consummation of this
offering; and
to pay all accrued but unpaid dividends on our
series A preferred stock, series B preferred stock,
series C preferred stock and series D preferred stock,
which were approximately $11.6 million as of
September 30, 2003.
CAPITALIZATION
The following table sets forth our cash and cash
equivalents and our capitalization as of June 30, 2003:
You should read this table together with the
Use of Proceeds, Managements Discussion
and Analysis of Financial Condition and Results of
Operations, Description of Capital Stock and
our consolidated financial statements included elsewhere in this
prospectus.
23
For further information regarding our stock and
stock option plans, including the provisions for the automatic
increase in reserved shares, see Management.
24
on an actual basis;
on a pro forma basis, giving effect to
(i) the repayment in July and August 2003, with available
cash on hand, of $15.8 million of our term loans under our
senior credit facilities, (ii) the retirement in August
2003 at a 10% discount of a subordinated convertible promissory
note having a principal amount of approximately
$7.0 million using available cash on hand of
$6.3 million, (iii) the repayment in August 2003 of a
promissory note having a principal amount of approximately
$4.0 million that was issued to a related party and the
subsequent remittance to us by that party of approximately
$4.0 million in satisfaction of the principal amount of,
and accrued interest on, a subscription note receivable and
(iv) the payment in September 2003, with available cash on
hand, of a $5.0 million dividend to our common stockholders
and holders of our series D preferred stock;
on a pro forma as adjusted basis, giving effect
to (i) our sale
of shares
of our common stock in this offering (at the initial public
offering price of
$ per
share); (ii) the application of the proceeds from that sale
as discussed under Use of Proceeds; (iii) the
exchange
of shares
of our series A preferred
stock, shares
of our series B preferred stock
and shares
of our series C preferred stock for an aggregate
of shares
of our common stock, which is expected to occur immediately
prior to the consummation of the offering; and (iv) the
automatic conversion of all outstanding shares of our
series D preferred stock
into shares
of our common stock, which is expected to occur concurrently
with the consummation of the offering in accordance with the
provisions of our certificate of incorporation.
As of June 30, 2003
Pro Forma
Actual
Pro Forma
As Adjusted
(In millions)
$
31.2
$
4.1
47.3
31.6
0.5
0.5
7.0
4.0
58.8
32.1
11.4
15.1
5.5
5.5
4.6
4.6
46.3
46.3
(82.5
)
(87.1
)
(0.6
)
(0.3
)
(83.1
)
(87.4
)
$
43.5
$
16.2
(1)
In July 2003, we amended our senior credit
facilities to increase the availability under the revolving
credit facility from $20 million to $30 million.
Availability of the revolving credit facility is reduced by the
amount of outstanding letters of credit
issued under the facility. As of
September 30, 2003, we had letters of credit in an
aggregate amount of $15.6 million outstanding under our
revolving credit facility.
(2)
In connection with the repayment by us in July
2003 of a $4.0 million promissory note held by Whites
Family Company, LLC, an entity controlled by John C. White,
Whites Family Company, LLC remitted to us approximately
$4.0 million in satisfaction of the principal amount of,
and accrued interest on, a subscription note receivable bearing
interest at approximately 6.1%. Approximately $3.7 million
of the subscription note receivable was issued as payment for
series A preferred stock issued to Whites Family
Company, LLC. The remittance with respect to the subscription
note receivable correspondingly reduced an equity account that
was offset against the amount of the outstanding series A
preferred stock.
DILUTION
If you invest in our common stock, your interest
will be diluted to the extent of the difference between the
initial public offering price per share of our common stock and
the pro forma net tangible book value per share of our common
stock after the offering. Dilution results from the fact that
the per share offering price of the common stock is
substantially in excess of the book value per share attributable
to the existing stockholders for the presently outstanding
stock. Our net tangible book value at June 30, 2003 was
$ million,
or
$ per
share of common stock. Our pro forma net tangible book value at
June 30, 2003 was
$ million,
or
$ per
share of common stock. Pro forma net tangible book value per
share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock
outstanding after giving effect to:
After giving effect to our sale
of shares
of common stock in the offering at the initial public offering
price of
$ per
share (the mid-point of the range set forth on the cover of this
prospectus) and after deducting the underwriting discounts and
commissions and estimated offering expenses, our pro forma net
tangible book value as of June 30, 2003 would have been
$ million,
or
$ per
share. This represents an immediate increase in pro forma net
tangible book value of
$ per
share to existing stockholders and an immediate dilution of
$ per
share to investors purchasing common stock in the offering. The
following table illustrates this per share dilution:
The following table summarizes, on a pro forma
basis as of June 30, 2003, the differences between existing
stockholders and the new investors with respect to the number of
shares of common stock purchased from us, the total
consideration paid and the average price per share paid before
deducting the underwriting discounts and commissions and our
estimated offering expenses.
The discussion and tables above assume no
exercise of stock options outstanding as of June 30, 2003.
As of the consummation of this offering, we expect to have
options outstanding to purchase a total
of shares
of common stock, with a weighted average exercise price of
$ per
share. To the extent that any of these options are exercised,
there will be further dilution to new investors. See
25
If the underwriters over-allotment option
is exercised in full:
26
a -for-one
split of our common stock;
the automatic conversion of all outstanding
shares of our series D convertible preferred stock into shares
of common stock; and
the exchange
of shares
of our series A preferred
stock, shares
of our series B preferred stock
and shares
of our series C preferred stock into shares of common
stock, and the redemption of the
remaining shares
of such preferred stock at the aggregate redemption price of
$ million;
$
$
the percentage of our shares of common stock held
by our existing holders of capital stock will decrease to
approximately % of the
total number of common shares outstanding after this offering;
and
the number of shares of common stock held by
investors purchasing common stock in this offering will increase
to shares,
or approximately % of
the total number of shares of common stock outstanding after
this offering.
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth our selected
historical consolidated financial and operating data as of the
dates and for the periods indicated. You should read these data
together with Managements Discussion and Analysis of
Financial Condition and Results of Operations and our
consolidated financial statements included elsewhere in this
prospectus. The selected historical consolidated statement of
operations data for each of the years in the three-year period
ended September 30, 2002, and the historical consolidated
balance sheet data as of September 30, 2001 and 2002 have
been derived from our audited consolidated financial statements
which are included elsewhere in this prospectus. The selected
historical consolidated statements of operations data for the
fiscal years ended September 30, 1998 and 1999 and
historical consolidated balance sheet data as of
September 30, 1998, 1999 and 2000 have been derived from
our audited consolidated financial statements not included in
this prospectus. The selected interim historical consolidated
statement of operations data for the nine months ended June 30,
2002 and 2003 and the selected interim historical consolidated
balance sheet data as of June 30, 2003 have been derived from
our unaudited interim consolidated financial statements included
elsewhere in this prospectus. The selected interim historical
consolidated balance sheet data as of June 30, 2002 have
been derived from our unaudited interim consolidated financial
statements not included in this prospectus. In our opinion, the
unaudited interim consolidated financial statements have been
prepared on the same basis as our audited consolidated financial
statements and include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair statement of
the results for the unaudited interim periods. The results for
any interim period are not necessarily indicative of the results
that may be expected for a full fiscal year.
27
28
Nine Months Ended
Year Ended September 30,
June 30,
1998
1999
2000
2001
2002
2002
2003
(dollars in thousands, except per share data)
(unaudited)
$
63,936
$
78,020
$
92,079
$
109,493
$
144,372
$
105,428
$
141,642
27,950
34,560
48,523
59,554
70,813
51,710
66,551
29,968
49,111
33,893
38,332
51,541
36,607
48,198
57,918
83,671
82,416
97,886
122,354
88,317
114,749
6,018
(5,651
)
9,663
11,607
22,018
17,111
26,893
6,760
10,582
11,877
10,674
6,254
5,349
2,809
847
970
(742
)
(16,233
)
(2,214
)
933
14,917
10,792
24,084
(304
)
(5,609
)
(431
)
820
5,228
3,777
8,944
(438
)
(10,624
)
(1,783
)
113
9,689
7,015
15,140
(402
)
1,677
(34,437
)
(8,536
)
(1,316
)
(840
)
(8,947
)
(36,220
)
(9,739
)
9,689
7,015
15,140
(915
)
(914
)
(1,166
)
(1,166
)
(2,872
)
(1,729
)
(3,434
)
$
(1,755
)
$
(9,861
)
$
(37,386
)
$
(10,905
)
$
6,817
$
5,286
$
11,706
Nine Months Ended
Year Ended September 30,
June 30,
1998
1999
2000
2001
2002
2002
2003
(dollars in thousands, except per share data)
(unaudited)
(638.78
)
(5,268.84
)
(955.44
)
(341.99
)
2,212.96
1,715.86
3,790.86
(638.78
)
(5,268.84
)
(955.44
)
(341.99
)
1,901.48
1,488.39
2,532.07
2,117
2,190
3,088
3,081
3,081
3,081
3,088
2,117
2,190
3,088
3,081
4,654
4,286
5,737
$
2,358
$
2,917
$
3,887
$
4,533
$
4,951
$
3,167
$
4,476
6
6
6
6
7
6
7
4,906
5,321
5,866
6,710
8,277
8,163
10,228
$
4,144
$
10,316
$
3,326
$
3,353
$
13,554
$
8,420
$
31,215
15,709
26,643
21,110
15,428
29,278
19,463
47,911
(7,919
)
670
(12,987
)
(29,187
)
(14,577
)
(13,770
)
(2,585
)
99,522
112,071
68,845
63,086
76,886
62,550
95,442
106,252
115,885
104,122
97,336
57,886
59,012
55,060
108,691
117,631
109,294
104,578
60,902
61,528
58,765
12,487
17,155
18,296
19,414
64,395
63,238
67,813
(45,719
)
(54,675
)
(92,071
)
(102,976
)
(96,159
)
(97,689
)
(83,137
)
(1)
Working capital is defined as current assets less
current liabilities.
MANAGEMENTS DISCUSSION AND ANALYSIS
OF
You should read the following discussion
together with the financial statements and the related notes
included elsewhere in this prospectus. This discussion contains
forward-looking statements that are based on managements
current expectations, estimates and projections about our
business and operations. Our actual results may differ
materially from those currently anticipated and expressed in
such forward-looking statements as a result of a number of
factors, including those we discuss under Risk
Factors and elsewhere in this prospectus.
General
We are a leading provider of post-secondary
education for students seeking careers as professional
automotive, diesel, collision repair, motorcycle and marine
technicians. We offer undergraduate degree, diploma or
certificate programs at seven campuses across the United States,
and manufacturer-sponsored advanced programs at 22 dedicated
training centers. We have provided technical education programs
for over 35 years.
Our revenues consist principally of student
tuition and fees derived from the programs we provide and are
presented as net revenues after reductions related to
scholarships we sponsor and refunds for students who withdraw
from our programs prior to specified dates. We recognize tuition
revenue and fees ratably over the terms of the various programs
we offer. We supplement our core revenues with additional
revenues from sales of textbooks and program supplies, student
housing provided by us and other revenues, all of which are
recognized as sales occur or services are performed. In
aggregate, these additional revenues represented less than 10%
of our total net revenues in each fiscal year in the three-year
period ended September 30, 2002 and in the nine months
ended June 30, 2003. Tuition revenue and fees generally
vary based on the average number of students enrolled and
average tuition charge per program.
Average student enrollments vary depending on,
among other factors, the number of (i) continuing students
at the beginning of a fiscal period, (ii) new student
enrollments during the fiscal period, (iii) students who
have previously withdrawn but decide to re-enroll during the
fiscal period, and (iv) graduations and withdrawals during
the fiscal period. We believe that our average student
enrollments are influenced by the number of graduating high
school students, the attractiveness of our program offerings to
high school graduates and potential adult students, the
effectiveness of our marketing efforts, the depth of our
strategic relationships, the strength of employment markets and
long term career prospects, the quality of our instructors and
student services professionals, the persistence of our students,
the length of our education programs, the availability of
federal funding for our programs, the number of graduates of our
programs who elect to attend the advanced training programs we
offer and general economic conditions. Our introduction of
additional program offerings at existing schools and
establishment of new schools (either through acquisition or
start-up) are expected to significantly influence our average
student enrollment. Our average undergraduate student
enrollments have grown at a compounded annual growth rate of
18.8% over the past three full fiscal years. This growth can
largely be attributed to the demand for our graduates and the
expansion of our capacity. We currently offer 38 start dates
throughout the year in our various undergraduate programs. The
number of start dates of advanced programs varies by the
duration of those programs and the needs of the manufacturers
who sponsor them.
Our tuition charges vary by type or length of our
programs and the program level, such as undergraduate or
advanced training. Tuition has increased by approximately 3% to
5% per annum in each fiscal year in the three-year period ended
September 30, 2002, as well as in the nine months ended
June 30, 2003. Tuition increases are generally consistent
across our schools and programs, however, changes in operating
costs may impact price increases at individual locations. We
believe that we can continue to increase tuition as the demand
for our graduates remains strong and tuition at other
post-secondary institutions continues to rise, although any of
those increases may be less than historical levels.
Most students at our campuses rely on funds
received under various government-sponsored student financial
aid programs, predominantly Title IV Programs, to pay a
substantial portion of their tuition and
29
We extend credit for tuition and fees to the
majority of our students that are in attendance at our campuses.
Our credit risk is mitigated through the students participation
in federally funded financial aid programs unless students
withdraw prior to the receipt by us of Title IV funds for
those students. Any remaining tuition receivable is comprised of
smaller individual amounts due from students across the United
States.
We categorize our operating expenses as
(i) educational services and facilities and
(ii) selling, general and administrative.
Major components of educational services and
facilities expenses include faculty compensation and benefits,
compensation and benefits of other campus administration
employees, facility rent, maintenance, utilities, depreciation
and amortization of property and equipment used in the provision
of educational services, royalties payable to licensors under
our licensing arrangements and other costs directly associated
with teaching our programs and providing educational services to
our students.
Selling, general and administrative expenses
include compensation and benefits of employees who are not
directly associated with the provision of educational services
(such as executive management, finance and central accounting,
legal, human resources and business development), marketing and
student enrollment expenses (including compensation and benefits
of personnel employed in sales and marketing and student
admissions), costs of professional services, bad debt expense,
costs associated with the implementation and operation of our
student management and reporting system, rent for our corporate
headquarters, depreciation and amortization of property and
equipment that is not used in the provision of educational
services and other costs that are incidental to our operations.
All marketing and student enrollment expenses are recognized in
the period incurred. Costs related to the opening of new
facilities, excluding related capital expenditures, are expensed
in the period incurred.
Costs associated with the implementation of our
student management and reporting system have increased over the
last several years as we installed a new integrated information
network that tracks inquiries from potential students and
supports our student enrollment and processing of data as it
relates to our students activities. We anticipate that we will
need to further upgrade our student management and reporting
system and expect additional costs will be incurred in
connection with such an upgrade. We believe that the investment
in our student management and reporting system has improved
services to students and our ability to track student inquiries
and may facilitate the integration of new schools into our
operations, if and when new schools are opened or acquired.
Acquisitions
In January 1998, we acquired all of the assets of
the parent company of MMI for an aggregate of
$26.3 million. As consideration for the MMI assets, we
issued 3,673 shares of our series A preferred stock
having a liquidation value of $1,000 per
share, shares
of common stock and a subordinated note bearing interest at
13.5% in the principal amount of $2.0 million and maturing
in January 2008, and paid $18.7 million in cash. Concurrent
with the MMI acquisition, we also engaged in a recapitalization
transaction with a group of investors assembled by The Jordan
Company, LLC and with certain members of our management.
Pursuant to the recapitalization agreement, we issued to the
Jordan investors 7,505 shares of our series A
preferred stock for net proceeds of
$22.5 million, shares
of common stock and a subordinated note bearing interest at
13.5% in the principal amount of $15.4 million and maturing
in January 2008. In addition, we issued to the management group
4,067 shares of our series B preferred stock having a
liquidation value of $1,000 per share as well as subordinated
notes in the aggregate principal amount of $2.0 million
bearing interest at 13.5% and maturing in January 2008. The
$47.8 million recapitalization transaction provided
liquidity for certain stockholders as well as funds for the MMI
acquisition and for our continued growth.
30
In April 2002, we effected another
recapitalization transaction with a number of investors,
including Charlesbank Capital Partners, LLC and Worldwide
Training Group, LLC. This recapitalization was recorded at fair
value. See Liquidity.
Critical Accounting Policies and
Estimates
Our discussion of our financial condition and
results of operations is based upon our financial statements,
which have been prepared in accordance with accounting
principles generally accepted in the United States, or GAAP.
During the preparation of these financial statements, we are
required to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses
and related disclosures of contingent assets and liabilities. On
an ongoing basis, we evaluate our estimates and assumptions,
including those related to revenue recognition, bad debts, fixed
assets, long-lived assets, including goodwill, income taxes and
contingent assets and liabilities. We base our estimates on
historical experience and on various other assumptions that we
believe are reasonable under the circumstances. The results of
our analysis form the basis for making assumptions about the
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions, and
the impact of such differences may be material to our
consolidated financial statements.
We believe that the following critical accounting
policies affect our more significant judgments and estimates
used in the preparation of our financial statements:
Revenue recognition.
Net revenues consist primarily of
student tuition and fees derived from the programs we provide
after reductions made for scholarships we sponsor. Tuition and
fee revenue is recognized ratably over the term of the various
programs offered. If a student withdraws from a program prior to
a specified date, any paid but unearned tuition is refunded.
Approximately 96% of our net revenues for the nine months ended
June 30, 2003 consisted of tuition. Our net revenues vary
from period to period in conjunction with our average student
population. Our undergraduate programs are typically designed to
be completed in 12 to 18 months and our advanced training
programs range from eight to 27 weeks in duration. Sales of
textbooks and program supplies, revenue related to student
housing and other revenue are each recognized as sales occur or
services are performed. Deferred tuition represents the excess
of tuition payments received as compared to tuition earned and
is reflected as a current liability in our consolidated
financial statements because it is expected to be earned within
the twelve-month period immediately following the date on which
such liability is reflected in our consolidated financial
statements.
Allowance for uncollectible accounts.
We maintain an allowance for
uncollectible accounts for estimated losses resulting from the
inability, failure or refusal of our students to make required
payments. We offer a variety of payment plans to help students
pay that portion of their education expenses not covered by
financial aid programs. That portion is unsecured and not
guaranteed. Management analyzes accounts receivable, historical
percentages of uncollectible accounts, customer credit
worthiness, when applicable, and changes in payment history when
evaluating the adequacy of the allowance for uncollectible
accounts. We use an internal group of collectors, augmented by
third party collectors as deemed appropriate, in our collection
efforts. Although we believe that our reserves are adequate, if
the financial condition of our students deteriorates, resulting
in an impairment of their ability to make payments, or if we
underestimate the allowances required, additional allowances may
be necessary, which will result in increased selling, general
and administrative expenses in the period such determination is
made.
Healthcare and workers compensation
costs.
Claims and insurance costs
which primarily relate to health insurance and workers
compensation are accrued using current information and, in the
case of healthcare costs, future estimates provided by
consultants to accurately measure current cost incurred but not
invoiced for services provided.
Long-lived assets.
We record our long-lived assets,
such as property and equipment, at cost. We review the carrying
value of our long-lived assets for possible impairment whenever
events or changes in circumstances indicate that the carrying
amount of assets may not be recoverable in accordance with the
31
Goodwill.
We
assess the impairment of goodwill in accordance with SFAS
No. 142, Goodwill and Other Intangible Assets.
Accordingly, we test our goodwill for impairment annually, or
whenever events or changes in circumstances indicate an
impairment may have occurred, by comparing its fair value to its
carrying value. Impairment may result from, among other things,
deterioration in the performance of the acquired business,
adverse market conditions, adverse changes in applicable laws or
regulations, including changes that restrict the activities of
the acquired business, and a variety of other circumstances. If
we determine that an impairment has occurred, we are required to
record a write-down of the carrying value and charge the
impairment as an operating expense in the period the
determination is made. Goodwill represents a significant portion
of our total assets. At June 30, 2003, goodwill represented
approximately 21.6% of our total assets, or $20.6 million,
and resulted from our acquisition of the parent company of MMI
in January of 1998. Although we believe goodwill is
appropriately stated in our consolidated financial statements,
changes in strategy or market conditions could significantly
impact these judgments and require an adjustment to the recorded
balance.
Stock-based
compensation.
We account for
stock-based employee compensation arrangements in accordance
with the provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees, and related Interpretations, and comply with
the disclosure provisions of SFAS No. 123, Accounting
for Stock-Based Compensation. Several companies recently
elected to change their accounting policies and record the fair
value of options as an expense. We currently are not required to
record stock-based compensation charges if the employee stock
option exercise price or restricted stock purchase price equals
or exceeds the deemed fair value of our common stock at the
grant date. Because no market for our common stock existed prior
to this offering, our board of directors determines the fair
value of our common stock based upon several factors, including
our operating performance, forecasted future operating results,
the terms of redeemable or convertible preferred stock issued by
us, including the liquidation value and other preferences of our
preferred stockholders and our expected valuation in an initial
public offering.
32
In addition, we understand that discussions of
potential changes to APB 25 and SFAS 123 standards are
ongoing and the parties responsible for authoritative guidance
in this area may require changes to the applicable accounting
standards. If we had estimated the fair value of the options on
the date of grant using a minimum value pricing model and then
amortized this estimated fair value over the vesting period of
the options, our net income (loss) would have been adversely
affected, as shown in the table below.
Accounting for income
taxes.
In preparing our
consolidated financial statements, we assess the likelihood that
our deferred tax assets will be realized from future taxable
income. We establish a valuation allowance if we determine that
it is more likely than not that some portion or all of the net
deferred tax assets will not be realized. Changes in the
valuation allowance are included in our statement of operations
as provision for or benefit from income taxes. We exercise
significant judgment in determining our provisions for income
taxes, our deferred tax assets and liabilities and our future
taxable income for purposes of assessing our ability to utilize
any future tax benefit from our deferred tax assets. Although we
believe that our tax estimates are reasonable, the ultimate tax
determination involves significant judgments that could become
subject to audit by tax authorities in the ordinary course of
business.
As of June 30, 2003, we had a valuation
allowance of $13.9 million to reduce our deferred tax
assets to an amount that management believes is more likely than
not realizable. The valuation allowance primarily relates to a
deferred tax asset arising from a capital loss carryforward from
the sale of a discontinued business. In addition, we had
deferred tax assets comprised primarily of compensation and
related costs and accrued expenses associated with tool
purchases. We use significant judgment in determining the
amounts of those accrued expenses reflected in the underlying
financial statements. Should we incur capital gains in the
future, we would be able to realize all or part of the capital
loss carryforward we have applied the valuation allowance
against. In that event, our current income tax expense would be
reduced or our income tax benefits would be increased, resulting
in an increase in net income or a reduction in net loss.
33
Results of Operations
The following table sets forth selected
statements of operations data as a percentage of net revenues
for each of the periods indicated.
Nine Months Ended June 30, 2003 Compared
to Nine Months Ended June 30, 2002
Net revenues.
Our net revenues for the nine months ended June 30, 2003
were $141.6 million, representing an increase of
$36.2 million, or 34.3%, as compared to net revenues of
$105.4 million for the nine months ended June 30,
2002. This increase was primarily due to a 25.3% increase in the
average undergraduate full-time student enrollment during the
nine months ended June 30, 2003 and an increase in the
average tuition charge per student resulting from tuition
increases of between 3% and 5%, depending on the program, and a
shift in the mix of average student enrollments toward higher
priced programs, particularly following the introduction of our
higher-priced NASCAR programs at our new NTI facility opened in
July 2002. For the nine months ended June 30, 2003, the
average undergraduate full-time student enrollment was 10,228,
compared with 8,163 for the nine months ended June 30,
2002. We have been able to accommodate the increase in student
enrollments by improving the utilization of our existing
facilities, opening our new NTI campus in July 2002 and
expanding many of our existing facilities.
Educational services and facilities
expenses.
Our educational services
and facilities expenses for the nine months ended June 30,
2003 were $66.6 million, representing an increase of
$14.8 million, or 28.7%, as compared to educational
services and facilities expenses of $51.7 million for the
nine months ended June 30, 2002. This increase was
primarily due to incremental education expenses related to
higher average student enrollments, including additional costs
of $5.4 million incurred in connection with the start-up
and operation of our new campus that we opened in July 2002.
Educational services and facilities expenses as a percentage of
net revenues decreased to 47.0% of net revenues for the nine
months ended June 30, 2003 from 49.1% for the nine months
ended June 30, 2002, primarily due to cost and operating
efficiencies resulting from increased enrollments at our
existing facilities, partially offset by the costs attributable
to the opening and operation of our new campus.
Selling, general and administrative
expenses.
Our selling, general and
administrative expenses for the nine months ended June 30,
2003 were $48.2 million, representing an increase of
$11.6 million, or 31.7%, as compared to selling, general
and administrative expenses of $36.6 million for the nine
months ended June 30, 2002. This increase was due in large
measure to the incremental increase in marketing and
34
Interest
expense.
Our interest expense for
the nine months ended June 30, 2003 was $3.2 million,
representing a decrease of $2.5 million, or 44.3%, compared
to interest expense of $5.7 million for the nine months
ended June 30, 2002. This decrease was due primarily to a
reduction in the average debt balance outstanding and a decrease
in the average interest rate paid on our indebtedness to 4.33%
for the nine months ended June 30, 2003 from 4.71% for the
nine months ended June 30, 2002. The reduction in the
average debt balance outstanding was principally due to the
repayment of $23.4 million of 13.5% subordinated notes and
repayment of $17.9 million of long term debt under our
existing senior credit facilities with proceeds received from
the issuance of our series D convertible preferred stock in
April 2002, as well as scheduled repayments under the senior
credit facilities. The decrease in the average rate of interest
we paid on our indebtedness was primarily attributable to the
repayment of the 13.5% subordinated notes that carried a higher
fixed interest rate, decreases in the LIBOR rates and a
reduction in the applicable interest margin under our senior
credit facilities as a result of our improved financial
condition and the amendment of our senior credit facilities.
Other
expenses.
Our other expenses for
the nine months ended June 30, 2002 represent the write-off
of unamortized deferred financing costs of approximately
$1.0 million as a result of the amendment of our senior
credit facilities in April 2002.
Income taxes.
Our provision for income taxes for
the nine months ended June 30, 2003 was $8.9 million,
or 37.1% of pretax income, compared to $3.8 million, or
35.0% of pretax income, for the nine months ended June 30,
2002. The increase in the effective rate is primarily
attributable to higher state taxes for the nine months ended
June 30, 2003 as all state net operating loss carryforwards
were utilized in the nine months ended June 30, 2002. In
addition, a higher federal statutory rate applied to the nine
months ended June 30, 2003.
Income from continuing operations.
As a result of the foregoing, we
reported income from continuing operations for the nine months
ended June 30, 2003 of $15.1 million, as compared to
income from continuing operations of $7.0 million for the
nine months ended June 30, 2002.
Fiscal Year Ended September 30, 2002
Compared to Fiscal Year Ended September 30, 2001
Net revenues.
Our net revenues for the fiscal year ended September 30,
2002 were $144.4 million, representing an increase of
$34.9 million, or 31.9%, as compared to net revenues of
$109.5 million for the fiscal year ended September 30,
2001. This increase was primarily due to a 23.4% increase in the
average undergraduate full-time student population and an
increase in the average tuition charge per student resulting
from tuition increases of between 3% and 5%, depending on the
program, and a modest shift in the mix of enrollments toward
higher priced programs. For the fiscal year ended
September 30, 2002, our average undergraduate full-time
student enrollment was 8,277, compared with 6,710 for the fiscal
year ended September 30, 2001. We have been able to
accommodate the increase in student enrollments by improving the
utilization of our existing facilities and opening a new campus
in July 2002, as well as expanding our existing facilities.
Educational services and facilities
expenses.
Our educational services
and facilities expenses for the fiscal year ended
September 30, 2002 were $70.8 million, representing an
increase of $11.3 million, or 18.9%, compared to
educational services and facilities expenses of
$59.6 million for the fiscal year ended September 30,
2001. This increase was primarily due to incremental education
expenses related to higher average student enrollments and
additional costs of $1.8 million incurred in connection
with the start-up and operation of our new campus that was
opened in July 2002. Educational services and facilities
expenses as a percentage of net revenues decreased to 49.0% of
net revenues for the fiscal year ended
35
Selling, general and administrative
expenses.
Our selling, general and
administrative expenses for the fiscal year ended
September 30, 2002 were $51.5 million, representing an
increase of $13.2 million, or 34.5%, as compared to
selling, general and administrative expenses of
$38.3 million for the fiscal year ended September 30,
2001. This increase is primarily attributable to an incremental
increase in marketing and student enrollment expenses related to
higher student enrollments, an increase in administrative
expense resulting from investments to further develop our
corporate infrastructure and an increase in bad debt expense and
professional services costs. In fiscal 2002, we made further
investments in our corporate infrastructure by adding additional
management personnel to accommodate our growth during that
period as well as by increasing the number of our education
representatives to support future growth. Selling, general and
administrative expenses for the fiscal year ended
September 30, 2002 also include $0.6 million related
to the write-off of a related party note receivable and
$1.0 million in professional services costs incurred in
connection with our recapitalization completed in April 2002.
Selling, general and administrative expenses as a percentage of
net revenues increased to 35.7% of net revenues for the fiscal
year ended September 30, 2002 from 35.0% in the fiscal year
ended September 30, 2001.
Interest
expense.
Our interest expense for
the fiscal year ended September 30, 2002 was
$6.8 million, representing a decrease of $4.4 million,
or 39.2%, as compared to interest expense of $11.1 million
for the fiscal year ended September 30, 2001. This decrease
was primarily due to a decrease in the average debt balance
outstanding during the 2002 period and a decrease in the average
rate of interest we paid on our indebtedness to 7.8% for the
fiscal year ended September 30, 2002 from 10.0% for the
fiscal year ended September 30, 2001. The decrease in our
average debt balance outstanding was primarily due to the
repayment of $23.4 million of our 13.5% subordinated notes
and repayment of $17.9 million of long term debt under our
existing senior credit facilities and a portion of the term
loans outstanding under our senior credit facilities
concurrently with our recapitalization completed in April 2002,
as well as scheduled repayments under the senior credit
facilities. The decrease in the average rate of interest we paid
on our indebtedness was primarily attributable to the repayment
of the 13.5% subordinated notes that carried a higher fixed
interest rate and the decrease in the interest rate margins
applicable on borrowings under our senior credit facilities
following their amendment.
Other
expenses.
Our other expenses for
the fiscal year ended September 30, 2002 include the
write-off of unamortized deferred financing costs that we were
no longer able to amortize as a result of the amendment of our
senior credit facilities in April 2002 of approximately
$1.0 million which was partially offset by a gain on the
sale of miscellaneous securities.
Income taxes.
Our provision for income taxes for
the fiscal year ended September 30, 2002 was
$5.2 million, or 35.0% of pretax income, compared to
$0.8 million, or 87.9% of pre-tax income for the fiscal
year ended September 30, 2001. This decrease is primarily
due to lower state income taxes as a percentage of net income
and non-deductible items representing a lower percentage of
pre-tax income for the fiscal year ended September 30, 2002
as compared to the fiscal year ended September 30, 2001.
Income from continuing
operations.
As a result of the
foregoing, we reported income from continuing operations of
$9.7 million for the fiscal year ended September 30,
2002, compared to $0.1 million for the fiscal year ended
September 30, 2001.
Fiscal Year Ended September 30, 2001
Compared to Fiscal Year Ended September 30, 2000
Net revenues.
Our net revenues for the fiscal
year ended September 30, 2001 were $109.5 million,
representing an increase of $17.4 million, or 18.9%,
compared to net revenues of $92.1 for the fiscal year ended
September 30, 2000. This increase was primarily due to a
14.4% increase in the average undergraduate full-time student
population, an increase of approximately $3.9 million in
net revenues attributable to our advanced training programs and
an increase in the average tuition charge per student resulting
primarily from tuition increases of between 3% and 5%, depending
on the program. For the fiscal
36
Educational services and facilities
expenses.
Our educational services
and facilities expenses for the fiscal year ended
September 30, 2001 were $59.6 million, representing an
increase of $11.0 million, or 22.7%, as compared to
educational services and facilities expenses of
$48.5 million for the fiscal year ended September 30,
2000. This increase was primarily attributable to incremental
education expenses related to higher average student
enrollments. Educational services and facilities expenses as a
percentage of net revenues increased to 54.4% of our net
revenues for the fiscal year ended September 30, 2001 from
52.7% for the fiscal year ended September 30, 2000.
Selling, general and administrative
expenses.
Our selling, general and
administrative expenses for the fiscal year ended
September 30, 2001 were $38.3 million, representing an
increase of $4.4 million, or 13.1%, as compared to selling,
general and administrative expenses of $33.9 million for
the fiscal year ended September 30, 2000. This increase was
primarily due to incremental marketing and student enrollment
expenses in the 2001 period to support future growth in student
enrollments, partially offset by a decrease in our bad debt
expense following a change in the administration of our
non-Title IV student loan program which was previously
guaranteed by us. Selling, general and administrative expenses
as a percentage of net revenues decreased to 35.0% of net
revenues for the fiscal year ended September 30, 2001 from
36.8% for the fiscal year ended September 30, 2000.
Interest expense.
Our interest expense for the
fiscal year ended September 30, 2001 was
$11.1 million, representing a decrease of
$1.3 million, or 10.8%, as compared to interest expense of
$12.5 million for the fiscal year ended September 30,
2000. This decrease was primarily due to a reduction in the
average debt balance outstanding and a decrease in the average
rate of interest we paid on our indebtedness. The reduction in
the average debt balance outstanding during the fiscal year
ended September 30, 2001 was due to a reduction of our
borrowings under our senior credit facilities following regular
amortization payments under that facility, and the decrease in
the average rate of interest we paid on our indebtedness during
the same period was primarily due to decreases in the LIBOR
rates.
Income taxes.
Our provision for income taxes for
the fiscal year ended September 30, 2001 was
$0.8 million, or 87.9% of pre-tax income, compared to a
benefit of $0.4 million for the fiscal year ended
September 30, 2000. This change was primarily due to the
fact that we reported net income from continuing operations for
the fiscal year ended September 30, 2001 as compared to a
loss from continuing operations for the fiscal year ended
September 30, 2000.
Income from continuing
operations.
As a result of the
foregoing, we reported income from continuing operations of
$0.1 million for the fiscal year ended September 30,
2001, as compared to a loss from continuing operations of
$1.8 million for the fiscal year ended September 30,
2000.
Discontinued Operations
In June 1998, we acquired National Technology
Transfer, Inc., or NTT, and Performance Training Associates, or
PTA, a wholly owned subsidiary of NTT at the date of
acquisition. NTT provides intensive training seminars to
technicians in sectors similar to the sectors that we serve. PTA
organized lecture training seminars in markets similar to those
in which NTT is active. The acquisition of NTT and PTA was
completed for approximately $50.2 million, comprised of
$37.8 million we borrowed under our senior credit
facilities to finance the acquisition, our issuance of a
$5.2 million subordinated convertible promissory note
payable to the former NTT and PTA shareholder, our issuance of a
$5.4 million 60-day note payable to the former NTT and PTA
shareholder and $1.8 million in transaction costs. PTA was
subsequently merged into NTT. In September 2001, we sold our
interest in NTT for a nominal consideration to certain of our
stockholders. The NTT business has been reflected in our
consolidated financial statements included in this prospectus as
a discontinued operation. Losses related to the operations (net
of taxes) of NTT were $34.4 million and $8.5 million
in our fiscal years ended September 30, 2000 and 2001,
respectively.
37
Liquidity and Capital Resources
Liquidity
During the last three fiscal years and the nine
months ended June 30, 2003, we financed our operating
activities and capital expenditures principally from net cash
provided by operating activities.
Net cash from operations is attributable
primarily to net income adjusted for depreciation and changes in
working capital items. Net cash provided by operating activities
was $25.8 million during the nine months ended
June 30, 2003, an increase of $16.0 million, or
163.5%, from $9.8 million during the comparable period in
2002. This increase was primarily due to the increase in net
income in the 2003 period, an increase in accounts payable and
accrued expenses related to the purchase of supplies and
equipment as a result of the increase in average student
enrollments and an additional four days of accrued salaries and
related expenses due to the timing of payroll payments, an
increase related to accrued health care benefits for a self
insured benefit plan and an increase in employees.
Net cash provided by operating activities was
$20.5 million during the fiscal year ended
September 30, 2002, an increase of $9.7 million, or
90.2%, from $10.8 million during the fiscal year ended
September 30, 2001. This increase was primarily due to the
increase in net income in the 2001 period, an increase in
deferred tuition revenue and accrued salaries and related
benefits partially offset by an increase in receivables and
prepaid expenses.
Net cash provided by operating activities was
$10.8 million during the fiscal year ended
September 30, 2001, an increase of $5.0 million, or
87.0%, from $5.8 million during the fiscal year ended
September 30, 2000. This increase was primarily due to the
increase in net income in the 2001 period, as well as an
increase in accrued salaries and benefits, including accrued
bonuses, partially offset by an increase in deferred income
taxes primarily related to our arrangement with Snap-on-Tools.
A majority of our net revenues are derived from
Title IV Programs. Federal regulations dictate the timing
of disbursements of funds under Title IV Programs. Students
must apply for a new loan for each academic year (thirty-week
periods). Loan funds are generally provided by lenders in two
disbursements for each academic year. The first disbursement is
usually received 30 days after the start of a
students academic year and the second disbursement is
typically received at the beginning of the sixteenth week from
the start of the students academic year. Certain types of
grants and other funding are not subject to a 30-day delay. Our
undergraduate programs are typically designed to be completed in
twelve to eighteen months. In certain instances, if a student
withdraws from a program prior to a specified date, any paid but
unearned tuition or prorated Title IV financial aid is
refunded.
Capital
Expenditures
Our cash used in investing activities is
primarily related to the purchase of property and equipment. Our
capital expenditures primarily result from the addition of new
and the expansion of existing facilities, investment in tools,
classroom technology and other equipment that supports our
program offerings and our student management and reporting
system. Net cash used in investing activities was
$3.2 million, $5.5 million, $5.8 million and
$5.7 million for fiscal 2000, 2001, 2002 and the nine
months ended June 30, 2003. We estimate that for fiscal
2003, expenditures for property, plant and equipment and other
investments will approximate $11.6 million in the
aggregate. Capital expenditures are primarily related to ongoing
replacements related to student training as well as costs
associated with expansion of new and existing campuses. In
addition, capital improvements consist of upgrades of various
systems used throughout our company and therefore reflected as
selling, general and administrative expenses. Capital
expenditures are expected to increase as we upgrade and expand
current equipment and facilities or open new facilities to meet
increased student enrollments. We expect to be able to fund
these capital expenditures with cash generated from operations.
At the current time, we have no material commitments for capital
expenditures. Furthermore, our strategy includes considering
strategic acquisitions in the future. To the extent that
potential acquisitions are large enough to require financing
beyond cash from operations
38
We lease all of our facilities. We expect to make
future payments on existing leases from cash provided from
operations.
Our total debt was $60.9 million as of
September 30, 2002 and $58.8 million as of June 30,
2003.
The following schedule sets forth our long-term
debt obligations as of September 30, 2000, 2001 and 2002
and June 30, 2003.
At June 30, 2003, the term A loan
facility, the term B loan facility and the revolving credit
facility bore interest at a rate equal to (a) in the case
of the term A loan facility and the revolving credit
facility, LIBOR plus 2.75% to 3.50% or, at our option, the
alternate base rate (as defined in the senior credit facilities)
plus 1.50% to 2.25% and (b) in the case of the term
B loan facility, LIBOR plus 3.25% to 4.00% or, at our
option, the alternate base rate plus 2.00% to 2.75%, in each
case depending on our leverage ratio during the applicable
interest period. In addition to paying interest on outstanding
principal under the senior credit facilities, we are required to
pay a commitment fee to the lenders under the revolving credit
facility with respect to the unused commitments at a rate equal
to 0.5% per year and a risk participation fee equal to 1.5% per
year to the lenders under the term A loan facility and the
issuers of letters of credit under our senior credit facilities
with respect to the term A loan borrowing and the amount of
such letters of credit, as applicable. The revolving credit
facility and the term A loan facility mature on
March 31, 2007 and the term B loan facility matures on
March 31, 2009. The term A loan and term B loan
facilities provide for quarterly amortization payments that
increase over time. See Contractual
Obligations.
Our revolving credit facility is available for
working capital, capital expenditures, other general corporate
purposes and to support letters of credit issued under the
facility. The amount available under the revolving credit
facility is reduced by the amount of outstanding letters of
credit. As a result of our failure to meet the standards of
financial responsibility prescribed by the U.S. Department
of Education, or ED, primarily due to our level of indebtedness,
we have posted a letter of credit issued under our senior credit
facilities in favor of ED in the amount of $6.4 million as
of September 30, 2002 and $7.6 million as of
June 30, 2003. In November 2003, we expect to increase the
amount under that letter of credit by approximately
$1.8 million due to our failure to meet the financial
responsibility standards prescribed by
39
Our senior credit facilities contain a number of
covenants that, among other things, restrict our ability to:
incur additional indebtedness, grant liens or other security
interests, make investments, become liable for contingent
obligations, make specified restricted payments, dispose of
assets or stock of our subsidiaries, or make capital
expenditures above a specified limit. Our senior credit
facilities also require us to comply with specified financial
ratios and tests, including minimum fixed charge coverage and
interest coverage ratios and maximum leverage ratios, which
become more stringent over time. Furthermore, our senior credit
facilities contain customary events of default as well as an
event of default in the event that any of our institutions loses
any accreditation necessary for Title IV Program
eligibility, or the ability of any such institution to
participate in Title IV Programs is cancelled, and such
loss or cancellation is not cured within a specified period.
In July 2003, we amended our senior credit
facilities to further increase the availability under the
revolving loan facility from $20.0 million to
$30.0 million. The amendment also decreased the interest
rate for borrowings under our senior credit facilities to, in
the case of the term A loan facility and the revolving loan
facility, LIBOR plus 2.50% to 3.50% or the prime rate plus 1.25%
to 2.25% and, in the case of the term B loan facility,
LIBOR plus 3.00% to 4.00% or the prime rate plus 1.75% to 2.75%,
in each case depending on our leverage ratio during the
applicable interest period, and increased the level of permitted
capital expenditures. In connection with this amendment, we
prepaid without penalty, with available cash on hand,
$15.0 million of borrowings under our term loan B
facility.
In April 2002, we issued shares of our
series D convertible preferred stock to a number of
investors, including Charlesbank Capital Partners, LLC, and
Worldwide Training Group, LLC and, in connection with that
issuance, received net proceeds of approximately
$42.0 million. We used the net proceeds from the issuance
of our series D convertible preferred stock to repay
$23.4 million of our 13.5% subordinated promissory notes
and to prepay approximately $17.9 million of borrowings
under our senior credit facilities. In connection with our April
2002 recapitalization, we amended our senior credit facilities
to increase the availability under the revolving loan facility
and the limit on the letters of credit that may be issued under
that facility.
In August 2003, we retired at a 10% discount a
subordinated convertible promissory note having a principal
amount of approximately $7.0 million using available cash
on hand of $6.3 million.
Also in August 2003, we repaid in full,
including all accrued interest, a promissory note in the
principal sum of $4.0 million that we had issued in
September 1997 in favor of Whites Family Company,
LLC, an entity controlled by John C. White. This note bore
interest at approximately 6.6% and was due on or before
September 2023. Immediately following this repayment,
Whites Family Company, LLC remitted to us approximately
$4.0 million in satisfaction of the principal amount of,
and accrued interest on, a subscription note receivable bearing
interest at approximately 6.1%.
We will use a portion of the net proceeds from
this offering to prepay all amounts outstanding under our term
loan A and term loan B facilities. Future borrowings
and repayments under our revolving loan facility will be based
upon the level of our net cash from operating activities and
payment requirements for capital spending and possible future
acquisitions.
40
In September 2003, we paid a $5.0 million
dividend to our common stockholders and the holders of the
series D preferred stock. Following consummation of this
offering, we do not expect to pay any dividends on our common
stock for the foreseeable future.
We believe that the portion of the net proceeds
of the offering that we plan to use for working capital and
general corporate purposes, together with our cash flows from
operations and borrowings from time to time under the revolving
credit facility, will provide adequate funds for ongoing
operations, expansion to new locations, planned capital
expenditures and debt service for the next 12 to
18 months.
Contractual Obligations
The following table sets forth, as of
June 30, 2003, the aggregate amounts of our significant
contractual obligations and commitments with definitive payment
terms that will require significant cash outlays in the future.
On September 15, 2003, Universal Technical
Institute of Arizona executed a Construction Agency Agreement
and Lease Agreement with an independent third party lessor in
connection with a build-to-suit lease for the replacement of one
of our existing campuses. The obligations of Universal Technical
Institute of Arizona under these agreements are guaranteed by
Universal Technical Institute, Inc. The lease anticipates an
occupancy date of June 2004 with an initial term of
20 years. Our lease payments are estimated to be
approximately $230,000 per month. Further increases in monthly
rent are based on changes in the consumer price index. It is
currently anticipated that this new facility will replace our
current Phoenix, Arizona facility in the summer of 2004.
Related Party Transactions
We will offer to exchange the outstanding shares
of our series A preferred stock, series B preferred
stock and series C preferred stock for shares of our common
stock immediately prior to the consummation of this offering. We
intend to use
$ million
of the net proceeds from this offering to redeem all outstanding
shares of our series A preferred stock, series B
preferred stock and series C preferred stock that are not
exchanged for shares of our common stock and to pay all the
accrued and unpaid dividends on the preferred stock (whether or
not exchanged). The following table shows the amounts that our
affiliates will receive from the net proceeds of this offering
for the redemption of our series A preferred
41
We lease some of our properties from entities
controlled by John C. White, our Chief Strategic Planning
Officer and Vice Chairman of our board of directors. A portion
of the property comprising our Orlando location is occupied
pursuant to a lease with the John C. and Cynthia L. White 1989
Family Trust, with the lease term expiring on August 19,
2022. The annual base lease payments for the first year under
this lease total approximately $326,000, with annual adjustments
based on the higher of (i) an amount equal to 4% of the
total annual rent for the immediately preceding year or
(ii) the percentage of increase in the Consumer Price
Index. Another portion of the property comprising our Orlando
location is occupied pursuant to a lease with Delegates LLC, an
entity controlled by the White Family Trust, with the lease term
expiring on July 1, 2016. The beneficiaries of this trust
are Mr. Whites children, and the trustee of the trust
is not related to Mr. White. Annual base lease payments
under this lease are approximately $680,000, with annual
adjustments based on the higher of (i) an amount equal to
4% of the total annual rent for the immediately preceding year
or (ii) the percentage of increase in the Consumer Price
Index. Additionally, we lease two of our Phoenix properties
under one lease from City Park LLC, a successor in interest of
2844 West Deer Valley L.L.C. and in which the John C. and
Cynthia L. White 1989 Family Trust holds a 25% interest.
The lease expires on February 28, 2015, and the annual base
lease payments under this lease, as amended, are approximately
$463,000 for 2002, with annual adjustments based on the higher
of (i) an amount equal to 4% of the total annual rent for
the immediately preceding year or (ii) the percentage of
increase in the Consumer Price Index. The table below sets forth
the total payments that we made in fiscal 2000, 2001, 2002 and
2003 (until June 30, 2003) under these leases:
We believe that the rental rates under these
leases approximate the fair market rental value of the
properties at the time the lease agreements were negotiated.
For a description of additional related party
transactions, see Certain Relationships and Related
Transactions.
Seasonality
Our net revenues and operating results normally
fluctuate as a result of seasonal variations in our business,
principally due to changes in total student population. Student
population varies as a result of new student enrollments,
graduations and student attrition. Historically, our schools
have had lower student populations in our third fiscal quarter
than in the remainder of our fiscal year because fewer students
are enrolled during the summer months. Our expenses, however, do
not vary significantly with changes in student population and
net revenues and, as a result, such expenses do not fluctuate
significantly on a quarterly basis. We expect quarterly
fluctuations in operating results to continue as a result of
seasonal enrollment patterns. Such patterns may change, however,
as a result of acquisitions, new school openings, new program
introductions and increased enrollments of adult students. For
example, in the 2003 fiscal
42
Quantitative and Qualitative Disclosures about
Market Risk
Our principal exposure to market risk relates to
changes in interest rates. At June 30, 2003, we had
$47.3 million of loans outstanding under our senior credit
facilities, all of which bear interest based on LIBOR or prime
rate. Each 1% increase in these interest rates could add
$473,000 per year to our interest expense.
The fair value of our fixed rate long-term debt
is sensitive to interest rate changes. Interest rate changes
would result in increases or decreases in the fair value of our
debt due to differences between market interest rates and rates
in effect at the inception of our debt obligation. Changes in
the fair value of our fixed rate debt have no impact on our cash
flows or consolidated financial statements.
Effect of Inflation
To date, inflation has not had a significant
effect on our operations.
Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards
Board (FASB) issued SFAS No. 143, Accounting for
Asset Retirement Obligations. SFAS No. 143 addresses
financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 is
effective for financial statements issued for fiscal years
beginning after June 15, 2002, and we expect that the
adoption will not have a material impact on our consolidated
financial condition or results of operations.
In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which addresses financial accounting
and reporting for the impairment or disposal of long-lived
assets. SFAS No. 144 retains the fundamental provisions of
existing accounting principles generally accepted in the United
States with respect to the recognition and measurement of
long-lived asset impairment contained in SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. SFAS No. 144
also provides additional guidance intended to address certain
significant implementation issues associated with SFAS
No. 121, including expanded guidance with respect to
appropriate cash flows to be used in determining whether
recognition of a long-lived asset impairment is required, and if
required, how to measure the amount of the impairment. SFAS
No. 144 also requires that any net assets to be disposed of
by sale be reported at the lower of carrying value or fair value
less cost to sell, and expands the reporting of discontinued
operations to include any component of any entity with
operations and cash flows that can be clearly distinguished from
the rest of the entity. SFAS No. 144 is effective for
financial statements issued for fiscal years beginning after
December 15, 2001, and our adoption of it on
October 1, 2002 did not have a material effect on our
consolidated financial condition or results of operations.
In April 2002, the FASB issued SFAS No. 145,
Rescission of SFAS Nos. 4, 44 and 64, Amendment of
SFAS 13, and Technical Corrections. SFAS No. 145
rescinds SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and excludes extraordinary item
treatment for gains and losses associated with the
extinguishment of debt that do not meet the criteria for such
treatment, as outlined in APB Opinion No. 30,
Reporting the Results of Operations Reporting
the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. Any gain or loss on extinguishment of debt
that was previously classified as an extraordinary item in the
reported financial results that does not meet the criteria in
APB Opinion No. 30 for classification as an extraordinary
item shall be reclassified. SFAS No. 145 was effective
beginning after
43
In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or
disposal activities and replaces Emerging Issues Task Force
(EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a
Restructuring). SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred and should
be initially measured at fair value. Under EITF Issue
No. 94-3, a liability for such costs is recognized as of
the date of an entitys commitment to an exit plan. The
provisions of SFAS No. 146 are effective for exit or
disposal activities that we initiated after December 31,
2002. Our adoption of SFAS No. 146 did not have a material
effect on our financial condition or results of operations.
In November 2002, the FASB issued Interpretation
(FIN) No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. FIN No. 45
requires certain guarantees to be recorded at fair value and
also requires a guarantor to make certain disclosures regarding
guarantees. FIN No. 45s initial recognition and
initial measurement provisions are applicable on a prospective
basis to guarantees issued or modified after December 31,
2002. Our adoption of this Interpretation did not have a
material impact on our consolidated financial statements or
disclosures.
In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure. This
statement amends SFAS No. 123, Accounting for
Stock-Based Compensation An Amendment of
SFAS No. 123. Although SFAS 148 does not
require use of the fair value method of accounting for
stock-based employee compensation, it does provide alternative
methods of transition. It also amends the disclosure provisions
of SFAS 123 and APB Opinion No. 28, Interim
Financial Reporting, to require disclosure in the summary
of significant accounting policies or the effects of an
entitys accounting policy with respect to stock-based
employee compensation on reported net income and earnings per
share in annual and interim financial statements. SFAS
148s amendment of the transition and annual disclosure
requirements is effective for fiscal years ending after
December 15, 2002. The amendment of disclosure requirements
of APB Opinion No. 28 is effective for interim periods
beginning after December 15, 2002. Our adoption of SFAS
No. 148 has resulted in expanded disclosure to include the
effect of stock-based compensation in interim reporting.
In January 2003, the FASB issued FIN No. 46,
Consolidation of Variable Interest Entities, an
Interpretation of ARB 51. FIN No. 46 provides
guidance on the identification of entities of which control is
achieved through means other than voting rights (variable
interest entities or VIEs) and how to
determine when and which business enterprise should consolidate
the VIE (the primary beneficiary). In addition, FIN
No. 46 requires that both the primary beneficiary and all
other enterprises with a significant variable interest in a VIE
make additional disclosures. The transitional disclosure
requirements of FIN No. 46 are required in all financial
statements initially issued after January 31, 2003, if
certain conditions are met. Our adoption of this Interpretation
did not have a material impact on our consolidated financial
statements or disclosures.
In April 2003, the FASB issued SFAS No. 149,
Amendment of Statement 133 on Derivative Instruments
and Hedging Activities. SFAS No. 149 amends and
clarifies the accounting guidance on derivative instruments
(including certain derivative instruments embedded in other
contracts) and hedging activities that fall within the scope of
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS No. 149 is effective
prospectively for contracts entered into or modified after
June 30, 2003, with certain exceptions, and for hedging
relationships designated after June 30, 2003. Our adoption
of SFAS No. 149 did not have a material impact on our
consolidated financial statements or disclosures.
44
In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS
No. 150 changes the accounting and disclosure requirements
for certain financial instruments that, under previous guidance,
could be classified as equity. The guidance in SFAS No. 150
is generally effective for all financial instruments entered
into or modified after May 31, 2003 and is otherwise
effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of SFAS No. 150 is
not expected to have a material impact on our consolidated
financial statements or disclosures.
45
Nine Months Ended
Year Ended September 30,
June 30,
2000
2001
2002
2002
2003
$
(37,386
)
$
(10,905
)
$
6,817
$
5,286
$
11,706
21
(6
)
(1
)
(72
)
(40
)
(116
)
$
(37,392
)
$
(10,906
)
$
6,745
$
5,246
$
11,611
$
(12,108.04
)
$
(3,539.74
)
$
2,212.96
$
1,715.86
$
3,790.86
$
(12,108.04
)
$
(3,539.74
)
$
1,901.48
$
1,488.39
$
2,532.07
$
(12,109.87
)
$
(3,540.02
)
$
2,189.68
$
1,702.82
$
3,753.19
$
(12,109.87
)
$
(3,540.02
)
$
1,886.07
$
1,479.02
$
2,511.63
Nine Months
Year Ended September 30,
Ended June 30,
2000
2001
2002
2002
2003
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
52.7
%
54.4
%
49.0
%
49.1
%
47.0
%
36.8
%
35.0
%
35.7
%
34.7
%
34.0
%
89.5
%
89.4
%
84.7
%
83.8
%
81.0
%
10.5
%
10.6
%
15.3
%
16.2
%
19.0
%
(0.6)
%
(0.4)
%
(0.3)
%
(0.3)
%
(0.2)
%
13.5
%
10.1
%
4.7
%
5.4
%
2.2
%
0.0
%
0.0
%
0.6
%
0.9
%
0.0
%
12.9
%
9.7
%
5.0
%
6.0
%
2.0
%
(2.4)
%
0.9
%
10.3
%
10.2
%
17.0
%
(0.5)
%
0.8
%
3.6
%
3.6
%
6.3
%
(1.9)
%
0.1
%
6.7
%
6.6
%
10.7
%
Debt Service
Long-Term Debt
September 30,
June 30,
2000
2001
2002
2003
(in thousands)
$
$
$
$
18,281
14,188
19,150
17,625
55,635
54,966
29,850
29,625
23,400
23,400
4,000
4,000
4,000
4,000
6,126
6,616
7,011
7,011
1,852
1,408
891
504
109,294
104,578
60,902
58,765
5,172
7,242
3,016
3,705
$
104,122
$
97,336
$
57,886
$
55,060
Dividends
Future Liquidity Sources
Payments Due by Period
(in thousands)
Total
Less than 1 year
1-3 years
4-5 years
After 5 years
$
47,250
$
3,250
$
10,250
$
21,750
$
12,000
504
455
49
107,197
8,885
16,169
15,911
66,232
11,011
4,000
7,011
165,962
12,590
26,468
41,661
85,243
13,600
13,600
$
179,562
$
26,190
$
26,468
$
41,661
$
85,243
(1)
Minimum rental commitments.
(2)
Consists of a letter of credit in the amount of
$7.6 million issued under our senior credit facilities in
favor of ED as a result of our failure to meet the standards of
financial responsibility prescribed by ED and letters of credit
in the amount of $6.0 million issued under our senior
credit facilities to secure surety bonds issued on behalf of our
schools and education representatives with various state
agencies that regulate our activities.
Preferred Stock
Redemption Amount
(in thousands)
$
John C. and Cynthia L. White
City Park LLC
1989 Family Trust
Delegates LLC
$
381,841
$
293,942
$
321,543
$
447,795
$
299,597
$
404,912
$
462,567
$
364,508
$
644,715
$
370,481
$
298,081
$
592,732
BUSINESS
General
We are a leading provider of post-secondary
education for students seeking careers as professional
automotive, diesel, collision repair, motorcycle and marine
technicians. We offer undergraduate degree, diploma and
certificate programs at seven campuses across the United States,
and manufacturer-sponsored advanced programs at 22 dedicated
training centers. For the nine-month period ended June 30,
2003, our net revenues were $141.6 million, a 34.3%
increase over the nine-month period ended June 30, 2002,
and our average undergraduate enrollments were 10,228 full-time
students, a 25.3% increase over the nine-month period ended
June 30, 2002.
We work closely with leading original equipment
manufacturers (OEMs) in the automotive, diesel, motorcycle and
marine industries to understand their needs for qualified
service professionals. By staying current on the equipment and
technology employed by OEMs, we are able to continuously refine
and expand our programs and curricula. We believe that our
industry-oriented educational philosophy and national presence
have enabled us to develop valuable strategic relationships that
provide us with a significant competitive strength and support
our market leadership. We are a primary provider of
manufacturer-branded technician training programs for Audi of
America; American Honda Motor Co., Inc.; American Suzuki Motor
Corp.; BMW of North America, LLC; Ford Motor Co.;
Harley-Davidson Motor Co.; International Truck and Engine
Corp.; Jaguar Cars, Inc.; Kawasaki Motors Corp., U.S.A.;
Mercedes-Benz USA, LLC; Mercury Marine; Porsche Cars of North
America, Inc.; Volkswagen of America, Inc.; Volvo Car Corp.; and
Yamaha Motor Corp., USA.
Through our campus-based undergraduate programs,
we offer specialized technical education under the banner of
several well-known brands, including Universal Technical
Institute (UTI), Motorcycle Mechanics Institute and Marine
Mechanics Institute (collectively, MMI) and NASCAR Technical
Institute (NTI). Our undergraduate programs are designed to be
completed in 12 to 18 months and culminate in an
associates degree, diploma or certificate, depending on
the program and campus. Tuition ranges from approximately
$17,000 to $31,000 per program, primarily depending on the
nature and length of the program. All of our undergraduate
programs are accredited and eligible for federal Title IV
financial aid. Upon completion of one of our automotive or
diesel undergraduate programs, qualifying students have the
opportunity to enroll in one of the manufacturer-sponsored
advanced training programs that we offer. These training
programs are manufacturer-specific and are offered in a facility
in which the OEM supplies the cars, equipment, specialty tools
and curriculum. Tuition for these advanced training programs is
paid by each participating OEM in return for a commitment by the
student to work for a dealer of that OEM upon graduation. We
also provide continuing education and retraining to experienced
technicians at our customers sites or in our training
facilities.
Our History
We were founded in Phoenix, Arizona in 1965 to
educate students in automotive services. Since our inception, we
have expanded our programs with additional curricula and have
opened new campuses, growing internally and through
acquisitions. To address the needs of corporate clients, we
started providing continuing education and training for
technicians in 1980. In 1983, we opened our Houston, Texas
campus, and in 1988 we opened our Glendale Heights,
Illinois campus outside of Chicago. In 1998, we opened a campus
in Rancho Cucamonga, California.
In January 1998, we acquired all of the assets of
the parent company of MMI, which expanded our program offerings
to include motorcycle and marine technician training. From its
inception in 1973, MMI grew from a small operator of regional
training centers to an educational institution with campus
locations in Phoenix, Arizona and Orlando, Florida and
relationships with leading OEMs in the motorcycle and marine
industries. Concurrent with this acquisition, in order to
provide liquidity for certain stockholders and capital for the
acquisition of MMI, and to fund growth, we recapitalized our
company with the assistance of The Jordan Company, LLC. As
part of the recapitalization, we sold preferred and common
46
In July 1999, we entered into a licensing
arrangement with the National Association for Stock Car Auto
Racing (NASCAR) to build NTI. NTI is the nations first
NASCAR-licensed technical training school to combine general
automotive and NASCAR technology. The school is an extension of
NASCARs Officially Licensed Automotive Aftermarket
Program. Opened in July 2002, NTI is located in Mooresville,
North Carolina.
Industry
Based on estimates by the U.S. Department of
Education, National Center for Education Statistics,
expenditures for post-secondary education exceeded
$290 billion in the 2002-2003 academic year. While public
and private four-year colleges currently represent a majority of
this spending, a fast-growing segment of the post-secondary
education market is the field of technical, career-oriented
training. According to the Bureau of Labor Statistics,
occupations requiring a post-secondary vocational credential or
an academic degree, which accounted for 29% of all jobs in 2000,
will account for 42% of total job growth from 2000 to 2010. To
address the need for career-focused technical curricula,
post-secondary institutions are increasingly offering programs
in automotive technology, health sciences and information
technology. According to data collected by the
U.S. Department of Labor, there will be approximately
55,000 new job openings each year from 2000 to 2010 in the
fields we serve.
In recent years, there has been an increasing
shortage of qualified service technicians in the automotive,
diesel, collision repair, motorcycle and marine industries. This
shortage primarily is being driven by the rapid technological
advancement in these industries and an aging workforce. For
example, it is not unusual today for an automobile to have more
than 50 microprocessors to meet the need for sophisticated
engine controls, comply with fuel emissions standards, perform
advanced diagnostic analysis, enhance safety features (such as
anti-lock brakes or automatic airbags) and provide certain
comfort and convenience features (such as global positioning
systems or sophisticated climate controls). Aspiring technicians
must have sophisticated technical skills and be able to adapt to
continually changing technologies, making it increasingly
challenging for them to be self-trained. Furthermore,
technicians working for particular dealers of such manufacturers
need additional training to familiarize themselves with
technologies that are proprietary to those manufacturers. In
addition to creating employment requirements for new
technicians, these technological changes have increased the need
for continuing training for working technicians.
As a result of these trends, we believe that the
market for qualified service technicians is large, growing and
increasingly underserved. In 2000, the U.S. Department of
Labor estimated that there were approximately 840,000 working
automotive technicians in the United States, and that this
number was expected to increase by 18% from 2000 to 2010. These
estimates also indicate that the other industries we serve have
similar growth trends. Furthermore, the National Auto Dealers
Association cites a current shortage of approximately 60,000
automotive technicians.
The rapidly changing technologies in the fields
that we serve dictate that manufacturers and dealers continually
invest in their training programs. The recurring need and
resultant expense of training technicians has led many
manufacturers to outsource training that was formerly conducted
internally. Traditionally, manufacturers and dealers spend a
significant amount of time recruiting and training entry-level
technicians. Automotive manufacturers typically look to their
dealerships to recruit and screen applicants; however, local
dealerships may lack recruiting resources and expertise, making
it difficult for them to attract qualified candidates. By
outsourcing their recruiting and training, manufacturers and
dealers can better focus on their core activities. In addition,
by hiring technicians directly from our graduating classes,
manufacturers and dealers are able to benefit from our extensive
national recruiting
47
Competitive Strengths
We believe that we are well positioned to
capitalize on these market opportunities as a result of the
following competitive strengths:
48
Growth Strategy
We have a long history of providing high quality
educational programs to our students, helping many of them to
secure attractive positions in their chosen fields of specialty.
Our goal is to maintain and strengthen our role as a leading
provider of technical education services. We intend to pursue
the following growth strategies to attain this goal:
Schools and Programs
Through our campus-based school system, we offer
specialized technical education programs under the banner of
several well-known brands, including Universal Technical
Institute (UTI), Motorcycle Mechanics Institute and Marine
Mechanics Institute (collectively, MMI) and NASCAR Technical
Institute (NTI). Our undergraduate programs are designed to be
completed in 12 to 18 months and culminate in an
associates degree, diploma or certificate, depending on
the program and campus. Tuition
49
Our undergraduate schools and programs are
summarized in the following table:
Universal
Technical Institute (UTI)
UTI is one of the few schools in the
United States to offer automotive, diesel &
industrial, and collision repair and refinishing programs that
are master certified by the National Automotive Technicians
Education Foundation (NATEF), a division of the Institute for
Automotive Service Excellence (ASE). All UTI programs are
accredited and culminate in an associates degree or
diploma, depending on the program and campus. Students also have
the option to enhance their core program through the Ford
Accelerated Credential Training (FACT) Elective, a
Ford-specific program that allows them to become Ford-certified
technicians.
50
Established in 2002, NTI offers the same type of
automotive training as UTI does, but with additional
NASCAR-specific courses. In addition to the training received in
our Automotive Technology program, students are able to learn
first-hand on NASCAR engines and equipment and to learn specific
skills required for entry-level positions in NASCAR-related
career opportunities. The program ranges from 57 to
73 weeks in duration and tuition ranges from $25,100 to
$31,200. Similar to graduates of the Automotive Technology
program, NTI graduates are qualified to work as entry-level
service technicians in automotive repair facilities or
automotive dealer service departments. A small percentage of
these graduates may have the opportunity to work on NASCAR
technician teams.
Manufacturer-Sponsored
Programs
51
Strategic Relationships
We have an extensive network of strategic
relationships that provide a wide range of strategic and
financial benefits, including product/ financial support,
licensing and manufacturer training.
An example of a product/financial support
relationship is:
An example of a licensing arrangement is:
52
Student Recruitment Model
We strive to increase our school enrollment and
profitability through a dedicated marketing program designed to
maximize market penetration. Our strategy is to recruit a
geographically dispersed and demographically diverse student
body, including both recent high school graduates and adults.
Due to the diverse backgrounds and locations of students who
attend our schools, we utilize a variety of marketing techniques
to recruit applicants to our programs, including:
53
Student Admissions and Retention
We currently employ 194 field- and campus-based
education representatives who work directly with prospective
students to facilitate the enrollment process. At each campus,
student admissions are overseen by an admissions department that
reviews each application. We screen prospective student
applications to increase the likelihood that all admitted
students are capable of completing the requisite coursework and
ready to obtain employment following graduation. Different
programs have varying admissions standards. For example,
applicants for the diploma and associate of occupational studies
programs must be at least 16 years of age and have a high
school diploma or certification of high school equivalency
(G.E.D.). Applicants for the certificate programs must have a
high school diploma or G.E.D. or be beyond the age of compulsory
school attendance and have the ability to benefit from the
training offered, as determined by personal interviews and
performance on the Wonderlic Scholastic Level Exam.
To maximize student persistence, we have staff
and other resources to assist and advise students regarding
academic, financial, personal and employment matters. Currently,
our student completion rate is typically above 70%, which we
believe compares favorably with other providers of comparable
educational/ training programs.
Enrollment
We enroll students continuously throughout the
year. For the nine months ended June 30, 2003, we had an
average enrollment of 10,228 full-time undergraduate students,
representing an increase of approximately 25.3% as compared to
the nine months ended June 30, 2002 and making us the
largest
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Graduate Placement
We believe that securing employment for our
graduates is critical to our ability to attract high quality
prospective students. In addition, high placement rates are
directly correlated to low student loan default rates, an
important requirement for continuing participation in
Title IV federal funding programs. Accordingly, we dedicate
significant resources to maintaining an efficient graduate
placement program. Our consolidated graduate placement rates
were 90%, 89% and 90% for our fiscal years 2000, 2001 and 2002,
respectively.
Our schools utilize their externship programs to
develop job opportunities and referrals. During the course of
each program, students receive instruction on job search and
interviewing skills and have available reference materials and
assistance with the composition of resumes.
Currently, over 3,200 employers participate
in the Tuition Reimbursement Incentive Program (TRIP), whereby
employers of our graduates make some or all of the
graduates monthly student loan payments for as long as
they employ the graduate or until the loan is paid in full,
whichever is earlier. We believe that TRIP provides us with a
more compelling value proposition to prospective students and
further enhances our relationship with our OEM partners.
Faculty and Employees
Faculty members are hired nationally in
accordance with established criteria, applicable accreditation
standards and applicable state regulations. Members of our
faculty are primarily industry professionals and are hired based
on their prior work and educational experience. We require a
specific level of industry experience in order to enhance the
quality of the programs that we offer and to address current and
industry-specific issues in the course content. We provide
intensive instructional training and continuing education to our
faculty members to maintain the quality of instruction in all
fields of study. Generally, our existing instructors have
between four and seven years teaching experience and our average
undergraduate student-to-teacher ratio is approximately 24-to-1.
The staff of each school includes a school
director, a director of graduate placement, an education
director, a director of student services, a financial-aid
director, an accounting manager or division controller and a
director of admissions. The staff is composed of industry
professionals with experience in the fields that we serve. As of
September 30, 2003, we had approximately
1,400 full-time employees, including approximately
600 student support employees and approximately
600 full-time faculty members.
None of our employees is represented by labor
unions or is subject to collective bargaining agreements.
Accordingly, we have never experienced a work stoppage, and we
believe that we have a good relationship with our employees.
However, as we open or acquire campuses in new geographic areas,
we may encounter employees who desire or maintain union
representation.
Seasonality
Our business is subject to seasonal variations,
principally due to changes in total student population. Student
population varies as a result of new student enrollments,
graduation and student attrition. Historically, our campuses
have had lower student populations in the third fiscal quarter
than in the remainder of the year because fewer students are
enrolled during the summer months. Our expenses, however, do not
significantly vary with changes in student population and net
revenues and, as a result, such expenses do not fluctuate
significantly on a quarterly basis. We expect quarterly
fluctuations in operating results to continue as a result of
seasonal enrollment patterns. Such patterns may change,
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Competition
The career-oriented school industry is highly
fragmented, with no one provider or public institution
controlling a significant market share. Generally, there is
limited direct competition between career-oriented schools and
traditional four-year colleges or universities. Our main
competitors are traditional public and private two-year junior
and community colleges, other proprietary career-oriented
schools and technical schools, including Lincoln Technical
Institute and Wyoming Technical Institute, which is owned by
Corinthian Colleges, Inc. We compete at a local and regional
level based primarily on the content, visibility and
accessibility of academic programs, the quality of instruction
and the time necessary to enter the workforce. We believe that
we are superior to our competitors in size, strategic
relationships, brand, reputation and recruiting capability.
Campuses and Other Properties
The following chart provides information relating
to our seven leased campuses and other leased properties:
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Environmental Matters
We use hazardous materials at our training
facilities and campuses, and generate small quantities of waste
such as used oil, antifreeze, paint and car batteries. As a
result, our facilities and operations are subject to a variety
of environmental laws and regulations governing, among other
things, the use, storage and disposal of solid and hazardous
substances and waste, and the clean-up of contamination at our
facilities or off-site locations to which we send or have sent
waste for disposal. We are also required to obtain permits for
our air emissions, and to meet operational and maintenance
requirements, including periodic testing, for an underground
storage tank located at one of our properties. In the event we
do not maintain compliance with any of these laws and
regulations, or are responsible for a spill or release of
hazardous materials, we could incur significant costs for
clean-up, damages, and fines or penalties.
Legal Proceedings
In the ordinary conduct of our business, we are
subject to periodic lawsuits, investigations and claims,
including, but not limited to, claims involving students or
graduates and routine employment matters. Although we cannot
predict with certainty the ultimate resolution of lawsuits,
investigations and claims asserted against us, we do not believe
that any currently pending legal proceeding to which we are a
party will have a material adverse effect on our business,
results of operations, cash flows or financial condition.
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REGULATORY ENVIRONMENT
Our schools and students participate in a variety
of government-sponsored financial aid programs to assist
students in paying the cost of their education. The largest
source of such support is the federal programs of student
financial assistance under Title IV of the Higher Education
Act of 1965, as amended, commonly referred to as Title IV
Programs, which are administered by the U.S. Department of
Education or ED. In our 2002 fiscal year, we derived
approximately 65% of our net revenues from Title IV
Programs.
To participate in Title IV Programs, a
school must be authorized to offer its programs of instruction
by relevant state education agencies, be accredited by an
accrediting commission recognized by ED, and be certified as an
eligible institution by ED. For this reason, our schools are
subject to extensive regulatory requirements imposed by all of
these entities.
State Authorization
Each of our schools must be authorized by the
applicable state education agency of the state in which the
school is located in order to operate and to grant degrees,
diplomas or certificates to its students. Our schools are
subject to extensive, ongoing regulation by each of these
states. State authorization is also required for an institution
to become and remain eligible to participate in Title IV
Programs. In addition, our schools are required to be authorized
by the applicable state education agencies of certain other
states in which our schools recruit students. Currently, each of
our schools is authorized by the applicable state education
agency or agencies.
The level of regulatory oversight varies
substantially from state to state, and is very extensive in some
states. State laws typically establish standards for
instruction, qualifications of faculty, location and nature of
facilities and equipment, administrative procedures, marketing,
recruiting, financial operations and other operational matters.
State laws and regulations may limit our ability to offer
educational programs and to award degrees, diplomas or
certificates. Some states prescribe standards of financial
responsibility that are different from, and in certain cases
more stringent than, those prescribed by ED, and some states
require schools to post a surety bond. Currently, we have posted
surety bonds on behalf of our schools and education
representatives with multiple states in a total amount of
approximately $8.0 million. These bonds are backed by
letters of credit. We believe that each of our schools is in
substantial compliance with state education agency requirements.
If any one of our schools lost its authorization from the
education agency of the state in which the school is located,
that school would be unable to offer its programs and we could
be forced to close that school. If one of our schools lost its
state authorization from a state other than the state in which
the school is located, the school would not be able to recruit
students in that state.
In August 2003, due to reduced state
appropriations, the State of Illinois eliminated the positions
of all employees in the office of the Illinois State Board of
Education, or ISBE, that authorizes and oversees private
business and technical schools, and that office has ceased to
function. That office oversees over 200 schools, including our
UTI school in Glendale Heights, Illinois. ISBE recently
reauthorized UTI/ Illinois to operate through June 2004. Despite
the elimination of the employee positions in ISBE, the State of
Illinois did not repeal or suspend the requirements imposed by
the Illinois Private Business and Vocational Schools Act. It is
not clear how the elimination of the employee positions in ISBE
will affect the ongoing operations of UTI/ Illinois, including
the implementation of any changes in operations for which the
school is required to obtain the approval of ISBE, such as a
change of control, the opening of a new campus, the introduction
of new programs or the hiring or placement of new education
representatives. Due to state budget constraints in other states
in which we operate, such as Texas and California, it is
possible that those states may reduce the number of employees
in, or curtail the operations of, the state education agencies
that authorize our schools. A delay or refusal by any state
education agency in approving any changes in our operations that
require state approval could prevent us from making such changes
or could delay our ability to make such changes.
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Accreditation
Accreditation is a non-governmental process
through which a school submits to ongoing qualitative review by
an organization of peer institutions. Accrediting commissions
primarily examine the academic quality of the schools
instructional programs, and a grant of accreditation is
generally viewed as confirmation that the schools programs
meet generally accepted academic standards. Accrediting
commissions also review the administrative and financial
operations of the schools they accredit to ensure that each
school has the resources necessary to perform its educational
mission.
Accreditation by an accrediting commission
recognized by ED is required for an institution to be certified
to participate in Title IV Programs. In order to be
recognized by ED, accrediting commissions must adopt specific
standards for their review of educational institutions. All of
our schools are accredited by the Accrediting Commission of
Career Schools and Colleges of Technology, or ACCSCT, an
accrediting commission recognized by ED. We believe that each of
our schools is in substantial compliance with ACCSCT
accreditation standards. If any one of our schools lost its
accreditation, students attending that school would no longer be
eligible to receive Title IV Program funding, and we could
be forced to close that school.
Nature of Federal and State Support for
Post-Secondary Education
The federal government provides a substantial
part of its support for post-secondary education through
Title IV Programs, in the form of grants and loans to
students who can use those funds at any institution that has
been certified as eligible by ED. Most aid under Title IV
Programs is awarded on the basis of financial need, generally
defined as the difference between the cost of attending the
institution and the amount a student can reasonably contribute
to that cost. All recipients of Title IV Program funds must
maintain a satisfactory grade point average and progress in a
timely manner toward completion of their program of study. In
addition, each school must ensure that Title IV Program funds
are properly accounted for and disbursed in the correct amounts
to eligible students.
Students at our schools receive grants and loans
to fund their education under the following Title IV
Programs: (1) the Federal Family Education Loan, or FFEL,
program, (2) the Federal Pell Grant, or Pell, program,
(3) the Federal Supplemental Educational Opportunity Grant,
or FSEOG, program, and (4) the Federal Perkins Loan, or
Perkins, program.
FFEL.
Under the FFEL program, banks and
other lending institutions make loans to students or their
parents. If a student or parent defaults on a loan, payment is
guaranteed by a federally recognized guaranty agency, which is
then reimbursed by ED. Students with financial need qualify for
interest subsidies while in school and during grace periods. In
our 2002 fiscal year, we derived more than 50% of our net
revenues from the FFEL program.
Pell.
Under the Pell program, ED makes
grants to students who demonstrate financial need. In our 2002
fiscal year, we derived less than 10% of our net revenues from
the Pell program.
FSEOG.
FSEOG grants are designed to
supplement Pell grants for students with the greatest financial
needs. An institution is required to make a 25% matching
contribution for all funds received from ED under this program.
In our 2002 fiscal year, we derived less than 1% of our net
revenues from the FSEOG program.
Perkins.
Perkins loans are made from a
revolving institutional account, 75% of which is capitalized by
ED and the remainder by the institution. Each institution is
responsible for collecting payments on Perkins loans from its
former students and lending those funds to currently enrolled
students. Defaults by students on their Perkins loans reduce the
amount of funds available in the applicable schools
revolving account to make loans to additional students, but the
school does not have any obligation to guarantee the loans or
repay the defaulted amounts. In our 2002 fiscal year, we derived
less than 1% of our net revenues from the Perkins program.
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Some of our students receive financial aid from
federal sources other than Title IV Programs, such as the
programs administered by the U.S. Department of Veterans
Affairs and under the Workforce Investment Act. In addition,
many states also provide financial aid to our students in the
form of grants, loans or scholarships. The eligibility
requirements for state financial aid and these other federal aid
programs vary among the funding agencies and by program. Several
states that provide financial aid to our students, including
California, are facing significant budgetary constraints. We
believe that the overall level of state financial aid for our
students is likely to decrease in the near term, but we cannot
predict how significant any such reductions will be or how long
they will last.
Regulation of Federal Student Financial Aid
Programs
To participate in Title IV Programs, an
institution must be authorized to offer its programs by the
relevant state education agencies, be accredited by an
accrediting commission recognized by ED and be certified as
eligible by ED. ED will certify an institution to participate in
Title IV Programs only after the institution has
demonstrated compliance with the Higher Education Act and
EDs extensive regulations regarding institutional
eligibility. An institution must also demonstrate its compliance
to ED on an ongoing basis. These standards are applied primarily
on an institutional basis, with an institution defined by ED as
a main campus and its additional locations, if any. Under this
definition, for ED purposes, we have the following three
institutions:
Main campus: Universal Technical Institute,
Phoenix, Arizona
Universal Technical Institute, Rancho Cucamonga,
California
Main campus: Motorcycle Mechanics Institute,
Phoenix, Arizona
Additional location: Motorcycle and Marine
Mechanics Institute, Orlando, Florida
Main campus: Universal Technical Institute,
Houston, Texas
Additional locations: None
All of our schools are currently certified by ED
to participate in Title IV Programs.
The substantial amount of federal funds disbursed
through Title IV Programs, the large numbers of students
and institutions participating in those programs and instances
of fraud and abuse by some schools and students in the past have
caused Congress to require ED to increase its level of
regulatory oversight. Accrediting commissions and state
education agencies also have responsibilities for overseeing
compliance of institutions with Title IV Program
requirements. As a result, each of our institutions is subject
to detailed oversight and review, and must comply with a complex
framework of laws and regulations. Because ED periodically
revises its regulations and changes its interpretation of
existing laws and regulations, we cannot predict with certainty
how the Title IV Program requirements will be applied in
all circumstances.
Significant factors relating to Title IV
Programs that could adversely affect us include the following:
Congressional Action.
Political and budgetary concerns
significantly affect Title IV Programs. Congress must
reauthorize the Higher Education Act approximately every six
years. The last reauthorization took place in 1998.
Consequently, Congress recently began the process of reviewing
and reauthorizing the Higher Education Act again, a process that
is expected to be concluded in late 2004. We
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In addition, Congress reviews and determines
federal appropriations for Title IV Programs on an annual
basis. Congress can also make changes in the laws affecting
Title IV Programs in the annual appropriations bills and in
other laws it enacts between the Higher Education Act
reauthorizations. Since a significant percentage of our net
revenues is derived from Title IV Programs, any action by
Congress that significantly reduces Title IV Program
funding or the ability of our schools or students to participate
in Title IV Programs could reduce our student enrollment
and net revenues. Congressional action may also increase our
administrative costs and require us to modify our practices in
order for our schools to comply fully with Title IV Program
requirements.
The 90/10
Rule.
A proprietary
institution, such as each of our institutions, loses its
eligibility to participate in Title IV Programs if, on a
cash accounting basis, it derives more than 90% of its revenue
for any fiscal year from Title IV Programs. Any institution
that violates this rule becomes ineligible to participate in
Title IV Programs as of the first day of the fiscal year
following the fiscal year in which it exceeds 90%, and is unable
to apply to regain its eligibility until the next fiscal year.
If one of our institutions violated the 90/10 Rule and became
ineligible to participate in Title IV Programs but
continued to disburse Title IV Program funds, ED would
require the institution to repay all Title IV Program funds
received by the institution after the effective date of the loss
of eligibility.
We have calculated that, for each of our 2000,
2001 and 2002 fiscal years, none of our institutions derived
more than 81.9% of its revenue from Title IV Programs for
any fiscal year. For our 2002 fiscal year, our
institutions 90/10 Rule percentages ranged from 74.0% to
80.5%. We regularly monitor compliance with this requirement to
minimize the risk that any of our institutions would derive more
than the maximum percentage of its revenue from Title IV
Programs for any fiscal year. If an institution appeared likely
to approach the maximum percentage threshold, we would consider
making changes in student financing to comply with the 90/10
Rule.
Student Loan Defaults.
An institution may lose its
eligibility to participate in some or all Title IV Programs
if the rates at which the institutions current and former
students default on their federal student loans exceed specified
percentages. ED calculates these rates based on the number of
students who have defaulted, not the dollar amount of such
defaults. ED calculates an institutions cohort default
rate on an annual basis as the rate at which borrowers scheduled
to begin repayment on their loans in one year default on those
loans by the end of the next year. An institution whose FFEL
cohort default rate is 25% or greater for three consecutive
federal fiscal years (which correspond to our fiscal years)
loses eligibility to participate in the FFEL and Pell programs
for the remainder of the federal fiscal year in which ED
determines that such institution has lost its eligibility and
for the two subsequent federal fiscal years. An institution
whose FFEL cohort default rate for any single federal fiscal
year exceeds 40% may have its eligibility to participate in all
Title IV Programs limited, suspended or terminated by ED.
None of our institutions has had an FFEL cohort
default rate of 25% or greater for any of the federal fiscal
years 1999, 2000 and 2001, the three most recent years for which
ED has published such rates. The following table sets forth the
FFEL cohort default rates for our institutions for those years.
An institution whose cohort default rate under
the FFEL program is 25% or greater for any one of the three most
recent federal fiscal years, or whose cohort default rate under
the Perkins program exceeds 15% for any federal award year (the
twelve-month period from July 1 through June 30), may
be placed on provisional certification status by ED for up to
four years. All of our institutions have Perkins cohort
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An institution whose Perkins cohort default rate
is 50% or greater for three consecutive federal award years
loses eligibility to participate in the Perkins program for the
remainder of the federal award year in which ED determines that
the institution has lost its eligibility and for the two
subsequent federal award years. None of our institutions has had
a Perkins cohort default rate of 50% or greater for any of the
last three federal award years. ED also will not provide any
additional federal funds to an institution for Perkins loans in
any federal award year in which the institutions Perkins
cohort default rate is 25% or greater. None of our institutions
has had its federal Perkins funding eliminated for the last two
federal award years for this reason.
Financial Responsibility Standards.
All institutions participating in
Title IV Programs must satisfy specific standards of
financial responsibility. ED evaluates institutions for
compliance with these standards each year, based on the
institutions annual audited financial statements, as well
as following a change of control of the institution.
The most significant financial responsibility
measurement is the institutions composite score, which is
calculated by ED based on three ratios:
ED assigns a strength factor to the results of
each of these ratios on a scale from negative 1.0 to
positive 3.0, with negative 1.0 reflecting financial
weakness and positive 3.0 reflecting financial strength. ED
then assigns a weighting percentage to each ratio and adds the
weighted scores for the three ratios together to produce a
composite score for the institution. The composite score must be
at least 1.5 for the institution to be deemed financially
responsible without the need for further oversight. If ED
determines that an institution does not satisfy EDs
financial responsibility standards, depending on its composite
score and other factors, that institution may establish its
financial responsibility on an alternative basis by, among other
things:
Beginning with our 1999 fiscal year, ED has
evaluated the financial condition of our institutions on a
consolidated basis based on the financial statements of
Universal Technical Institute, Inc., as the parent company.
EDs regulations permit ED to examine the financial
statements of Universal Technical Institute, Inc., as the parent
company, the financial statements of each institution and the
financial statements of any related party.
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Based on its review of the financial statements
of Universal Technical Institute, Inc., as the parent company,
for our fiscal years 1999, 2000 and 2001, ED found that we did
not have a composite score of 1.5 or higher. Consequently, since
November 2000, we have been required to post a letter of credit
on behalf of our institutions in favor of ED and to accept
provisional certification and additional ED reporting and
monitoring procedures. We currently have posted a letter of
credit in the amount of $7.6 million, representing approximately
10% of the total Title IV Program funds received by our
institutions in our 2001 fiscal year, as calculated by ED. In
addition, all of our institutions are provisionally certified
and are required to credit their students accounts before
requesting and receiving Title IV Program funds on behalf of
their students, and two of our institutions are required to file
additional reports with ED regarding their receipt of Title IV
Program funds. Based on our financial statements for our 2002
fiscal year, which we submitted to ED in March 2003, our
composite score at the parent company level remained below 1.5.
Consequently, when the existing letter of credit expires in
November 2003, we expect ED to require us to renew that letter
of credit at a higher amount, representing 10% of Title IV
Program funds received by our institutions in our 2002 fiscal
year. We anticipate that we will have to increase the amount of
that letter of credit by approximately $1.8 million with
respect to our 2002 fiscal year.
Return of Title IV Funds.
A school participating in
Title IV Programs must calculate the amount of unearned
Title IV Program funds that have been disbursed to students who
withdraw from their educational programs before completing them,
and must return those unearned funds to ED or the applicable
lending institution in a timely manner, which is generally
within 30 days from the date the institution determines
that the student has withdrawn.
If an institution is cited in an audit or program
review for returning Title IV Program funds late for 5% or
more of the students in the audit or program review sample, the
institution must post a letter of credit in favor of ED in an
amount equal to 25% of the total amount of Title IV Program
funds that should have been returned for students who withdrew
in the institutions previous fiscal year. Our 2002 fiscal
year Title IV compliance audits cited UTI/Texas and MMI for
exceeding the 5% late payment threshold. While ordinarily we
would be required to post letters of credit for this reason, ED
informed us that we were not required to post these additional
letters of credit because we had already posted a larger letter
of credit as a result of our financial responsibility composite
score being less than 1.5.
School Acquisitions.
When a company acquires a school
that is eligible to participate in Title IV Programs, that
school undergoes a change of ownership resulting in a change of
control as defined by ED. Upon such a change of control, a
schools eligibility to participate in Title IV
Programs is generally suspended until it has applied for
recertification by ED as an eligible school under its new
ownership, which requires that the school also re-establish its
state authorization and accreditation. ED may temporarily and
provisionally certify an institution seeking approval of a
change of control under certain circumstances while ED reviews
the institutions application. The time required for ED to
act on such an application may vary substantially. EDs
recertification of an institution following a change of control
will be on a provisional basis. Our expansion plans are based,
in part, on our ability to acquire additional schools and have
them certified by ED to participate in Title IV Programs.
Our expansion plans take into account the approval requirements
of ED and the relevant state education agencies and accrediting
commissions.
Change of Control.
In addition to school
acquisitions, other types of transactions can also cause a
change of control. ED, most state education agencies and our
accrediting commission all have standards pertaining to the
change of control of schools, but these standards are not
uniform. EDs regulations describe some transactions that
constitute a change of control, including the transfer of a
controlling interest in the voting stock of an institution or
the institutions parent corporation. For a company that is
privately held, but not closely held, which is the status of our
company prior to the offering, EDs regulations provide
that a change of ownership resulting in a change of control
occurs if any person either acquires or ceases to hold at least
25% of the companys total outstanding voting stock and
that person gains or loses actual control of the corporation.
With respect to a publicly-traded corporation, which will be the
status of our company after the offering, ED regulations provide
that a change of control occurs in one of two ways: (a) if
there is an event that would obligate the corporation to file a
Current Report on
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We have received confirmation from our
accrediting commission that this offering will not be a change
of control under its standards. We have submitted a description
of the offering to ED, and have asked ED to confirm our
understanding that the offering will not be a change of control
under its standards, but we have not yet received EDs
reply. We believe that the offering will be a change of control
under the standards of the state education agencies in Texas and
Illinois, but will not be a change of control under the
standards of any other education agencies of states in which our
schools are located. As a result, our schools in Texas and
Illinois will be required to be reauthorized by their respective
state education agencies. We believe that the offering will not
affect the ability of those schools to participate in
Title IV Programs unless any of those state education
agencies fail to reauthorize any of those schools in a timely
manner. The failure of any of those schools to re-obtain state
authorization would cause that school to lose its eligibility to
participate in Title IV Programs. In August 2003, due to
reduced state appropriations, the State of Illinois eliminated
the positions of all employees in the office of the Illinois
state education agency that oversees private business and
technical schools, and that office has ceased to function. It is
not clear how this action will affect the change of control
approval process in Illinois. Due to state budget problems in
other states, such as Texas, it is possible that such other
states may reduce the number of employees in the state education
agencies that authorize our schools or curtail those
agencies operations, which could affect the change of
control approval process in those states. We believe the
offering will not affect the ability of our schools in Arizona,
California, Florida and North Carolina to continue their
participation in Title IV Programs.
A change of control could occur as a result of
future transactions in which our company or schools are
involved. Some corporate reorganizations and some changes in the
board of directors are examples of such transactions. Moreover,
once we become a publicly-traded company, the potential adverse
effects of a change of control could influence future decisions
by us and our stockholders regarding the sale, purchase,
transfer, issuance or redemption of our stock. In addition, the
adverse regulatory effect of a change of control also could
discourage bids for your shares of common stock and could have
an adverse effect on the market price of your shares. If a
future transaction results in a change of control of our company
or our schools, we believe that we will be able to obtain all
necessary approvals from ED, our accrediting commission and the
applicable state education agencies. However, we cannot assure
you that all such approvals can be obtained at all or in a
timely manner that will not delay or reduce the availability of
Title IV Program funds for our students and schools.
Opening Additional Schools and Adding
Educational Programs.
For-profit
educational institutions must be authorized by their state
education agencies and fully operational for two years before
applying to ED to participate in Title IV Programs.
However, an institution that is certified to participate in
Title IV Programs may establish an additional location and
apply to participate in Title IV Programs at that location
without reference to the two-year requirement, if such
additional location satisfies all other applicable ED
eligibility requirements. Our expansion plans are based, in
part, on our ability to open new schools as additional locations
of our existing institutions and take into account EDs
approval requirements.
A student may use Title IV Program funds
only to pay the costs associated with enrollment in an eligible
educational program offered by an institution participating in
Title IV Programs. Generally, an institution that is
eligible to participate in Title IV Programs may add a new
educational program without
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Some of the state education agencies and our
accrediting commission also have requirements that may affect
our schools ability to open a new campus, establish an
additional location of an existing institution or begin offering
a new educational program. We do not believe that these
standards will create significant obstacles to our expansion
plans.
Administrative Capability.
ED assesses the administrative
capability of each institution that participates in
Title IV Programs under a series of separate standards.
Failure to satisfy any of the standards may lead ED to find the
institution ineligible to participate in Title IV Programs
or to place the institution on provisional certification as a
condition of its participation. One standard that applies to
programs with the stated objective of preparing students for
employment requires the institution to show a reasonable
relationship between the length of the program and the
entry-level job requirements of the relevant field of
employment. We believe we have made the required showing for
each of our applicable programs.
Other standards provide that an institution may
be found to lack administrative capability and be placed on
provisional certification if its student loan default rate under
the FFEL program is 25% or greater for any of the three most
recent federal fiscal years, or if its Perkins cohort default
rate exceeds 15% for any federal award year. In recertifying all
of our institutions for continued participation in Title IV
Programs in July 2003, ED did not find that any of our
institutions lacked administrative capability and did not place
any of our institutions on provisional certification for their
student loan default rates.
Restrictions on Payment of Commissions,
Bonuses and Other Incentive Payments.
An institution participating in
Title IV Programs may not provide any commission, bonus or other
incentive payment based directly or indirectly on success in
securing enrollments or financial aid to any person or entity
engaged in any student recruiting or admission activities or in
making decisions regarding the awarding of Title IV Program
funds. In November 2002, ED published new regulations, which
took effect July 2003, to attempt to clarify this so-called
incentive compensation law. The new regulations
identify twelve compensation arrangements that ED has determined
are not in violation of the incentive compensation law,
including the payment and adjustment of salaries, bonuses and
commissions in certain circumstances. EDs new regulations
do not establish clear criteria for compliance in all
circumstances, and ED has announced that it will no longer
review and approve individual schools compensation plans.
Nonetheless, we believe that our current compensation plans are
in compliance with the Higher Education Act and EDs new
regulations, although we cannot assure you that ED will not find
deficiencies in our compensation plans.
Eligibility and Certification Procedures.
Each institution must apply to ED
for continued certification to participate in Title IV Programs
at least every six years, or when it undergoes a change of
control, and an institution may come under ED review when it
expands its activities in certain ways, such as opening an
additional location or raising the highest academic credential
it offers. ED may place an institution on provisional
certification status if it finds that the institution does not
fully satisfy all of the eligibility and certification
standards. ED may withdraw an institutions provisional
certification without advance notice if ED determines that the
institution is not fulfilling all material requirements. In
addition, ED may more closely review an institution that is
provisionally certified if it applies for approval to open a new
location, add an educational program, acquire another school or
make any other significant change. Provisional certification
does not otherwise limit an institutions access to Title
IV Program funds.
65
All of our institutions were recertified by ED in
July 2003 for continued participation in Title IV Programs
through June 2006. All of the recertifications were on a
provisional basis, based on our composite score at the parent
company level under EDs financial responsibility formula.
Compliance with Regulatory Standards and
Effect of Regulatory Violations.
Our schools are subject to audits and program compliance reviews
by various external agencies, including ED, EDs Office of
Inspector General, state education agencies, student loan
guaranty agencies, the U.S. Department of Veterans Affairs and
our accrediting commission. Each of our institutions
administration of Title IV Program funds must also be audited
annually by an independent accounting firm, and the resulting
audit report submitted to ED for review. If ED or another
regulatory agency determined that one of our institutions
improperly disbursed Title IV Program funds or violated a
provision of the Higher Education Act or EDs regulations,
that institution could be required to repay such funds and could
be assessed an administrative fine. ED could also transfer the
institution to the reimbursement system of receiving Title IV
Program funds, under which an institution must disburse its own
funds to students and document the students eligibility
for Title IV Program funds before receiving such funds from ED.
Violations of Title IV Program requirements could also subject
us or our schools to other civil and criminal penalties.
Significant violations of Title IV Program
requirements by us or any of our institutions could be the basis
for a proceeding by ED to limit, suspend or terminate the
participation of the affected institution in Title IV Programs.
Generally, such a termination extends for 18 months before
the institution may apply for reinstatement of its
participation. There is no ED proceeding pending to fine any of
our institutions or to limit, suspend or terminate any of our
institutions participation in Title IV Programs, and we
have no reason to believe that any such proceeding is
contemplated.
We and our schools are also subject to complaints
and lawsuits relating to regulatory compliance brought not only
by our regulatory agencies, but also by third parties, such as
present or former students or employees and other members of the
public. If we are unable to successfully resolve or defend
against any such complaint or lawsuit, we may be required to pay
money damages or be subject to fines, limitations, loss of
federal funding, injunctions or other penalties. Moreover, even
if we successfully resolve or defend against any such complaint
or lawsuit, we may have to devote significant financial and
management resources in order to reach such a result.
Predominant Use of One Lender and One
Guaranty Agency.
Our students have
traditionally received their FFEL student loans from a limited
number of lending institutions. For example, in our 2002 fiscal
year, one lending institution, Sallie Mae, provided more than
95% of the FFEL loans that our students received. In addition,
in our 2002 fiscal year, one student loan guaranty agency,
EdFund, guaranteed more than 95% of the FFEL loans made to our
students. Sallie Mae and EdFund are among the largest student
loan lending institutions and guaranty agencies, respectively,
in the United States in terms of loan volume. We do not believe
that either one intends to withdraw from the student loan field
or reduce the volume of loans it makes or guarantees in the near
future. If loans by our primary lender or guarantees by our
primary guaranty agency were significantly reduced or no longer
available, we believe that we would be able to identify other
lenders and guarantors to make and guarantee those loans for our
students because the student loan industry is highly competitive
and we are frequently approached by other lenders and guarantors
seeking our business. If we were not able to timely identify
other lenders and guarantors to make and guarantee those loans
for our students, that could delay our students receipt of
their loans, extend our tuition collection cycle and reduce our
student population and net revenues.
66
Industry-Oriented Business
Model.
We
work extensively with leading automotive, diesel, collision
repair, motorcycle and marine equipment manufacturers, dealers
and suppliers to determine the present and future needs of the
end-markets our graduates enter and to tailor our educational
programs to best serve those constituents. As a result, we
believe that our graduates have the opportunity to work for the
most desirable employers in their chosen fields due to the
quality of their education and their commitment to careers as
qualified service technicians. In turn, we believe that the
higher quality employment opportunities available to our
graduates drive increased enrollments at our campuses and
training centers.
Unique Manufacturer-Based Programs.
We work closely with OEMs to
develop brand-specific education programs. Participating
manufacturers typically assist us in developing course content
and curricula, and provide us with equipment, specialty tools
and parts at no charge. In addition, the manufacturer pays the
full tuition of each student enrolled in our advanced training
programs. Our collaboration with OEMs enables us to provide
highly specialized education to our students, resulting in
improved employment opportunities and the potential for higher
wages for graduates. We are a primary provider of such programs
for Audi of America; American Honda Motor Co., Inc.; American
Suzuki Motor Corp.; BMW of North America, LLC; Ford Motor Co.;
Harley-Davidson Motor Co.; International Truck and Engine Corp.;
Jaguar Cars, Inc.; Kawasaki Motors Corp., U.S.A.; Mercedes-Benz
USA, LLC; Mercury Marine; Porsche Cars of North America, Inc.;
Volkswagen of America, Inc.; Volvo Car Corp.; and Yamaha Motor
Corp., USA.
Strategic Relationships.
In addition to our
curriculum-based relationships with OEMs, we develop and
maintain a variety of complementary relationships with OEMs,
parts and tools suppliers, enthusiast organizations and other
industry participants. Currently, these relationships include
BEL-RAY Company, Inc., Dana Corporation, Dodge Motorsports,
DuPont Automotive Finishes,
Hot Rod
Magazine, NASCAR and
Snap-on Industrial, among others. These relationships provide us
with a variety of strategic and financial benefits, including
equipment sponsorship, new product support, licensing and
branding opportunities, and selected financial sponsorship for
our campuses and students. We believe that these relationships
improve the quality of our educational programs, reduce our
investment cost of equipping classrooms, enable us to expand the
scope of our programs, strengthen our graduate placements and
enhance our overall image within the industry.
National Presence.
Since our founding in 1965, we
have grown our business and expanded our campus platform to
establish a national presence. Through the UTI, MMI and NTI
brands, our undergraduate campuses and advanced training centers
currently provide us with local representation covering several
geographic regions across the United States. Supporting our
campuses, we maintain a national recruiting network of over 190
education representatives who are able to identify, advise and
enroll students from all 50 states. Consequently, unlike
competitors with single-or regional-campus models, we are able
to effectively reach a national pool of potential students and
to provide qualified professionals to our various end-markets on
a broad geographic basis.
Superior Recruiting Strategy.
We employ an integrated marketing
and recruitment strategy that we believe enables us to
effectively target and recruit both traditional post-secondary
students and working adults. Our field-based education
representatives provide a local presence to prospective students
at high schools across the country. Additionally, our
campus-based education representatives respond to media-driven
inquiries from adults across the United States who are
interested in returning to school. We support our education
representatives recruiting efforts with a national
multimedia marketing strategy that includes
television, enthusiast magazines, direct mail and the Internet.
Open New Campuses.
We continue to identify new
markets that we believe will complement our established campus
network and support further growth. We believe that there are a
number of local markets, in regions where we do not currently
have a campus, with both pools of interested prospective
students and career opportunities for graduates. By establishing
campuses in these locations, we believe that we will be able to
supply skilled technicians to local employers, as well as
provide educational opportunities for students otherwise
unwilling to relocate to acquire a post-secondary education.
Additional locations will also provide us with an opportunity to
expand our relationships with OEMs by providing a graduate
population with greater geographic reach.
Increase Recruitment and Marketing.
We plan to hire additional
education representatives to enhance our recruitment coverage in
territories where we are currently active in recruiting students
and to expand into new regions and cities. We estimate that in
our 2003 fiscal year, our field-based education representatives
made approximately 9,000 high school visits and approximately
360,000 student contacts. In addition, during the same period,
we estimate that our campus-based education representatives
addressed approximately 150,000 inquiries from prospective
students. We believe that additional education representatives,
combined with increased marketing spending, will increase our
national presence and enable us to better target the prospective
student pool from which we recruit.
Expand Program Offerings.
As the industries we serve become
more technologically advanced, the requisite training for
qualified technicians continues to increase. We continually work
with our industry customers to expand and adapt our course
offerings to meet their needs for skilled technicians. We also
intend to increase the number of specialized or
manufacturer-specific electives we offer in our undergraduate
programs, such as our
Hot Rod U
high performance series
and our Ford-certified elective.
Seek Additional Strategic Relationships.
We actively seek to develop new
strategic relationships with leading OEMs, dealership networks
and other industry participants. Securing such relationships
will enable us to further drive undergraduate enrollment growth,
diversify funding sources and expand the scope and increase the
number of the programs we offer. We believe that these
relationships are also valuable to our industry partners since
our programs provide them with a steady supply of highly trained
service technicians and are a cost-effective alternative to
in-house training. Therefore, we believe that these
relationships will also provide us additional incremental
revenue opportunities from retraining OEMs existing
employees.
Consider Strategic Acquisitions.
We may selectively consider
acquisition opportunities that, among other factors, would
complement our program offerings, benefit from our expertise and
scale in marketing and administration and could be integrated
into our existing operations.
Date
School
Location
Opened
Principal Programs
UTI
Phoenix, Arizona
1965
Automotive; Diesel & Industrial;
Automotive/ Diesel; Automotive/ Diesel & Industrial
UTI
Houston, Texas
1983
Automotive; Diesel & Industrial;
Automotive/ Diesel; Automotive/ Diesel & Industrial;
Collision Repair and Refinishing
UTI
Glendale Heights, Illinois
1988
Automotive; Diesel & Industrial;
Automotive/ Diesel; Automotive/ Diesel & Industrial
UTI
Rancho Cucamonga, California
1998
Automotive
MMI
Phoenix, Arizona
1973
Motorcycle
MMI
Orlando, Florida
1986
Motorcycle, Marine
NTI
Mooresville, North Carolina
2002
Automotive with NASCAR
Automotive Technology.
Established in 1965, the
Automotive Technology program is designed to teach students how
to diagnose, service and repair automobiles. The program ranges
from 48 to 76 weeks in duration, and tuition ranges from
$19,200 to $27,900. Graduates of this program are qualified to
work as entry-level service technicians in automotive repair
facilities or automotive dealer service departments.
Diesel & Industrial Technology.
Established in 1968, the
Diesel & Industrial Technology program is designed to
teach students how to diagnose, service and repair diesel
systems and industrial equipment. The program is 45 weeks
in duration and tuition ranges from $18,200 to $18,800.
Graduates of this program are qualified to work as entry-level
service technicians in medium and heavy truck facilities, truck
dealerships, or in service and repair facilities for marine
diesel engines and equipment utilized in various industrial
applications, including materials handling, construction,
transport refrigeration or farming.
Automotive/Diesel Technology.
Established in 1970, the
Automotive/ Diesel Technology program is designed to teach
students how to diagnose, service and repair automobiles and
diesel systems. The program ranges from 66 to 81 weeks in
duration and tuition ranges from approximately
$23,500 to $29,800. Graduates of this program
typically can work as entry-level service technicians in
automotive repair facilities, automotive dealer service
departments, diesel engine repair facilities, medium and heavy
truck facilities or truck dealerships.
Automotive/ Diesel & Industrial
Technology.
Established in 1970,
the Automotive/ Diesel & Industrial Technology program is
designed to teach students how to diagnose, service and repair
automobiles, diesel systems and industrial equipment. The
program ranges from 72 to 84 weeks in duration and tuition
ranges from $24,400 to $31,000. Graduates of this program are
qualified to work as entry-level service technicians in
automotive repair facilities, automotive dealer service
departments, diesel engine repair facilities, medium and heavy
truck facilities, truck dealerships, or in service and repair
facilities for marine diesel engines and equipment utilized in
various industrial applications, including material handling,
construction, transport refrigeration or farming.
Collision Repair and Refinishing Technology
(CRRT).
Established in 1999, the
CRRT program teaches students how to repair non-structural and
structural automobile damage as well as how to prepare cost
estimates on all phases of repair and refinishing. The program
ranges from 51 to 57 weeks in duration and tuition ranges
from $20,400 to $21,900. Graduates of this program are qualified
to work as entry-level service technicians at OEM dealerships
and independent repair facilities.
Motorcycle Mechanics Institute and Marine
Mechanics Institute (collectively, MMI)
Motorcycle.
Established in 1973, this MMI
program is designed to teach students how to diagnose, service
and repair motorcycles and all-terrain vehicles. The program
ranges from 57 to 81 weeks in duration and tuition ranges
from $17,000 to $23,100. Graduates of this program are qualified
to work as entry-level service technicians in motorcycle
dealerships and independent repair facilities. MMI is supported,
pursuant to oral understandings, by all five major motorcycle
manufacturers: American Honda Motor Co., Inc.; American Suzuki
Motor Corp.; Harley-Davidson Motor Co.; Kawasaki Motors Corp.,
U.S.A.; and Yamaha Motor Corp., USA. We estimate that MMI
commands over 80% market share in the entry-level
motorcycle technician training industry.
Marine.
Established in 1986, this MMI
program is designed to teach students how to diagnose, service
and repair boats and personal watercraft. The program is
60 weeks in duration and tuition is approximately $19,900.
Graduates of this program are qualified to work as entry-level
service technicians for marine dealerships and independent
repair shops, as well as for marinas, boat yards and yacht clubs.
NASCAR Technical Institute
(NTI)
Advanced Training Programs.
Pursuant to oral or written
understandings, we offer manufacturer-specific advanced training
programs for the following companies: Audi of America; BMW of
North America, LLC; Ford Motor Co.; International Truck and
Engine Corp.; Jaguar Cars, Inc.; Mercedes-Benz USA, LLC; Porsche
Cars of North America, Inc.; Volkswagen of America, Inc.; and
Volvo Car Corp. These programs are intended to offer in-depth
instruction on specific manufacturers products, qualifying
a graduate for employment with a dealer seeking highly
specialized, entry-level technicians with
brand-specific skills. The programs range from eight to
27 weeks in duration, and tuition, which generally ranges
from $5,000 to $8,200, is paid by the manufacturer. The
manufacturer also supplies equipment for the courses.
Retraining.
Technicians in all of the industries we serve are in regular
need of retraining or certification on new technologies.
Increasingly, manufacturers such as American Honda Motor Co.,
Inc.; BMW of North America, LLC; Harley-Davidson Motor Co.; and
Mercedes-Benz USA, LLC are outsourcing a portion of this
training to education providers such as our company.
Product/ Financial
Support.
Product/financial support is an
integral component of our business strategy and is employed
across our schools. In these relationships, sponsors provide
their products, including equipment and supplies, at little or
no cost to us in return for our use of those products in the
classroom, or provide financial sponsorship to either us or our
students. Product/financial support is an attractive marketing
channel for sponsors because our classrooms provide them with
early access to the future end-users of their products. As
students become familiar with a manufacturers products
during training, they may be more likely to continue to use the
same products upon graduation. Our extensive use of product
support relationships allows us to minimize the equipment and
supply costs in each of our classrooms and significantly reduces
the capital outlay necessary for operating and equipping our
campuses.
Snap-on Tools.
At
various stages in our undergraduate programs, students receive a
Snap-on Tools entry-level tool set having an approximate retail
value of $1,000. We purchase these tool sets from Snap-on Tools
at a discount from their list price. In the context of this
relationship, we have granted Snap-on Tools exclusive access to
our campuses and display advertising and we have agreed to use
Snap-on tools to train our students. We receive credits from
Snap-on Tools for tool kits and any additional purchases made by
our students. We can then redeem those credits to purchase
Snap-on Tools equipment and tools for our campuses at the full
retail list price.
Licensing.
Licensing encompasses our affiliation
with key industry brands. We pay a licensing fee and, in return,
receive the right to use a particular industry
participants name or logo in our promotional materials and
on our campuses. We believe that our current and potential
students generally identify favorably with the recognized brand
names licensed to us, enhancing our reputation and the
effectiveness of our marketing efforts.
NASCAR.
In July
1999, we entered into a licensing arrangement with NASCAR and
became its exclusive education provider for automotive
technicians. In July 2002, the NASCAR Technical Institute opened
in Mooresville, North Carolina. More than
1,000 students currently attend this campus. This
relationship provides us with access to the extensive network of
NASCAR sponsors, presenting us with the opportunity to enhance
our product support relationships. The popular NASCAR brand name
combined with the opportunity to learn on high-performance cars
is a powerful recruiting and retention tool for a broad group of
potential students.
Manufacturer
Training.
Manufacturer training relationships
provide strategic benefits to us that impact each of our
education programs. These relationships induce entry-level
training tailored to the needs of a specific manufacturer, as
well as continuing education and retraining of experienced
technicians. In our entry-level programs, students receive
training and certification on a given
manufacturers products. In return, the
manufacturer supplies equipment, specialty tools and parts, and
assistance in developing curricula. Students who receive this
training are often certified to work on that manufacturers
products when they complete the program. That certification
typically leads to both improved employment opportunities and
the potential for higher wages. Manufacturer training
relationships lower the capital investment necessary to equip
our classrooms and provide us with a significant marketing
advantage. In addition, through these relationships,
manufacturers are able to increase the pool of skilled resources
available to service and repair their products.
We actively seek to extend our relationship with
a given manufacturer by providing the manufacturers
retraining. Like the advanced training, these programs are built
on a strategic training relationship under which the
manufacturer not only provides the equipment and curriculum but
also pays for the students tuition. These retraining
courses often take place within our existing facilities,
allowing the manufacturer to avoid the costs associated with
establishing its own dedicated facility.
Examples of Manufacturer Training relationships
include:
Ford Motor Company.
We offer the Ford Accelerated Credential Training (FACT)
Elective to all of the students in our Automotive and
Automotive/Diesel programs. The FACT Elective is a 15-week
course in Ford-specific training, during which students are able
to earn Ford certifications. Ford Motor Company provides the
curriculum, vehicles, specialty equipment and other training
aids required in this elective.
Mercedes-Benz USA,
LLC.
We offer the Mercedes-Benz ELITE
training program. This is a 16-week advanced training program
that enables students to earn Mercedes-Benz training credits in
service maintenance, diagnosis and repair of most Mercedes-Benz
vehicle systems. Highly ranked graduates of UTIs
Automotive and Automotive/ Diesel programs may apply for
acceptance into the Mercedes-Benz ELITE training program.
Tuition for the program is paid by the manufacturer. All
curricula, vehicles, specialty tools and training aids are
provided by Mercedes-Benz. Recently, we added a Mercedes-Benz
ELITE training program for graduates of the CRRT program. In
addition, we provide training for Mercedes-Benz factory
technicians on a regular basis at our Houston, Texas facility.
American Honda Motor Co., Inc.
American Honda Motor Co., Inc.
supports our campus training program called HonTech® by
donating equipment and providing curriculum. In addition, we are
a primary provider of continuing training for experienced
American Honda technicians. We oversee administration of the
training program, including scheduling classes and technician
enrollment. Our instructors provide the training at American
Honda-authorized training centers across the United States.
Field-Based Representatives.
Our field-based education
representatives recruit prospective students from high schools
across the country. Over the last three fiscal years,
approximately 60% of our student population has been recruited
directly out of high school. Currently, we have 128 field-based
education representatives, an increase from 58 field-based
representatives as of the end of our 1998 fiscal year, with
assigned territories covering the United States and
U.S. territories. Our field-based education representatives
recruit students by making career presentations at high schools
and direct presentations at the homes of prospective students.
We estimate that in our 2003 fiscal year,
our education representatives made
approximately 9,000 high school visits and approximately
360,000 student contacts.
Our reputation in local, regional and national
business communities, endorsements from high school guidance
counselors and the recommendations of satisfied graduates are
some of our most effective recruiting tools. Accordingly, we
strive to build relationships with the people who influence the
career decisions of prospective students, such as vocational
instructors and high school guidance counselors. Every year, we
conduct seminars for high school career counselors and
instructors at our training facilities and campuses as a means
of further educating these individuals on the merits of our
programs. We estimate that as much as 10% of our enrollment
comes from referrals from our staff, current students and alumni.
Campus-Based
Representatives.
In
addition to our field-based education representatives, we use
campus-based representatives to recruit students. These
representatives respond to targeted marketing leads and inbound
inquiries to directly recruit new students typically
adults returning to school from anywhere across the
United States. We estimate that our 66 campus-based
education representatives, an increase from 35 campus-based
education representatives at the end of our 1998 fiscal year,
addressed approximately 150,000 media-driven inquiries in our
2003 fiscal year. Since working adults tend to start our
programs throughout the year instead of in the fall as is most
typical of traditional school calendars, these students help
balance our enrollment throughout the year.
Marketing and Advertising.
We make use of multiple direct and
indirect marketing and advertising channels aimed at prompting
enthusiasts and underemployed or unemployed prospective students
to contact us. We select various advertising methods on a
national, regional and local basis to drive enrollments at our
campuses. We utilize television advertising on national cable
networks such as Speed Channel, Fox Sports Net, Spike TV
(formerly known as TNN) and Outdoor Life Network, as well as on
local stations. We advertise in both national and regional
automotive, motorcycle and marine enthusiast publications,
including Harley-Davidsons enthusiast publication which
has a circulation of over 495,000. We also employ direct
mailings and maintain a proprietary database consisting of over
980,000 names that enable us to target both high school students
and working adults throughout the year.
Approximate
Square
School/Program
Location
Footage
UTI
Phoenix, Arizona
(1)
166,000
UTI
Houston, Texas
178,000
UTI
Glendale Heights, Illinois
125,000
UTI
Rancho Cucamonga, California
83,000
MMI
Phoenix, Arizona
109,000
MMI
Orlando, Florida
108,000
NTI
Mooresville, North Carolina
146,000
Headquarters
Phoenix, Arizona (current through October 2003)
31,300
Phoenix, Arizona (after October, 2003)
47,100
Centers:
Audi Academy
Phoenix, Arizona
10,000
Audi Academy
Glendale Heights, Illinois
6,500
Audi Academy
Allentown, Pennsylvania
6,200
BMW STEP
Phoenix, Arizona
9,700
BMW STEP
Ontario, California
2,500
BMW STEP
Houston, Texas
7,500
BMW STEP
Upper Saddle River, New Jersey
7,500
BMW STEP
Orlando, Florida
13,300
Ford Technical Institute
Dearborn, Michigan
9,600
Jaguar PACE
Orlando, Florida
13,300
(1) We have entered into a lease for a new
273,000 square foot facility in Avondale, Arizona. It is
currently contemplated that this new facility will replace the
current Phoenix, Arizona facility in the summer of 2004. This
replacement is not expected to increase our student capacity.
Approximate
Square
School/Program
Location
Footage
International Tech Education Program
Carol Stream, Illinois
7,100
Mercedes-Benz ELITE
Rancho Cucamonga, California
8,700
Mercedes-Benz ELITE
Orlando, Florida
10,100
Mercedes-Benz ELITE
Houston, Texas
27,600
Mercedes-Benz ELITE
Glendale Heights, Illinois
11,900
Mercedes-Benz ELITE
Allentown, Pennsylvania
10,600
Porsche TAP
Atlanta, Georgia
5,000
Volkswagen V.S.T.T.
Glendale Heights, Illinois
6,900
Volkswagen V.S.T.T.
Allentown, Pennsylvania
6,900
Volkswagen V.S.T.T.
Rancho Cucamonga, California
8,700
Volvo SAFE
Glendale Heights, Illinois
11,000
Volvo SAFE
Phoenix, Arizona
10,000
Universal Technical Institute of Arizona
Additional locations:
Universal Technical Institute, Glendale Heights,
Illinois
Clinton Technical Institute
Universal Technical Institute of Texas
FFEL Cohort Default
Rate
School
1999
2000
2001
6.8
%
6.7
%
4.4
%
7.5
%
8.7
%
5.9
%
12.3
%
15.6
%
8.1
%
the equity ratio, which measures the
institutions capital resources, ability to borrow and
financial viability;
the primary reserve ratio, which measures the
institutions ability to support current operations from
expendable resources; and
the net income ratio, which measures the
institutions ability to operate at a profit.
posting a letter of credit in an amount equal to
at least 50% of the total Title IV Program funds received by the
institution during the institutions most recently
completed fiscal year;
posting a letter of credit in an amount equal to
at least 10% of such prior years Title IV Program funds,
accepting provisional certification, complying with additional
ED monitoring requirements and agreeing to receive Title IV
Program funds under an arrangement other than EDs standard
advance funding arrangement; or
complying with additional ED monitoring
requirements and agreeing to receive Title IV Program funds
under an arrangement other than EDs standard advance
funding arrangement.
MANAGEMENT
Directors and Executive Officers
Below is information with respect to our
executive officers and directors as of October 1, 2003:
Robert D. Hartman
serves as our Chairman of the Board
effective as of October 1, 2003. From 1990 to
September 30, 2003, Mr. Hartman served as our Chief
Executive Officer, and from April 2002 to September 30,
2003, Mr. Hartman served as the Co-Chairman of the Board.
Mr. Hartman has been a member of our Board since 1985. From
1979 to 1990, Mr. Hartman held several positions with UTI,
including Student Services Director, Controller, School Director
and President. He was appointed to the Arizona State Board for
Private Post-secondary Education in 1990 and served until 1995.
In addition, he has served on the Advisory Council for the
Arizona Educational Loan Program, representing the private
career school sector. He was founder and former Chairman of the
Western Council of Private Career Schools. Mr. Hartman
received a BA in General Business from Michigan State University
and an MBA in Finance from DePaul University in Chicago.
John C. White
serves
as our Chief Strategic Planning Officer and Vice Chairman
effective as of October 1, 2003. From April 2002 to
September 30, 2003, Mr. White served as our Chief
Strategic Planning Officer and Co-Chairman of the Board. From
1998 to March 2002, Mr. White served as our Chief Strategic
Planning Officer and Chairman of the Board. Mr. White
served as the President of Clinton Harley Corporation (which
operated under the name Motorcycle Mechanics Institute and
Marine Mechanics Institute) from 1977 until it was acquired by
UTI in 1998. Prior to 1977, Mr. White was a marketing
representative with International Business Machines Corporation.
Mr. White was appointed by the Arizona Senate to serve as a
member of the Joint Legislative Committee on Private Regionally
Accredited Degree Granting Colleges and Universities and Private
Nationally Accredited Degree Granting and Vocational
Institutions in 1990. He was appointed by the Governor of
Arizona to the Arizona State Board for Private Post-secondary
Education, where he was a member and Complaint Committee
Chairman from 1993-2001. Mr. White received a BS in
Engineering from the University of Illinois. Mr. White is
the uncle of David K. Miller, our Senior Vice President of
Admissions.
Kimberly J. McWaters
serves as our Chief Executive Officer
effective as of October 1, 2003. From 2000 to
September 30, 2003, Ms. McWaters served as our President.
From 1984 to 2000, Ms. McWaters held several positions with
UTI, including Vice President of Marketing and Vice President of
Sales and Marketing. She is involved with the Womens Car
Care Council, an organization dedicated to the needs of
67
Jennifer L. Haslip
serves as our Senior Vice President,
Chief Financial Officer and Treasurer effective October 1,
2003. From 2002 to September 30, 2003, Ms. Haslip
served as our Senior Vice President, Chief Financial Officer,
Treasurer and Secretary. From 1998 to 2002, Ms. Haslip
served as our Director of Accounting, Director of Financial
Planning and Vice President of Finance. From 1993 to 1998, she
was employed in public accounting at Toback CPAs P.C.
Ms. Haslip received a BS in Accounting from Western
International University. She is a certified public accountant
in Arizona.
David K. Miller
has
served as our Senior Vice President of Admissions since 2002.
From 1998 to 2002, Mr. Miller served as our Vice President
of Campus Admissions. From 1979 to 1998, Mr. Miller served
in various positions at MMI, including Admissions
Representative, Admissions Director and National Director.
Mr. Miller joined Motorcycle Mechanics Institute in 1979 as
an education representative. He has served on the Board of the
Arizona Private School Association and was a team leader for the
Accrediting Commission. Mr. Miller received a BS in
Marketing from Arizona State University. Mr. Miller is the
nephew of John White, our Chief Strategic Planning Officer and
Vice Chairman of our Board.
Roger L. Speer
has
served as our Senior Vice President of Operations/ Education
since 2002. From 1988 to 2002, Mr. Speer held several
positions with us, including Director of Graduate Employment at
the UTI Phoenix Campus, Corporate Director of Graduate
Employment, School Director of the UTI Glendale Heights Campus
and Vice President of Operations. Mr. Speer received a BS
in Human Resource Management from Arizona State University.
A. Richard Caputo, Jr.
has served as a director on our board
since 1997. Mr. Caputo has been a managing director of The
Jordan Company, LLC, a private merchant banking firm, and
its predecessors since 1990. Mr. Caputo is also a director
of AmeriKing, Inc., GSFI, Inc., GSFI Holdings, Inc., Jackson
Products, Inc. and Safety Insurance Group, Inc. AmeriKing is
currently the subject of Chapter 11 proceedings, and prior
to commencement of those proceedings, Mr. Caputo was
appointed a vice president of that company. Mr. Caputo
received a BA in Mathematical and Business Economics from Brown
University.
Robert F. Cioffi
has
served as a director on our board since 2003. Mr. Cioffi
has served as a vice president at GE Equity, a private
equity investment company, since 1998. Mr. Cioffi received
a BA in Political Science and Economics from the University of
Vermont and a MBA from Duke University.
Michael R. Eisenson
has served as a director on our board
since 2002. Mr. Eisenson is a managing director and Chief
Executive Officer of Charlesbank Capital Partners, LLC, a
private investment firm and the successor to Harvard Private
Capital Group, which he joined in 1986. Mr. Eisenson is
also a director of CCC Information Services Group, Inc.,
ImmunoGen, Inc., Playtex Products, Inc. and United Auto Group,
Inc. He received a BA in Economics from Williams College and a
JD and MBA from Yale University.
James A. Hislop
has
served as a director on our board since 2002. Mr. Hislop
has been President and Chief Executive Officer of Penske Capital
Partners, L.L.C., an acquisition and investment company
specializing in the transportation and transportation services
industries, since 1997. Mr. Hislop is also a director of
Penske Corporation and United Auto Group, Inc. Mr. Hislop
received a BS in Business Administration from Bucknell
University and a MBA from New York University.
John W.
Jordan, II
has served as a
director on our board since 1997. Mr. Jordan has been a
managing partner of The Jordan Company, LLC since 1982.
Mr. Jordan is also a director of AmeriKing, Inc., Carmike
Cinemas, Inc., GSFI, Inc., GFSI Holdings, Inc., Jackson
Products, Inc., Jordan Industries, Inc., and Kinetek, Inc.
(formerly known as Motors & Gears Holdings, Inc.). AmeriKing
is currently the subject of Chapter 11 proceedings. He
received a BA in Business Administration from the University of
Notre Dame.
68
Roger S. Penske
has
served as a director on our board since 2002. Mr. Penske
has served as Chairman of the Board and Chief Executive Officer
of United Auto Group, Inc., a publicly-traded auto dealer, since
1999. Mr. Penske has also been Chairman of the Board and
Chief Executive Officer of Penske Corporation since 1969.
Mr. Penske serves as a director of General Electric
Company, Delphi Corporation, Home Depot, Inc.,
CarsDirect.com, Inc. and United Auto Group, Inc.
Our Board of Directors
Upon completion of this offering, Kimberly J.
McWaters, Robert F. Cioffi, James A. Hislop and John W.
Jordan, II will resign as directors and our board will
consist of five persons. We intend for our board ultimately to
consist of seven persons, at least a majority of whom will
satisfy the independence requirements of the New York Stock
Exchange. Consequently, we intend to appoint two additional
directors following completion of the offering.
Our executive officers are appointed by the board
on an annual basis and serve until their successors have been
duly elected. There are no family relationships among any of our
directors or executive officers, except that John C. White,
our Vice Chairman and Chief Strategic Planning Officer, and
David K. Miller, our Senior Vice President of Admissions,
are uncle and nephew of each other, respectively.
Terms of Directors and Executive
Officers
Each director serves for a term of three years.
The terms of office of the members of our board of directors are
divided into three classes. Two directors will be appointed
following completion of the offering and shall serve as
Class I Directors (whose terms expire in 2004),
Messrs. Penske and White serve as Class II Directors
(whose terms expire in 2005), and Messrs. Caputo, Eisenson
and Hartman serve as Class III Directors (whose terms
expire in 2006). At each annual meeting of stockholders, the
successors to directors whose terms will then expire will be
elected to serve from the time of election and qualification
until the third annual meeting following election. Any
additional directorships resulting from an increase in the
number of directors will be distributed among the three classes
so that, as nearly as possible, each class will consist of
one-third of the total number of directors. The classification
of our board of directors may have the effect of delaying or
preventing changes in control or management of our company.
Each executive officer is appointed by, and
serves at the discretion of, our board of directors.
Committees of the Board
Currently, our board has an audit committee and a
compensation committee. Messrs. Caputo, Eisenson and Hislop
serve as members of each of those committees.
After this offering, our board will designate new
committees to assist it with its responsibilities. Those
committees are described below.
After this offering, our board will designate a
new audit committee that will consist of at least three
directors, two of whom are expected to be Messrs. Eisenson
and Caputo, both of whom serve on our pre-offering audit
committee. The two directors to be appointed following
completion of this offering are also expected to be members of
our new audit committee. Each member of the audit committee will
be financially literate at the time such member is appointed.
The composition of the audit committee will satisfy the
independence requirements of the New York Stock Exchange and the
Securities and Exchange Commission.
The audit committee will have at least four
regular meetings each year. The result of each meeting will be
reported at the next regular meeting of our board.
69
The audit committee will have the responsibility
for overseeing:
To fulfill these responsibilities, the audit
committee will:
After this offering, our board will designate a
new compensation committee that will consist of at least three
directors. It is currently expected that Messrs. Caputo and
Eisenson will serve on the compensation committee after the
offering, along with one of the directors appointed following
completion of this offering. The composition of the compensation
committee will satisfy the independence requirements of the New
York Stock Exchange. The nominating and governance committee
will recommend to our board nominees for the compensation
committee. The compensation committee will meet at least twice
during each fiscal year. The primary responsibility of the
compensation committee will be to develop and oversee
70
After this offering, our board will designate a
nominating and governance committee that will consist of at
least three directors. It is currently expected that
Messrs. Caputo and Penske will serve on the nominating and
governance committee along with one of the directors appointed
following completion of this offering. The composition of the
nominating and governance committee will satisfy the
independence requirements of the New York Stock Exchange. The
nominating and governance committee will:
To fulfill these responsibilities, the nominating
and governance committee will:
Director Compensation
After this offering, each non-employee director
will receive a $20,000 annual retainer, an annual award
of shares
of our common stock and $2,500 per board meeting attended in
person or by telephone. In addition, each non-employee director
will receive a $1,500 stipend per board meeting attended in
person for
71
Executive Compensation
The table below sets forth summary information
concerning the compensation awarded to our chief executive
officer and our four most highly compensated executive officers
other than our chief executive officer during 2003. The
individuals listed below are referred to in this prospectus as
our named executive officers.
Summary Compensation Table
Option Grants in 2003
The following table presents information
concerning stock options granted during 2003 to our named
executive officers who received a grant in 2003.
72
Option Exercises in Last Fiscal Year and
Year-End Option Values
The following table presents information
concerning the stock options exercised during the last fiscal
year by each of our named executive officers and the fiscal
year-end value of unexercised options held by each of our named
officers as of September 30, 2003.
Employment-Related Arrangements
Employment Agreements with Robert D.
Hartman and John C. White.
In
April 2002, we entered into employment agreements with Robert
Hartman and John White. Under the terms of the employment
agreements, Messrs. Hartman and White have agreed to serve as
Chief Executive Officer and Co-Chairman of the Board of
Directors and Chief Strategic Planning Officer and Co-Chairman
of the Board of Directors, respectively. Each of the employment
agreements provides for an initial term ending
September 30, 2006 and automatically renewing successive
one-year terms thereafter, subject to at least 90 days
advance notice by either party of a decision not to renew the
employment agreements. Messrs. Hartman and White are each
entitled to receive an annual base salary of $312,500, subject
to annual cost of living adjustments.
Employment Agreements with Kimberly J.
McWaters.
In April 2002, we
entered into an employment agreement with Kimberly McWaters to
serve as our President. This agreement provides for an initial
term ending March 31, 2005 and automatically renewing
successive one-year terms thereafter, subject to at least 90
days advance notice by either party of a decision not to
renew the employment agreement. Under the employment agreement,
Ms. McWaters is entitled to receive an annual base salary of
$280,000, subject to annual cost of living adjustments.
Provisions Common to Each Employment
Agreement.
Certain provisions are
common to each of the employment agreements. For example, each
employment agreement:
73
Severance
Agreements.
It is currently
contemplated that we will enter into severance agreements with
several of our executive officers or key employees upon the
consummation of this offering. Each severance agreement will
provide for the payment of severance compensation and other
benefits to the employee depending upon the circumstances of
their termination of employment, such as if the employee is
terminated by us without cause or if the employee leaves for
good reason, in each case within 12 months after we have
undergone a change in control, as that term is defined in the
severance agreement. Each severance agreement, as currently
contemplated, will also provide that:
As part of the consideration for our payment of
the severance payments and benefits, the severance agreement
provides that, for a period of 12 months after the
termination of employment, the employee covenants not to compete
directly or indirectly with us or directly or indirectly
solicit, recruit or employ any persons or entities with whom we
have, or within the 24 months prior to such solicitation,
recruitment or employment have had, business relationships.
Existing Stock and Stock Option
Plans
1997 Restricted Stock Plan.
Our 1997 restricted stock plan was
adopted by the board of directors and became effective in
September 1997. A maximum
of shares
of common stock may be issued under the plan to employees of our
company, or the employees of any subsidiaries of our company,
including officers and employee directors, or such
employees designee. The plan is administered by our board
of directors and the compensation committee.
The term of the awards granted under the plan is
set forth in each stock award agreement. Beginning on the date
of grant, the participant, as owner of the shares, will have the
right to vote his or her shares. If requested, however, the
participant must agree to place his or her shares in a voting
trust until the shares have vested. Furthermore, all
participants must be signatories to the stockholders agreement
dated September 30, 1997, as amended. The vesting schedule
of all the awards under our 1997 restricted stock plan was
accelerated with effect as of September 30, 1999.
As of June 30, 2003, we have
awarded shares
of our common stock under the plan, all of which are vested. We
do not intend to grant any additional awards from the plan.
74
Management 1999 Stock Option Program.
Our 1999 stock option program was
adopted by our board of directors and became effective in
September 1999 to provide for the issuance of up
to shares
of common stock. The program is administered by our board of
directors and its compensation committee.
The program provides for the grant of incentive
and non-qualified stock options to our employees, including
officers and employee directors, and non-qualified stock options
to other persons providing material services to our company or
related companies. A non-employee director is not eligible to
receive an award. Upon cancellation of an award, the optionee
either is permitted to exercise all cancelled awards for a
reasonable period prior to the effective date of the
cancellation or receives reasonable compensation for the value
of the cancelled awards. At the request of the board of
directors, a committee administers the program and determines
the optionees and the terms of options granted, including the
exercise price, number of shares subject to the option and the
exercisability of the shares. None of the members of the
committee is eligible to receive awards or options under the
program.
The term of the options granted under the program
is set forth in each option agreement. The term of an option may
not exceed the earlier of ten years and the date on which the
optionee ceases to be an employee of, and to perform services
for, us and/or related companies. Options granted under the
program vest and become exercisable as set forth in each option
agreement.
No incentive stock options under the program may
be granted to an optionee, which, when combined with all other
incentive stock options becoming exercisable in any calendar
year that are held by that optionee, would have an aggregate
fair market value in excess of $100,000. In the event an
optionee is awarded $100,000 in incentive stock options in any
calendar year, any further stock options granted during the same
year shall be treated as non-qualified stock options.
As of June 30, 2003, we have
issued shares
of common stock upon the exercise of options granted under the
program. No options under the program are outstanding and we do
not intend to grant any additional options under the program.
Management 2002 Stock Option Program.
Our 2002 stock option program was
adopted by our board of directors and became effective in April
2002. A maximum
of shares
of common stock may be issued under the program, which is
administered by our board of directors and its compensation
committee.
The program provides for the grant of incentive
and non-qualified stock options to employees of our company and
related companies, including officers and employee directors,
and non-statutory options to other persons providing material
services to our company or related companies. A non-employee
director is not eligible to receive an award. None of the
members of the committee is eligible to receive awards under the
program. Upon cancellation of an award, the optionee either is
permitted to exercise all cancelled awards for a reasonable
period prior to the effective date of the cancellation or
receives reasonable compensation for the value of the cancelled
awards, as determined by the committee.
The term of the options granted under the program
is set forth in each option agreement. However, the term of an
option may not exceed the earlier of ten years and the date on
which the optionee ceases to be an employee of, and to perform
services for, our company and/or related companies. Options
granted under the program vest over a four-year period and
become exercisable as set forth in each option agreement.
No incentive stock options may be granted to an
optionee, which, when combined with all other incentive stock
options becoming exercisable in any calendar year that are held
by that optionee, would have an aggregate fair market value in
excess of $100,000. In the event an optionee is awarded $100,000
in incentive stock options in any calendar year, any further
stock options granted during the same year shall be treated as
non-qualified stock options.
As of June 30,
2003, shares
of our common stock are issuable pursuant to options granted
under the program, at a weighted average exercise price
of per
share
and shares
remain available for future option grants under the program.
75
New Employee Benefits Plans
Set forth below is information concerning our
benefit plans that will be effective immediately following the
consummation of the offering. Under these plans, we propose to
pay cash and non-cash compensation, including equity grants, to
eligible participants of the plans, including our executive
officers.
2003 Stock Incentive
Plan.
Upon completion of the
offering, a new incentive compensation plan will go into effect,
which we refer to in this prospectus as the incentive plan. The
incentive plan will be administered by the compensation
committee of our board of directors, which committee has the
exclusive authority, including the power to determine
eligibility to receive awards, the types and number of shares of
stock subject to the awards, the price and timing of awards and
the acceleration or waiver of any vesting, and performance or
forfeiture restriction. The compensation committee, however,
does not have the authority to waive any performance
restrictions for performance-based awards. As used in this
prospectus, the term administrator means the
compensation committee.
Stock options.
Stock options may be granted under the
incentive plan, including incentive stock options, as defined
under Section 422 of the Internal Revenue Code, as amended
(Code), and nonqualified stock options. The option exercise
price of all stock options granted under the incentive plan will
be determined by the administrator, except that any incentive
stock option or any option intended to qualify as
performance-based compensation under Code Section 162(m)
will not be granted at a price that is less than 100% of the
fair market value of the stock on the date of grant. Stock
options may be exercised as determined by the administrator, but
in no event after the tenth anniversary date of grant.
Stock appreciation rights (SAR).
SAR entitles a participant to receive
a payment equal in value to the difference between the fair
market value of a share of stock on the date of exercise of the
SAR over the grant price of the SAR. The administrator may pay
that amount in cash, in shares of our common stock, or a
combination. The terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any
other terms and conditions of any SAR will be determined by the
administrator at the time of the grant of award and will be
reflected in the award agreement.
76
77
2003 Employee Stock Purchase Plan.
Subject to board approval, we plan
to sponsor an employee stock purchase plan following the
completion of the offering. The new employee stock purchase plan
will permit eligible employees (as defined in the employee stock
purchase plan) to purchase up
to shares
of our common stock annually at a price of no less than 85% of
the price per share of our common stock either at the beginning
or the end of the six-month offering period, whichever is less.
The compensation committee of our board of directors will
administer the employee stock purchase plan. Our board may amend
or terminate the plan. The employee stock purchase plan will
comply with the requirements of Section 423 of the Code.
Deferred Compensation
Agreements.
We have entered into
deferred compensation agreements with seven of our employees,
providing for the payment of deferred compensation to each
employee in the event that the employee becomes no longer
employed by us. Under each agreement, the employee shall receive
an amount equal to the compensation the employee would have
earned if the employee had repeated the employment performance
of the prior twelve months. We will pay the deferred
compensation in a lump sum or over the period in which the
employee would typically have earned the compensation had the
employee been actively employed, at our option. Our total
commitment under the deferred compensation agreements was
$1.5 million as of June 30, 2003.
Executive Benefit
Plan.
We sponsor the Universal
Technical Institute Executive Benefit Plan that is designed to
attract and retain competent executives and key employees. Under
the plan, eligible employees may contribute base pay as well as
all or any part of their annual bonus on a tax-deferred basis
into the plan. We may elect to make matching contributions on an
annual basis. All employee deferrals and employer matches are
fully vested when deferred and matched. We also provide eligible
employees with individual life insurance coverage at no cost to
them. The plan is an unfunded plan and, as such, is exempt from
the participation and funding requirements of the Employee
Retirement Income Security Act of 1974. As of June 30,
2003, the obligation for deferred compensation under the plan
totaled approximately $0.8 million. The plan assets held to
fund the deferred compensation liability are included in our
financial statements under Other Assets and represent the cash
surrender value of life insurance. This value was
$0.2 million at June 30, 2003.
401(k) Plan
We maintain a plan qualified under
Section 401(k) of the Internal Revenue Code. Under our
401(k) plan, a participant may contribute a maximum of 50% of
his or her pre-tax salary, commissions and bonuses through
payroll deductions, up to the statutorily prescribed annual
limit ($12,000 in calendar year 2003). The percentage elected by
more highly compensated participants may be required to be
lower. In addition, at the discretion of our board of directors,
we may make discretionary matching and/or profit-sharing
contributions into our 401(k) plan for eligible employees.
Compensation Committee Interlocks and Insider
Participation
None of our executive officers has served as a
director or member of the compensation committee of any other
entity whose executive officers served as a director or member
of our compensation committee.
78
Name
Age
Position Held
55
Chairman of the Board
55
Chief Strategic Planning Officer and Vice
Chairman of the Board
39
Chief Executive Officer, President and Director
38
Senior Vice President, Chief Financial Officer
and Treasurer
45
Senior Vice President of Admissions
45
Senior Vice President of Operations
37
Director
35
Director
48
Director
45
Director
55
Director
66
Director
(1)
Member of the audit committee.
(2)
Member of the compensation committee.
Audit Committee
our accounting and financial reporting processes;
the reliability of our financial statements;
the effective evaluation and management of our
financial risks;
our compliance with laws and regulations; and
the maintenance of an effective and efficient
audit of our financial statements by a qualified independent
auditor.
be aware of the current areas of greatest
financial risk to us and ensure that management is effectively
assessing and managing risks;
consider the effectiveness of our disclosure
controls and procedures to promote timely, accurate, compliant
and meaningful disclosure in our periodic reports filed with the
SEC;
periodically review with the independent auditors
their assessment as to the adequacy of our structure of internal
controls over financial accounting and reporting, and their
qualitative judgments as to the accounting principals employed
and related disclosures by us and the conclusions expressed in
our financial reports;
review our accounting policies and practices to
ensure they meet the requirements with respect to the FASB, the
SEC and the American Institute of Certified Public Accountants;
select, evaluate and, if necessary, replace our
independent auditors;
actively engage in dialogue with the independent
auditors with respect to any disclosed relationships or services
that may impact the objectivity or independence of the
independent auditors;
meet with the independent auditors, the internal
auditors and senior management to review the scope and
methodology of the proposed audit;
discuss with management policies and practices
regarding earnings press releases, as well as financial
information and earnings guidelines provided to analysts and
rating agencies;
set clear hiring policies with respect to any
current or former employees of our independent auditors;
review periodically our code of conduct and
obtain confirmation from management that the policies included
in the code of conduct are understood and implemented; and
establish procedures for the receipt, retention
and treatment of complaints we receive regarding our internal
accounting controls or auditing matters and for the
confidential, anonymous submission by employees of their
concerns regarding our internal accounting controls and auditing
matters.
Compensation Committee
develop and maintain a compensation policy and
strategy that creates a direct relationship between pay levels
and corporate performance and returns to stockholders;
recommend compensation and benefit plans to our
board for approval;
review and approve annual corporate and personal
goals and objectives to serve as the basis for the chief
executive officers compensation, evaluate the chief
executive officers performance in light of the goals and,
based on such evaluation, determine the chief executive
officers compensation;
determine the annual total compensation for our
named executive officers;
with respect to our equity-based compensation
plans, approve the grants of stock options and other
equity-based incentives as permitted under our compensation
plans;
review and recommend compensation for
non-employee directors to our board; and
review and recommend employment agreements,
severance arrangements and change of control plans that provide
for benefits upon a change in control, or other provisions for
our executive officers and directors, to our board. It is
intended that arrangements for change of control benefits for
our executive officers will be considered by the compensation
committee after this offering.
Nominating and Governance
Committee
identify individuals qualified to serve as our
directors;
recommend qualified individuals for election to
our board of directors at annual meetings of stockholders;
recommend to our board the directors to serve on
each of our board committees; and
recommend a set of corporate governance
guidelines to our board.
review periodically the composition of our board;
identify and recommend director candidates for
our board;
recommend to our board nominees for election as
directors;
recommend to our board the composition of the
committees of the board;
review periodically our corporate governance
guidelines and recommend governance issues that should be
considered by our board;
review periodically our committee structure and
operations and the working relationship between each committee
and the board; and
consider, discuss and recommend ways to improve
our boards effectiveness.
Annual Compensation
Long-Term Compensation
Securities
Other Annual
Underlying
Name and Principal Position
Year
Salary
Bonus
Compensation
Options
2003
$
344,834
$
393,200
2002
260,000
187,500
2001
260,000
2003
$
343,495
$
393,200
2002
260,000
187,500
2001
260,000
2003
$
307,356
$
193,200
2002
258,654
268,000
2001
206,092
101,250
2003
$
179,885
$
73,750
2002
162,479
116,250
2001
116,474
50,625
2003
$
219,385
$
55,250
2002
190,887
43,896
2001
180,897
54,837
Potential Realizable
Individual Grants
Value at
Assumed Rate of
Number of
Percent of
Stock Price
Shares
Total Options
Appreciation for
Underlying
Granted to
Option Term
(1)
Options
Employees
Exercise Price
Granted
in Year
Per Share
Expiration Date
5%
10%
21.7
%
$
February 25, 2013
$
150,029
$
380,203
(1)
Amounts reported in these columns represent
amounts that may be realized upon exercise of the option
immediately prior to the expiration of its term assuming the
specified compound rates of appreciation (5% and 10%) in
the market value of our common stock over the term of the
option. These numbers are calculated based on rules promulgated
by the Securities and Exchange Commission and do not reflect our
estimate of future stock price growth. The gains shown are net
of the option exercise price, but do not include deductions for
taxes or other expenses associated with the exercise of the
option or the sale of the underlying shares. The actual gains,
if any, on the exercise of this stock option will depend on the
future performance of our common stock, the optionholders
continued employment through the option period, and the date on
which the option is exercised.
Number of Shares
Value of Unexercised
Underlying Unexercised
in-the-Money Options at
Shares
Options at Year-End
Year-End
(1)
Acquired
Value
on Exercise
Realized
Exercisable
Unexercisable
Exercisable
Unexercisable
$
$
$
Chairman of the Board(1)
Chief Strategic Planning Officer and
Vice-Chairman of the Board
Chief Executive Officer, President
Senior Vice President, Chief Financial Officer
and Treasurer
Senior Vice President of Admissions
(1)
There was no public market for our common stock
on September 30, 2003. Accordingly, these values have been
calculated in accordance with the rules of the Securities and
Exchange Commission, on the basis of the initial public offering
price per share of
$ , less
the applicable exercise price.
provides that each executive may be paid an
annual, performance-based bonus to be determined by our board of
directors, in its sole discretion;
specifies that each executive is entitled to
certain perquisites, including reimbursement of expenses, paid
vacations, health and medical reimbursement plan, a car
allowance and automobile insurance and such other perquisites
and benefits, including health, short- and long-term disability,
pension and life insurance benefits for our executives and their
families, established from time to time at the sole discretion
of our board of directors;
provides for our payment of severance
compensation and benefits to the executives under certain
circumstances, such as when the executives employment is
terminated by us other than for cause, as defined in the
employment agreements, or by the executive if we materially
breach the employment agreement or due to the executives
death or disability; and
restricts the employees disclosure and use
of our confidential information, as defined in the employment
agreement, and prohibit the employee from competing with us for
a specified period following the termination of employment.
as a precondition to our payment of any severance
compensation or benefits, the employee must execute a waiver and
release that we provide to the employee;
the amounts paid to or benefits received by the
employee are subject to a downward adjustment so that the total
payments to the employee due to a change in control do not
constitute an excess parachute payment, as that term is defined
in Section 280G of the Internal Revenue Code of 1986, as
amended, or cause the employee to be required to pay an excise
tax under Section 4999 of the Code; and
the employee is not required to mitigate any
amounts paid or benefits received under the severance agreement
by seeking other employment or otherwise.
Participants.
Any of our employees, our
non-employee directors, consultants and advisors to us, as
determined by the compensation committee may be selected to
participate in the incentive plan. We may award these
individuals with one or more of the following:
stock options;
stock appreciation rights;
restricted stock awards;
performance shares;
performance-based awards; and
IPO awards.
Upon the exercise of a stock option, the
purchase price must be paid in full in either cash or its
equivalent or by tendering previously acquired shares of our
common stock with a fair market value at the time of exercise
equal to the exercise price, provided such shares have been held
for at least six months prior to tender. The administrator may
also allow a broker-assisted cashless exercise or by any other
means that it determines to be consistent with the purpose of
the incentive plan and as permitted under applicable law.
Restricted stock.
A restricted stock
award is the grant of shares of our common stock at a price
determined by the administrator (including zero), that is
nontransferable and is subject to substantial risk of forfeiture
until specific conditions or goals are met. Conditions may be
based on continuing employment or achieving performance goals.
During the period of restriction, participants holding shares of
restricted stock may, if permitted by the administrator, have
full voting and dividend rights
with respect to such shares. The restrictions
will lapse in accordance with a schedule or other conditions
determined by the administrator.
Performance shares.
A performance share
award is a contingent right to receive pre-determined shares of
our common stock if certain performance goals are met. The value
of performance units will depend on the degree to which the
specified performance goals are achieved but are generally based
on the value of our common stock. The administrator may, in its
discretion, pay earned performance shares in cash, or stock, or
a combination of both.
Performance-based awards.
Grants of
performance-based awards enable us to treat restricted stock and
performance share awards granted under the incentive plan as
performance-based compensation under
Section 162(m) of the Code and preserve the deductibility
of these awards for federal income tax purposes. Because
Section 162(m) of the Code only applies to those employees
who are covered employees, as defined in
Section 162(m) of the Code, only covered employees are
eligible to receive performance-based awards.
Participants are only entitled to receive
payment for a performance-based award for any given performance
period to the extent that pre-established performance goals set
by the administrator for the period are satisfied. These
pre-established performance goals must be based on one or more
of the following performance criteria: pre- or after-tax net
earnings, sales or revenue, operating earnings, operating cash
flow, return on net assets, return on stockholders equity,
return on assets, return on capital, stock price growth,
stockholder returns, gross or net profit margin, earnings per
share, price per share, and market share. These performance
criteria may be measured in absolute terms or as compared to any
incremental increase or as compared to results of a peer group.
With regard to a particular performance period, the
administrator will have the discretion to select the length of
the performance period, the type of performance-based awards to
be granted, and the goals that will be used to measure the
performance for the period. In determining the actual size of an
individual performance-based award for a performance period, the
administrator may reduce or eliminate (but not increase) the
award. Generally, a participant will have to be employed on the
date the performance-based award is paid to be eligible for a
performance-based award for that period.
IPO awards.
IPO awards are non-qualified
stock options granted by the administrator to selected
individuals as of the effective date of the offering. The
exercise price for these awards is the initial public offering
price and will become fully vested as of the third anniversary
of the date of grant and will be subject to such other terms and
conditions included in a participants award agreement.
Shares reserved for issuance.
Subject to
certain adjustments, we may issue a maximum
of shares
of our common stock, including shares of common stock that may
be issued upon the exercise of options, under the incentive
plan. The maximum number of shares of common stock that may be
subject to one or more awards to a participant under the
incentive plan during any fiscal year
is .
The maximum number of shares of common stock payable in the form
of performance-based awards to any one participant for a
performance period
is .
Change of control.
The incentive plan
provides that all awards granted under the incentive plan will
become fully exercisable and all restrictions on awards will
lapse if there is a change of control and the
optionholders employment is terminated without cause by
us, or for good reason by the optionholder, within one year of
the effective date of the change of control. The term
change of control under the incentive plan is
generally defined to include (1) the acquisition of at
least 25% of our voting securities by any person,
(2) certain changes in the composition of our board of
directors, (3) a merger or consolidation in which our
stockholders own less than 50% of the voting securities of the
surviving entity, (4) stockholder approval of a liquidation
or dissolution of our company and (5) a transfer of all or
substantially all of our total assets.
Amendment and termination.
The
administrator, with the boards approval, may terminate,
amend, or modify the incentive plan at any time; however,
stockholder approval will be obtained for any
amendment to the extent necessary and desirable
to comply with any applicable law, regulation or stock exchange
rule. We may not make any grants under the incentive plan
after ,
2013.
Adoption by stockholders.
The incentive
plan has been adopted by the approval of holders of a majority
of outstanding shares of our common stock and series D
preferred stock.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Management Consulting Agreement
In 1997, we engaged in a leveraged
recapitalization with the assistance of The Jordan Company, LLC,
a New York-based private merchant banking firm that specializes
in buying and building companies in partnership with management.
In connection with that transaction, we entered into a
management consulting agreement with TJC Management Corporation
(Jordan Management), an affiliate of The Jordan Company. Jordan
Management may be considered an affiliate of our company because
Mr. Caputo, one of our directors, is a managing director of
The Jordan Company and, prior to the offering, executives of and
consultants to The Jordan Company beneficially owned an
aggregate of approximately 14.3% of our common stock.
In April 2002, the management consulting
agreement was amended to include Worldwide Training Group, LLC
(Worldwide) and Charlesbank Capital Partners, LLC (Charlesbank)
as additional consultants, as such term is defined
in the agreement, in connection with their purchase of our
series D preferred stock. Worldwide and Charlesbank may be
deemed our affiliates because their beneficial ownership of our
common stock prior to the offering, on a converted basis,
represents 19.9% and 22.3%, respectively, of our total equity
ownership. In addition, Mr. Eisenson, one of our directors,
is a managing director and Chief Executive Officer of
Charlesbank. Following the offering, Charlesbank is expected to
own %
of our common stock. Our board of directors has concluded that
Mr. Eisenson will meet the independence requirement set
forth in the rules promulgated under the Sarbanes-Oxley Act of
2002 and that Mr. Eisenson qualifies to serve as a member
of our audit committee after the completion of the offering.
Under the management consulting agreement, Jordan
Management, Worldwide and Charlesbank render consulting services
to us in connection with financial and business affairs,
relationships with lenders, stockholders and other third
parties, and the expansion of our business. Under the agreement,
we are required to pay these consultants an aggregate management
fee, in quarterly installments due at the end of each fiscal
quarter, equal to the greater of $300,000 or 2.5% of our EBITDA
earnings, as defined in the agreement, for our preceding fiscal
year.
In addition to the management fee, the agreement
also provides for:
Under the management consulting agreement, any
payment we make pursuant to the agreement will be divided as
follows:
79
The table below sets forth the payments we have
made under the management consulting agreement in the first nine
months of our 2003 fiscal year and the prior three fiscal years:
We expect that the management consulting
agreement will be terminated in its entirety upon the
consummation of the offering and that no additional payments
will be made pursuant to that agreement as a result of the
offering or otherwise.
Registration Rights Agreement
As a condition to terminating the amended and
restated stockholders agreement, we anticipate entering
into a registration rights agreement with the following
stockholders: (i) JZ Equity Partners plc and The Jordan
Company, LLC (collectively, the TJC Shareholders);
(ii) Charlesbank Voting Trust, Charlesbank Equity
Fund V, Limited Partnership and CB Offshore Equity
Fund V, L.P. (the three Charlesbank entities are
collectively called the Charlesbank Shareholders),
(iii) Worldwide Training Group, LLC; (iv) Whites
Family Company, LLC and (v) Robert D. Hartman. Pursuant to
the registration rights agreement, each of the TJC Shareholders,
the Charlesbank Shareholders and Worldwide Training Group, LLC
shall have one demand registration right. Pursuant
to this demand right, at any time after 180 days following
the closing of this offering, any of the TJC Shareholders, the
Charlesbank Shareholders and Worldwide Training Group, LLC may
request that we file a registration statement under the
Securities Act of 1933 to cover the restricted shares of our
common stock that they own, as long as the aggregate offering
price for the proposed transaction to be registered is greater
than $50.0 million or represents an offering of at least
10% of our outstanding common stock. Upon receipt of such
request, we generally will be required to use our best efforts
to effect such registration. We will not be required to effect a
requested registration, however, if we have effected one such
registration which is still in effect, or if the request is made
within 360 days following the effective date of any
registered offering we have made to the general public, other
than this offering, in which a holder of restricted stock, as
defined in the registration rights agreement, shall have been
able to effectively register all the restricted stock as to
which registration has been requested. We may also delay filing
a registration statement or withhold efforts to cause a
registration statement to become effective if our board of
directors determines in good faith that such registration
statement will materially and adversely interfere with or affect
the negotiation or completion of any material transaction we are
considering or will involve initial or continuing disclosure
obligations that are not in our stockholders best
interests.
The registration rights agreement also provides
for piggyback rights with respect to the restricted
shares of our common stock held by each of the stockholders
party to this agreement, including Robert D. Hartman, our
Chairman of the Board, and Whites Family Company, LLC, an
entity controlled by John White, our Chief Strategic Planning
Officer and Vice Chairman. Accordingly, if we propose to
register, or are required to register following the exercise of
a demand registration right as described above, any
of our common stock for sale to the public following completion
of this offering, we are required to give written notice of our
intention to do so to each of the stockholders who is a party to
this agreement and to use our best efforts to include in the
registration statement the number of restricted shares of our
common stock beneficially owned and requested to be registered
by such stockholders, subject to reduction of such shares under
certain circumstances by an underwriter. If a reduction of
shares is necessary, stockholders who request to participate in
the registration will do so pro rata based on the numbers of
shares held by such stockholders on a fully-diluted basis,
except that we will have first priority to register shares of
our common stock if we initiate the registration for our own
account.
80
Transactions with Management and
Others
Senior Subordinated Notes Payable by Us.
Pursuant to a purchase agreement
dated as of January 23, 1998 between us and JZ Equity
Partners plc, formerly known as MCIT plc, we issued two senior
subordinated notes to JZ Equity Partners plc. These notes were
issued in an aggregate principal amount of $15.4 million,
bore interest at an annual rate of 13.5% and were due on
January 1, 2008. Pursuant to the same purchase agreement,
on October 30, 1998 we issued a senior subordinated note in
the amount of $4.0 million due October 31, 2006 and
bearing an annual interest rate of 13.5%. We repaid these three
notes in full, including the associated accrued interest, in
April 2002, concurrently with the closing of our series D
preferred stock offering. JZ Equity Partners is an investment
trust listed on the London Stock Exchange. Its principal
business is to invest, primarily in the United States, in debt
and equity securities recommended by Jordan/ Zalaznick Advisers,
Inc., its sole investment adviser and an affiliate of The Jordan
Company.
Subordinated Promissory Notes Payable by
Us.
In addition to the senior
subordinated notes described above, we also issued on
September 30, 1997 separate subordinated promissory notes
in favor of a group of our officers and employees, including
Robert Hartman, John White, Kimberly McWaters, Roger Speer and
David Miller, and CHC I, Inc. These notes aggregated
$4.0 million in original principal amount, had an annual
interest rate of 13.5% and were due on January 31, 2008.
CHC I, Inc. is controlled by John C. White. We repaid these
notes, including the accrued interests in April 2002,
concurrently with the closing of our series D preferred
stock offering.
Loans to and from Insiders.
In 1997, we made restricted stock
awards to 16 of our employees and officers, including Robert
Hartman, Kimberly McWaters, Roger Speer and David Miller,
pursuant to our 1997 Restricted Stock Plan. Each of them
executed a promissory note in our favor as payment for the
restricted shares received. The aggregate principal amount of
the notes executed by these four officers was approximately
$115,000, plus interest accruing at an annual rate of 6.25%.
Robert Hartman, Kimberly McWaters, Roger Speer and David Miller
have repaid these notes in full, including all accrued interest.
In September 1997, we issued a promissory note in
the principal sum of approximately $4.0 million in favor of
Whites Family Company, LLC, an entity controlled by
John C. White, at an annual interest rate of approximately
6.6% and due on September, 2023. In August 2003, we repaid this
note in full, including all accrued interest. Immediately
following this repayment, Whites Family Company, LLC
remitted to us approximately $4.0 million in satisfaction
of the principal amount of, and accrued interest on, a
subscription note receivable bearing interest at approximately
6.1%.
In June 2003, Robert Hartman, Kimberly McWaters,
Roger Speer, David Miller and an entity affiliated with John
White and the assignee of his options purchased shares of our
common stock pursuant to their respective exercises of vested
options granted under our Management 1999 Stock Option Program.
Each of the optionees executed a note in our favor in payment
for their respective shares of our common stock received
pursuant to the exercise. The aggregate of the obligations under
these notes was $90,475, and interest accrued under these notes
at an annual rate of 6.0%. These notes have been paid in full.
The Preferred Share Exchange.
In addition to the series D
preferred stock, we have issued and outstanding shares of our
series A preferred stock, series B preferred stock and
series C preferred stock, which are held by a total of 21
persons or entities consisting of investors, our employees and
officers, including Robert Hartman, John White and Kimberly
McWaters. The series A preferred stock, series B
preferred stock and series C preferred stock are not
convertible by their terms into common stock. We will offer to
exchange the outstanding shares of series A, series B
and series C preferred stock for shares of our common stock
immediately prior to the consummation of this offering. We plan
to redeem all shares of our series A, series B and
series C preferred stock that are not exchanged and pay all
the accrued and unpaid dividends on all our preferred stock
(whether or not exchanged for common stock pursuant to our
exchange offer) with the proceeds of the offering. The number of
shares of our common stock that will be issued in exchange for
each share of the preferred stock is the quotient of the
liquidation value of the preferred stock ($1,000) divided by the
initial offering price of our common stock in this offering. The
exchange will be completed pursuant to an exchange agreement
between us and the holders of series A,
81
Declaration of Cash Dividend.
In September 2003, our board of
directors declared, and we paid, a cash dividend on the shares
of our common stock payable to the record holders as of
August 25, 2003. Charlesbank and Worldwide, the record
holders of our series D preferred stock, were entitled to
receive, upon conversion, such cash dividend, pro rata and on an
as-converted basis, pursuant to certain provisions of the
certificate of designation of the series D preferred stock.
Our certificate of incorporation was amended to permit the
holders of series D preferred stock to be paid the dividend
prior to the conversion and simultaneously with holders of our
common stock, and the holders of our series A, B and C
preferred stock consented to such payment. The aggregate amount
of the cash dividend was $5.0 million and was paid out
among Charlesbank ($1.2 million), Worldwide
($1.0 million), JZEP ($0.7 million), executives of and
consultants to The Jordan Company ($0.7 million), Robert D.
Hartman ($0.5 million), John C. White ($0.5 million)
and other members of our management (approximately
$0.3 million, in aggregate) by virtue of their ownership of
our common stock.
NTT Transaction.
In June 1998, we acquired National
Technology Transfer, Inc. (NTT) and Performance Training
Associates, Inc. (PTA), a wholly-owned subsidiary of NTT at the
acquisition date. NTT is engaged in technical training that
presents hands-on, equipment-intensive training seminars to the
maintenance, repair and operations sectors of our industry. PTA
organized lecture training seminars in markets similar to those
in which NTT is active. The acquisition of NTT and PTA was
completed for approximately $50.2 million, comprised of the
$37.8 million we borrowed under our senior credit
facilities to finance the acquisition, our issuance of a
$5.2 million subordinated convertible promissory note
payable to the former NTT and PTA shareholder, our issuance of a
$5.4 million 60-day note payable to the former NTT and PTA
shareholder and $1.8 million in transaction costs. PTA was
subsequently merged into NTT. In September of 2001, we sold our
interest in NTT to NTT Acquisition Corp. for a nominal
consideration because contemplated synergies did not materialize
and operating results were less than desired. NTT Acquisition
Corp. is owned by certain of our stockholders, including
affiliates of The Jordan Company, LLC, such as one of our
directors, A. Richard Caputo, and an entity controlled by
one of our directors, John W. Jordan, as well as our management,
including Robert D. Hartman and John C. White, who serve on our
board of directors. We reported the operating results of NTT and
the loss on disposal as discontinued operations. In addition, we
advanced funds to NTT Acquisition Corp. subsequent to the sale
of NTT in exchange for a note receivable in the amount of
$0.6 million. This note has not been repaid. In 2002, we
recorded a full valuation allowance because collection was
uncertain.
Leases.
We
lease some of our properties from entities controlled by John C.
White, our Chief Strategic Planning Officer and Vice Chairman of
our board of directors. A portion of the property comprising our
Orlando location is occupied pursuant to a lease with the John
C. and Cynthia L. White 1989 Family Trust, with the lease term
expiring on August 19, 2022. The annual base lease payments
for the first year under this lease total approximately
$326,000, with annual adjustments based on the higher of
(i) an amount equal to 4% of the total annual rent for the
immediately preceding year or (ii) the percentage of
increase in the Consumer Price Index. Another portion of the
property comprising our Orlando location is occupied pursuant to
a lease with Delegates LLC, an entity controlled by the White
Family Trust, with the lease term expiring on July 1, 2016.
The beneficiaries of this trust are Mr. Whites
children, and the trustee of the trust is not related to
Mr. White. Annual base lease payments under this lease are
approximately $680,000, with annual adjustments based on the
higher of (i) an amount equal to 4% of the total annual
rent for the immediately preceding year or (ii) the
percentage of increase in the Consumer Price Index.
Additionally, we lease two of our Phoenix properties under one
lease from City Park LLC, a successor in interest of 2844 West
Deer Valley L.L.C. and in which the John C. and Cynthia L. White
1989 Family Trust holds a 25% interest. The lease expires on
February 28, 2015, and the annual base lease payments under
this lease, as amended, are approximately $463,000 for 2002,
with annual adjustments based on the higher of (i) an
amount equal to 4% of the total annual rent for the immediately
preceding year or (ii) the percentage of increase in the
Consumer Price Index. The table below sets forth
82
We believe that the rental rates under these
leases approximate the fair market rental value of the
properties at the time the lease agreements were negotiated.
Other Related Party
Transactions.
In 2000, we engaged a consulting firm
for services related to strategic change management. We learned
about the consulting firm through Shirley Richard, who was a
member of our Advisory Board from 1994 until she joined us in
May 2003 as our Senior Vice President, Strategic Change
Management. Ms. Richard received approximately $116,400 in
2001 from the consulting firm for services rendered.
Ms. Richard has no equity ownership in the consulting firm
and has not had any financial relationship with the consulting
firm other than that described above.
83
an investment banking fee equal to 2% of the
value of any assets or stock of ours or other entity acquired or
sold by us;
a financial consulting fee equal to 1% of the
value of any debt or equity financing we consummate; and
reimbursement of reasonable out-of-pocket
expenses incurred by the consultants and their personnel in
providing the services to us.
with respect to any management fee, 40% to Jordan
Management or its assignee, 42% to Worldwide or its assignee and
18% to Charlesbank or its assignee; and
with respect to any investment banking fee or
financial consulting fee, 40% to Jordan Management or its
assignee, 30% to Worldwide or its assignee and 30% to
Charlesbank or its assignee.
2003
2000
2001
2002
(as of June 30)
$
0
$
250,000
$
2,348,949
(1)
$
235,545
$
0
$
0
$
111,321
$
247,322
$
0
$
0
$
47,709
$
105,995
(1)
Reflects fees for services rendered for 2000 and
2001 that were deferred pursuant to an agreement between Jordan
Management and us.
John C. and Cynthia L. White
City Park LLC
1989 Family Trust
Delegates LLC
$
381,841
$
293,942
$
321,543
$
447,795
$
299,597
$
404,912
$
462,567
$
364,508
$
644,715
$
370,481
$
298,081
$
592,732
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information
regarding the beneficial ownership of our common stock as of
September 30, 2003, and as adjusted to reflect the sale of
shares in the offering by:
Footnote (1) below provides a brief
explanation of what is meant by the term beneficial
ownership. For the purpose of calculating the percentage
of shares beneficially owned by any stockholder, the number of
shares of common stock deemed outstanding prior to
offering reflects or assumes the exchange
of shares
of our series A preferred
stock, shares
of our series B preferred stock
and shares
of our series C preferred stock into an aggregate
of shares
of our common stock and the automatic conversion of all
outstanding shares of series D preferred stock into an aggregate
of shares
of our common stock and includes shares of common stock subject
to options held by beneficial owners that are currently
exercisable. This table assumes the over-allotment option
granted to the underwriters is not exercised.
The number of shares of common stock outstanding
After Offering includes an
additional shares
of common stock offered by us in the offering. Except as
indicated in the footnotes to this table and subject to
applicable community property laws, the persons named in this
table have the sole voting power with respect to all shares of
common stock listed as beneficially owned by them.
84
85
86
87
each person known to us to beneficially own more
than 5% of the outstanding shares of common stock;
each of the executive officers identified in the
summary compensation table;
each of our directors;
all directors and executive officers as a group;
and
each selling stockholder.
Before Offering
After Offering
Number of
Number of
Number of
Shares of
Percent of
Shares
Shares of
Percent of
Common Stock
Common Stock
Offered in
Common Stock
Common Stock
Beneficially
Beneficially
This
Beneficially
Beneficially
Name of Beneficial Owner
(1)
Owned
Owned
Offering
Owned
Owned
Before Offering
After Offering
Number of
Number of
Number of
Shares of
Percent of
Shares
Shares of
Percent of
Common Stock
Common Stock
Offered in
Common Stock
Common Stock
Beneficially
Beneficially
This
Beneficially
Beneficially
Name of Beneficial Owner
(1)
Owned
Owned
Offering
Owned
Owned
*
Less than 1% of the outstanding common stock.
(1)
Beneficial ownership is a term
broadly defined by the Securities and Exchange Commission in
Rule 13d-3 under the Exchange Act, and includes more than
the typical forms of stock ownership, that is, stock held in the
persons name. The term also includes what is referred to
as indirect ownership, meaning ownership of shares
as to which a person has or shares investment or voting power.
For purpose of this table, a person or group of persons is
deemed to have beneficial ownership of any shares as
of a given date that such person or group has the right to
acquire within 60 days after such date.
(2)
Shares beneficially owned prior to the offering
consist of 1,246.46395 shares of series D preferred stock
with a liquidation value of $19,302.60401 per share that are
convertible
into shares
of common stock, which will occur concurrently with the closing
of the offering. Number of shares to be beneficially owned after
the offering consists
of shares
which may be transferred to the respective holders of the trust
certificates in accordance with the procedures described below.
Charlesbank Equity Fund V, Limited Partnership, is the
trustee of the voting trust. Charlesbank Capital Partners, LLC
is the general partner of Charlesbank Equity
Fund V GP, Limited Partnership, which is the general
partner of the voting trustee of the voting trust. Charlesbank
Capital Partners, LLCs business address is 600 Atlantic
Avenue, 26th Floor, Boston, Massachusetts 02210. This
voting trust terminates immediately upon the termination of the
amended and restated stockholders agreement which we anticipate
will terminate upon the closing of this offering. Upon
termination of the voting trust, the voting trustee will require
the then outstanding holders of voting trust certificates to
surrender the trust certificates in exchange for a stock
certificate or certificates representing the number of shares of
our common stock. Currently, holders of the trust certificates
are as follows: Charlesbank Equity Fund V, Limited
Partnership,
representing shares;
CB Offshore Equity Fund V, L.P.,
representing shares;
Charlesbank Equity Co-investment Fund V, Limited
Partnership,
representing shares
and Coyote Training Group, LLC,
representing shares.
(3)
Shares beneficially owned prior to the offering
consist of 1,110.73097 shares of series D preferred
stock convertible
into shares
of common stock, which will occur concurrently with the closing
of the offering. Number of shares to be beneficially owned after
the offering consists
of shares
held of record by Worldwide Training Group, LLC. Worldwide
Training Group, LLCs business address is 13400 Outer
Drive West, Suite B36, Detroit, Michigan 48239.
(4)
Shares beneficially owned prior to the offering
consist
of shares
of common stock held of record by the voting trust. Shares
beneficially owned after the offering consists
of shares
which will be transferred to the respective holders of the trust
certificates in accordance with the procedures described below.
The voting trustees of the TJC Voting Trust are A. Richard
Caputo, John W. Jordan and David Zalaznick, who are
principals of The Jordan Company, LLC, a private merchant
banking firm, with a business address of 767 Fifth Avenue,
48th Floor, New York, New York 10153. This voting trust
terminates immediately upon the termination of the amended and
restated stockholders agreement, which we anticipate will
terminate upon the closing of this offering. Upon termination of
the voting trust, the voting trustees, will require the then
outstanding holders of voting trust certificates to surrender
the trust certificates in exchange for a stock certificate or
certificates representing the number of shares of our common
stock. Currently, holders of the trust certificates are as
follows: John W. Jordan, II,
representing shares;
Jonathan F. Boucher,
representing shares;
A. Richard Caputo,
representing shares;
Adam E. Max,
representing shares;
John R. Lowden,
representing shares;
The Lowden Family Trust,
representing shares;
James E. Jordan Jr. Profit Sharing Plan &
Trust,
representing shares;
Douglas J. Zych,
representing shares;
Paul Rodzevik Profit Sharing & Trust,
representing shares,
and Leucadia Investors, Inc.,
representing shares.
(15)
James A. Hislop serves on our board of
directors and is President of Worldwide Training Group, LLC and
President of Penske Capital Partners, LLC.
Mr. Hislops beneficial ownership
includes shares
of series D preferred stock held by Worldwide Training
Group, LLC, as previously described in Note (3) above.
Mr. Hislop has shared voting power and shared investment
power over these shares. Mr. Hislops business address
is One Harmon Plaza, 9th Floor, Secausus, New Jersey 07094.
(16)
John W. Jordan serves on our board of
directors. Mr. Jordans beneficial ownership
includes shares
held by the TJC Voting Trust, as previously described in
Note (4) above. Mr. Jordan is a voting trustee of TJC
Voting Trust and, as such, has shared voting and
investment power over the shares held in the trust.
Mr. Jordans address is 875 N. Michigan Avenue,
#4020, Chicago, Illinois 60611.
(17)
Roger S. Penske serves on our board of
directors. Mr. Penske also is Chairman of the Board of
Directors of Penske Corporation, United Auto Group, Inc. and
Penske Truck Leasing Corporation, all of which have ownership
rights in Worldwide Training Group, LLC. Mr. Penske
disclaims his beneficial ownership, other than the pecuniary
interest therein, of all the shares held by Worldwide Training
Group, LLC, that may be attributable to him.
Mr. Penskes business address is 2555 Telegraph
Road, Bloomfield Hills, MI 48302.
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to
issue shares
of common stock,
$ par
value per share,
and shares
of preferred stock,
$ par
value per share.
The following description of the material terms
of our capital stock and our amended and restated certificate of
incorporation and amended and restated bylaws is only a summary.
You should refer to our amended and restated certificate of
incorporation and amended and restated bylaws as in effect upon
the closing of this offering, which are included as exhibits to
the registration statement of which this prospectus is a part.
Common Stock
As of June 30, 2003, there
were shares
of common stock outstanding, which were held of record by
23 stockholders. Prior to or concurrently with the
completion of this offering (i) we will effect
a -for-one common stock split,
(ii) our outstanding shares of series D preferred
stock will, in accordance with their terms, be converted
into shares
of common stock, (iii) we will consummate an offer to
holders of our outstanding shares of our series A preferred
stock, series B preferred stock and series C preferred
stock to exchange such shares for shares of our common stock at
an exchange ratio based upon the initial public offering price
of the common stock in this offering and the liquidation value
of their preferred stock and (iv) we will redeem in
accordance with their terms all shares of our series A,
series B and series C preferred stock which are not
timely transmitted for exchange. We estimate
that shares
of our
series A, shares
of our series B
and shares
of our series C preferred stock will be tendered for
exchange, resulting in our issuance
of shares
of common stock (assuming an initial public offering price for
the common stock of
$ per
share, the mid-point of the price range set forth on the cover
of this prospectus). Consequently, upon completion of this
offering, there will
be shares
of common stock outstanding (assuming no exercise of the
underwriters over-allotment option).
Voting rights.
The holders of our common stock
are entitled to one vote per share for each share held of record
on any matter to be voted upon by stockholders. Our amended and
restated certificate of incorporation does not provide for
cumulative voting in connection with the election of directors
and, accordingly, holders of more than 50% of the shares voting
will be able to elect all of the directors standing for election.
Dividend rights.
All shares of our common stock are
entitled to share equally in any dividends our board of
directors may declare from legally available sources. Our senior
secured credit facilities currently impose restrictions on our
ability to declare dividends with respect to our common stock.
Liquidation rights.
Upon liquidation or dissolution of
our company, whether voluntary or involuntary, all shares of our
common stock are entitled to share equally in the assets
available for distribution to stockholders after payment of all
of our prior obligations, including our preferred stock.
Other matters.
The holders of our common stock
have no preemptive or conversion rights and our common stock is
not subject to further calls or assessments by us. There are no
redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of our common stock, including the
common stock offered in this offering, are fully paid and
non-assessable.
Preferred Stock
Prior to or concurrently with the completion of
this offering, all outstanding shares of our preferred stock
will either be converted into shares of our common stock,
exchanged for shares of our common stock or redeemed.
Consequently, no shares of preferred stock will be outstanding
immediately following completion of this offering.
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Our amended and restated certificate of
incorporation provides for the authorization
of shares
of preferred stock. The shares of preferred stock may be issued
from time to time at the discretion of the board of directors
without stockholder approval. The board of directors is
authorized to issue these shares in different classes and series
and, with respect to each class or series, to determine the
dividend rate, the redemption provisions, conversion provisions,
liquidation preference and other rights and privileges not in
conflict with our amended and restated certificate of
incorporation. No shares of our preferred stock will be
outstanding immediately following completion of this offering,
and we have no immediate plans to issue any preferred stock. The
issuance of any of our preferred stock could provide needed
flexibility in connection with possible acquisitions and other
corporate purposes, however, the issuance could also make it
more difficult for a third party to acquire a majority of our
outstanding voting stock or discourage an attempt to gain
control of us. In addition, the board of directors, without
stockholder approval, can issue shares of preferred stock with
voting and conversion rights which could adversely affect the
voting power and other rights of the holders of common stock.
The listing requirements of the New York Stock Exchange, which
would apply so long as the common stock is listed on the New
York Stock Exchange, require stockholder approval of certain
issuances equal to or exceeding 20% of the then outstanding
voting power or then outstanding number of shares of common
stock. These additional shares may be used for a variety of
corporate purposes, including future public offerings, to raise
additional capital or to facilitate acquisitions.
Directors Exculpation and
Indemnification
Our amended and restated certificate of
incorporation provides that none of our directors shall be
liable to us or our stockholders for monetary damages for any
breach of fiduciary duty as a director, except to the extent
otherwise required by the Delaware General Corporation Law, or
the DGCL. The effect of this provision is to eliminate our
rights, and our stockholders rights, to recover monetary
damages against a director for breach of a fiduciary duty of
care as a director, except to the extent otherwise required by
the DGCL. This provision does not limit or eliminate our right,
or the right of any stockholder, to seek non-monetary relief,
such as an injunction or rescission in the event of a breach of
a directors duty of care. In addition, our amended and
restated certificate of incorporation provides that, if the DGCL
is amended to authorize the further elimination or limitation of
the liability of a director, then the liability of the directors
shall be eliminated or limited to the fullest extent permitted
by the DGCL, as so amended. These provisions will not alter the
liability of directors under federal or state securities laws.
We have entered into indemnification agreements
with each of our directors and officers. These indemnification
agreements provide that we will indemnify our directors and
officers to the fullest extent permitted by law for liabilities
they may incur because of their status as directors and
officers. These agreements also provide that we will advance
expenses to our directors and officers relating to claims for
which they may be entitled to indemnification. Upon a potential
change of control of our company, our directors and officers may
request that we create a trust for their benefit in an amount
sufficient to satisfy any expenses that they may reasonably
expect to incur in connection with a claim against them. These
indemnification agreements also provide that we will maintain
directors and officers liability insurance.
Registration Rights
We anticipate entering into a registration rights
agreement with certain of our stockholders, including
JZ Equity Partners plc, TJC Voting Trust, Charlesbank
Voting Trust, Worldwide Training Group, LLC, Whites Family
Company, LLC and Robert D. Hartman. See Certain
Relationships And Related Transactions for a more detailed
summary of the proposed registration rights agreement.
Certain Provisions of Our Certificate of
Incorporation and Bylaws
Provisions with anti-takeover implications.
We have opted not to be governed
by the provisions of Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a publicly
held Delaware corporation from engaging in a business
combination with an interested stockholder for
a period of three years after the date of the transaction in
which the person became an interested
89
Election and removal of directors.
Our amended and restated
certificate of incorporation and amended and restated bylaws
provide for the division of our board of directors into three
classes as nearly equal in size as possible and with staggered
three-year terms. Any vacancy on our board of directors,
including a vacancy resulting from an enlargement of our board
of directors, may be filled only by the vote of a majority of
the directors then in office. The classification of our board of
directors and the limitation on filling of vacancies could make
it more difficult for a third party to acquire, or discourage a
third party from attempting to acquire, control of our company.
Board meetings.
Our amended and restated bylaws
provide that special meetings of the board of directors may be
called by the chairman of our board of directors, our chief
executive officer or by a majority of the directors in office.
Stockholder meetings.
Our amended and restated bylaws
provide that any action required or permitted to be taken by our
stockholders at an annual meeting or special meeting of
stockholders may only be taken if it is properly brought before
such meeting and may not be taken by written action in lieu of a
meeting. Our bylaws further provide that special meetings of the
stockholders may only be called by the chairman of our board of
directors, by a committee that is duly designated by the board
or by resolution adopted by the affirmative vote of the majority
of the board of directors.
Requirements for advance notification of
stockholder nominations and
proposals.
Our amended and
restated bylaws establish advance notice procedures with respect
to stockholder proposals and the nomination of candidates for
election as directors, other than nominations made by or at the
direction of our board of directors or a committee of the board
of directors. In order for any matter to be considered
properly brought before a meeting, a stockholder
must comply with requirements regarding advance notice and
provide certain information to us. These provisions could have
the effect of delaying until the next stockholders meeting
stockholder actions that are favored by the holders of a
majority of our outstanding voting securities. These provisions
could also discourage a third party from making a tender offer
for our common stock, because even if it acquired a majority of
our outstanding voting securities, it would be able to take
action as a stockholder (such as electing new directors or
approving a merger) only at a duly called stockholders meeting
and not by written consent.
Stockholder action by written consent.
Our amended and restated
certificate of incorporation and amended and restated bylaws
provide that stockholder action may be taken only at a duly
called annual or special meeting of stockholders of our common
stock.
Cumulative voting.
Our amended and restated
certificate of incorporation provides that our stockholders
shall have no cumulative voting rights.
Amendment of certificate of incorporation
and bylaws.
Amendment of the
provisions described above in our amended and restated
certificate of incorporation generally will require the
affirmative vote of a majority of our directors, as well as the
affirmative vote of the holders of at least 66 2/3% of our
then outstanding voting stock. Our amended and restated bylaws
may be amended (i) by the affirmative vote of
90
NYSE Trading
We intend to apply to have our common stock
listed on the New York Stock Exchange under the symbol
UTI.
Transfer Agent and Registrar
The transfer agent and registrar issues stock
certificates and keeps track of the registered holders of our
stock. Our transfer agent and registrar is The Bank of New York.
91
AMENDED AND RESTATED CREDIT FACILITY
Following the repayment in full of all borrowings
under our term A loan facility and the term B loan
facility with a portion of the proceeds of this offering, our
senior credit facilities will consist only of a revolving credit
facility that allows for aggregate borrowings of
$30 million. The revolving credit facility provides for the
issuance of letters of credit up to a specified amount for the
benefit of ED or any other third party. The amount available
under the revolving credit facility is reduced by the amount of
outstanding letters of credit. Our wholly-owned subsidiary,
UTI Holdings, Inc., is the borrower under the senior credit
facilities. UTI Holdings, Inc. is an intermediate holding
company that is holding the capital stock of all of our
operating subsidiaries. The revolving credit facility expires on
March 31, 2007.
As of July 2003, the revolving credit facility
bears interest at a rate equal to LIBOR plus 2.50% to 3.50% or,
at our option, the prime rate plus 1.25% to 2.25%, in each case
depending on our leverage ratio during the applicable interest
period. In addition to paying interest on outstanding principal
under the revolving credit facility, we are required to pay to
the issuers of letters of credit under our senior credit
facilities a risk participation fee equal to 1.5% per year on
the amount of such letters of credit.
The obligations of the borrower under the senior
credit facilities and the related documents are secured by a
first priority lien upon substantially all of the
borrowers assets, including a pledge of substantially all
of the common stock of the borrowers subsidiaries.
The senior credit facilities contain a number of
covenants that, among other things, restrict our ability to:
In addition, under the senior credit facilities,
we are required to comply with specified financial ratios and
tests, including minimum fixed charge coverage and interest
coverage ratios and maximum leverage ratios, which become more
stringent over time. The senior credit facilities also contain
customary events of default as well as an event of default in
the event that any of our institutions loses any accreditation
necessary for Title IV Program eligibility, or the ability
of any such institution to participate in the Title IV
Programs is cancelled, and such loss or cancellation is not
cured within a specified period.
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incur additional indebtedness;
grant liens or other security interests;
make investments;
become liable for contingent obligations;
make specified restricted payments;
dispose of assets or stock of our subsidiaries; or
make capital expenditures above a specified
aggregate amount.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been a
public market for our common stock. Future sales of substantial
amounts of our common stock in the public market, or the
possibility of these sales, could adversely affect the trading
price of our common stock and could impair our future ability to
raise capital through the sale of our equity at a time and price
we deem appropriate.
Upon completion of this offering, we will have
outstanding shares
of common stock. Of these shares,
the shares
sold in this offering will be freely tradable without
restriction or further registration under the Securities Act,
except for any shares purchased by our affiliates,
as defined in Rule 144 under the Securities Act, which
would be subject to the limitations and restrictions described
below.
Assuming the underwriters over-allotment
option is not exercised, the
remaining shares
of common stock that will be held by affiliates will be
restricted securities, as defined in Rule 144.
Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration
under Rules 144 and 144(k) promulgated under the Securities
Act, which rules are summarized below. It is currently
contemplated that included among these restricted securities
will
be shares
of common stock owned by a limited number of our stockholders
that will be parties to a registration rights agreement with us.
That agreement provides certain of the stockholders that are
parties to it with the right, after the expiration of the
lock-up agreements described in Underwriting, to
require us to effect the registration of their shares. In
addition, if we propose to register, or are required to register
following the exercise of a demand registration
right as described in the previous sentence, any of our shares
of common stock under the Securities Act, all of our
stockholders that are parties to the registration rights
agreement will be entitled to include their shares of common
stock in that registration. For a description of the
registration rights agreement see Certain Relationships
and Related Transactions Registration Rights
Agreement.
Subject to the lock-up agreements described in
Underwriting and the provisions of Rules 144
and 144(k), additional shares will be available for sale in the
public market as follows:
All of these restricted securities will be
eligible for sale in the public market, subject in some cases to
the volume limitations and other restrictions of Rule 144,
beginning upon expiration of the lock-up agreements described in
Underwriting. The numbers of shares of common stock
listed above do not include shares of common stock issuable upon
exercise of stock options granted under our stock plans that
were unexercised as of June 30, 2003. Upon completion of
the offering, we intend to file a registration statement on
Form S-8 with the SEC to
register shares
of our common stock reserved for issuance or sale under our
incentive stock plan. As of September 30, 2003, there were
outstanding options to purchase a total
of shares
of common
stock, of
which were vested. Shares of common stock issuable upon the
exercise of options granted or to be granted under our stock
option plan will be freely tradable without restriction under
the Securities Act, unless such shares are held by an affiliate
of ours.
Rule 144
In general, under Rule 144 as currently in
effect, beginning 90 days after this offering, a person (or
persons whose shares are required to be aggregated), including
an affiliate, who has beneficially owned
93
Sales under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the
availability of current public information about us.
Rule 144(k)
In addition, a person who is not deemed to have
been an affiliate of ours at any time during the 90 days
preceding a sale and who has beneficially owned the shares
proposed to be sold for at least two years, would be entitled to
sell those shares under Rule 144(k) without regard to the
manner of sale, public information, volume limitation or notice
requirements of Rule 144. To the extent that our affiliates
sell their shares, other than pursuant to Rule 144 or a
registration statement, the purchasers holding period for
the purpose of effecting a sale under Rule 144 commences on
the date of transfer from the affiliate.
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Number of Shares
Date
After the date of this prospectus.
After 90 days from the date of this
prospectus.
After 180 days from the date of this
prospectus.
1% of then outstanding shares of common stock,
or shares;
and
the average weekly trading volume in the common
stock on the New York Stock Exchange during the four calendar
weeks preceding the date on which notice of sale is filed,
subject to restrictions.
MATERIAL U.S. FEDERAL TAX
CONSEQUENCES
The following is a general discussion of the
material U.S. federal income and estate tax consequences to
non-U.S. Holders with respect to the acquisition, ownership
and disposition of our common stock. In general, a
Non-U.S. Holder is any holder of our common
stock other than the following:
This discussion is based on current provisions of
the Internal Revenue Code, Treasury Regulations promulgated
under the Internal Revenue Code, judicial opinions, published
positions of the Internal Revenue Service, and all other
applicable authorities, all of which are subject to change,
possibly with retroactive effect. This discussion does not
address all aspects of U.S. federal income and estate
taxation or any aspects of state, local, or
non-U.S. taxation, nor does it consider any specific facts
or circumstances that may apply to particular
Non-U.S. Holders that may be subject to special treatment
under the U.S. federal income tax laws, such as insurance
companies, tax-exempt organizations, financial institutions,
brokers, dealers in securities, and U.S. expatriates. The
discussion also does not address any tax considerations with
respect to shares that are held by partnerships or other
pass-through entities.
Prospective investors are urged to consult their
tax advisors regarding the U.S. federal, state, local, and
non-U.S. income and other tax considerations of acquiring,
holding, and disposing of shares of common stock.
Dividends
In general, dividends paid to a
Non-U.S. Holder will be subject to U.S. withholding
tax at a rate equal to 30% of the gross amount of the dividend,
or a lower rate prescribed by an applicable income tax treaty,
unless the dividends are effectively connected with a trade or
business carried on by the Non-U.S. Holder within the
United States. Under applicable Treasury Regulations, a
Non-U.S. Holder will be required to satisfy certain
certification requirements, generally on IRS Form W-8BEN,
directly or through an intermediary, in order to claim a reduced
rate of withholding under an applicable income tax treaty. If
tax is withheld in an amount in excess of the amount applicable
under an income tax treaty, a refund of the excess amount may
generally be obtained by filing an appropriate claim for refund
with the IRS.
Dividends that are effectively connected with
such a U.S. trade or business generally will not be subject
to U.S. withholding tax if the Non-U.S. Holder files
the required forms, including IRS Form W-8ECI, or any
successor form, with the payor of the dividend, but instead
generally will be subject to U.S. federal income tax on a
net income basis in the same manner as if the
Non-U.S. Holder were a resident of the United States. A
corporate Non-U.S. Holder that receives effectively
connected dividends may be subject to an additional branch
profits tax at a rate of 30%, or a lower rate prescribed by an
applicable income tax treaty, on the repatriation from the
United States of its effectively connected earnings and
profits, subject to adjustments.
95
Gain on Sale or Other Disposition of Common
Stock
In general, a Non-U.S. Holder will not be
subject to U.S. federal income tax on any gain realized
upon the sale or other taxable disposition of the
Non-U.S. Holders shares of common stock unless:
Information Reporting and Backup
Withholding
Generally, we must report annually to the IRS the
amount of dividends paid, the name and address of the recipient,
and the amount, if any, of tax withheld. A similar report is
sent to the recipient. These information reporting requirements
apply even if withholding was not required because the dividends
were effectively connected dividends or withholding was reduced
by an applicable income tax treaty. Under tax treaties or other
agreements, the IRS may make its reports available to tax
authorities in the recipients country of residence.
Payments made to a Non-U.S. Holder that is
not an exempt recipient generally will be subject to backup
withholding, currently at a rate of 28%, unless a
Non-U.S. Holder certifies as to its foreign status, which
certification may be made on IRS Form W-8BEN.
Proceeds from the disposition of common stock by
a Non-U.S. Holder effected by or through a United States
office of a broker will be subject to information reporting and
backup withholding, currently at a rate of 28% of the gross
proceeds, unless the Non-U.S. Holder certifies to the payor
under penalties of perjury as to, among other things, its
address and status as a Non-U.S. Holder or otherwise
establishes an exemption. Generally, United States information
reporting and backup withholding will not apply to a payment of
disposition proceeds if the transaction is effected outside the
United States by or through a non-U.S. office of a broker.
However, if the broker is, for U.S. federal income tax
purposes, a U.S. person, a controlled foreign corporation,
a foreign person who derives 50% or more of its gross income for
specified periods from the conduct of a U.S. trade or
business, specified U.S. branches of foreign banks or
insurance companies, or, a foreign partnership with various
connections to the United States, information reporting but not
backup withholding will apply unless:
Backup withholding is not an additional tax.
Rather, the amount of tax withheld is applied to the
U.S. federal income tax liability of persons subject to
backup withholding. If backup withholding results in an
overpayment of U.S. federal income taxes, a refund may be
obtained, provided the required documents are filed with the IRS.
Estate Tax
Our common stock owned or treated as owned by an
individual who is not a citizen or resident of the United States
(as specifically defined for U.S. federal estate tax
purposes) at the time of death will be includible in the
individuals gross estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides
otherwise.
96
a citizen or resident of the United States,
including an alien individual who is a lawful
permanent resident of the United States or meets the
substantial presence test under
section 7701(b)(1)(A)(3) of the Code;
a corporation (or an entity treated as a
corporation) created or organized in the United States or under
the laws of the United States, any state thereof, or the
District of Columbia;
an estate, the income of which is subject to
U.S. federal income tax regardless of its source; or
a trust, if a U.S. court can exercise
primary supervision over the administration of the trust and one
or more U.S. persons can control all substantial decisions
of the trust, or certain other trusts that have a valid election
in effect.
the gain is effectively connected with a trade or
business carried on by the Non-U.S. Holder within the
United States, in which case the branch profits tax discussed
above may also apply if the Non-U.S. Holder is a
corporation;
the Non-U.S. Holder is an individual who
holds shares of common stock as capital assets and is present in
the United States for 183 days or more in the taxable year
of disposition and various other conditions are met.
the broker has documentary evidence in its files
that the holder is a Non-U.S. Holder and other conditions
are met; or
the holder otherwise establishes an exemption.
UNDERWRITING
Under the terms and subject to the conditions
contained in an underwriting agreement
dated ,
we and the selling stockholders have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston
LLC is acting as the representative, the following respective
numbers of shares of common stock:
The underwriting agreement provides that the
underwriters are obligated to purchase all the shares of common
stock in the offering if any are purchased, other than those
shares covered by the over-allotment option described below. The
underwriting agreement also provides that if an underwriter
defaults the purchase commitments of non-defaulting underwriters
may be increased or the offering may be terminated.
The selling stockholders have granted to the
underwriters a 30-day option to purchase on a pro rata basis up
to additional
outstanding shares from them at the initial public offering
price less the underwriting discounts and commissions. The
option may be exercised only to cover any over-allotments of
common stock.
The underwriters propose to offer the shares of
common stock initially at the public offering price on the cover
page of this prospectus and to selling group members at that
price less a selling concession of
$ per
share. The underwriters and selling group members may allow a
discount of
$ per
share on sales to other broker/ dealers. After the initial
public offering, the representative may change the public
offering price and concession and discount to broker/dealers.
The following table summarizes the compensation
and estimated expenses we and the selling stockholders will pay:
The representative has informed us that the
underwriters do not expect discretionary sales to exceed 5% of
the shares of common stock being offered.
We have agreed that we will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission
a registration statement under the Securities Act of 1933 (the
Securities Act), relating to any shares of our
common stock or securities convertible into or exchangeable or
exercisable for any shares of our common stock, or publicly
disclose the intention to make any offer, sale, pledge,
disposition or filing, without the prior written consent of
Credit Suisse First Boston LLC for a period of 180 days
after the date of this prospectus, except that we may issue
shares of common stock pursuant to the conversion or exchange of
convertible or exchangeable securities or the exchange of
preferred shares as described in this prospectus or the exercise
of warrants or options, in each case outstanding on the date of
this prospectus, or grant employee stock options or
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Our officers, directors, stockholders and
optionholders have agreed that they will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares
of our common stock, enter into a transaction that would have
the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of our common stock, whether
any of these transactions are to be settled by delivery of our
common stock or other securities, in cash or otherwise, or
publicly disclose the intention to make any offer, sale, pledge
or disposition, or to enter into any transaction, swap, hedge or
other arrangement, without, in each case, the prior written
consent of Credit Suisse First Boston LLC for a period of
180 days after the date of this prospectus. The exercise of
options granted to these persons or the conversion or exchange,
prior to or upon effectiveness of the registration statement
filed with the Securities and Exchange Commission in connection
with this offering, of shares of our series A, B, C and D
preferred stock currently outstanding and held by them into
shares of our common stock will not be subject to or prohibited
by these lock-up agreements.
The underwriters have reserved for sale at the
initial public offering price up
to shares
of the common stock for employees, directors and other persons
associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for
sale to the general public in the offering will be reduced to
the extent these persons purchase the reserved shares. Any
reserved shares not so purchased will be offered by the
underwriters to the general public on the same terms as the
other shares.
We and the selling stockholders have agreed to
indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments that the underwriters
may be required to make in that respect.
We intend to apply to list the shares of common
stock on the New York Stock Exchange.
Certain of the underwriters and their respective
affiliates have from time to time performed, and may in the
future perform, various financial advisory, commercial banking
and investment banking services for us and our affiliates in the
ordinary course of business, for which they received, or will
receive, customary fees and expenses.
Prior to the offering, there has been no market
for our common stock. The initial public offering price will be
determined by negotiation between us and the underwriters and
will not necessarily reflect the market price of the common
stock following the offering. The principal factors that will be
considered in determining the public offering price will include:
We offer no assurances that the initial public
offering price will correspond to the price at which the common
stock will trade in the public market subsequent to this
offering or that an active trading market for the common stock
will develop and continue after the offering.
98
In connection with the offering the underwriters
may engage in stabilizing transactions, over-allotment
transactions, syndicate covering transactions and penalty bids
in accordance with Regulation M under the Securities
Exchange Act of 1934 (the Exchange Act).
These stabilizing transactions, syndicate
covering transactions and penalty bids may have the effect of
raising or maintaining the market price of our common stock or
preventing or retarding a decline in the market price of the
common stock. As a result, the price of our common stock may be
higher than the price that might otherwise exist in the open
market. These transactions may be effected on the New York Stock
Exchange or otherwise and, if commenced, may be discontinued at
any time.
A prospectus in electronic format may be made
available on the web sites maintained by one or more of the
underwriters, or selling group members, if any, participating in
the offering and one or more of the underwriters participating
in this offering may distribute prospectuses electronically. The
representative may agree to allocate a number of shares to
underwriters and selling group members for sale to their online
brokerage account holders. Internet distributions will be
allocated by the underwriters and selling group members that
will make internet distributions on the same basis as other
allocations.
99
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is
being made only on a private placement basis exempt from the
requirement that we and the selling stockholders prepare and
file a prospectus with the securities regulatory authorities in
each province where trades of common stock are made. Any resale
of the common stock in Canada must be made under applicable
securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made under
available statutory exemptions or under a discretionary
exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal
advice prior to any resale of the common stock.
Representations of Purchasers
By purchasing common stock in Canada and
accepting a purchase confirmation a purchaser is representing to
us, the selling stockholders and the dealer from whom the
purchase confirmation is received that
Rights of Action Ontario
Purchasers Only
Under Ontario securities legislation, a purchaser
who purchases a security offered by this prospectus during the
period of distribution will have a statutory right of action for
damages, or while still the owner of the shares, for rescission
against us and the selling stockholders in the event that this
prospectus contains a misrepresentation. A purchaser will be
deemed to have relied on the misrepresentation. The right of
action for damages is exercisable not later than the earlier of
180 days from the date the purchaser first had knowledge of
the facts giving rise to the cause of action and three years
from the date on which payment is made for the shares. The right
of action for rescission is exercisable not later than
180 days from the date on which payment is made for the
shares. If a purchaser elects to exercise the right of action
for rescission, the purchaser will have no right of action for
damages against us or the selling stockholders. In no case will
the amount recoverable in any action exceed the price at which
the shares were offered to the purchaser and if the purchaser is
shown to have purchased the securities with knowledge of the
misrepresentation, we and the selling stockholders will have no
liability. In the case of an action for damages, we and the
selling stockholders will not be liable for all or any portion
of the damages that are proven to not represent the depreciation
in value of the shares as a result of the misrepresentation
relied upon. These rights are in addition to, and without
derogation from, any other rights or remedies available at law
to an Ontario purchaser. The foregoing is a summary of the
rights available to an Ontario purchaser. Ontario purchasers
should refer to the complete text of the relevant statutory
provisions.
Enforcement of Legal Rights
All of our directors and officers as well as the
experts named herein and the selling stockholders may be located
outside of Canada and, as a result, it may not be possible for
Canadian purchasers to effect service of process within Canada
upon us or those persons. All or a substantial portion of our
assets and the assets of those persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a
judgment against us or those persons in Canada or to enforce a
judgment obtained in Canadian courts against us or those persons
outside of Canada.
Taxation and Eligibility for
Investment
Canadian purchasers of common stock should
consult their own legal and tax advisors with respect to the tax
consequences of an investment in the common stock in their
particular circumstances and about the eligibility of the common
stock for investment by the purchaser under relevant Canadian
legislation.
100
Number
Underwriter
of Shares
Per Share
Total
Without
With
Without
With
Over-allotment
Over-allotment
Over-allotment
Over-allotment
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
the information presented in this prospectus and
otherwise available to the underwriters;
the history of and the prospects for the industry
in which we will compete;
the ability of our management;
the prospects for our future earnings;
the present state of our development and our
current financial condition;
the recent market prices of, and the demand for,
publicly traded common stock of generally comparable companies;
and
the general condition of the securities markets
at the time of the offering.
Stabilizing transactions permit bids to purchase
the underlying security so long as the stabilizing bids do not
exceed a specified maximum.
Over-allotment involves sales by the underwriters
of shares in excess of the number of shares the underwriters are
obligated to purchase, which creates a syndicate short position.
The short position may be either a covered short position or a
naked short position. In a covered short position, the number of
shares over-allotted by the underwriters is not greater than the
number of shares that they may purchase in the over-allotment
option. In a naked short position, the number of shares involved
is greater than the number of shares in the over-allotment
option. The underwriters may close out any covered short
position by either exercising their over-allotment option and/or
purchasing shares in the open market.
Syndicate covering transactions involve purchases
of the common stock in the open market after the distribution
has been completed in order to cover syndicate short positions.
In determining the source of shares to close out the short
position, the underwriters will consider, among other things,
the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through
the over-allotment option. If the underwriters sell more shares
than could be covered by the over- allotment option, a naked
short position, the position can only be closed out by buying
shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned that there could
be downward pressure on the price of the shares in the open
market after pricing that could adversely affect investors who
purchase shares in the offering.
Penalty bids permit the representative to reclaim
a selling concession from a syndicate member when the common
stock originally sold by the syndicate member is purchased in a
stabilizing or syndicate covering transaction to cover syndicate
short positions.
the purchaser is entitled under applicable
provincial securities laws to purchase the common stock without
the benefit of a prospectus qualified under those securities
laws,
where required by law, that the purchaser is
purchasing as principal and not as agent, and
the purchaser has reviewed the text above under
Resale Restrictions.
LEGAL MATTERS
The validity of the shares of common stock
offered by this prospectus will be passed upon for us by Bryan
Cave LLP, Phoenix, Arizona. The underwriters have been
represented by Cravath, Swaine & Moore LLP, New York, New
York.
EXPERTS
The financial statements as of September 30,
2001 and 2002 and for each of the three years in the period
ended September 30, 2002 included in this prospectus have
been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the SEC a registration
statement on Form S-1 under the Securities Act relating to
the common stock we are offering. This prospectus, which
constitutes a part of the registration statement, does not
contain all the information that is in the registration
statement and its exhibits and schedules. Certain portions of
the registration statement have been omitted as allowed by the
rules and regulations of the SEC. Statements in this prospectus
which summarize documents are not necessarily complete, and in
each case you should refer to the copy of the document filed as
an exhibit to the registration statement. You may read and copy
the registration statement, including exhibits and schedules
filed with it, and reports or other information we may file with
the SEC at the public reference facilities of the SEC at
450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. You may call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. In
addition, the registration statement and other public filings
can be obtained from the SECs internet site at
http://www.sec.gov.
Upon completion of this offering, we will become
subject to information and periodic reporting requirements of
the Exchange Act, and we will file annual, quarterly and current
reports, proxy statements and other information with the SEC. We
intend to furnish our stockholders written annual reports
containing financial statements audited by our independent
auditors, and make available to our stockholders quarterly
reports for the first three quarters of each year containing
unaudited interim financial statements.
101
UNIVERSAL TECHNICAL INSTITUTE, INC. AND
SUBSIDIARIES
Page | ||||
|
||||
Report of Independent Auditors
|
F-2 | |||
Audited Consolidated Balance Sheets at
September 30, 2001 and 2002, Unaudited Consolidated Balance
Sheet at June 30, 2003 and Unaudited Pro Forma
Shareholders Deficit at June 30, 2003
|
F-3 | |||
Audited Consolidated Statements of Operations for
the years ended September 30, 2000, 2001, and 2003 and
Unaudited Consolidated Statements of Operations for the nine
months ended June 30, 2002 and 2003
|
F-4 | |||
Audited Consolidated Statements of
Shareholders Deficit for the years ended
September 30, 2000, 2001, and 2002 and Unaudited
Consolidated Statement of Shareholders Deficit for the
nine months ended June 30, 2003
|
F-5 | |||
Audited Consolidated Statements of Cash Flows for
the years ended September 30, 2000, 2001, and 2002 and
Unaudited Consolidated Statements of Cash Flows for the nine
months ended June 30, 2002 and 2003
|
F-6 | |||
Notes to Consolidated Financial Statements
|
F-7 | |||
Schedule of Valuation and Qualifying Accounts
|
F-33 |
F-1
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
In our opinion, the consolidated financial
statements listed in the accompanying index present fairly, in
all material respects, the financial position of Universal
Technical Institute, Inc. and its subsidiaries at
September 30, 2001 and 2002, and the results of their
operations and their cash flows for each of the three years in
the period ended September 30, 2002 in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in
all material respects, the information set forth therein when
read in conjunction with the related consolidated financial
statements. These financial statements and financial statement
schedule are the responsibility of the Companys
management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
As discussed in Note 3 to the consolidated
financial statements, effective October 1, 2001, the
Company adopted Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets.
PricewaterhouseCoopers LLP
F-2
UNIVERSAL TECHNICAL INSTITUTE, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Pro Forma
Shareholders
September 30,
Deficit
June 30,
June 30,
2001
2002
2003
2003
(unaudited)
(unaudited)
$
3,353
$
13,554
$
31,215
10,298
12,527
13,611
1,777
3,197
3,085
15,428
29,278
47,911
18,360
23,231
23,319
438
438
135
20,579
20,579
20,579
1,895
2,248
1,871
4,469
372
1,917
740
1,627
$
63,086
$
76,886
$
95,442
$
14,910
$
16,474
$
21,132
7,242
3,016
3,705
15,077
20,427
20,320
3,292
386
886
910
924
3,184
3,552
3,529
44,615
43,855
50,496
2,064
63,320
46,875
44,049
34,016
11,011
11,011
438
438
135
4,259
4,407
5,075
146,648
108,650
110,766
19,414
20,646
21,503
43,749
46,310
4,267
42,043
(102,475
)
(95,658
)
(82,528
)
(82,528
)
(15
)
(15
)
(15
)
(15
)
(443
)
(443
)
(534
)
(534
)
(43
)
(43
)
(60
)
(60
)
(102,976
)
(96,159
)
(83,137
)
$
(41,094
)
$
63,086
$
76,886
$
95,442
The accompanying notes are an integral part of these consolidated financial statements.
F-3
UNIVERSAL TECHNICAL INSTITUTE, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
Nine Months Ended
Year Ended September 30,
June 30,
2000
2001
2002
2002
2003
(unaudited)
$
92,079
$
109,493
$
144,372
$
105,428
$
141,642
48,523
59,554
70,813
51,710
66,551
33,893
38,332
51,541
36,607
48,198
82,416
97,886
122,354
88,317
114,749
9,663
11,607
22,018
17,111
26,893
(586
)
(446
)
(508
)
(333
)
(355
)
11,679
10,336
6,213
5,241
3,007
784
784
549
441
157
847
970
11,877
10,674
7,101
6,319
2,809
(2,214
)
933
14,917
10,792
24,084
(431
)
820
5,228
3,777
8,944
(1,783
)
113
9,689
7,015
15,140
(34,437
)
(8,536
)
(1,316
)
(34,437
)
(9,852
)
(36,220
)
(9,739
)
9,689
7,015
15,140
(1,166
)
(1,166
)
(2,872
)
(1,729
)
(3,434
)
$
(37,386
)
$
(10,905
)
$
6,817
$
5,286
$
11,706
$
(955.44
)
$
(341.99
)
$
2,212.96
$
1,715.86
$
3,790.86
(11,152.60
)
(2,770.63
)
(427.12
)
$
(12,108.04
)
$
(3,539.74
)
$
2,212.96
$
1,715.86
$
3,790.86
$
(955.44
)
$
(341.99
)
$
1,901.48
$
1,488.39
$
2,532.07
(11,152.60
)
(2,770.63
)
(427.12
)
$
(12,108.04
)
$
(3,539.74
)
$
1,901.48
$
1,488.39
$
2,532.07
3,088
3,081
3,081
3,081
3,088
3,088
3,081
4,654
4,286
5,737
$
1,587.82
$
2,619.84
$
1,488.39
$
2,532.07
3,867
5,445
4,286
5,737
F-4
UNIVERSAL TECHNICAL INSTITUTE, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS
DEFICIT
Common Stock
Total
Paid-in
Treasury
Accumulated
Subscriptions
Shareholders
Shares
Amount
Capital
Stock
Deficit
Receivable
Deficit
3,091
$
$
1,262
$
$
(55,451
)
$
(486
)
$
(54,675
)
(36,220
)
(36,220
)
5
5
5
(1,166
)
(1,166
)
(15
)
(15
)
3,096
101
(15
)
(91,671
)
(486
)
(92,071
)
(9,739
)
(9,739
)
(101
)
(1,065
)
(1,166
)
3,096
(15
)
(102,475
)
(486
)
(102,976
)
9,689
9,689
(2,872
)
(2,872
)
3,096
(15
)
(95,658
)
(486
)
(96,159
)
15,140
15,140
108
108
(108
)
1,281
1,281
35
35
(1,424
)
(2,010
)
(3,434
)
3,204
$
$
$
(15
)
$
(82,528
)
$
(594
)
$
(83,137
)
The accompanying notes are an integral part of these consolidated financial statements.
F-5
UNIVERSAL TECHNICAL INSTITUTE, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Nine Months Ended
Year Ended September 30,
June 30,
2000
2001
2002
2002
2003
(unaudited)
$
(36,220
)
$
(9,739
)
$
9,689
$
7,015
$
15,140
3,894
4,532
4,948
3,167
4,476
2,682
1,463
2,681
1,803
1,395
33,941
3,074
1,281
35
539
214
2,045
1,657
1,900
970
970
25
27
232
76
79
1,316
(3,104
)
(1,765
)
(4,910
)
(149
)
(2,479
)
(309
)
735
(278
)
(118
)
(1,030
)
257
(411
)
1,120
700
(365
)
2,253
3,540
619
(2,245
)
4,351
402
3,808
5,350
(531
)
(107
)
1,204
1,862
(2,143
)
(2,604
)
477
(63
)
296
148
59
669
256
1,811
5,757
10,763
20,471
9,800
25,822
(3,774
)
(5,472
)
(11,772
)
(7,430
)
(6,044
)
5,869
5,857
20
590
123
303
(3,184
)
(5,472
)
(5,780
)
(1,573
)
(5,721
)
42,043
42,116
16,819
17,451
(7,049
)
(1,914
)
(5,264
)
(39,952
)
(39,327
)
(2,137
)
(23,400
)
(23,400
)
(590
)
(303
)
5
(15
)
(9,563
)
(5,264
)
(4,490
)
(3,160
)
(2,440
)
(6,990
)
27
10,201
5,067
17,661
10,316
3,326
3,353
3,353
13,554
$
3,326
$
3,353
$
13,554
$
8,420
$
31,215
$
10,973
$
10,195
$
6,831
$
5,978
$
2,017
$
455
$
490
$
395
$
395
$
$
1,166
$
1,166
$
2,872
$
1,729
$
3,434
$
(149
)
$
1,269
$
(3,088
)
$
$
$
$
1,489
$
945
$
30
$
307
$
$
$
2,064
$
$
(2,064
)
$
171
$
58
$
$
$
$
$
$
$
$
108
The accompanying notes are an integral part of these consolidated financial statements.
F-6
UNIVERSAL TECHNICAL INSTITUTE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business
Business Description |
We are a provider of post-secondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians. We offer undergraduate degree, diploma and certificate programs at seven campuses and manufacturer-sponsored advanced programs at 22 dedicated training centers. We work closely with leading original equipment manufacturers (OEMs) in the automotive, diesel, motorcycle and marine industries to understand their needs for qualified service professionals.
The accompanying consolidated financial statements include all the accounts of Universal Technical Institute, Inc. (a Delaware corporation) and each of its wholly-owned subsidiaries (collectively we and our). All significant intercompany accounts and transactions have been eliminated.
2. Government Regulation and Financial Aid
Our schools and students participate in a variety of government-sponsored financial aid programs that assist students in paying the cost of their education. The largest source of such support is the federal programs of student financial assistance under Title IV of the Higher Education Act of 1965, as amended, commonly referred to as the Title IV Programs, which are administered by the U.S. Department of Education, or ED. During the years ended September 30, 2000, 2001 and 2002, approximately 68%, 67% and 65%, respectively, of our net revenues were indirectly derived from funds distributed under Title IV Programs.
To participate in Title IV Programs, a school must be authorized to offer its programs of instruction by relevant state education agencies, be accredited by an accrediting commission recognized by ED and be certified as an eligible institution by ED. For this reason, our schools are subject to extensive regulatory requirements imposed by all of these entities. After our schools receive the required certifications by the appropriate entities, our schools must demonstrate their compliance with the ED regulations of the Title IV Programs on an ongoing basis. Included in these regulations is the requirement that we must satisfy specific standards of financial responsibility. ED evaluates institutions for compliance with these standards each year, based upon the institutions annual audited financial statements, as well as following a change in ownership of the institution. Under regulations which took effect July 1, 1998, ED calculates the institutions composite score for financial responsibility based on its (i) equity ratio, which measures the institutions capital resources, ability to borrow and financial viability; (ii) primary reserve ratio, which measures the institutions ability to support current operations from expendable resources; and (iii) net income ratio, which measures the institutions ability to operate at a profit.
An institution that does not meet EDs minimum composite score requirements may establish its financial responsibility as follows:
| by posting a letter of credit in favor of ED in an amount up to 50% of the Title IV Program funds received by the institution during the institutions most recently completed fiscal year; | |
| by posting a letter of credit in an amount equal to at least 10% of the Title IV Program funds received during the institutions most recent fiscal year, accepting provisional certification, complying with additional ED monitoring requirements and agreeing to receive Title IV Program funds under an arrangement other than EDs standard advance funding arrangement; or | |
| by complying with additional ED monitoring requirements and agreeing to receive Title IV Program funds under an arrangement other than EDs standard advance funding arrangement. |
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Based on its review of our financial statements for each of our fiscal years since the year ended September 30, 1999, ED found that we did not have a composite score of 1.5 or higher. Consequently, since November 2000, we have been required to post a letter of credit on behalf of our institutions in favor of ED and to accept provisional certification and additional ED reporting and monitoring procedures. At September 30, 2002, we have outstanding a letter of credit in the amount of $6.4 million representing approximately 10% of the total Title IV Program funds received by our institutions in the year ended September 30, 2001, as calculated by ED. This letter of credit was increased to $7.6 million in November 2002. The increase in our required letter of credit is attributable to increased funds received under Title IV Programs. Additionally, we are required to credit students accounts before requesting and receiving Title IV Program funds and two of our institutions are required to file additional reports with ED regarding their receipt of Title IV Program funds.
In addition, based upon our year ended September 30, 2002 Title IV compliance audits of our institutions, it was determined that we exceeded EDs late refund threshold of 5% at two of our institutions. While ordinarily we would be required to post letters of credit for this reason, ED informed us that we were not required to post these additional letters of credit because we already posted a larger letter of credit as a result of our financial responsibility composite score.
3. Summary of Significant Accounting Policies
Principles of Consolidation |
The accompanying consolidated financial statements include the accounts of Universal Technical Institute, Inc. and each of its wholly-owned subsidiaries (collectively we and our). All significant intercompany accounts and transactions have been eliminated.
As permitted by rules of the Securities and Exchange Commission for interim reporting, we have prepared the accompanying interim consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. The interim financial data as of June 30, 2003 and for the nine months ended June 30, 2002 and June 30, 2003 are unaudited; however, in our opinion, the interim data include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Operating results for the nine months ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending September 30, 2003. Such interim financial statements should be read in conjunction with our audited consolidated financial statements.
Revenue Recognition |
Net revenues consist primarily of student tuition and fees derived from the programs we provide after reductions for scholarships we sponsor. Tuition and fee revenue is recognized ratably over the term of the various programs offered. If a student withdraws from a program prior to a specified date, any paid but unearned tuition is refunded. Sales of textbooks and program supplies, revenue related to student housing and other revenue are each recognized as sales occur or services are performed. In aggregate, these additional revenues represented less than 10% of total net revenues in each year in the three-year period ended September 30, 2002. Deferred revenue represents the excess of tuition and fee payments received as compared to tuition and fees earned and is reflected as a current liability in the accompanying consolidated financial statements because it is expected to be earned within the twelve-month period immediately following the date on which such liability is reflected in our consolidated financial statements.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash and Cash Equivalents |
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Deferred Financing Fees |
Costs incurred in connection with obtaining financing are capitalized and amortized using the effective interest method over the term of the related debt. Amortization of deferred financing fees was $0.6 million for the year ended September 30, 2000, $0.6 million for the year ended September 30, 2001 and $1.1 million for the year ended September 30, 2002.
Property and Equipment |
Property, equipment and leasehold improvements are recorded at cost. Amortization of equipment under capital leases and leasehold improvements are calculated using the straight-line method over the remaining useful life of the asset or term of lease, whichever is shorter. Equipment under capital leases totaled $1.9 million with accumulated amortization of $0.9 million at September 30, 2001, and totaled $1.8 million with accumulated amortization of $1.2 million at September 30, 2002. Depreciation is calculated using the straight-line method over the estimated useful life. The estimated useful life of our training, office and computer equipment ranges from 3 years to 7 years. The estimated useful life of our vehicles is 5 years.
Depreciation and amortization related to our property and equipment was $2.7 million for the year ended September 30, 2000, $3.4 million for the year ended September 30, 2001 and $3.8 million for the year ended September 30, 2002. Maintenance and repairs are expensed as incurred.
Software Development Costs |
We capitalize certain internal software development costs which are amortized using the straight-line method over the estimated lives of the software (not to exceed 5 years). Capitalized costs include external direct costs of materials and services consumed in developing or obtaining internal-use software and payroll and payroll related costs for employees who are directly associated with the internal software development project. Capitalization of such costs ceases no later than the point at which the project is substantially complete and ready for its intended purpose.
Goodwill and Other Intangible Assets |
Goodwill represents the excess of the cost of the acquired businesses over the fair market value of the acquired net assets. We account for our goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, which we adopted effective October 1, 2001. Prior to our adoption of SFAS No. 142, we recorded amortization expense of $0.6 million for each of the fiscal years ended September 30, 2000 and 2001. Amortization of goodwill is no longer required under SFAS No. 142.
F-9
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table presents a comparison of net
income (loss) and earnings per share as if SFAS No. 142 had
been adopted at the beginning of the earliest period presented:
Year ended Sept 30,
2000
2001
2002
$
(1,783
)
$
113
$
9,689
460
69
$
(1,323
)
$
182
$
9,689
$
(37,386
)
$
(10,905
)
$
6,817
2,703
1,257
$
(34,683
)
$
(9,648
)
$
6,817
$
(955.44
)
$
(341.99
)
$
2,212.96
149.07
22.47
$
(806.37
)
$
(319.52
)
$
2,212.96
$
(12,108.04
)
$
(3,539.74
)
$
2,212.96
875.23
407.92
$
(11,232.81
)
$
(3,131.82
)
$
2,212.96
$
(955.44
)
$
(341.99
)
$
1,901.48
149.07
22.47
$
(806.37
)
$
(319.52
)
$
1,901.48
$
(12,108.04
)
$
(3,539.74
)
$
1,901.48
875.23
407.92
$
(11,232.81
)
$
(3,131.82
)
$
1,901.48
Impairment of Long-Lived Assets |
We review the carrying value of our long-lived assets and identifiable intangibles for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable in accordance with the provisions of SFAS No. 121, Accounting for the Impairment or Disposal of Long-Lived Assets. Impairment losses, if any, are recorded as a component of earnings from operations.
Prior to adopting SFAS No. 142, we recorded an asset impairment relative to goodwill which was recorded in connection with the purchase of National Technology Training (NTT). We assessed the recoverability of NTT goodwill utilizing its undiscounted projected cash flow. Based upon this analysis and due to a weak market response and lower student densities for our training products offered, as well as declining historical and forecasted operating income, we determined that an impairment of our goodwill existed. Accordingly, based upon the excess of the carrying value as compared to the assets, estimated fair
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
value impairment losses were recorded in the amount of $33.9 million for the year ended September 30, 2000 and $3.1 million for the year ended September 30, 2001.
Advertising Costs |
Costs related to advertising are expensed as incurred and totaled approximately $3.8 million for the year ended September 30, 2000, $5.0 million for the year ended September 30, 2001 and $5.7 million for the year ended September 30, 2002.
Start-up Costs |
Costs related to the start-up of new campuses are expensed as incurred.
Stock-Based Compensation |
We account for stock-based employee compensation
arrangements in accordance with the provisions of Accounting
Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations,
and comply with the disclosure provisions of SFAS No. 123,
Accounting for Stock-Based Compensation as amended
by SFAS No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure
An Amendment of SFAS No. 123, which defines a
fair value based method and addresses common stock and options
given to employees as well as those given to non-employees in
exchange for products and services. The following table
illustrates the effect on net income and earnings per share if
we had applied the fair value recognition provisions of SFAS
No. 123:
Nine Months Ended
Year Ended September 30,
June 30,
2000
2001
2002
2002
2003
(unaudited)
$
(37,386
)
$
(10,905
)
$
6,817
$
5,286
$
11,706
21
(6
)
(1
)
(72
)
(40
)
(116
)
$
(37,392
)
$
(10,906
)
$
6,745
$
5,246
$
11,611
$
(12,108.04
)
$
(3,539.74
)
$
2,212.96
$
1,715.86
$
3,790.86
$
(12,108.04
)
$
(3,539.74
)
$
1,901.48
$
1,488.39
$
2,532.07
$
(12,109.87
)
$
(3,540.02
)
$
2,189.68
$
1,702.82
$
3,753.19
$
(12,109.87
)
$
(3,540.02
)
$
1,886.07
$
1,479.02
$
2,511.63
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair value of each option grant is estimated
on the date of grant using the Black-Scholes option pricing
model. The following table illustrates the assumptions used for
grants made during each of the years ended September 30,
2000, 2001 and 2002 and the nine months ended June 30, 2002
and 2003.
Nine Months Ended
Year Ended September 30,
June 30,
2000
2001
2002
2002
2003
(unaudited)
5 years
5 years
5.02%
3.25%
Income Taxes |
We account for income taxes as prescribed by SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 requires recognition of deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled. Deferred tax assets are reduced through the establishment of a valuation allowance at the time, based upon available evidence, if it is more likely than not that the deferred tax assets will not be realized.
Comprehensive Income |
SFAS No. 130, Reporting Comprehensive Income, requires that all items that meet the definition of components of comprehensive income be reported in a financial statement for the period in which they are recognized. Components of comprehensive income include revenues, expenses, gains, and losses that under accounting principles generally accepted in the United States are included in comprehensive income but excluded from net income. There are no differences between our net income, as reported, and comprehensive income, as defined for the periods presented.
Concentration of Risk |
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and receivables.
We place our cash and cash equivalents with high quality financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation up to $0.1 million.
We extend credit for tuition and fees to the majority of our students that are in attendance at our campuses. Our credit risk with respect to these accounts receivable is mitigated through the students participation in federally funded financial aid programs unless students withdraw prior to the receipt by us of Title IV funds for those students. In addition, our remaining tuition receivable is primarily comprised of smaller individual amounts due from students throughout the United States.
Use of Estimates |
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions. Such estimates and
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
assumptions affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, bad debts, fixed assets, long-lived assets including goodwill, income taxes and contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results of our analysis form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to our consolidated financial statements.
Fair Value of Financial Instruments |
The carrying value of cash equivalents, accounts receivable and payable, accrued liabilities and deferred tuition approximates their fair value at September 30, 2001 and 2002 due to the short-term nature of these instruments.
The carrying value of our long-term variable rate debt reflects its fair value as such long-term debt is subject to fees and interest rates, which adjust regularly to reflect current market rates.
The carrying value of the portion of our long-term debt with stated interest rates reflects its fair value based on current rates offered to us on debt with similar maturities and characteristics.
Earnings per Common Share |
SFAS No 128, Earnings Per
Share, requires the dual presentation of basic and diluted
earnings per share on the face of the income statement and the
disclosure of the reconciliation between the numerators and
denominators of basic and diluted earnings per share
calculations. The weighted average number of common shares used
in determining basic and diluted earnings per share for the
years ended September 30, 2000, 2001 and 2002 and for the
nine months ended June 30, 2002 and 2003 are as follows:
Year Ended
Nine Months
September 30,
Ended June 30,
2000
2001
2002
2002
2003
(unaudited)
3,088
3,081
3,081
3,081
3,088
89
67
145
302
352
147
1,182
786
2,357
3,088
3,081
4,654
4,286
5,737
For the year ended September 30, 2001, the dilutive effect of 4,215 shares related to our convertible debt and 37 shares related to outstanding options was not considered, as the effect would be anti-dilutive. For the year ended September 30, 2000, the dilutive effect of 6,028 shares related to our convertible debt was not considered, as the effect would be anti-dilutive.
Pro forma Shareholders Information (unaudited) |
Immediately prior to the consummation of an initial public offering, our outstanding series D redeemable convertible preferred stock will automatically convert into 2,357.19491 shares of common
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
stock. The proforma effects of this transaction are unaudited and have been reflected in the accompanying Pro forma Shareholders Deficit and Earnings Per Share information as of June 30, 2003.
Recent Accounting Pronouncements |
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002, and we expect that the adoption will not have a material impact on our consolidated financial condition or results of operations.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 retains the fundamental provisions of existing accounting principles generally accepted in the United States with respect to the recognition and measurement of long-lived asset impairment contained in SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. SFAS No. 144 also provides additional guidance intended to address certain significant implementation issues associated with SFAS No. 121, including expanded guidance with respect to appropriate cash flows to be used in determining whether recognition of a long-lived asset impairment is required, and if required, how to measure the amount of the impairment. SFAS No. 144 also requires that any net assets to be disposed of by sale be reported at the lower of carrying value or fair value less cost to sell, and expands the reporting of discontinued operations to include any component of any entity with operations and cash flows that can be clearly distinguished from the rest of the entity. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and our adoption of it on October 1, 2002 did not have a material effect on our consolidated financial condition or results of operations.
In April 2002, the FASB issued SFAS No. 145, Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS 13, and Technical Corrections. SFAS No. 145 rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and excludes extraordinary item treatment for gains and losses associated with the extinguishment of debt that do not meet the criteria for such treatment, as outlined in APB Opinion No. 30, Reporting the Results of Operations Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. Any gain or loss on extinguishment of debt that was previously classified as an extraordinary item in the reported financial results that does not meet the criteria in APB Opinion No. 30 for classification as an extraordinary item shall be reclassified. SFAS No. 145 was effective beginning after May 15, 2002. We elected to early adopt SFAS 145, which resulted in the classification of costs associated with the early extinguishment of debt of $0.6 million, net of income tax benefit of $0.4 million for the year ended September 30, 2002, to the individual financial statement components of other expense and income tax expense.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and replaces Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred and should be initially measured at fair value. Under EITF Issue No. 94-3, a liability for such costs is recognized as of the date
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
of an entitys commitment to an exit plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that we initiated after December 31, 2002. Our adoption of SFAS No. 146 did not have a material effect on our financial condition or results of operations.
In November 2002, the FASB issued Interpretation (FIN) No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 requires certain guarantees to be recorded at fair value and also requires a guarantor to make certain disclosures regarding guarantees. FIN No. 45s initial recognition and initial measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. Our adoption of this Interpretation did not have a material impact on our consolidated financial statements or disclosures.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure. This statement amends SFAS No. 123, Accounting for Stock-Based Compensation An Amendment of SFAS No. 123. Although SFAS 148 does not require use of the fair value method of accounting for stock-based employee compensation, it does provide alternative methods of transition. It also amends the disclosure provisions of SFAS 123 and APB Opinion No. 28, Interim Financial Reporting, to require disclosure in the summary of significant accounting policies or the effects of an entitys accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. SFAS 148s amendment of the transition and annual disclosure requirements is effective for fiscal years ending after December 15, 2002. The amendment of disclosure requirements of APB Opinion No. 28 is effective for interim periods beginning after December 15, 2002. Our adoption of SFAS No. 148 has resulted in expanded disclosure to include the effect of stock-based compensation in interim reporting.
In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB 51. FIN No. 46 provides guidance on the identification of entities of which control is achieved through means other than voting rights (variable interest entities or VIEs) and how to determine when and which business enterprise should consolidate the VIE (the primary beneficiary). In addition, FIN No. 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures. The transitional disclosure requirements of FIN No. 46 are required in all financial statements initially issued after January 31, 2003, if certain conditions are met. Our adoption of this Interpretation did not have a material impact on our consolidated financial statements or disclosures.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies the accounting guidance on derivative instruments (including certain derivative instruments embedded in other contracts) and hedging activities that fall within the scope of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 149 is effective prospectively for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships designated after June 30, 2003. Our adoption of SFAS No. 149 did not have a material impact on our consolidated financial statements or disclosures.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 changes the accounting and disclosure requirements for certain financial instruments that, under previous guidance, could be classified as equity. The guidance in SFAS No. 150 is generally effective for all financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 15, 2003. The adoption of SFAS No. 150 is not expected to have a material impact on our consolidated financial statements or disclosures.
4. | Receivables |
Receivables, net consist of the following:
September 30,
2001
2002
$
11,467
$
13,439
379
664
11,846
14,103
(1,548
)
(1,576
)
$
10,298
$
12,527
5. | Property and Equipment |
Property and equipment, net consist of the
following:
September 30,
2001
2002
$
10,536
$
12,485
12,722
14,571
5,821
7,542
1,531
366
515
1,548
1,343
2,485
32,336
39,129
(13,976
)
(15,898
)
$
18,360
$
23,231
Included in construction in progress are costs associated with the development of software to be utilized in managing our student data and accounting records. These costs totalled approximately $1.0 million at September 30, 2001 and $0.3 million at September 30, 2002. In addition, at September 30, 2002, we have recorded $2.1 million in construction in progress and its corresponding construction liability related to a build-to-suit lease agreement for a new campus facility.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. | Accounts Payable and Accrued Expenses |
Accounts payable and accrued expenses consist of
the following:
September 30,
June 30,
2001
2002
2003
(unaudited)
$
4,671
$
4,031
$
2,364
6,208
9,543
14,178
4,031
2,900
4,590
$
14,910
$
16,474
$
21,132
7. | Investment in Land |
We previously acquired land in Phoenix, Arizona for possible future expansion. We did not make formal plans for the development of the land and have placed the land for sale. The land parcels are valued at the lower of cost or market value less selling costs. In connection with our 1999 recapitalization where we issued additional common stock and our Series C preferred stock, we agreed to distribute any proceeds received from the sale of the land to the participating common shareholders. The carrying value of the land at September 30, 2001 and 2002 was $0.4 million. We also have recorded a corresponding long-term liability in the accompanying Consolidated Balance Sheets to reflect the required distribution payable to shareholders.
During the year ended 2000, we sold certain parcels of the land held for sale. Total proceeds from the sale were $0.5 million and were distributed to the common shareholders. In June 2003, we sold certain parcels of the remaining land held for sale. Total proceeds from the sale were $0.3 million and were distributed to the common shareholders.
8. | Revolving Credit Facility |
Effective March 29, 2002, we restructured our debt in conjunction with the issuance of series D preferred stock (Note 16) and entered into a Second Amendment and Restatement of Credit Agreement (Second Amendment). The Second Amendment increased the borrowing limit under the revolving credit facility from $12.5 million to $20.0 million and increased the limit on letters of credit that may be issued under the revolving credit facility to ED from $5.0 million to the greater of $10.0 million or 10% of Title IV funding not to exceed $15.0 million. There were no outstanding borrowings under the revolving credit facility at September 30, 2001 or September 30, 2002. Issued and outstanding letters of credit were $5.0 million at September 30, 2001 and $6.4 million at September 30, 2002.
In October 2002, we issued an additional letter of credit totaling $6.0 million that expires October 31, 2003 to secure existing surety bonds required by certain state entities that were previously secured by personal guarantees of certain officers. In September 2003, we posted an additional $2.0 million letter of credit.
The revolving credit facility matures on March 31, 2007 and is secured by a security interest in substantially all the assets of UTI Holding Inc., the borrower under our senior credit facilities. UTI Holding Inc. is an intermediate holding company that is holding the capital stock of all of our operating subsidiaries. Borrowings under the revolving credit facility bear interest based upon, at our option at the time of the borrowing, LIBOR or an alternative base rate, at the alternate base rate plus 1.50% to 2.25% or LIBOR plus 2.75% to 3.50%, in each case depending on our leverage ratio during the applicable interest
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
period. In addition to paying interest on outstanding principal under the revolving credit facility, we are required to pay a commitment fee to the lenders under the revolving credit facility with respect to the unused commitments at a rate equal to 0.5% per year, and a risk participation fee equal to 1.5% per year to the issuers of letters of credit under our revolving credit facility with respect to the amount of such letters of credit. Interest is payable quarterly. The alternate base rate was 7.25% at September 30, 2001 and 6.5% at September 30, 2002. LIBOR was 5.375% at September 30, 2001 and 4.813% at September 30, 2002.
The Second Amendment contains certain restrictive covenants, including but not limited to maintenance of certain financial ratios and restrictions on capital expenditures, indebtedness, contingent obligations, investments and certain payments. We were not in compliance with certain restrictive covenants, however, we received a waiver of these violations from our lenders.
In July 2003, we further amended our credit agreements. The amendment increased our available borrowing under our revolving credit facility from $20.0 million to $30.0 million, increased the limit for letters of credit issued under the revolving credit facility from the greater of (a) $10,000,000 and (b) an amount, not exceeding $15,000,000, equal to 10% of Title IV funding received by us to the greater of (x) $15,000,000 and (y) an amount, not exceeding $22,500,000, equal to 10% of Title IV funding received by us. The amendment also increased the level of permitted capital expenditures, reduced the interest rate from the alternate base rate plus 1.50% to 2.25% or LIBOR plus 2.75% to 3.5% to the alternate base rate plus 1.25% to 2.25% or LIBOR plus 2.50% to 3.50%, in each case depending on our leverage ratio during the applicable interest period and approved certain restricted cash payments. In connection with the amendment, we were required to repay $15.0 million on our Term B loan facility discussed in Note 8.
9. | Long-Term Debt and Capital Leases |
As discussed in Note 8, in March 2002 we executed the Second Amendment which restructured our revolving credit facility and term loan facilities. The amendment relative to our term loan facilities modified our payment schedules, interest rates and various financial and non-financial covenants. Borrowings under our Term A and Term B loan facilities are secured by a security interest in substantially all the assets of UTI Holding Inc., the borrower under our senior credit facilities. UTI Holding Inc., is an intermediate holding company that is holding the capital stock of all our operating subsidiaries.
The Term A loan facility requires interest to be paid quarterly at either the alternate base rate plus 1.75% or LIBOR plus 3%, at our election at the time of the borrowing, and expires March 31, 2007. The Term B loan facility requires interest to be paid quarterly at either the alternate base rate plus 2.25% or LIBOR plus 3.5%, at our election at the time of the borrowing, and expires March 31, 2009. We may prepay Term A and Term B loan facilities in whole or in part, without penalty.
As a result of our debt restructuring, we incurred additional deferred financing fees of approximately $2.0 million and recognized approximately $1.0 million in other expense related to the write-off of previously recorded and unamortized deferred financing fees.
Our alternate base rate was 7.25% at September 30, 2001 and 6.5% at September 30, 2002. The LIBOR rate was 5.375% at September 30, 2001 and 4.813% at September 30, 2002. As discussed in Note 8, the Second Amendment contains certain restrictive covenants. We were not in compliance with certain restrictive covenants, however, we received a waiver of these violations from our lenders.
At September 30, 2002, we have recorded a construction liability of $2.1 million in connection with a build to suit lease for a new campus facility. We also have various capital leases related to training
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
equipment utilized in our campus classrooms and office equipment. These capital leases bear interest at rates from 6.0% to 14.2% and are secured by the underlying equipment.
As discussed in Note 8, in July 2003, we amended our Second Amendment. In addition to the modifications related to the revolving credit facility, we amended the interest rate applicable to the Term A loan facility and Term B loan facility. The interest rate on the Term A loan facility was amended from the alternate base rate plus 1.5% to 2.25% or LIBOR plus 2.75% to 3.5% to the alternate base rate plus 1.25% to 2.25% or LIBOR plus 2.5% to 3.5%, in each case depending on our leverage ratio during the applicable interest period. The interest rate on the Term B loan facility was amended from the alternate base rate plus 2.0% to 2.75% or LIBOR plus 3.25% to 4.0% to the alternate base rate plus 1.75% to 2.75% or LIBOR plus 3.0% to 4.0%, in each case depending on our leverage ratio during the applicable interest period. In connection with the amendment, we were required to repay $15.0 million on our Term B loan facility.
Long-term debt and capital leases consist of the
following:
September 30,
2001
2002
$
14,188
$
19,150
54,966
29,850
69,154
49,000
(6,722
)
(2,500
)
62,432
46,500
1,408
891
(520
)
(516
)
888
375
$
63,320
$
46,875
Maturities on long-term debt at
September 30, 2002 are as follows:
$
2,500
3,500
4,750
6,250
9,750
22,250
$
49,000
F-19
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Future minimum lease payments under our capital
lease agreements at September 30, 2002 are as follows:
10. Subordinated
Long-Term Related Party Debt
$
576
375
11
4
966
(75
)
891
(516
)
$
375
We issued several subordinated promissory notes to related parties in connection with acquisitions and capital raising transactions. All of these notes are with related parties.
In April 2002, in addition to restructuring our bank debt described in Note 8 and Note 9, we sold shares of our series D preferred stock for aggregate gross proceeds of $45.5 million. A portion of the net proceeds received from the sale was utilized to repay in full the 13.5% subordinated promissory notes having a principal amount of $23.4 million.
Subordinated long-term related party debt consist of the following:
F-20
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Maturities on subordinated long-term debt at
September 30, 2002 are as follows:
$
7,011
4,000
$
11,011
In August 2003, we negotiated terms for the early payment of the 8.0% subordinated convertible promissory note payable to a shareholder and related party with a face value of $7.0 million. Under the terms of the repayment agreement, we paid $6.3 million with available cash and recognized a gain in the amount of $0.7 million, representing an early payment discount of approximately 10%.
In August 2003, we repaid, without penalty, the 6.6% subordinated promissory note payable to a shareholder and related party with a face value of $4.0 million.
10. Income Taxes
The components of income tax benefit (expense)
are as follows:
Year Ended September 30,
2000
2001
2002
$
(384
)
$
(361
)
$
1,964
(47
)
1,181
3,264
$
(431
)
$
820
$
5,228
$
(431
)
$
820
$
5,228
1,239
(544
)
$
808
$
276
$
5,228
The income tax benefit for the loss on sale of the discontinued operation of $13.9 million was recorded and fully reserved during the year ended September 30, 2001 resulting in an income tax benefit of zero for the period.
The income tax provision differs from the tax
that would result from application of the statutory federal tax
rate. The reasons for the differences are as follows:
Year Ended September 30,
2000
2001
2002
$
(842
)
$
317
$
5,073
72
70
68
238
241
329
101
192
(242
)
$
(431
)
$
820
$
5,228
F-21
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The components of the deferred tax assets
(liabilities) are recorded in the accompanying Consolidated
Balance Sheets as follows:
September 30,
2001
2002
$
922
$
972
616
860
2,932
3,795
17,048
14,034
(13,933
)
(13,933
)
7,585
5,728
(3,247
)
(2,444
)
(399
)
(1,705
)
(380
)
(65
)
(4,026
)
(4,214
)
$
3,559
$
1,514
The deferred tax assets (liabilities) are
reflected in the accompanying Consolidated Balance Sheets as
follows (in thousands):
September 30,
2001
2002
$
(910
)
$
1,142
4,469
372
$
3,559
$
1,514
At September 30, 2001 and 2002, we had a valuation allowance of $13.9 million to reduce our deferred tax assets to an amount that management believes is more likely than not to be realized. The valuation allowance primarily relates to a deferred tax asset arising from a capital loss carryforward from the sale of a discontinued business. Our capital loss carryforward expires in 2005.
12. Noncompete and Consulting Agreements
Effective September 30, 1997, we entered into a management consulting agreement with our largest outside shareholder. Effective April 1, 2002, the management consulting agreement was amended to include all outside shareholders as additional consultants. Under the amended consulting agreement, all outside shareholders render consulting services to us in connection with financial and business matters. The annual management consulting fee is equal to the greater of $0.3 million or 2.5% of a defined earnings measure as described in the agreement. The agreement expires upon the earlier of September 30, 2007, and shall be automatically renewed for successive one-year terms unless certain events occur. We have recorded and paid management consulting fees of $0.5 million for the year ended September 30, 2000, $0.4 million for the year ended September 30, 2001 and $0.5 million for the year ended September 30, 2002. We expect that the management consulting agreement will be terminated upon the consummation of
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
this offering and that no additional payments will be made pursuant to that agreement as a result of the offering or otherwise.
We have entered into consulting and non-compete agreements with two former officers. The agreements expired December 1, 2000. In accordance with these agreements, we paid the former officers approximately $0.2 million in the aggregate for the year ended September 30, 2000.
13. Commitments and Contingencies
Operating Leases |
We lease our facilities and certain equipment
under non-cancelable operating leases, some of which contain
renewal options, escalation clauses and requirements to pay
other fees associated with the leases. We recognize rent expense
on a straight line basis. Two of our campus facilities are
leased from a related party. Future minimum rental commitments
at September 30, 2002 for all non-cancelable operating
leases for each of the years ending September 30 are as
follows:
$
9,745
9,235
7,797
7,631
7,456
64,707
$
106,571
Rent expense for operating leases was approximately $5.9 million, $6.9 million and $8.6 million for the years ended September 30, 2000, 2001 and 2002, respectively. Rent paid to related parties was approximately $1.9 million, $2.2 million and $2.3 million for the years ended September 30, 2000, 2001 and 2002, respectively.
On September 15, 2003, Universal Technical Institute of Arizona executed a Construction Agency Agreement and Lease Agreement with an independent third party lessor in connection with a build-to-suit lease. The obligations of Universal Technical Institute of Arizona under these agreements are guaranteed by Universal Technical Institute, Inc. The lease anticipates an occupancy date of June 2004 with an initial term of 20 years. Our lease payments are estimated to be approximately $230,000 per month. Future increases in monthly rent are based on changes in the consumer price index.
Licensing Agreement |
In 1997, we entered into a licensing agreement that gives us the right to use certain materials and trademarks in the development of our courses and delivery of services on our campuses. The agreement was amended in January 2002. Under the terms of the amended license agreement, we are committed to pay royalties based upon a flat per student fee for students who elect and attend the licensed program. Minimum payments of $0.2 million are required for the each of the calendar years 2002 through 2004, and minimum payments of $0.3 million are required for the calendar year 2005. A license fee is also payable based upon a percentage of net sales related to the sale of any product which bears the licensed trademark. In addition, we are required to pay a minimum marketing and advertising fee for which in return we receive the right to utilize certain advertising space in the licensors published periodicals. The minimum
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
marketing and advertising fee is $0.3 million for calendar years 2002 through 2004 and $0.4 million for the calendar year 2005. The agreement expires December 31, 2005.
In 1999, we entered into a licensing agreement that gives us the right to use certain materials and trademarks in the development of our courses. Under the terms of the agreement, we are required to pay a flat per student fee for each three week phase a student completes of the total 3 phases offered in connection with this license agreement. There are no minimum license fees required to be paid. The agreement terminates upon the written notice of either party providing not less than six months notification of the intent to terminate. In addition, the agreement may be terminated by the licensor after notification to licensee of a contractual breach if such breach remains uncured for more than 30 days.
In 2001, we entered into a licensing agreement that gives us the right to use certain trademarks in connection with the development and operation of our campuses and courses. In accordance with the agreement, we have prepaid $1.0 million that will be used to satisfy future minimum annual royalties. We are committed to pay royalties based upon net revenue, as defined in the agreement, commencing in calendar year 2001 and ending upon the expiration of the agreement in calendar year 2006. The agreement requires minimum royalty payments of $0.4 million in calendar year 2002 and $0.5 million thereafter. In connection with the royalty agreement, we have recorded royalty expense totalling $0.1 million for the year ended September 30, 2001 and $0.4 million for the year ended September 30, 2002.
Vendor Relationship |
In 1998, we entered into an agreement with Snap-on Tools. The agreement provides that we may purchase promotional tool kits for our students at a discount from their list price. In addition, we earn credits that are redeemable for equipment we use in our business. Credits are earned on our purchases as well as purchases made by students enrolled at our campuses. We have agreed to provide Snap-on Tools exclusive access to our campuses and display advertising as well as to use Snap-on tools to train our students. The credits earned under this agreement may be redeemed for Snap-on tools or equipment at the full retail list price, which is more than we would be required to pay using cash.
Students are each promised the receipt of a tool kit upon completing certain coursework. The cost of the tool kits (net of the credit) is accrued during the time period in which the students begin attending school until they have reached the phase in which the promotional tool kits are provided.
As we have opened new campuses, Snap-on has historically advanced us credits for the purchase of their tools or equipment that support our new campus growth. At September 30, 2001, our net Snap-on liability resulting from using credits in excess of credits earned was $0.8 million, and at September 30, 2002 that liability was $1.4 million.
Upon termination of the agreement, we continue to earn credits relative to promotional tool kits we purchase or additional tools our active students purchase. We continue to earn these credits until a tool kit is provided to the last student eligible under the agreement.
Executive Employee Agreement |
We have entered into employment contracts with key executives. At September 30, 2002, the future employment contract commitments for such employees were approximately $0.6 million, plus benefits, for each fiscal year ending September 30, 2003 through 2006, respectively.
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Legal |
In the ordinary conduct of our business, we are subject to periodic lawsuits, investigations and claims, including, but not limited to, claims involving students or graduates and routine employment matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe that any currently pending legal proceeding to which we are a party will have a material adverse effect on our business, results of operations, cash flows or financial condition.
14. | Employee Benefit Plans |
401(k) Plan |
We sponsor a defined contribution 401(k) plan, under which our employees elect to withhold specified amounts from their wages to contribute to the plan and we have a fiduciary responsibility with respect to the plan. The plan provides for matching a portion of employees contributions at managements discretion. All contributions and matches by us are invested at the direction of the employee in one or more mutual funds. We made contributions totaling approximately $0.1 million for the year ended September 30, 2000, $0.2 million for the year ended September 30, 2001 and $0.5 million for the year ended September 30, 2002.
Deferred Compensation Plan |
We have entered into deferred compensation agreements with seven of our employees, providing for the payment of deferred compensation to each employee in the event that the employee becomes no longer employed by us. Under each agreement, the employee shall receive an amount equal to the compensation the employee would have earned if the employee had repeated the employment performance of the prior twelve months. We will pay the deferred compensation in a lump sum or over the period in which the employee would typically have earned the compensation had the employee been actively employed, at our option. Our total commitment under the deferred compensation agreements was approximately $1.5 million as of September 30, 2001 and 2002.
Executive Benefit Plan |
We sponsor the Universal Technical Institute Executive Benefit Plan. The plan provides for the annual deferral of all or part of certain executive bonuses into the plan as well as amounts withheld from executives wages, where applicable. We may elect to match contributions on an annual basis. All amounts are fully vested when deferred and matched. The obligation for deferred compensation under the plan totaled approximately $1.1 million at September 30, 2001 and $0.8 million at September 30, 2002, and is included in Other liabilities in the accompanying Consolidated Balance Sheets. The plan assets held to fund the deferred compensation liability are included in Other assets and represent the cash surrender value of life insurance totaling $0.6 million and $0.2 million at September 30, 2001 and 2002, respectively, and $0.5 million of our Series C preferred stock at September 30, 2001 and 2002, respectively (Note 15).
15. | Common Stock |
Holders of our common stock shall be entitled to receive dividends when and as declared by the board of directors. The common stock is not redeemable. The holder of each share of common stock has the right to one vote per share owned. At September 30, 2001 and 2002, we had outstanding related party subscriptions receivable of $0.5 million and $0.6 million, respectively. In August 2003, we received payments on the outstanding subscriptions receivable of $0.4 million.
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In September 2003, our board of directors declared, and we paid, a $5.0 million cash dividend on the shares of our common stock payable to the record holders as of August 25, 2003. The record holders of our Series D preferred stock were entitled to receive, upon conversion, such cash dividend pro rata and on an as-converted basis, pursuant to certain provisions of the certificate of designation of the Series D preferred stock. Our certificate of incorporation was amended to permit the holders of Series D preferred stock to be paid the dividend prior to the conversion and simultaneously with holders of our common stock, and the holders of our Series A, B and C preferred stock consented to such payment.
16. | Preferred Stock |
Preferred stock consists of the following:
September 30, 2001
Accrued and
Liquidation
Subscriptions
Unpaid
Held by
Transaction
Carrying
Amount
Receivable
Dividends
UTI Trust
Fees
Amount
$
11,178
$
(3,673
)
$
2,683
$
$
$
10,188
4,067
976
5,043
4,200
504
(521
)
4,183
$
19,445
$
(3,673
)
$
4,163
$
(521
)
$
$
19,414
September 30, 2002
Accrued and
Liquidation
Subscriptions
Unpaid
Held by
Transaction
Carrying
Amount
Receivable
Dividends
UTI Trust
Fees
Amount
$
11,178
$
(3,673
)
$
3,353
$
$
$
10,858
4,067
1,220
5,287
4,200
756
(455
)
4,501
19,445
(3,673
)
5,329
(455
)
20,646
45,500
1,706
(3,457
)
43,749
$
64,945
$
(3,673
)
$
7,035
$
(455
)
$
(3,457
)
$
64,395
Series A and Series B Preferred Stock |
In January 1998, we issued 11,178 shares of series A preferred stock (Series A) and 4,067 shares of series B preferred stock (Series B), each with a par value of $.0001. The Series A and Series B provide for cumulative annual dividends of 6%, whether or not declared, payable on June 30 of each year. The Series A and Series B are subject to mandatory redemption on March 31, 2010 and October 15, 2017, respectively. The liquidation value is equal to one thousand dollars per share. The redemption value is equal to the liquidation value plus accrued and unpaid dividends.
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In August 2003, we collected, in its entirety, the subscription receivable from a shareholder and related party with a face value of approximately $3.7 million.
Series C Preferred Stock |
In September 1999, in conjunction with a recapitalization transaction, we issued 4,200 shares of series C preferred stock (Series C) with a par value of $.0001. The stock was recorded at its fair value on the date of issuance. The Series C provides for cumulative annual dividends of 6%, whether or not declared, payable on September 30 of each year. The Series C is subject to mandatory redemption on March 31, 2010. The liquidation value is equal to one thousand dollars per share. The redemption value is equal to the liquidation value plus accrued and unpaid dividends.
We own the UTI Tax-Deferred Trust (UTI Trust), which was set up to facilitate the provision of deferred compensation to our executives (Note 14). The UTI Trust held 465 shares of Series C at September 30, 2001 and 386 shares at September 30, 2002. The carrying value of these shares, including accrued and unpaid dividends, was $0.5 million at September 30, 2001 and 2002 and is reflected as a reduction of the total carrying value of Series C in the accompanying Consolidated Balance Sheets.
Series D Preferred Stock |
In April 2002, in conjunction with a recapitalization transaction, we issued 2,357 shares of $.0001 par value convertible Series D preferred stock (Series D) for aggregate gross proceeds of $45.5 million. The Series D was recorded at $42.0 million, net of its issuance costs of $3.5 million. The Series D provides for annual dividends of 7.5% which shall be cumulative, whether or not declared, payable on September 30 of each year. Series D is convertible on a one for one basis and redeemable, at the holders option, upon a change in control. Pursuant to the certificate of designation, a change of control occurs if, among other things, (i) we sell all or substantially all of our assets; (ii) we are not the surviving entity after a merger or consolidation with an unaffiliated party or our stockholders, immediately before a merger or consolidation, no longer own at least the majority of the common stock of the surviving entity; or (iii) any person or entity becomes the beneficial owner, directly or indirectly, of more than 50% of the total voting power of our outstanding capital stock, as more particularly described in the certificate of designation. Series D converts automatically into shares of common stock upon a qualified initial public offering, as that term is defined in the certificate of designation.
Ranking, Liquidation Preference and Voting Rights |
The Series A, Series B and Series C (Senior Stock) rank senior to, and have preference and priority with respect to any payment of any dividend or distribution on, the Series D, the common stock or any other shares of our capital stock. The Series D ranks senior to, and has preference and priority with respect to any payment of any dividends or distribution on, the common stock or any other shares of our capital stock (other than the Senior Stock). All capital stock ranking junior to the Series D is referred to as Junior Stock.
Upon our liquidation, dissolution or winding up, whether voluntary or involuntary, the holders of shares of Series D then outstanding shall be entitled to be paid out of our assets available for distribution to our shareholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Stock (liquidation value per share plus any accrued and unpaid dividends), but before any payment shall be made to the holders of Junior Stock by reason of their ownership thereof, an amount equal to the liquidation value per share plus any accrued and unpaid dividends thereon.
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
If upon such liquidation, our assets are not sufficient to permit payment in full of the liquidation value (plus any accrued and unpaid dividends) of the Series A, Series B, Series C and Series D, our entire assets are to then be distributed ratably among the holders of such stock.
The Series A, Series B and Series C do not carry voting rights. The holders of outstanding shares of Series D are entitled to vote together with the holders of shares of common stock, as a single class, on all matters on which holders of common stock are entitled to vote, with each share of Series D voting on an as-if-converted basis.
17. | Shareholders Agreement |
Our shareholders have entered into an agreement setting forth certain rights and restrictions relating to ownership of our securities. This agreement restricts the transfer of stock without our prior written consent. Further restrictions exist upon employee termination or retirement. In cases of involuntary termination for cause and voluntary termination, we may elect to repurchase (call) all of the stock owned by the shareholder. Upon retirement or involuntary termination other than for cause, the shareholder may elect to have us repurchase (put) all shares owned. In all instances, except involuntary termination other than for cause, the call or put price shall be an amount equal to the greater of (i) one-half of the fair market value or (ii) cost; however, upon execution by the selling shareholder of a non-competition agreement, the call or put price shall be an amount equal to the fair market value of the stock. Upon involuntary termination other than for cause, the put price will be equal to the fair market value of the stock. In all instances, the fair market value is to be determined by our board of directors.
The agreement also grants shareholders a right to purchase stock being offered by a selling shareholder, based upon their pro rata ownership basis. The selling shareholder must also require certain buyers to irrevocably offer to other shareholders the right to acquire additional shares of stock, subject to a specified formula.
These restrictions shall terminate upon the closing of a Public Offering (as defined in the stockholders agreement) or execution of a registration rights agreement.
18. | Employee Stock Plans |
Restricted Stock Plan |
We adopted a Restricted Stock Plan (Stock Plan) pursuant to which eligible participants may receive an award of restricted common stock (Restricted Stock). In January 1998, 235 shares of Restricted Stock were issued to certain of our executives and managers in exchange for 6.25% subscription notes receivable due January 31, 2009. Effective September 30, 1999, we vested all shareholders. There were 226 shares outstanding under the Stock Plan at September 30, 2001 and 2002. Subscription notes receivable related to these shares totaled $0.2 million for the years ended September 30, 2001 and 2002. In August 2003, we received payment of outstanding subscription notes receivable from all of our executive officers participating in the Stock Plan and certain other participants totalling $0.1 million.
Management Stock Option Plans |
We have two stock option plans, which we refer to as the Management 1999 Option Program (1999 Plan) and the Management 2002 Option Program (2002 Plan).
On September 30, 1999, we granted non-qualified options to purchase 108 shares of common stock at an exercise price of $1,000 per share, the fair market value of our common stock as of that date. All
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
grants were immediately vested. In June 2003, all outstanding options issued under the 1999 Plan were exercised by tender of 6% subscription notes receivable which were repaid in August 2003. The exercise of the non-qualified options generated a tax savings of approximately $1.3 million relative to the additional compensation expense we are required to report to the Internal Revenue Service.
The 2002 Plan was approved and adopted on April 1, 2002 and authorized the issuance of options to purchase 171.5 shares of our common stock. Options to acquire 140 shares were granted on April 1, 2002 at an exercise price of $19,125 per share, the fair market value of our common stock as of that date. On February 25, 2003, our board of directors authorized an additional 8.5 shares to be issued under options to purchase our common stock and granted options on an additional 34.5 shares at an exercise price of $31,808 per share, which is less than the fair market value at that date. Options vest ratably each year over a four-year period.
The expiration date of options granted under these plans is the earlier of the ten-year anniversary of the grant date; the one-year anniversary of the termination of the participants employment by reason of death or disability; thirty days after the date of the participants termination of employment if caused by reasons other than death, disability, cause, material breach or unsatisfying performance; or on the termination date if termination occurs for reasons of cause, material breach or unsatisfactory performance. The weighted average remaining contractual life for the 1999 Plan was 8 years and 7 years as of September 30, 2001 and 2002, respectively. The remaining contractual life for the 2002 Plan was 9.5 years as of September 30, 2002.
The following table summarizes stock option
activity for 2001 and 2002:
Year Ended
Year Ended
September 30, 2001
September 30, 2002
Stock
Weighted Average
Stock
Weighted Average
Options
Exercise Price
Options
Exercise Price
108
$
1,000
108
$
1,000
140
19,125
108
$
1,000
248
$
10,796
108
$
1,000
108
$
1,000
19. Discontinued Operations
On September 29, 2001, our board of directors authorized a Stock Purchase Agreement between us and NTT Acquisition Corp. by which we sold NTT for nominal consideration. Certain of NTT Acquisition Corp. shareholders are also our shareholders. We reported the operating results of NTT and the loss on disposal as discontinued operations for all periods in the accompanying Consolidated Statements of Operations. At September 30, 2001, we recorded a loss on the sale of NTT of approximately $1.3 million.
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Our historical Consolidated Statements of
Operations have been adjusted to show the results of the
discontinued operations separately. The results of the
discontinued operations for the periods presented in our
Consolidated Statements of Operations consist of the following:
Year Ended
September 30,
2000
2001
$
28,874
$
25,224
11,419
11,785
16,711
19,450
33,942
3,074
(33,198
)
(9,085
)
5
(33,198
)
(9,080
)
(1,239
)
544
$
(34,437
)
$
(8,536
)
There were no assets and liabilities of the discontinued operations to be disposed of included in our Consolidated Balance Sheets for the years ended September 30, 2001 and 2002.
We advanced funds to NTT Acquisition Corp. subsequent to the sale of NTT in exchange for a note receivable in the amount of $0.6 million. This note has not been repaid. During the year ended September 30, 2002, we recorded a full valuation reserve because collection was uncertain.
20. Segment Information
We follow SFAS No. 131, Disclosures about segments of an Enterprise and Related Information. SFAS establishes standards for the way that public business enterprises report certain information about operating segments in their financial reports. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in assessing performance of the segment and in deciding how to allocate resources to an individual segment. SFAS No. 131 also establishes standards for related disclosures about products and services, geographic areas and major customers.
Our principal business is providing post-secondary education. We also provide manufacturer-specific training, and these operations are managed separately from our campus operations. These operations do not currently meet the quantitative criteria for segments and therefore are not deemed reportable under SFAS No. 131 and are reflected in the Other category. Corporate expenses are allocated to Post-Secondary Education and the Other category.
F-30
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Summary information by reportable segment is as
follows as of and for the years ended September 30:
2000
Post-
Secondary
Education
Other
Total
$
86,307
$
5,772
$
92,079
$
10,681
$
(1,018
)
$
9,663
$
3,759
$
128
$
3,887
$
21,150
$
$
21,150
$
69,237
$
(392
)
$
68,845
2001
Post-
Secondary
Education
Other
Total
$
99,852
$
9,641
$
109,493
$
12,479
$
(872
)
$
11,607
$
4,340
$
193
$
4,533
$
20,579
$
$
20,579
$
63,977
$
(891
)
$
63,086
2002
Post-
Secondary
Education
Other
Total
$
132,607
$
11,765
$
144,372
$
23,319
$
(1,301
)
$
22,018
$
4,681
$
270
$
4,951
$
20,579
$
$
20,579
$
78,244
$
(1,358
)
$
76,886
Summary information by reportable segment is as
follows as of and for the nine months ended June 30:
2002
Post-
Secondary
Education
Other
Total
(unaudited)
$
96,716
$
8,712
$
105,428
$
18,304
$
(1,193
)
$
17,111
$
2,966
$
201
$
3,167
$
20,579
$
$
20,579
$
64,744
$
(2,194
)
$
62,550
F-31
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2003
Post
Secondary
Education
Other
Total
(unaudited)
$
131,350
$
10,292
$
141,642
$
26,568
$
325
$
26,893
$
4,260
$
216
$
4,476
$
20,579
$
$
20,579
$
96,388
$
(946
)
$
95,442
F-32
UNIVERSAL TECHNICAL INSTITUTE, INC.
SCHEDULE OF VALUATION AND QUALIFYING
ACCOUNTS
(In thousands)
Beginning
Ending
Balance
Additions
Reductions
Balance
$
1,379
3,167
2,246
2,300
$
$
2,300
2,259
3,011
1,548
$
13,933
13,933
$
1,548
2,465
2,437
1,576
$
13,933
13,933
F-33
PART II
INFORMATION NOT REQUIRED IN THE
PROSPECTUS
The following are the estimated expenses to be
incurred in connection with the issuance and distribution of the
securities registered under this Registration Statement, other
than underwriting discounts and commissions. All amounts shown
are estimates except the Securities and Exchange Commission
registration fee and the National Association of Securities
Dealers, Inc. filing fee. The following expenses will be borne
solely by the Registrant.
Section 145 of the Delaware General
Corporation Law permits a corporation to include in its charter
documents, and in agreements between the corporation and its
directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current
law.
The Registrants certificate of
incorporation provides for the indemnification of directors and
officers to the fullest extent under Delaware law. In addition,
the Registrants certificate of incorporation and
individual indemnification agreements between the Registrant and
its directors and officers provide for indemnification of the
Registrants directors and officers for liabilities and
expenses that they may incur in such capacities. In general,
directors and officers are indemnified with respect to actions
taken in good faith in a manner reasonably believed to be in, or
not opposed to, the best interests of the Registrant and, with
respect to any criminal action or proceeding, actions that the
indemnitee had no reasonable cause to believe were unlawful.
In addition, the Registrant has purchased
directors and officers liability insurance.
During the past three years, we have issued
unregistered securities to a limited number of persons, as
described below. None of these transactions involved any
underwriters or any public offerings and we believe that each of
these transactions was exempt from registration requirements
pursuant to Section 3(a)(9) or Section 4(2) of the
Securities Act of 1933, as amended, Regulation D
promulgated thereunder or Rule 701 of the Securities Act of
1933 pursuant to compensatory benefit plans and contracts
related to compensation as provided under Rule 701. The
recipients of the securities in these transactions represented
their intention to acquire the securities for investment only
and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to
the share certificates and instruments issued in these
transactions.
In 2003,
and pursuant to an exchange agreement between us and certain
holders of our Series A preferred stock, Series B
preferred stock and Series C preferred stock, we issued a
total of
II-1
In February 2003, we granted stock options
to purchase an aggregate of 34.5 shares of our common stock
at an exercise price of $31,808 per share to certain of our
employees.
In April 2002, we granted stock options to
purchase an aggregate of 140 shares of our common stock at
an exercise price of $19,302.60 per share to certain of our
employees.
In April 2002, we issued
2357.19491 shares of our series D convertible
preferred stock to two groups of investors for an aggregate
amount of $45.5 million. These securities were issued in
reliance on the exemption from registration pursuant to
Section 4(2) of the Securities Act of 1933 and
Regulation D promulgated thereunder.
(a)
Exhibits.
II-2
(b)
Financial Statement Schedules.
All schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or
are inapplicable, and therefore have been omitted.
Item 17.
Undertakings
II-3
Item 13.
Other Expenses of Issuance and
Distribution
$
10,113
*
*
*
*
*
*
*
*
*
To be provided by amendment.
Item 14.
Indemnification of Directors and
Officers
Item 15.
Recent Sales of Unregistered
Securities
Item 16.
Exhibits and Financial Statement
Schedules
*1
.1
Form of Underwriting Agreement.
3
.1
Second Amended and Restated Certificate of
Incorporation of registrant and amendments thereto.
3
.2
Form of Amended and Restated Certificate of
Incorporation of registrant (to become effective upon completion
of the offering).
3
.3
Bylaws of registrant.
3
.4
Form of Amended and Restated of Bylaws of
registrant (to become effective upon completion of the offering).
*4
.1
Specimen Certificate evidencing shares of common
stock.
*4
.2
Registration Rights Agreement, dated
October , 2003, between registrant
and .
4
.3
Form of Lock-up Agreement by and among the
existing stockholders of registrant, registrant and the
underwriters.
*5
.1
Form of Opinion of Bryan Cave LLP regarding
legality of common stock.
10
.1
Second Amendment and Restatement of Credit
Agreement dated March 29, 2002, among registrant, UTI
Holdings, Inc., Antares Capital Corporation, JP Morgan Chase
Bank, as Trustee of the Antares Funding Trust, and the Royal
Bank of Scotland plc, as lenders, and Heller Financial, Inc., as
agent and lender, as amended.
10
.2
Universal Technical Institute Executive Benefit
Plan, effective March 1, 1997.
10
.3
1997 Restricted Stock Plan.
10
.4
Management 1999 Option Program.
10
.5
Management 2002 Option Program.
10
.6
2003 Stock Incentive Plan.
10
.7
2003 Employee Stock Purchase Plan.
10
.8
Amended and Restated Employment and
Non-Interference Agreement dated April 1, 2002, between
registrant and Robert D. Hartman, as amended.
10
.9
Employment and Non-Interference Agreement dated
April 1, 2002, between registrant and John C. White, as
amended.
10
.10
Employment and Non-Interference Agreement dated
April 1, 2002, between registrant and Kimberly J. McWaters,
as amended.
*10
.11
Form of Severance Agreement between registrant
and certain executive officers.
10
.12
Lease Agreement dated April 1, 1994, as
amended, between City Park LLC, as successor in interest to 2844
West Deer Valley L.L.C., as landlord, and the Clinton Harley
Corporation, as tenant.
10
.13
Lease Agreement dated July 2, 2001, as
amended, between John C. and Cynthia L. White, as trustees of
the John C. and Cynthia L. White 1989 Family Trust, as landlord,
and The Clinton Harley Corporation, as tenant.
10
.14
Lease Agreement dated July 2, 2001, between
Delegates LLC, as landlord, and the Clinton Harley Corporation,
as tenant.
21
.1
Subsidiaries of registrant.
*23
.1
Consent of Bryan Cave LLP (included in
Exhibit 5.1).
23
.2
Consent of PricewaterhouseCoopers LLP.
24
.1
Power of Attorney (included on signature page).
*
To be filed by amendment.
(a) Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
(b) The undersigned Registrant undertakes
that:
(i)
For purposes of determining any liability under
the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this Registration Statement as
of the time it was declared effective; and
(ii)
For the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment
that contains a form of prospectus shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial
bona fide
offering thereof.
(c) The undersigned Registrant undertakes to
provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Phoenix, Arizona on
October 3, 2003.
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of
Universal Technical Institute, Inc., hereby severally constitute
and appoint Robert D. Hartman, Jennifer L. Haslip and
James H. Domaz, and each of them singly, our true and
lawful attorneys with full power to them, and each of them
singly, with full powers of substitution and resubstitution, to
sign for us and in our names in the capacities indicated below,
the Registration Statement on Form S-1 filed herewith and
any and all pre-effective and post-effective amendments to said
Registration Statement on Form S-1 filed herewith and any
and all pre-effective and post-effective amendment to said
Registration Statement, and any subsequent Registration
Statement for the same offering which may be filed under Rule
462(b), and generally to do all such things in our names and on
our behalf in our capacities as officers and directors to enable
Universal Technical Institute, Inc. to comply with the provision
of the Securities Act of 1933, as amended, and all requirements
of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said
attorney, or any of them, or their substitute or substitutes, to
said Registration Statement and any and all amendments thereto
or to any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b).
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been
signed by the following persons in the capacities and on the
dates indicated.
S-1
S-2
UNIVERSAL TECHNICAL INSTITUTE, INC.
By:
/s/ ROBERT D. HARTMAN
Robert D. Hartman
Chairman of the Board
Signature
Title
Date
/s/ ROBERT D. HARTMAN
Robert D. Hartman
Chairman of the Board
October 3, 2003
/s/ JOHN C. WHITE
John C. White
Chief Strategic Planning Officer and Vice
Chairman of the Board
October 3, 2003
/s/ KIMBERLY J. MCWATERS
Kimberly J. McWaters
Chief Executive Officer, President and Director
October 3, 2003
/s/ JENNIFER L. HASLIP
Jennifer L. Haslip
Senior Vice President and Chief Financial Officer
and Treasurer and (Principal Financial and Accounting Officer)
October 3, 2003
/s/ MICHAEL R. EISENSON
Michael R. Eisenson
Director
October 3, 2003
/s/ A. RICHARD CAPUTO, JR.
A. Richard Caputo, Jr.
Director
October 3, 2003
Signature
Title
Date
Robert F. Cioffi
Director
October 3, 2003
John W. Jordan, II
Director
October 3, 2003
James A. Hislop
Director
October 3, 2003
Roger S. Penske
Director
October 3, 2003
EXHIBIT INDEX
The following exhibits are filed with this
Registration Statement.
Exhibit
Number
Description
*1.1
Form of Underwriting Agreement.
3.1
Second Amended and Restated Certificate of
Incorporation of registrant and amendments thereto.
3.2
Form of Amended and Restated Certificate of
Incorporation of registrant (to become effective upon completion
of the offering).
3.3
Bylaws of registrant.
3.4
Form of Amended and Restated Bylaws of registrant
(to become effective upon completion of the offering).
*4.1
Specimen Certificate evidencing shares of common
stock.
*4.2
Registration Rights Agreement, dated
October , 2003, between registrant
and .
4.3
Form of Lock-up Agreement by and among the
existing stockholders of registrant, registrant and the
underwriters.
*5.1
Form of Opinion of Bryan Cave LLP regarding
legality of common stock.
10.1
Second Amendment and Restatement of Credit
Agreement dated March 29, 2002, among registrant, UTI
Holdings, Inc., Antares Capital Corporation, JP Morgan Chase
Bank, as Trustee of the Antares Funding Trust, and the Royal
Bank of Scotland plc, as lenders, and Heller Financial, Inc., as
agent and lender, as amended.
10.2
Universal Technical Institute Executive Benefit
Plan, effective March 1, 1997.
10.3
1997 Restricted Stock Plan.
10.4
Management 1999 Option Program.
10.5
Management 2002 Option Program.
10.6
2003 Stock Incentive Plan.
10.7
2003 Employee Stock Purchase Plan.
10.8
Amended and Restated Employment and
Non-Interference Agreement dated April 1, 2002, between
registrant and Robert D. Hartman, as amended.
10.9
Employment and Non-Interference Agreement dated
April 1, 2002, between registrant and John C. White, as
amended.
10.10
Employment and Non-Interference Agreement dated
April 1, 2002, between registrant and Kimberly J. McWaters,
as amended.
*10.11
Form of Severance Agreement between registrant
and certain executive officers.
10.12
Lease Agreement dated April 1, 1994, as
amended, between City Park LLC, as successor in interest to 2844
West Deer Valley L.L.C., as landlord, and the Clinton Harley
Corporation, as tenant.
10.13
Lease Agreement dated July 2, 2001, as
amended, between John C. and Cynthia L. White, as trustees of
the John C. and Cynthia L. White 1989 Family Trust, as landlord,
and The Clinton Harley Corporation, as tenant.
10.14
Lease Agreement dated July 2, 2001, between
Delegates LLC, as landlord, and the Clinton Harley Corporation,
as tenant.
21.1
Subsidiaries of registrant.
*23.1
Consent of Bryan Cave LLP (included in
Exhibit 5.1).
23.2
Consent of PricewaterhouseCoopers LLP.
24.1
Power of Attorney (included on signature page).
*
To be filed by amendment.
EXHIBIT 3.1
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
UNIVERSAL TECHNICAL INSTITUTE, INC.
A CLOSE CORPORATION
Universal Technical Institute, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), certifies as follows:
1. The name of the Corporation is Universal Technical Institute, Inc. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on September 10, 1997. The Amended and Restated Certificate of Incorporation was filed on September 29, 1997; the Certificate of Designation of Preferences and Rights of Series A Preferred Stock and Series B Preferred Stock was filed on September 30, 1997; and Amendment No. 1 to the Amended and Restated Certificate of Incorporation and the Certificate of Designation of Preferences and Rights of Series C Preferred Stock were filed with the Secretary of State of the State of Delaware on September 29, 1999.
2. Pursuant to sections 242 & 245 of the General Corporation Law of the State of Delaware, this Second Amended and Restated Certificate of Incorporation has been duly adopted by the Corporation's Board of Directors.
3. The text of the Corporation's Certificate of Incorporation (this "Certificate") is hereby restated and further amended to read in its entirety as follows:
ARTICLE I.
The name of the corporation is Universal Technical Institute, Inc., a close corporation.
ARTICLE II.
The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III.
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
ARTICLE IV.
A. Classes of Stock. This Corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the Corporation is authorized to issue is Thirty-Three Thousand Five Hundred (33,500) shares, of which Eight Thousand Five Hundred (8,500) shares shall be Common Stock,
$0.0001 par value per share, and Twenty-Five Thousand (25,000) shares shall be Preferred Stock, $0.0001 par value per share. The Preferred Stock may be issued from time to time in one or more series.
B. Issuance of Preferred Stock.
1. Series A, B, C and D Preferred Stock. The Preferred Stock authorized to be issued hereunder shall include (i) Eleven Thousand One Hundred Seventy-Eight (11,178) shares of Series A Preferred Stock (the "Series A Preferred Stock"), (ii) Four Thousand Sixty-Seven (4,067) shares of Series B Preferred Stock (the "Series B Preferred Stock"), (iii) Four Thousand Two Hundred (4,200) shares of Series C Preferred Stock (the "Series C Preferred Stock") and (iv) Two Thousand Three Hundred Fifty-Eight (2,358) shares of Series D Preferred Stock (the "Series D Preferred Stock").
2. Issuance of Additional Preferred Stock. The Board of Directors is hereby authorized, by filing one or more certificates pursuant to the Delaware General Corporation Law (each, a "Preferred Stock Designation"), to fix or alter from time to time the designations, powers, preferences and rights of each series of Preferred Stock and the qualifications, limitations or restrictions thereof, including without limitation the dividend rights, dividend rate, conversion rights, voting rights and terms of redemption (including sinking fund provisions), redemption price or prices, and the liquidation preferences of any wholly-unissued series of Preferred Stock, and to establish from time to time the number of shares constituting any such series and the designation thereof, or any of them; and to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.
C. Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors.
2. Redemption. The Common Stock is not redeemable upon demand of any holder thereof or upon demand of this corporation.
3. Voting Rights. The holder of each share of Common Stock shall have the right to one vote, and shall be entitled to notice of any stockholder's meeting in accordance with the Bylaws of this corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law.
D. Series A Preferred Stock and Series B Preferred Stock.
1. Definitions. As used in this subsection D of this Certificate, capitalized terms not otherwise defined herein shall have, for all purposes hereof, the meanings herein specified.
"Capital Stock" shall mean any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, partnership interests and other indicia of ownership of a business entity.
"Change of Control" shall mean the occurrence of any of the
following events: (i) all or substantially all of the Corporation's assets, on a
consolidated basis, are sold as an entirety to any Person or related group of
Persons, (ii) there shall be consummated any consolidation or merger of the
Corporation or any exchange of all of the outstanding shares of Common Stock (A)
in the case of a merger or consolidation, in which the Corporation is not the
continuing or surviving company (other than a consolidation or merger with a
wholly-owned Subsidiary of the Corporation in which all shares of Common Stock
outstanding immediately prior to the effectiveness thereof are changed into or
exchanged for the same consideration), (B) in the case of a merger,
consolidation or exchange of all of the outstanding shares of Common Stock,
pursuant to which the Common Stock would be converted into or exchanged for
cash, securities or other property, in any case, other than a consolidation,
merger or exchange of all of the outstanding shares of Common Stock in which
the holders of the Corporation's capital stock immediately prior to the
consolidation, merger or share exchange receive as consideration in such
transaction, directly or indirectly, at least a majority of the common stock of
the transferee or continuing or surviving company immediately after such
consolidation, merger or share exchange or (C) in the case of a merger,
consolidation or exchange of all of the outstanding shares of Common Stock, in
which JZEP (as defined in the Stockholders Agreement) is compelled pursuant to
Section 4.9 of the Stockholders Agreement to convert or exchange its Common
Stock for property that does not consist of any common stock of the transferee
or continuing or surviving company immediately after such consolidation, merger
or share exchange or is compelled pursuant to Section 3.3(f) to affirmatively
vote for such transaction, or (iii) any Person is or becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act, provided that
such Person shall be deemed to have "beneficial ownership" of all shares that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total voting power of the outstanding Capital Stock of the
Corporation.
"Common Stock" shall mean all shares now or hereafter authorized of any class of common stock of the Corporation and any other stock of the Corporation, howsoever designated that has the right (subject always to prior rights of any class or series of Preferred Stock) to participate in the distribution of the assets and earnings of the Corporation without limit as to per share amount.
"Credit Agreement" shall mean the Amended and Restated Credit Agreement, dated as of March 29, 2002, among the Corporation, UTI Holding, Inc., Heller Financial, Inc., as Agent for itself and the Lenders, and certain lenders, as the same may be amended, refinanced or replaced.
"Equity Interests" shall mean Capital Stock or warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
"Liquidation" shall mean the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
"Person" shall mean an individual or a corporation, association, partnership, joint venture, organization, business, trust, or any other entity or organization, including a government or any subdivision or agency thereof.
"Preferred Stock" shall mean all shares now or hereafter authorized of any class of preferred stock of the Corporation (other than the Series A Preferred Stock and Series B Preferred Stock), howsoever designated that has the right to participate in the distribution of the assets and earnings of the Corporation prior to the Common Stock.
"Securities Purchase Agreement" shall mean the Securities Purchase Agreement, dated as of the Funding Date, between the Corporation and JZ Equity Partners PLC (f/k/a MCIT PLC), as the same may be amended, refinanced or replaced.
"Voting Stock" shall mean Capital Stock of the Company of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of corporate directors (or Persons performing similar functions).
2. Dividends.
Subject to Section 6 below of this subsection D, the holders of Series A Preferred Stock and the holders of Series B Preferred Stock shall be entitled to receive when, as and if declared by the Board of Directors, annual dividends of 6% of the Initial Liquidation Value (as defined below) of Series A Preferred Stock and Series B Preferred Stock, respectively, payable on June 30 of each year, commencing on June 30, 1998 (the "Dividend Payment Date"). Dividends on the Series A and the Series B Preferred Stock shall be cumulative and accrue, whether or not declared, earned or payable, from and after the date of issue of the Series A Preferred Stock and Series B Preferred Stock, respectively. Dividends, if declared by the Board of Directors, on Series A Preferred Stock and the Series B Preferred Stock shall be paid only in cash. The Initial Liquidation Value of each share of Series A Preferred Stock and the Series B Preferred Stock will be $1,000 per share (the "Initial Liquidation Value").
Dividend payments on Junior Stock shall be accrued but not paid for any period unless cumulative dividends to be paid hereunder prior to the date thereof have been paid on the Series A Preferred Stock and the Series B Preferred Stock; provided, however that the Corporation shall be permitted to issue Subordinated Securities as contemplated in subsection 4(h) of Section F of this Certificate. Dividend payments on the Series A Preferred Stock and
Series B Preferred Stock shall be accrued but not paid if the payment thereof is prohibited or would result in a default under any obligation of the Corporation or any subsidiary of the Corporation for borrowed money or any other extensions of credits, including but not limited to any default under the Securities Purchase Agreement of the Credit Agreement.
3. Ranking and Liquidation Preference.
(a) As to all dividends and distributions on Capital Stock of the Corporation, (i) the Series A Preferred Stock and the Series B Preferred Stock will rank pari passu with the Series C Preferred Stock and each other and will rank senior to, and shall have preference and priority with respect to any payment of any such dividend or distribution on, the Series D Preferred Stock, the Common Stock or any other shares of Capital Stock of the Corporation (all such Capital Stock ranking junior to the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock in respect of dividends and distributions being referred to in this subsection D as "Junior Stock"); provided, however that the Corporation shall be permitted to issue Subordinated Securities as contemplated in subsection 4(h) of Section F of this Certificate.
(b) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of shares of Series A Preferred Stock and Series B Preferred Stock than outstanding shall be entitled to be paid in cash out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of Junior Stock by reason of their ownership thereof, an amount equal to the Initial Liquidation Value per share of such Series A Preferred Stock and Series B Preferred Stock (subject to adjustment after certain partial redemptions as provided in Section 7 of this subsection D) plus any accrued and unpaid dividends (such sum being herein called the "Series A Preferred Stock and Series B Preferred Stock Liquidation Payment"), and the holders of Series A Preferred Stock and the holders or all shares of Series B Preferred Stock shall not be entitled to any further distribution or payment. If upon such liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, the assets of the Corporation to be distributed among the holders of the Capital Stock of the Corporation shall be insufficient to permit payment in full of the Series A Preferred Stock and Series B Preferred Stock Liquidation Payment to the holders of Series A Preferred Stock and holders of Series B Preferred Stock, then the entire assets of the Corporation to be distributed to the holders of the Capital Stock of the Corporation shall be distributed ratably among the holders of the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock in proportion to the Series A Preferred Stock and Series B Preferred Stock Liquidation Payment and the Series C Preferred Stock Liquidation Payment due under this Certificate to each such holder. Upon any such liquidation, dissolution or winding-up of the Corporation, but only after each holder of the Series A Preferred Stock, holders of Series B Preferred Stock and holder of Series C Preferred Stock shall have been paid in full the Series A Preferred Stock and Series B Preferred Stock Liquidation Payment or the Series C Preferred Stock Liquidation Payment, as the case may be, to which such holder is entitled, the remaining assets of the Corporation shall be distributed to the holders of Junior Stock.
(c) Written notice of such liquidation, dissolution or winding-up, stating a payment date, the amount of the Series A Preferred Stock and Series B Preferred Stock
Liquidation Payment and the place where the amounts distributed shall be payable, shall be given by mail, postage prepaid, not less than ten days prior to the payment date stated therein, to the holders of record of the Series A Preferred Stock and Series B Preferred Stock, such notice to be addressed to each stockholder at his or its post office address as shown by the records of the Corporation.
(d) Neither the consolidation or merger of the Corporation into or with any other corporation or corporations, nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the Capital Stock of the Corporation, shall be deemed to be a liquidation, dissolution or winding-up of the Corporation within the meaning of any of the provisions of this Section 3.
4. Redemption.
(a) Redemption Price. Subject to Section 7 of this subsection D, the Series A Preferred Stock and Series B Preferred Stock shall each be redeemable as provided in this Section 4 by paying for each share in cash on the redemption date the sum of the Initial Liquidation Value thereof plus any accrued and unpaid dividends through the redemption payment date, such sum being in this subsection D called in each case the "Redemption Price". Redemption payments (and dividend payments on Series A Preferred Stock and Series B Preferred Stock) shall be accrued but not paid if the payment thereof is prohibited or would result in a default under any obligation of the Corporation or any subsidiary of the Corporation for borrowed money or any other extensions of credits, including but not limited to any default under the Securities Purchase Agreement or the Credit Agreement.
(b) Redeemed or Otherwise Acquired Shares to be Retired. Any shares of Series A Preferred Stock and Series B Preferred Stock redeemed pursuant to this Section 4 or otherwise acquired by the Corporation in any manner whatsoever shall be permanently retired immediately on the acquisition thereof and shall not under any circumstances be reissued. The Corporation shall from time-to-time take such appropriate action as may be necessary to reduce the authorized number of shares of Series A Preferred Stock and Series B Preferred Stock accordingly.
(c) Shares to be Redeemed. In case of a redemption of only a part of the outstanding shares of the Series A Preferred Stock or Series B Preferred Stock, there shall be so redeemed from each registered holder as nearly as practicable, that proportion of all of the shares to be redeemed which the number of shares held of record by such holder bears to the total number of shares of Series A Preferred Stock or Series B Preferred Stock, respectively, at the time outstanding.
(d) Mandatory Redemption. Subject to Sections 4(a) and
4(c), on March 31, 2010 the Corporation shall purchase and redeem, at the
Redemption Price, all of the outstanding shares of Series A Preferred Stock. In
addition, subject of Sections 4(a) and 4(c) above, on October 15, 2017, the
Corporation shall purchase and redeem, at the Redemption Price, all of the
outstanding shares of Series B Preferred Stock.
(e) Change of Control. In the event that any Change of
Control shall occur or the Corporation shall have knowledge of any proposed
Change of Control, the Corporation shall give written notice (the "Corporation
Notice") to the holders of record of the Series A Preferred Stock and the
holders of record of Series B Preferred Stock. The Corporation Notice shall be
delivered promptly upon receipt of such knowledge by the Corporation and in any
event no more than sixty (60) days nor less than thirty (30) days prior to the
occurrence of any Change of Control. The Corporation Notice shall (i) describe
the facts and circumstances of such Change of Control in reasonable detail, (ii)
make reference to this Section 4(e) and the right of the holders of shares of
Series A Preferred Stock and the holders of record of Series B Preferred Stock
to require payment on the terms and conditions provided for in this Section
4(e), and (iii) offer in writing to redeem the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock at a redemption price equal to the
Liquidation Preference thereof on the date of redemption. Each holder of shares
of Series A Preferred Stock or Series B Preferred Stock shall have the right to
accept such offer and require prepayment of the shares of Series A Preferred
Stock and Series B Preferred Stock held by such holder by giving written notice
to the Corporation not later than 25 days following receipt of the Corporation
Notice. The Corporation shall redeem in accordance with this Section 4(e) all
shares of Series A Preferred Stock and Series B Preferred Stock held by holders
who have accepted such offer, which redemption shall occur on the date upon
which the Change of Control giving rise to such request occurs, and no
redemption requested pursuant to this Section 4(e) shall be effected unless the
Change of Control giving rise to such request shall occur.
(f) Optional Redemptions. Subject to Sections 4(a) and
4(c) of this subsection D, the Corporation may purchases and redeem shares of
Series A Preferred Stock and Series B Preferred Stock at the Redemption Price
prior to the date for mandatory redemption set forth in Section 4(e) of this
subsection on any date provided that (i) all accrued and unpaid dividends shall
be declared and issued with respect to the shares of Series A Preferred Stock
and Series B Preferred Stock, as the case may be, to be redeemed for each full
month since the immediately prior payment date up to the date of redemption and
(ii) any consent required for such redemption shall have been obtained.
5. Notice of Redemption.
Notice of each redemption of Series A Preferred Stock and Series B Preferred Stock pursuant to Section 4 of this subsection D, specifying the date and place of redemption and the number of shares which are to be redeemed, shall be mailed to each holder of record of shares to be redeemed at such holder's address as shown by the records of the Corporation not more than ninety (90) nor less than thirty (30) days prior to the date on which such redemption is to be made.
6. Dividends After Redemption Date.
Notice of redemption having been so mailed or a Mandatory Redemption having occurred, and provision for payment of the Redemption Price for such shares on the specified Redemption Date having been made by the Corporation, then, unless default be made in the payment of the Redemption Price for such shares when and as due (i) the shares of Series A
Preferred Stock or Series B Preferred Stock designated for redemption shall not be entitled to any dividends accruing after the Redemption Date specified, (ii) on such Redemption Date all rights of the respective holders of such shares, as shareholders of the Corporation by reason of the ownership of such shares, shall cease, except the right to receive the Redemption Price for such shares without interest upon presentation, and (iii) such shares shall not after such Redemption Date be deemed to be outstanding. In case less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued without cost to the holder thereof representing the unredeemed shares.
7. All Past Annual Dividends Must Be Declared Prior to Redemption.
Except as set forth in this Section 7, the Corporation shall not purchase or redeem shares of any Series A Preferred Stock or Series B Preferred Stock at the time outstanding unless all dividends on all Series A Preferred Stock or Series B Preferred Stock, as the case may be, for all past periods shall have been declared and issued. If applicable laws relating to the sources of funds for the payment of accrued and unpaid dividends on any shares of Series A Preferred Stock or Series B Preferred Stock would prohibit the payment in full on a Redemption Date of the dividends for any shares of Series A Preferred Stock or Series B Preferred Stock required to be redeemed by Section 4 of this subsection D, (i) notwithstanding any provision herein to the contrary, the aggregate Redemption Price payable in respect of all shares of Series A Preferred Stock or Series B Preferred Stock, as the case may be, to be redeemed shall be deemed reduced by the amount of accrued and unpaid dividends that the Corporation is prohibited by law from paying, (ii) shares of Series A Preferred Stock or Series B Preferred Stock, respectively, to be redeemed on the applicable Redemption Date shall otherwise be redeemed in accordance with the requirements of this Section 7 and (iii) the amount of such unpayable accrued and unpaid dividends shall be added in equal amounts per share to the accrued and unpaid dividends on the shares of Series A Preferred Stock or Series B Preferred Stock, respectively, remaining outstanding in the hands of the holder thereof. If applicable laws would prohibit the payment in full on the Redemption Date of the Redemption Price for the shares of Series A Preferred Stock or Series B Preferred Stock required to be redeemed pursuant to Section 4 of this subsection D, (a) no such shares shall be redeemed, (b) the Corporation shall nevertheless, to the extent legally permissible, pay to the holders of such shares on the final Redemption Date the highest permissible amount per share up to an amount equal to the applicable Liquidation Payment less $0.01, (c) the Redemption Price and applicable Liquidation Payment of each such share shall thereupon be reduced by the amount per share so paid pursuant to the immediately preceding clause (b), (d) the Corporation shall purchase and redeem all such shares on the soonest next date on which dividends are required to be paid pursuant to Section 2 of this subsection D and on which the Corporation is no longer prohibited by law from paying in full the Redemption Price for such shares, and (e) the obligation of the Corporation to pay dividends under Section 2 of this subsection D shall continue until all outstanding shares of Series A Preferred Stock and Series B Preferred Stock are redeemed in accordance with clause (d), except that dividends thereafter payable with respect to outstanding shares of Series A Preferred Stock and Series B Preferred Stock shall be reduced by the same percentage reduction as the percentage reduction in the Redemption Price and Series A Preferred Stock and Series B Preferred Stock Liquidation Payment that takes place pursuant to this Section 7. In no event shall the Corporation purchase
or redeem the last share of Series A Preferred Stock or Series B Preferred Stock held by any holder unless the Corporation shall have paid to the last holder of Series A Preferred Stock or Series B Preferred Stock, as the case may be, all accrued and unpaid dividends on all shares of Series A Preferred Stock or Series B Preferred Stock, as the case may be, held by such holder at any time.
8. Voting Rights.
The Series A Preferred Stock and the Series B Preferred Stock shall not have voting rights except as expressly required by law or in any amendment to the Corporation's Certificate of Incorporation to alter or change the respective powers, designations, preferences or special rights of the shares of such Series A Preferred Stock or Series B Preferred Stock, as the case may be.
E. Series C Preferred Stock.
1. Definitions. As used in this subsection E of this Certificate, capitalized terms not otherwise defined herein shall have, for all purposes hereof, the meanings herein specified.
"Capital Stock" shall have the meaning given to it in subsection D of this Article IV.
"Change of Control" shall have the meaning given to it in subsection D of this Article IV.
"Common Stock" shall have the meaning given to it in subsection D of this Article IV.
"Credit Agreement" shall have the meaning given to it in subsection D of this Article IV.
"Equity Interests" shall have the meaning given to it in subsection D of this Article IV.
"Exchange Act" shall have the meaning given to it in subsection D of this Article IV.
"Liquidation" shall have the meaning given to it in subsection D of this Article IV.
"Person" shall have the meaning given to it in subsection D of this Article IV.
"Preferred Stock" Shall have the meaning given to it in subsection D of this Article IV.
"Public Offering" means the consummation of a bona fide public offerings by the Corporation of its Common Stock pursuant to a registration statement or registration statements filed by the Corporation with the Securities and Exchange Commission, and underwritten by one or more reputable investment banks, in which the aggregate gross proceeds to the Corporation from such public offering, or from such series of public offerings, shall be not less than $50,000,000.
"Securities Purchase Agreement" shall have the meaning given to it in subsection D of this Article IV.
"Voting Stock" shall have the meaning given to it in subsection D of this Article IV.
2. Dividends.
Subject to Section 7 below of this subsection E, the holders of Series C Preferred Stock shall be entitled to receive when, as and if declared by the Board of Directors annual dividends of 6% of the Initial Liquidation Value (as defined below) of Series C Preferred Stock, payable on September 30 of each year, commencing on September 30, 2000 (the "Dividend Payment Date"). Dividends on the Series C Preferred Stock shall be cumulative and accrue, whether or not declared, from and after the date of issue of the Series C Preferred Stock. Dividends, if declared by the Board of Directors on Series C Preferred Stock shall be paid only in cash. The Initial Liquidation Value of each share of Series C Preferred Stock will be $1,000.00 per share (the "Initial Liquidation Value").
Dividend payments on Junior Stock shall be accrued but not paid for any period unless cumulative dividends to be paid hereunder prior to the date thereof have been paid on the Series C Preferred Stock; provided, however that the Corporation shall be permitted to issue Subordinated Securities as contemplated in subsection 4(h) of Section F of this Certificate. Dividend payments on the Series C Preferred Stock shall be accrued but not paid if the payment thereof is prohibited or would result in a default under any obligation of the Corporation or any subsidiary of the Corporation for borrowed money or any other extensions of credits, including but not limited to any default under the Securities Purchase Agreement or the Credit Agreement.
3. Ranking and Liquidation Preference.
(a) As to all dividends and distribution on Capital Stock of the Corporation. (i) the Series C Preferred Stock will rank pari passu with the Series A Preferred Stock and the Series B Preferred Stock and will rank senior to, and shall have preference and priority with respect to any payment of any such dividend or distribution on, the Series D Preferred Stock, the Common Stock or any other shares of Capital Stock of the Corporation (all such Capital Stock ranking junior to the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock in respect of dividends and distributions being referred to in this subsection E as "Junior Stock"); provided, however that the Corporation shall be permitted to issue Subordinated Securities as contemplated in subsection 4(h) of Section F of this Certificate.
(b) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of all shares of Series C Preferred Stock then outstanding shall each be entitled to be paid in cash out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of Junior Stock by reason of their ownership thereof, an amount equal to the sum of the Initial Liquidation Value per share (subject to adjustment after certain partial redemptions as provided in Section 7 of this subsection E) plus any accrued and unpaid dividends (such sum being herein called the "Series C Preferred Stock Liquidation Payment"), and the holders of all shares of Series C Preferred Stock shall not be entitled to any further distribution or payment. If upon such liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, the assets of the Corporation to be distributed among the holders of the Capital Stock of the Corporation shall be insufficient to permit payment in full of the Series C Preferred Stock Liquidation Payment to the holders of Series C Preferred Stock, then the entire assets of the Corporation to be distributed to the holders of the Capital Stock of the Corporation shall be distributed ratably among the holders of the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock in proportion to the Series A Preferred Stock and Series B Preferred Stock Liquidation Payment and the Series C Preferred Stock Liquidation Payment due under this Certificate to each such holder. Upon any such liquidation, dissolution or winding-up of the Corporation, but only after each holder of the Series A Preferred Stock, holders of Series B Preferred Stock and holder of Series C Preferred Stock shall have been paid in full the Series A Preferred Stock and Series B Preferred Stock Liquidation Payment or the Series C Preferred Stock Liquidation payment, as the case may be, to which such holder is entitled, the remaining assets of the Corporation shall be distributed to the holders of Junior Stock.
(c) Written notice of such liquidation, dissolution or winding-up, stating a payment date, the amount of the Series C Preferred Stock Liquidation Payment and the place where the amounts distributed shall be payable, shall be given by mail, postage prepaid, not less than ten days prior to the payment date stated therein, to the holders of record of the Series C Preferred Stock, such notice to be addressed to each stockholder at his or its post office address as shown by the records of the Corporation.
(d) Neither the consolidation or merger of the Corporation into or with any other corporation or corporations, nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the Capital Stock of the Corporation, shall be deemed to be a liquidation, dissolution or winding-up of the Corporation within the meaning of any of the provisions of this Section 3.
4. Redemption.
(a) Redemption Price. Subject to Section 7 of this subsection E, the Series C Preferred Stock shall each be redeemable as provided in this Section 4 by paying for each share in cash on the redemption date the sum of the Initial Liquidation Value thereof plus any accrued and unpaid dividends through the redemption payment date, such sum being in this subsection E called in each case the "Redemption Price." Redemption payments (and dividend payments on Series C Preferred Stock) shall be accrued but not paid if the payment thereof is prohibited or
would result in a default under any obligation of the Corporation or any subsidiary of the Corporation for borrowed money or any other extensions of credit, including but not limited to any default under the Securities Purchase Agreement or the Credit Agreement.
(b) Redeemed or Otherwise Acquired Shares to be Retired. Any shares of Series C Preferred Stock redeemed pursuant to this Section 4 or otherwise acquired by the Corporation in any manner whatsoever shall be permanently retired immediately on the acquisition thereof and shall not under any circumstances be reissued. The Corporation shall from time-to-time take such appropriate action as may be necessary to reduce the authorized number of shares of Series C Preferred Stock accordingly.
(c) Shares to be Redeemed. In case of a redemption of only a part of the outstanding shares of the Series C Preferred Stock, there shall be so redeemed from each registered holder as nearly as practicable, that proportion of all of the shares to be redeemed which the number of shares held of record by such holder bears to the total number of shares of Series C Preferred Stock at the time outstanding.
(d) Mandatory Redemption. Subject to Section 4(a) and
4(c), on March 31, 2010 the Corporation shall purchase and redeem, at the
Redemption Price, all of the outstanding shares of Series C Preferred Stock.
(e) Change of Control. In the event that any Change of Control shall occur or the Corporation shall have knowledge of any proposed Change of Control, the Corporation shall give written notice (the "Corporation Notice") to the holders of record of the Series C Preferred Stock. The Corporation Notice shall be delivered promptly upon receipt of such knowledge by the Corporation and in any event no more than sixty (60) days nor less than thirty (30) days prior to the occurrence of any Change of Control. The Corporation Notice shall (i) describe the facts and circumstances of such Change of Control in reasonable detail, (ii) make reference to this Section 4(c) and the right of the holders of record of Series C Preferred Stock to require payment on the terms and conditions provided for in this Section 4(c), and (iii) offer in writing to redeem the outstanding shares of Series C Preferred Stock at a redemption price equal to the Liquidation Preference thereof on the date of redemption. Each holder of shares of Series C Preferred Stock shall have the right to accept such offer and require prepayment of the shares of Series C Preferred Stock held by such holder by giving written notice to the Corporation not later than 25 days following receipt of the Corporation Notice. The Corporation shall redeem in accordance with this Section 4(e) all shares of Series C Preferred Stock held by holders who have accepted such offer, which redemption shall occur on the date upon which the Change of Control giving rise to such request occurs, and no redemption requested pursuant to this Section 4(e) shall be effected unless the Change of Control giving rise to such request shall occur.
(f) Optional Redemptions. Subject to Section 4(a) and 4(c) of this subsection E, the Corporation may purchase and redeem shares of Series C Preferred Stock at the Redemption Price prior to the date for mandatory redemption set forth in Section 4(e) of this Subsection E on any date provided that (i) all accrued and unpaid dividends shall be paid with respect to any such redemption of the shares of Series C Preferred Stock and (ii) any consent
required for such redemption shall have been obtained.
5. Notice of Redemption.
Notice of each redemption of Series C Preferred Stock pursuant
to Section 4 of this subsection E, specifying the date and place of redemption
and the number of shares which are to be redeemed, shall be mailed to each
holder of record of shares to be redeemed at such holder's address as shown by
the records of the Corporation not more than ninety (90) nor less than thirty
(30) days prior to the date on which such redemption is to be made.
6. Dividends After Redemption Date.
Notice of redemption having been so mailed or a Mandatory Redemption having occurred, and provision for payment of the Redemption Price for such shares on the specified Redemption Date having been made by the Corporation, then, unless default be made in the payment of the Redemption Price for such shares when and as due (i) the shares of Series C Preferred Stock designated for redemption shall not be entitled to any dividends accruing after the Redemption Date specified, (ii) on such Redemption Date all rights of the respective holders of such shares, as shareholders of the Corporation by reason of the ownership of such shares, shall cease, except the right to receive the Redemption Price for such shares without interest upon presentation, and (iii) such shares shall not after such Redemption Date be deemed, to be outstanding. In case less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued without cost to the holder thereof representing the unredeemed shares.
7. All Past Annual Dividends Must Be Declared Prior to Redemption.
Except as set forth in Section 7, the Corporation shall not purchase or redeem shares of any Series C Preferred Stock at the time outstanding unless all dividends on all Series C Preferred Stock for all past periods shall have been declared and issued. If applicable laws relating to the sources of funds for the payment of accrued and unpaid dividends on any shares of Series C Preferred Stock would prohibit the payment in full on a Redemption Date of the dividends for any shares of Series C Preferred Stock required to be redeemed by Section 4 of this subsection E, (i) notwithstanding any provision herein to the contrary, the aggregate Redemption Price payable in respect of all shares of Series C Preferred Stock to be redeemed shall be deemed reduced by he amount of accrued and unpaid dividends that the Corporation is prohibited by law from paying, (ii) shares of Series C Preferred Stock to be redeemed on the applicable Redemption Date shall otherwise be redeemed in accordance with the requirements of this Section 7 of this subsection E, and (iii) the amount of such unpayable accrued and unpaid dividends on the shares of Series C Preferred Stock remaining outstanding in the hands of the holder thereof. If applicable laws would prohibit the payment in full on the Redemption Date of the Redemption Price for the shares of Series C Preferred Stock required to be redeemed pursuant to Section 4 of this subsection E, (a) no such shares shall be redeemed, (b) the Corporation shall nevertheless, to the extent legally permissible, pay to the holders of such shares on the final Redemption Date the highest permissible amount per share up to an amount equal to the applicable Liquidation
Payment less $0.01, (c) the Redemption Price and applicable Liquidation Payment of each such share shall thereupon be reduced by the amount per share so paid pursuant to the immediately preceding clause (b), (d) the Corporation shall purchase and redeem all such shares on the soonest next date on which dividends are required to be paid pursuant to Section 2 of this subsection E and on which the Corporation is no longer prohibited by law from paying in full the Redemption Price for such shares, and (c) the obligation of the Corporation to pay dividends under Section 2 of this subsection E shall continue until all outstanding shares of Series C Preferred Stock are redeemed in accordance with clause (d), except that dividends thereafter payable with respect to outstanding shares of Series C Preferred Stock shall be reduced by the same percentage reduction as the percentage reduction in the Redemption Price and Series C Preferred Stock Liquidation Payment that takes place pursuant to this Section 7. In no event shall the Corporation purchase or redeem the last shares of Series C Preferred Stock held by any holder unless the Corporation shall have paid to the last holder of Series C Preferred Stock all accrued and unpaid dividends on all shares of Series C Preferred Stock held by such holder at any time.
8. Voting Rights.
The Series C Preferred Stock shall not have voting rights except as expressly required by law or in any amendment to the Corporation's Certificate of Incorporation to alter or change the respective powers, designations, preferences or special rights of the shares of such Series C Preferred Stock.
F. Series D Preferred Stock.
1. Definitions. As used in this subsection F of this Certificate, capitalized terms not otherwise defined herein shall have, for all purposes hereof, the meanings herein specified.
"Business Day" means any day that is not a Saturday, Sunday or a day on which banking institutions in Arizona or New York are not required to be open for business.
"Capital Stock" shall have the meaning given to it in subsection D of this Article IV.
"Change of Control" shall have the meaning given to it in subsection D of this Article IV.
"Common Stock" shall have he meaning given to it in subsection D of this Article IV.
"Credit Agreement" shall have the meaning given to it in subsection D of this Article IV.
"Current Market Price" means, in respect of any share of Common Stock on any date herein specified, (i) if the shares of Common Stock are publicly traded, the average of the daily closing prices of the Common Stock for the twenty consecutive trading days ending five
trading days prior to such date on the principal national securities exchange or stock market on which such shares are traded, or (ii) if the shares of Common Stock are not publicly traded, the Fair Market Value per share of Common Stock as of such date.
"Equity Interests" shall have the meaning given to it in subsection D of this Article IV.
"Exchange Act" shall have the meaning given to it in subsection D of this Article IV.
"Fair Market Value" of the Common Stock or any other property means the fair market value of such Common Stock or other property as determined (unless expressly otherwise provided herein) by mutual agreement between the Corporation and the holders of not less than a majority of the outstanding shares of Series D Preferred Stock or, if the parties are unable to agree, as determined by a nationally recognized independent investment banking firm selected by mutual agreement between the Corporation and the holders of not less than a majority of the outstanding shares of Series D Preferred Stock.
"Initial Series D Conversion Price" shall have the meaning given to it in Section 4(a) of this subsection F.
"Junior Stock" shall have the meaning given to it in Section 3(a) of this subsection F.
"Liquidation" shall have the meaning given to it in subsection D of this Article IV.
"Original Series D Issue Date" shall mean the date the first share of Series D Preferred Stock is issued by the Corporation.
"Original Series D Issue Price" shall mean $19,302.60401 per share.
"Person" shall have the meaning given to it in subsection D of this Article IV.
"Preferred Stock" shall mean all shares now or hereafter authorized of any class of preferred stock of the Corporation (other than the Series D Preferred Stock), howsoever designated that has the right to participate in the distribution of the assets and earnings of the Corporation prior to the Common Stock.
"Public Offering" shall have the meaning given to such term in subsection E of this Article IV.
"Qualifying Public Offering" means a Public Offering which (x) if the Public Offering occurs on or prior to the first anniversary of the Original Series D Issue Date, results in the sale of shares of Common Stock having a price per share equal to at least 150% of the then-applicable conversation price of the Series D Preferred Stock, or (y) if the Public Offering occurs after the first anniversary of the date of this Agreement, results in the sale of share of Common
Stock having a price per share equal to at least 200% of the then-applicable conversion price of the Series D Preferred Stock.
"Senior Stock" shall have the meaning given to it in Section 3(a) of this subsection F,
"Stockholders Agreement" shall mean the Amended and Restated Stockholders Agreement, dated as of the Original Series D Issue Date, among the Corporation and certain of its stockholders (including but not limited to the purchasers of the Series D Preferred Stock), as the same may be amended from time to time.
"Voting Stock" shall mean (i) with respect to the Corporation,
Capital Stock (including the Series D Preferred Stock but excluding any shares
of Preferred Stock) of the Corporation of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for the
election of corporate directors (or Persons performing similar functions) and
(ii) with respect to any Person other than the Corporation, Capital Stock of
such Person of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of corporate
directors (or Persons performing similar functions).
2. Dividends.
The holders of Series D Preferred Stock shall be entitled to
receive annual dividends of 7.5% of the initial Liquidation Value (as defined
below) of Series D Preferred Stock, payable on September 30 of each year (the
"Dividend Payment Date"), commencing on September 30, 2002. Dividends on the
Series D Preferred Stock shall be cumulative and payable, whether or not
declared, from and after the date of issue of the Series D Preferred Stock.
Dividends on Series D Preferred Stock shall be paid only in cash, subject to
Section 4(h) of this subsection F. The initial "Liquidation Value" of each share
of Series D Preferred Stock will be $19,302.60401 per share.
No dividends may be paid or set aside for such payment on Junior Stock for any period unless cumulative dividends to be paid hereunder prior to the date thereof have been paid on the Series D Preferred Stock. Dividend payments on the Series D Preferred Stock shall be accrued but not paid (other than payment by means of a Subordinated Security or in cash as set forth in Section 4(h) if the payment thereof is prohibited by this Certificate or is prohibited or would result in a default under any obligation of the Corporation or any subsidiary of the Corporation for borrowed money or any other extensions of credits, including but not limited to any default under the Credit Agreement.
3. Ranking and Liquidation Preference.
(a) As to all dividends and distributions on Capital Stock of the Corporation, (i) the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock will rank senior to, and shall have preferences and priority with respect to any payment of any such divided or distribution on, the Series D Preferred Stock, the Common Stock or any other
shares of Capital Stock of the Corporation (all such Capital Stock ranking senior to the Series D Preferred Stock in respect of dividends and distributions being in this subsection F referred to as the "Senior Stock";) and (ii) the Series D Preferred Stock will rank senior to, and shall have preference and priority with respect to any payment of any such dividend or distribution on, the Common Stock or any other shares of Capital Stock of the corporation (other than the Senior Stock) (all such Capital Stock ranking inferior to the series D preferred Stock being herein in this subsection F referred to as "Junior Stock").
(b) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of shares of Series D Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Stock, but before any payment shall be made to the holders of Junior Stock by reason of their ownership thereof, an amount equal to the Liquidation Value per share of Series D Preferred Stock plus any accrued and unpaid dividends thereon (such sum being herein called the "Series D Preferred Stock Liquidation Payment"), and the holders of all shares of Series D Preferred Stock shall not be entitled to any further distribution or payment; provided, however, that to the extent the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series D Preferred Stock the full amount to which they shall be entitled, the holders of shares of Series D Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
(c) Written notice of such liquidation, dissolution or winding-up, stating a payment date, the amount of the Series D Preferred Stock Liquidation Payment and the place where the amounts distributed shall be payable, shall be given by mail, postage prepaid, not less than ten days prior to the payment date stated therein, to the holders of record of the Series D Preferred Stock, such notice to be addressed to each stockholder at his or its post office address as shown by the records of the Corporation.
(d) A Change of Control of the Corporation shall be deemed to be a liquidation, dissolution or winding-up of the Corporation within the meaning of any of the provisions of this Section 3.
4. Conversion. The shares of Series D Preferred Stock shall be convertible into shares of Common Stocks as follows:
(a) Optional Conversion. Each share of Series D Preferred Stock shall be convertible, at the option of the holder thereof and without the payment of any additional consideration by the holder thereof, at any time and from time to time, into the number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Initial Series D Conversion Price (as hereafter defined) by the Current Conversion Price (as defined in Section 5 below of this subsection F) in effect at the time of conversion. The "Initial Series D Conversion Price" shall equal $19,302.60401.
(b) Automatic Conversion. Upon a Qualifying Public Offering each share of Series D Preferred Stock then outstanding shall automatically be converted into the number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Initial Series D Conversion Price by the Current Conversion Price; provided, however, that if the payment of accrued and unpaid dividends on the Series D Preferred Stock in cash is prohibited by this Certificate or is prohibited or would result in a default under any obligation of the Corporation or any subsidiary of the Corporation for borrowed money or any other extensions of credits, including but not limited to any default under the Credit Agreement, the shares of Series D Preferred Stock then outstanding shall not be automatically converted upon a Qualifying Public Offering but shall remain outstanding.
(c) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of shares of Series D Preferred Stock. In lieu of any fractional share to which the holder would otherwise be entitled after determination of the aggregate full number of shares of Common Stock issuable in respect of the Series D Preferred Stock then being converted, the Corporation shall pay cash equal to such fraction multiplied by the then Current Market Price per share of Common Stock.
(d) Mechanics of Optional Conversion. In order for a holder of Series D Preferred Stock to convert such shares into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series D Preferred Stock at the office of the transfer agent for the Series D Preferred Stock (or if the Corporation serves as its own transfer agent, at the principal office of the Corporation) (as applicable, the "Transfer Office"), together with written notice that such holder elects to convert all or any number of the shares of the Series D Preferred Stock represented by such certificate or certificates. If reasonably required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date (the "Optional Conversion Date"). The Corporation shall, as soon as practicable after the Optional Conversion Date, issue and deliver at the Transfer Office to such holder of Series D Preferred Stock, or to his or its nominees, a certificate or certificates for the number of whole shares of Common Stock (and any shares of Series D Preferred Stock represented by the certificate delivered to the Corporation by the holder thereof that are not converted into Common Stock) issuable upon such conversion in accordance with the provisions hereof, together with cash in lieu of fractional shares calculated in accordance with paragraph (c) of this Section 4 and with payment of any accrued and unpaid dividends thereon. On and as of the Optional Conversion Date, the shares of Common Stock issuable upon such conversion shall be deemed to be outstanding, and the holder thereof shall be entitled to exercise and enjoy all rights with respect to such shares of Common Stock, including the rights, if any, to receive notices and to vote. Shares of Series D Preferred Stock converted into Common Stock will be deemed cancelled, and may not thereafter be issued or re-issued.
(e) Mechanics of Automatic Conversion. All holders of record of shares of Series D Preferred Stock will be given at least ten (10) but not more than thirty (30) business
days' prior written notice of the date fixed (the "Automatic Conversion Date") and the place designated for automatic conversion of all shares of Series D Preferred Stock pursuant to this Section 4. Such notice will be sent by first class or registered mail, postage prepaid, to each record holder of Series D Preferred Stock at such holder's address last shown on the Company's share register. On or before the Automatic Conversion Date, each holder of shares of Series D Preferred Stock shall surrender his or its certificate or certificates for all such shares to the Corporation at the place designated in such notice. If reasonably required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing. On and after the Automatic Conversion Date, all rights with respect to the Series D Preferred Stock so converted, including the rights, if any, to receive notices and to vote, will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefor, to receive certificates for the number of shares of Common Stock into which such Series D Preferred Stock has been converted, payment of cash in lieu of fractional shares calculated in accordance with paragraph (c) of this Section 4, payment of any accrued and unpaid dividends thereon. As soon as practicable after the Automatic Conversion Date and the surrender of the certificate or certificates representing shares of Series D Preferred Stock, the Corporation shall issue and deliver to such holder, or on his or its written order to his or its nominees, a certificate or certificates for the number of whole shares of Common Stock issuable upon such conversion in accordance with the provisions hereof, together with cash in lieu of fractional shares calculated in accordance with paragraph (c) of this Section 4 and payment of any accrued and unpaid dividends thereon.
(f) Reservation of Shares. The Corporation shall at all times when the Series D Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series D Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series D Preferred Stock. Before taking any action which would cause Common Stock, upon the conversion of Series D Preferred Stock, to be issued below the then par value of the shares of Common Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock to the holders of Series D Preferred Stock.
(g) Treatment of Accrued and Unpaid Dividends. Upon any conversion of Series D Preferred Stock, no adjustment to the initial Series D Conversion Price shall be made for accrued and unpaid dividends on the Series D Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion, such dividends to be payable pursuant to paragraph (h) below.
(h) Termination of Rights. All shares of Series D Preferred Stock which shall have been surrendered for conversion as herein provided or, as to shares of series D Preferred Stock which are subject to automatic conversion pursuant to paragraph (b) of this Section 4, which have not been so surrendered prior to the Automatic Conversion Date, shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any,
to receive notices and to vote, shall immediately cease and terminate on the
Optional Conversion Date, or the Automatic Conversion Date, as the case may be,
except only the right of the holders thereof to receive shares of Common Stock
in exchange therefor, payment of cash in lieu of any fractional shares
calculated in accordance with paragraph (c) of this Section 4, and, subject to
the following sentence, payment of any accrued and unpaid dividends thereon. All
such accrued and unpaid dividends shall be paid on and including the Optional
Conversion Date or the Automatic Conversion Date, as the case may be in cash;
provided, however, that, other than in the case of a conversion in connection
with a Change of Control, if the payment of accrued and unpaid dividends on the
Series D Preferred Stock in cash is prohibited by or would result in a default
under any obligation of the Corporation or any subsidiary of the Corporation for
borrowed money or any other extensions of credits, including but not limited to
any default under, the Credit Agreement, the Corporation shall issue to each
applicable holder a junior subordinated security in the principal amount equal
to such accrued and unpaid dividends (collectively, the "subordinated
Securities") which shall, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, be subordinated
in right of payment to the prior payment in full cash of all Series A, Series B
and Series C Preferred Stock Initial Liquidation Values and all accrued and
unpaid dividends thereon (and by acceptance of such Subordinated Securities the
holders shall agree to hold in trust for and turnover to the holders of the
Series A, Series B and Series C Preferred Stock all amounts received in
violation of such subordination) and shall (i) for purposes of the subordination
provisions of Section 3 of subsections D and E be treated as junior stock and
(ii) for purposes of the subordination provisions of Section 3 of this
subsection F be treated as Series D Preferred Stock. The subordinated Securities
shall (i) accrue interest at 7.5% per annum, payable on September 30 of each
year, (ii) be payable in cash (and in any event at such time as substantially
all accrued but unpaid dividends have been paid in cash on the Series A, Series
B and Series C Preferred Stock) promptly following the date the prohibition or
default that caused the issuance of the security is no longer continuing
provided that no liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, shall be pending and (iii) be otherwise in
form and substance reasonably satisfactory to the holders of a majority of the
shares of Series D Preferred Stock entitled to such securities.
(i) Issue Taxes. The issuance of certificates for shares of Common Stock upon conversion of the Series D Preferred Stock shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series D Preferred Stock which is being converted.
(j) Transfer Books. The Corporation will at no time close its transfer books against the transfer of any Series D Preferred Stock, or of any shares of Common Stock issued or issuable upon the conversion of any shares of Series D Preferred Stock, in any manner which interferes with the timely conversion of such Series D Preferred Stock, except as may otherwise be required to comply with applicable securities laws.
5. Adjustments to Conversion Price.
(a) Current Conversion Price. The Initial Series D Conversion Price shall be subject to adjustment from time to time and such conversion price as adjusted shall likewise be subject to further adjustment, all as hereinafter set forth. The term "Current Conversion Price" shall mean, as of any time. The Initial Series D Conversion Price in case no adjustment shall have been made pursuant to this Section 5, or the Initial Series D Conversion Price as adjusted pursuant to this Section 5, as the case may be.
(i) In case the Corporation shall at any time or from time to time after the Original Series D Issue Date (A) pay a dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine the outstanding shares of Common Stock into a smaller number of shares or (D) issue by reclassification of the shares of Common Stock any shares of Capital Stock of the Corporation, then, and in each case, the Current Conversion Price in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Series D Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation which such holder would have owned or have been entitled to receive after the happening of any of the events, described above, had such shares of Series D Preferred Stock been surrendered for conversion immediately prior to the happening of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of such subdivision, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective. No adjustment shall be made pursuant to the clause (i) in connection with any transaction to which paragraph (b) below applies.
(ii) In case the Corporation shall at any time or from time to time after the Original Series D Issue Date declare, order, pay or make a dividend or other distribution (including without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its subsidiaries by way of dividend or spinoff), on its Common Stock, other than dividends or distributions of shares of Common Stock which are referred to in clause (i) of this paragraph (a), then, and in each such case, provision shall be made so that the holders of shares of Series D Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities or property that they would have received had their Series D Preferred Stock been converted into Common Stock immediately prior to such event and had thereafter, during the period from such event to and including the date such Series D Preferred Stock is
converted, retained such securities or other property receivable by them as aforesaid during such period giving application to all adjustments called for during such period. No adjustments shall be made pursuant to this clause (ii) in connection with any transaction to which paragraph (b) applies.
(iii) If the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution and shall thereafter, and before such dividend or distribution is paid or delivered to stockholders entitled thereto, legally abandon its plan to pay or deliver such dividend or distribution, then no adjustment in the Current Conversion Price then in effect shall be made by reason of the taking of such record, and any such adjustment previously made as a result of the taking of such record shall be reversed.
(iv) If any event occurs as to which, in the opinion of the Board of Directors (including any directors elected solely by holders of the Series D Preferred Stock), the provisions of this Section 5 are not strictly applicable or if strictly applicable would not fairly protect the rights of the holders of the Series D Preferred Stock in accordance with the essential intent and principles of such provisions, the Board of Directors (including any directors elected solely by holders of the Series D Preferred Stock) shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights of the holders of the Series D Preferred Stock.
(b) Good Faith. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of section 4 and this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series D Preferred Stock against impairment.
6. Voting Rights. The holders of outstanding shares of Series D Preferred Stock shall be entitled to vote together with the holders of shares of Common Stock, as a single class, on all matters on which holders of Common Stock are entitled to vote, with each share of Series D Preferred Stock voting on an as-if-converted to Common Stock basis. The holders of outstanding shares of Series D Preferred Stock shall not otherwise be entitled to vote on any matters, except (a) as expressly required by law, (b) as provided in the Stockholders Agreement or (c) as otherwise provided herein.
7. Certain Remedies. Any registered holder of Series D Preferred Stock may proceed to protect and enforce its rights and the rights of any other holders of Series D Preferred Stock with any and all remedies available at law or in equity.
ARTICLE V.
All of the Corporation's issued stock of all classes, exclusive of treasury shares, shall be represented by certificates and shall be held of record by not more than thirty persons. The Corporation shall make no public offering of any of its stock of any class which would constitute a "public offering" within the meaning of the Securities Act of 1933, as it may be amended from time to time. All of the issued stock of all classes may be subject to such restrictions on transfer as shall be permitted by law and as shall be provided in a written agreement among all the stockholders of each class of stock or among such holders of the Corporation; provided that no stock of any class may be issued until such agreement shall be in effect providing for at least one of the restrictions on transfer permitted by Section 202 of the General Corporation Law of the State of Delaware; and provided further than at least one of such restrictions must remain in effect as to each class at all times while the Corporation is a close corporation.
ARTICLE VI.
A. Exculpation. A director of the corporation shall not
be personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) under Section 174 of the Delaware
General Corporation Law or (4) for any transaction from which the director
derived any improper personal benefit. If the Delaware General Corporation Law
is hereafter amended to further reduce or to authorize, with the approval of the
corporation's stockholders, further reductions in the liability of the
corporations directors for breach of fiduciary duty, then a director of the
corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this corporation is also authorized to provide indemnification of (and advancement of expenses to) such agents (and any other persons to which Delaware law permits this corporation to provide indemnification) through bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General Corporation Law, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to the corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any of the foregoing provisions of this Article V shall be prospective and shall not adversely affect any right or protection of a director, officer, agent or other person existing at the time of, or increase the liability of any director or the corporation with respect to any acts of omissions of such director occurring prior to, such repeal or modification.
ARTICLE VII.
A. Number of Directors. The number of directors of the Corporation shall be fixed from time to time by the vote of a majority of the entire Board of Directors and shall initially be nine(9). Any such determination made by the Board of Directors shall continue in effect unless and until changed by the Board of Directors, but no changes shall affect the term of any directors then in office.
B. Term of Office; Quorum: Vacancies. A director shall hold office until the annual meeting of the year in which his or her term expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Subject to the Bylaws, a majority of the entire Board of Directors (which shall initially be five (5) directors) shall constitute a quorum for the transaction of business. Any vacancies and newly created directorships resulting from an increase in the number of directors shall be filed by the majority of the Board of Directors then in office even though less than a quorum and shall hold office until his or her successor is elected and qualified or until his or her earlier death, resignation, retirement, disqualification or removal from office.
C. Written Ballot. Elections of directors need not be by written ballot except and to the extent provided in the Bylaws of the Corporation.
ARTICLE VIII.
The corporation is to have a perpetual existence.
ARTICLE IX.
The corporation reserves the right to repeal, alter, amend or rescind any provision contained in this Certificate of Incorporation and/or any provision contained in any amendment to or restatement of this Certificate of Incorporation, in the manner now or hereafter prescribed by statue, and all rights conferred on stockholders herein are granted subject to this reservation.
ARTICLE X.
The Board of Directors may from time to time make, amend, supplement or repeal the Bylaws by the requisite affirmative vote of Directors as set forth in the Bylaws.
ARTICLE XI.
The name and mailing address of the Incorporator is Susan M. Reynholds, 550 West "C" Street, Suite 1300, San Diego, California 92101.
ARTICLE XII.
The corporation shall not be subject to the provisions of
Section 203 of the Delaware General Corporation Law.
[Remainder of This Page Intentionally Left Blank]
IN WITNESS WHEREOF, said Universal Technical Institute, Inc. has caused this certificate to be signed by Robert D. Hartman, its President, this 28th day of March, 2002.
UNIVERSAL TECHNICAL INSTITUTE, INC.
By: /s/ Robert D. Hartman ---------------------------- Robert D. Hartman, President |
CERTIFICATE OF AMENDMENT
TO
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
UNIVERSAL TECHNICAL INSTITUTE , INC.,
A CLOSE CORPORATION
Universal Technical Institute, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), certifies as follows:
FIRST: that the Board of Directors of the Corporation at a meeting duly called, adopted resolutions setting forth proposed amendments to the Second Amended and Restated Certificate of Incorporation of the Corporation, and referred the proposed amendments to the stockholders of the Corporation for their consideration and approval. The resolutions setting forth the proposed amendments are as follows:
RESOLVED, that the Second Amended and Restated Certificate of Incorporation of the Corporation be amended by changing Article I thereof so that, as amended said Article I shall read as follows:
"The name of the Corporation is Universal Technical Institute, Inc."
RESOLVED, that Section F.5(a)(ii) of Article IV of the Second Amended and Restated Certificate of Incorporation of the Corporation be amended by deleting it in its entirety and replacing it with the following:
"(ii) In case the Corporation shall at any time or from time to time after the Original Series D Issue Date declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its subsidiaries by way of dividend or spinoff), on its Common Stock, other than dividends or distributions of shares of Common Stock which are referred to in clause (i) of this paragraph (a), then, and in each such case, provision shall be made so that the holders of shares of Series D Preferred Stock shall receive, upon conversion thereof or at such earlier time as the Board
of Directors may specify, in addition to the number of shares of Common Stock receivable thereupon, the amount of securities or property that they would have received had their Series D Preferred Stock been converted into Common stock immediately prior to such event and had thereafter, during the period from such event to and including the date such Series D Preferred Stock is converted, retained such securities or other property receivable by them as aforesaid during such period giving application to all adjustments called for during such period. No adjustment shall be made pursuant to this clause (ii) in connection with any transaction to which paragraph (b) applies."
RESOLVED, that Article V of the Second Amended and Restated Certificate of Incorporation of the Corporation is hereby amended by deleting it in its entirety, the remaining articles to be renumbered accordingly.
SECOND: that the holders of the outstanding common and preferred stock of the Corporation, by written consent in lieu of meeting, unanimously approved the amendment.
THIRD: that said amendment was duly adopted in accordance with the provisions of Sections 242 and 346 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to by signed by Jennifer Haslip, its Secretary, this 4th day of September, 2003.
UNIVERSAL TECHNICAL INSTITUTE, INC.
By: /s/ Jennifer Haslip ------------------------------- Jennifer Haslip, Secretary |
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
UNIVERSAL TECHNICAL INSTITUTE, INC.
(AS OF _____________, 2003)
It is hereby certified that:
1. The present name of the corporation (herein called the "Corporation") is UNIVERSAL TECHNICAL INSTITUTE, INC., which is the name under which the Corporation was originally incorporated; and the date of filing the original Certificate of Incorporation of the Corporation with the Secretary of State of Delaware is September 10, 1997. The Corporation filed an Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware on September 29, 1997. The Corporation filed the Certificate of Designation of Preferences and Rights of Series A Preferred Stock and Series B Preferred Stock with the Secretary of State of Delaware on September 30, 1997. The Corporation filed an Amendment No. 1 to the Amended and Restated Certificate of Incorporation and the Certificate of Designation of Series C Preferred Stock with the Secretary of State of the State of Delaware on September 29, 1999. The Corporation filed a Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on March 28, 2002.
2. The Certificate of Incorporation of the Corporation as heretofore amended and/or supplemented is hereby amended in its entirety as set forth in the Amended and Restated Certificate of Incorporation herein provided for.
3. The provisions of the Certificate of Incorporation of the Corporation as heretofore amended or supplemented, and as herein amended, are hereby restated and integrated into the single instrument which is hereinafter set forth, and which is entitled Amended and Restated Certificate of Incorporation of Universal Technical Institute, Inc., without any further amendments other than the amendments herein certified and without any discrepancy between the provisions of the Certificate of Incorporation as heretofore amended and supplemented and the provisions of the said single instrument hereinafter set forth.
4. The Amended and Restated Certificate of Incorporation has been duly adopted by the stockholders in accordance with the provisions of Section 228, 242 and 245 of the General Corporation law of the State of Delaware.
5. The Certificate of Incorporation of the Corporation, as amended and restated herein, shall at the effective time of this Amended and Restated Certificate of Incorporation, read as follows:
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
UNIVERSAL TECHNICAL INSTITUTE, INC.
ARTICLE I
The name of the Corporation is: Universal Technical Institute, Inc. The Corporation shall have perpetual existence.
ARTICLE II
The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
ARTICLE IV
1. AUTHORIZED STOCK.
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is [_______] shares, consisting of (i) [_______]
shares of Common Stock, $0.0001 par value per share ("Common Stock"), and (ii)
[_______] shares of Preferred Stock, $0.0001 par value per share ("Preferred
Stock"), and including 11,178 shares of Series A Cumulative Preferred Stock,
4,067 shares of Series B Cumulative Preferred Stock, 4,200 shares of Series C
Cumulative Preferred Stock, and 2,358 shares of Series D Cumulative Preferred
Stock.
2. COMMON STOCK.
The powers, preferences and rights, and the qualifications, limitations and restrictions, of the Common Stock are as follows:
(a) NO CUMULATIVE VOTING. The holders of shares of Common Stock shall have no cumulative voting rights.
(b) DIVIDENDS; STOCK SPLITS. Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Amended and Restated Certificate of Incorporation, as it may be amended from time to time, the holders of Common Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the Corporation when, as and if declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor.
The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of Delaware.
(c) LIQUIDATION, DISSOLUTION, ETC. In the event of any liquidation, dissolution or winding up (either voluntary or involuntary) of the Corporation, holders of shares of Common Stock shall be entitled to receive all assets of the Corporation available for distribution after payments to creditors and to the holders of any Preferred Stock of the Corporation that may at the time be outstanding, in proportion to the number of shares held by them, respectively. For purpose of this paragraph 2(c), the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities, or other consideration) of all or substantially all of the assets of the Corporation or a consolidation or merger of the Corporation with one or more other corporations or other persons (whether or not the Corporation is the corporation surviving such consolidation or merger) shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary.
(d) MERGER, ETC. In the event of a merger or consolidation of the Corporation with or into another entity (whether or not the Corporation is the surviving entity), the holders of each share of Common Stock shall be entitled to receive the same per share consideration on a per share basis.
(e) VOTING. At every meeting of the stockholders of the Corporation in connection with the election of directors and all other matters submitted to a vote of stockholders, every holder of Common Stock is entitled to one vote in person or by proxy for each share of Common Stock registered in the name of the holder on the transfer books of the Corporation. Except as otherwise required by law, the holders of Common Stock shall vote together as a single class, subject to any right that may be conferred upon holders of Preferred Stock to vote together with holders of Common Stock on all matters submitted to a vote of stockholders of the Corporation.
(f) NO PREEMPTIVE OR SUBSCRIPTION RIGHTS. No holder of shares of Common Stock shall be entitled to preemptive or subscription rights.
3. PREFERRED STOCK.
(a) RIGHTS, PREFERENCES AND PRIVILEGES. Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to provide for the issuance of chares of Preferred Stock in a class or series and, by filing a certificate pursuant to the applicable law of the State of Delaware (a "Preferred Stock Designation"), to establish from time to time the number of shares to be include in each such class or series, and to fix the designation, powers, preferences and rights of the shares of each such class or series and the qualification, limitations and restrictions thereof. The authority of the Board of Directors with respect to each class or series shall include, but not be limited to, determination of the following:
(i) The designation of the class or series, which may be by distinguishing number, letter or title;
(ii) The number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding);
(iii) Whether dividends, if any, shall be cumulative or non-cumulative and the dividend rate of the class or series;
(iv) The dates on which dividends, if any, shall be payable;
(v) The redemption rights and price or prices, if any, for shares of the class or series;
(vi) The terms and amount of any sinking fund provided for the purchase or redemption of shares of the class or series;
(vii) The amounts payable on, and the preferences, if any, of, shares of the class or series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(viii) Whether the shares of the class or series shall be convertible into shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series of such other security, the conversion price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible and all other terms and conditions upon which such conversion may be made;
(ix) Restrictions on the issuance of shares of the same class or series or of any other class or series; and
(x) The voting rights, if any, of the holders of shares of the class or series.
(b) NUMBER OF AUTHORIZED SHARES. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of the voting power of Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of the applicable Preferred Stock Designation.
The rights, preferences and privileges of holders of the Corporation's outstanding Series A Cumulative Preferred Stock, Series B Cumulative Preferred Stock, and Series C Cumulative Preferred Stock, and Series D Cumulative Convertible Preferred Stock are set forth in the respective certificate of designation attached hereto as Exhibits A, B and C and are incorporated herein by this reference.
4. POWER TO SELL AND PURCHASE SHARES.
Subject to the requirements of applicable law, the Corporation shall have the power to issue and sell all or any part of any shares of any class of stock hereon or hereafter authorized to such persons, and for such consideration, as the Board of Directors shall from time to time, in its discretion, determine, whether or not greater consideration could be received upon the issue or sale of the same number of shares of another class, and as otherwise permitted by law. Subject to the requirements of applicable law, and except as expressly provided otherwise in Section 6.9 of the Bylaws, the Corporation shall have the power to purchase any shares of any class of stock herein or hereafter authorized from such persons, and for such consideration, as the Board of Directors shall from time to time, in its discretion, determine, whether or not less consideration could be paid upon the purchase of the same number of shares of another class, and as otherwise permitted by law.
ARTICLE V
For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:
1. BOARD OF DIRECTORS.
The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed by the Board of Directors in the manner provided in the Bylaws of the Corporation.
2. NUMBER AND ELECTION OF DIRECTORS.
The number of directors of the Corporation shall not be less than three or more than eleven. Election of directors need not be by written ballot, except as and to the extent provided in the Bylaws of the Corporation.
3. CLASSES OF DIRECTORS.
The Board of Directors, other than those who may be elected by the holders of any class or series of Preferred Stock issued by the Corporation, shall be divided into three classes: Class I, Class II and Class III as nearly equal in number as may be, to serve staggered three-year terms on the Board of Directors. No one class shall have more than one director more than any other class.
4. TERMS OF OFFICES.
Each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting at which such director was elected; provided, however, the directors first serving as Class I directors shall serve for a term expiring at the annual meeting next following September 30, 2003, the directors first serving as Class II
directors shall serve for a term expiring at the second annual meeting next following September 30, 2003, and the directors first serving as Class III directors shall serve for a term expiring at the third annual meeting next following September 30, 2003. A director shall hold office until the annual meeting for the year in which his or her term expires or until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office.
5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASE OR DECREASE IN THE NUMBER OF DIRECTORS.
Subject to applicable law and the terms of any one or more outstanding classes or series of Preferred Stock, any vacancy on the Board or Directors that results from an increase in the number of directors or resulting from the death, resignation, removal from office or any other cause may be filled by a majority of the Board of Directors then in office, although less than a quorum, or by a sole remaining director, and not by the stockholders. Any director of any class elected to fill a vacancy resulting from an increase in the number of directors of such class shall hold office for a term that shall coincide with the remaining term of that class. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor. Subject to applicable law and the rights, if any, of the holders of shares of Preferred Stock then outstanding, any or all of the directors of the Corporation may be removed from office at any time by the stockholders only for cause and only by the affirmative vote of at least the majority of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors. A director may not be removed by the stockholders at a meeting unless the notice of the meeting states that the purpose, or one of the purposes, of the meeting is the removal of the director. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorship shall be governed by the terms of this Amended and Restated Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article V unless expressly provided otherwise by such terms.
6. AMENDMENTS TO BYLAWS.
The Board of Directors may from time to time adopt, amend or repeal Bylaws. Stockholders may adopt, amend or repeal the Bylaws of the Corporation only on the recommendation of the Board.
7. ADVANCE NOTICE.
Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.
8. IN GENERAL.
In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the Delaware General Corporation Law, this Amended and Restated Certificate of Incorporation, and any Bylaws adopted by the stockholders; provided, however that no Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such Bylaws had not been adopted. Notwithstanding any other provisions of law, the Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article V.
ARTICLE VI
1. LIMITATION OF LIABILITY.
To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
2. INDEMNIFICATION.
The Corporation may indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or his or her testator in intestate is or was a director, officer, employee or agent of the Corporation, or any predecessor of the Corporation, or serves or served at any other enterprise as a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation.
3. GOOD FAITH RELIANCE.
The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided in this Amended and Restated Certificate of Incorporation or by applicable law.
4. AMENDMENTS.
Neither any amendment nor repeal of this Article VI, nor the adoption of any provision of the Corporation's Amended and Restated Certificate of Incorporation inconsistent with this Article VI, shall eliminate or reduce the effect of this Article VI, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VI, would accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent provision.
ARTICLE VII
Unless otherwise required by law, special meetings of stockholders, for any purpose or purposes, may be called at any time only by the Chairman of the Board of Directors or a committee of the Board that has been duly designated by the Board, and shall be called by the Secretary at the written request, or by resolution adopted by the affirmative vote, of a majority of the Board of Directors. Stockholders shall not have the right to call a special meeting of stockholders.
ARTICLE VIII
Any actions required or permitted to be taken by stockholders of the Corporation shall be effected at a duly called annual or special meeting of stockholders of the Corporation, and the ability of the stockholders to consent in writing to the taking of any action is hereby specifically denied, provided, however, that the holders of Preferred Stock may act by written consent to the extent expressly provided in the applicable Preferred Stock Designation authorizing the issuance of particular series of Preferred Stock pursuant to Article IV of this Amended and Restated Certificate of Incorporation.
ARTICLE IX
Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
ARTICLE X
The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute and this Amended and Restated Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation; provided, however, that notwithstanding any other provision of this Amended and Restated Certificate of Incorporation (and in addition to any other vote that may be required by law), the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation, voting together as a single class, shall be required to amend, alter, change or repeal, or to adopt any provisions as part of this Amended and Restated Certificate of Incorporation inconsistent with the purposes and intent of Article V, Article VI, Article VII, Article VIII and this Article X.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by its Chief Executive Officer this _____ day of _________ 2003.
UNIVERSAL TECHNICAL INSTITUTE, INC.
By:__________________________________
Robert D. Hartman
Chief Executive Officer
EXHIBIT A
CERTIFICATE OF DESIGNATION FOR SERIES A AND SERIES B PREFERRED STOCK
1. Definitions. As used herein capitalized terms not otherwise defined shall have, for all purposes hereof, the meanings herein specified.
"Capital Stock" shall mean any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, partnership interests and other indicia of ownership of a business entity.
"Change of Control" shall mean the occurrence of any of the following
events: (i) all or substantially all of the Corporation's assets, on a
consolidated basis, are sold as an entirety to any Person or related group of
Persons, (ii) there shall be consummated any consolidation or merger of the
Corporation or any exchange of all of the outstanding shares of Common Stock (A)
in the case of a merger or consolidation, in which the Corporation is not the
continuing or surviving company (other than a consolidation or merger with a
wholly-owned Subsidiary of the Corporation in which all shares of Common Stock
outstanding immediately prior to the effectiveness thereof are changed into or
exchanged for the same consideration), (B) in the case of a merger,
consolidation or exchange of all of the outstanding shares of Common Stock,
pursuant to which the Common Stock would be converted into or exchanged for
cash, securities or other property, in any case, other than a consolidation,
merger or exchange of all of the outstanding shares of Common Stock in which the
holders of the Corporation's capital stock immediately prior to the
consolidation, merger or share exchange receive as consideration in such
transaction, directly or indirectly, at least a majority of the common stock of
the transferee or continuing or surviving company immediately after such
consolidation, merger or sharer exchange or (C) in the case of a merger,
consolidation or exchange of all of the outstanding shares of Common Stock, in
which JZEP (as defined in the Stockholders Agreement) is compelled pursuant to
Section 4.9 of the Stockholders Agreement to convert or exchange its Common
Stock for property that does not consist of any common stock of the transferee
or continuing or surviving company immediately after such consolidation, merger
or share exchange or is compelled pursuant to Section 3.3(f) to affirmatively
vote for such transaction, or (iii) any Person is or becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act, provided that
such Person shall be deemed to have "beneficial ownership" of all shares that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total voting power of the outstanding Capital Stock of the
Corporation.
"Common Stock" shall mean all shares now or hereafter authorized of any class of common stock of the Corporation and any other stock of the Corporation, howsoever designated that has the right (subject always to prior rights of any class or Series of Preferred Stock) to participate in the distribution of the assets and earnings of the Corporation without limit as to per share amount.
"Credit Agreement" shall mean the Second Amendment and Restatement of Credit Agreement, dated as of Match 29, 2002, among the Corporation, UTI Holdings, Inc., Heller Financial, Inc.,
as Agent for itself and the Lenders, and certain lenders; as the same may be amended, refinanced or replaced.
"Equity Interests" shall mean Capital Stock or warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock):
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
"Liquidation" shall mean the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
"Person" shall mean an individual of a corporation, association, partnership, joint venture, organization, business, trust, or any other entity or organization, including a government or any subdivision or agency thereof.
"Preferred Stock" shall mean all shares now or hereafter authorized of any class of preferred stock of the Corporation (other than the Series A Preferred Stock and Series B Preferred Stock), howsoever designated that has the right to participate in the distribution of the assets and earnings of the Corporation prior to the Common Stock.
"Securities Purchase Agreement" shall mean the Securities Purchase Agreement, dated as of the Funding Date, between the Corporation and JZ Equity Partners PLC (f/k/a MCIT PLC), as the same may be amended, refinanced or replaced.
"Voting Stock" shall mean Capital Stock of the Company of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of corporate directors (or Persons performing similar functions).
2. Dividends.
Subject to Section 6 below of this Exhibit A, the holders of Series A Preferred Stock and the holders of Series B Preferred Stock shall be entitled to receive when, as and if declared by the Board of Directors, annual dividends of 6% of the Initial Liquidation Value (as defined below) of Series A Preferred Stock and Series B Preferred Stock, respectively, payable on June 30 of each year, commencing on June 30, 1998 (the "Dividend Payment Date"). Dividends on the Series A and the Series B Preferred Stock shall be cumulative and accrue, whether or not declared, earned or payable, from and. after the date of issue of the Series A Preferred Stock and Series B Preferred Stock, respectively. Dividends, if declared by the Board of Directors, on Series A Preferred Stock and the Series B Preferred Stock shall be paid only in cash. The Initial Liquidation Value of each share of Series A Preferred Stock and the Series B Preferred Stock will be $1,000 per share (the "Initial Liquidation Value").
Dividend payments on Junior Stock shall be accrued but not paid for any period unless cumulative dividends to be paid hereunder prior to the date thereof have been paid on the Series A Preferred Stock and the Series B Preferred Stock; provided, however that the Corporation shall be permitted to issue Subordinated Securities as contemplated in
subsection 4(h) of Section F of Exhibit C attached hereto and incorporated by reference. Dividend payments on the Series A Preferred Stock and Series B Preferred Stock shell be accrued but not paid if the payment thereof is prohibited or would result in a default under any obligation of the Corporation or any subsidiary of the Corporation for borrowed money or any other extensions of credits, including but not limited to any default under the Securities Purchase Agreement or the Credit Agreement.
3. Ranking and Liquidation Preference.
(a) As to all dividends and distributions on Capital Stock of the Corporation, (i) the Series A Preferred Stock and the Series B Preferred Stock will rank pari passu with the Series C Preferred Stock and each other and will rank senior to, and shall have preference and priority with respect to any payment of any such dividend or distribution on, the Series D Preferred Stock, the Common Stock or any other shares of Capital Stock of the Corporation (all such Capital Stock ranking junior to the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock in respect of dividends and distributions being referred to in this subsection D as "Junior Stock"); provided, however that the Corporation shall be permitted to issue Subordinated Securities as contemplated in section 4(h) of Exhibit C.
(b) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of shares of Series A Preferred Stock and Series B Preferred Stock then outstanding shall be entitled to be paid in cash out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of Junior Stock by reason of their ownership thereof, an amount equal to the Initial Liquidation Value per share of such Series Preferred Stock and Series B Preferred Stock (subject to adjustment after certain partial redemptions as provided in Section 7 of this Exhibit A plus any accrued and unpaid dividends (such sum being herein called the "Series A Preferred Stock and Series B Preferred Stock Liquidation Payment"), and the holders. of Series A Preferred Stock and the holders of all shares of Series B Preferred Stock shall not be entitled to any fine distribution or payment. If upon such liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, the assets of the Corporation to be distributed among the holders of the Capital Stock of the Corporation shall be insufficient to permit payment in full of the Series A Preferred Stock and Series B Preferred Stock Liquidation Payment to the holders of Series A Preferred Stock and holders of Series B Preferred Stock, then the entire assets of the Corporation to be distributed to the holders of the Capital Stock of the Corporation shall be distributed ratably among the holders of the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock in proportion to the Series A Preferred Stock and Series B Preferred Stock Liquidation Payment and the Series C Preferred Stock Liquidation Payment due under this Exhibit A to each such holder. Upon any such liquidation, dissolution or winding-up of the Corporation, but only after each holder of the Series A Preferred Stock, holders of Series B Preferred Stock and holder of Series C Preferred Stock shall have been paid in full the Series A Preferred Stock and Series B Preferred Stock Liquidation Payment or the Series C Preferred Stock Liquidation Payment, as the case may be, to which such holder is entitled, the remaining assets of the Corporation shall be distributed to the holders of Junior Stock.
(c) Written notice of such liquidation, dissolution or winding-up, stating a payment date, the amount of the Series A Preferred Stock and Series B Preferred Stock Liquidation Payment and the place where the amounts distributed shall be payable, shall be given by mail, postage prepaid, not leas than ten days prior to the payment date stated therein, to the holders of record of the Series A Preferred Stock and Series B Preferred Stock, such notice to be addressed to each stockholder at his or its post office address as shown by the records of the Corporation.
(d) Neither the consolidation or merger of the Corporation into or with any other or corporation or corporations, nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the Capital Stock of the Corporation, shall be deemed to be a liquidation, dissolution or winding-up of the Corporation within the meaning of any of the provisions of this Section 3.
4. Redemption.
(a) Redemption Price. Subject to Section 7 of this Exhibit A, the
Series A Preferred Stock and Series B Preferred Stock shall each be redeemable
as provided in this Section 4 by paying for each share in cash on the redemption
date the sum of the Initial Liquidation Value thereof plus any accrued and
unpaid dividends through the redemption payment date, such sum being in this
Exhibit A called in each case the "Redemption Price." Redemption payments
(and dividend payments on Series A Preferred Stock and Series B Preferred Stock)
shall be accrued but not paid if the payment thereof is prohibited or would
result in a default under any obligation of the Corporation or any subsidiary of
the Corporation for borrowed money or may other extensions of credits, including
but not limited to any default under the Securities Purchase Agreement or the
Credit Agreement.
(b) Redeemed or Otherwise Acquired Shares to be Retired. Any shares of Series A Preferred Stock and Series B Preferred Stock redeemed pursuant to this Section 4 or otherwise acquired by the Corporation in any manner whatsoever shall be permanently retired immediately on the acquisition thereof and shall not under any circumstances be reissued. The Corporation shall from time-to-time take such .appropriate action as may be necessary to reduce the authorized number of shares of Series A Preferred Stock and Series B Preferred Stock accordingly.
(c) Shares to be Redeemed. In case of a redemption of only a part of the outstanding shares of the Series A Preferred Stock or Series B Preferred Stock, there shall be so redeemed from each registered holder as nearly as practicable, that proportion of all of the shares to be redeemed which the number of shares held of record by such holder bears to the total number of shares of Series A Preferred Stock or Series B Preferred Stock, respectively, at the time outstanding.
(d) Mandatory Redemption. Subject to Section 4(a) and 4(c), on March 31, 2010 the Corporation shall purchase and redeem, at the Redemption Price, all of the outstanding shares of Series A Preferred Stock. In addition, subject to Sections 4(a) and 4(c) above, on October 15, 2017, the Corporation shall purchase and redeem, at the Redemption Price, all of the outstanding shares of Series B Preferred Stock.
(e) Change of Control. In the event that any Change of Control shall occur or the Corporation shall have knowledge of any proposed Change of Control, the Corporation shall give written notice (the "Corporation Notice") to the holders of record of the Series A Preferred Stock and the holders of record of Series B Preferred Stock. The Corporation Notice shall be delivered promptly upon receipt of such knowledge by the Corporation and in any event no more than sixty (60) days nor less than thirty (30) days prior to the occurrence of any Change of Control. The Corporation Notice shall (i) describe the facts and circumstances of such Change of Control in reasonable detail, (ii) make reference to this Section 4(e) and the right of the holders of shares of Series A Preferred Stock and the holders of record of Series B Preferred Stock to require payment on the terms and conditions provided for in this Section 4(e), and (iii) offer in writing to redeem the outstanding shares of Series A Preferred Stock and Series B Preferred Stock at a redemption price equal to the Liquidation Preference thereof on the date of redemption. Each holder of shares of Series A Preferred Stock or Series B Preferred Stock shall have the right to accept such offer and require prepayment of the shares of Series A Preferred Stock and Series B Preferred Stock held by such holder by giving written notice to the Corporation not later than 25 days following receipt of the Corporation Notice. The Corporation shall redeem in accordance with this Section 4(e) all shares of Series A Preferred Stock and Series B Preferred Stock held by holders who have accepted such offer, which redemption shall occur on the date upon which the Change of Control giving rise to such request occurs, and no redemption requested pursuant to this Section 4(e) shall be effected unless the Change of Control giving rise to such request shall occur.
(f) Optional Redemptions. Subject to Sections 4(a) and 4(c) of this Exhibit A, the Corporation may purchase and redeem shares of Series A Preferred Stock and Series B Preferred Stock at the Redemption Price prior to the date for mandatory redemption set forth in Section 4(e) of this Exhibit A on any date provided that (i) all accrued and unpaid dividends shall be declared and issued with respect to the shares of Series A Preferred Stock and Series B Preferred Stock, as the case may be, to be redeemed for each full month since the immediately prior payment date up to the date of redemption and (ii) any consent required for such redemption shall have been obtained.
5. Notice of Redemption.
Notice of each redemption of Series A Preferred Stock and Series B Preferred Stock pursuant to Section 4 of this Exhibit A, specifying the date and place of redemption and the number of shares which are to be redeemed, shall be mailed to each holder of record of shares to be redeemed at such holder's address as shown by the records of the Corporation not more than ninety (90) nor less than thirty (30) days prior to the date on which such redemption is to be made.
6. Dividends After Redemption Date.
Notice of redemption having been so mailed or a Mandatory Redemption having occurred, and provision for payment of the Redemption Price for such shares on the specified Redemption Date having been made by the Corporation, then, unless default be made in the payment of the Redemption Price for such shares when and as due (i) the shares of Series A Preferred Stock or Series B Preferred Stock designated for redemption shall not be entitled to
any dividends accruing after the Redemption Date specified, (ii) on such Redemption Date all rights of the respective holders of such shares, as shareholders of the Corporation by reason of the ownership of such shares, shall cease, except the right to receive the Redemption Price for such shares without interest upon presentation, and (iii) such shares shall not after such Redemption Date be deemed to be outstanding. In case less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued without cost to the holder thereof representing the unredeemed shares.
7. All Past Annual Dividends Must Be Declared Prior to Redemption.
Except as set forth in this Section 7, the Corporation shall not purchase or redeem shares of any Series A Preferred Stock or Series B Preferred Stock at the time outstanding unless all dividends on all Series A Preferred Stock or Series B Preferred Stock, as the case may be, for all past periods shall have been declared and issued. If applicable, laws relating to the sources of funds for the payment of accrued and unpaid dividends on any shares of Series A Preferred Stock or Series B Preferred Stock would prohibit the payment in full on a Redemption Date of the dividends for any shares of Series A Preferred Stock or Series B Preferred Stock required to be redeemed by Section 4 of this Exhibit A, (i) notwithstanding any provision herein to the contrary, the aggregate Redemption Price payable in respect of all shares of Series A Preferred Stock or Series B Preferred Stock, as the case may be, to be redeemed shall be deemed reduced by the amount of accrued and unpaid dividends that the Corporation is prohibited by law from paying, (ii) shares of Series A Preferred Stock or Series B Preferred Stock, respectively, to be redeemed on the applicable Redemption Date shall otherwise be redeemed in accordance with the requirements of this Section 7, and (iii) the amount of such unpayable accrued and unpaid dividends shall be added in equal amounts per share to the accrued and unpaid dividends on the shares of Series A Preferred Stock or Series B Preferred Stock, respectively, remaining outstanding in the hands of the holder thereof. If applicable laws would prohibit the payment in full on the Redemption Date of the Redemption Price for the shares of Series A Preferred Stock or Series B Preferred Stock required to be redeemed pursuant to Section 4 of this subsection D, (a) no such shares shall be redeemed, (b) the Corporation shall nevertheless, to the extent legally permissible, pay to the holders of such shares on the final Redemption Dates the highest permissible amount per share up to an amount equal to the applicable Liquidation Payment less $0.01, (c) the Redemption Price and applicable Liquidation Payment of each such share shall thereupon be reduced by the amount per share so paid pursuant to the immediately preceding clause (b), (d) the Corporation shall purchase and redeem all such shares on the soonest next date on which dividends are required to be paid pursuant to Section 2 of this Exhibit A and on which the Corporation is no longer prohibited by law from paying in full the Redemption Price for such shares, and (e) the obligation of the Corporation to pay dividends under Section 2 of this Exhibit A shall continue until all outstanding shares of Series A Preferred Stock and Series B Preferred Stock are redeemed in accordance with clause (d), except that dividends thereafter payable with respect to outstanding shares of Series A Preferred Stock and Series B Preferred Stock shall be reduced by the same percentage reduction as the percentage reduction in the Redemption Price and Series A Preferred Stock and Series B Preferred Stock Liquidation Payment that takes places pursuant to this Section 7. In no event shall the Corporation purchase or redeem the last share of Series A Preferred Stock and Series B Preferred Stock held by any holder unless the Corporation shall have paid to the last holder of Series A Preferred Stock or Series B Preferred Stock, as the case may be, all accrued and unpaid dividends on all shares of
Series A Preferred Stock or Series B Preferred Stock, as the case may be, held by such holder at any time.
8. Voting Rights.
The Series A Preferred Stock and the Series B Preferred Stock shall not have voting rights except as expressly required by law or in any amendment to the Corporation's Certificate of Incorporation to alter or change the respective powers, designations, preferences or special rights of the shares of such Series A Preferred Stock or Series B Preferred Stock, as the case may be.
Exhibit B
CERTIFICATE OF DESIGNATION FOR SERIES C PREFERRED STOCK
1. Definitions. As used herein capitalized terms not otherwise defined shall have, for all purposes hereof the meanings herein specified.
"Capital Stock" shall have the meaning given to it in section 1 of Exhibit A.
"Change of Control" shall have the meaning given to it in section 1 of Exhibit A.
"Common Stock" shall have the meaning given to it in section 1 of Exhibit A.
"Credit Agreement" shall have the meaning given to it in section 1 of Exhibit A.
"Equity Interests" shall have the meaning given to it in section 1 of Exhibit A.
"Exchange Act" shall have the meaning given to it in section 1 of Exhibit A.
"Liquidation" shall have the meaning given to it in section 1 of Exhibit A.
"Person" shall have the meaning given to it in section 1 of Exhibit A.
"Preferred Stock" shall have the meaning given to it in section 1 of Exhibit A.
"Public Offering" means the consummation of a bona fide public offerings by the Corporation of its Common Stock pursuant to a registration statement or registration statements filed by the Corporation with the Securities and Exchange Commission, and underwritten by one or more reputable investment banks, in which the aggregate gross proceeds to the Corporation from such public offering, or from such series of public offerings, shall be not less than $50,000,000.
"Securities Purchase Agreement" shall have the meaning given to it in section 1 of Exhibit A.
"Voting Stock" shall have the meaning given to it in section 1 of Exhibit A.
2. Dividends.
Subject to Section 7 below of this Exhibit B, the holders of Series C Preferred Stock shall be entitled to receive when, as and if declared by the Board of Directors annual dividends of 6% of the Initial Liquidation Value (as defined below) of Series C Preferred Stock, payable on September 30 of each year, commencing on September 30, 2000 (the "Dividend Payment Date"). Dividends on the Series C Preferred Stock shall be cumulative and accrue, whether or not declared, from and after the date of issue of the Series C Preferred Stock. Dividends, if declared by the Board of Directors on Series C Preferred Stock shall be paid only in cash. The Initial Liquidation Value of each share of Series C Preferred Stock will be $1,000.00 per share (the "Initial Liquidation Value").
Dividend payments on Junior Stock shall be accrued but not paid for any period unless cumulative dividends to be paid hereunder prior to the date thereof have been paid on the Series C Preferred Stock; provided, however that the Corporation shall be permitted to issue Subordinated Securities as contemplated in section 4(h) of Exhibit C. Dividend payments on the Series C Preferred Stock shall be accrued but not paid if the payment thereof is prohibited or would result in a default under any obligation of the Corporation or any subsidiary of the Corporation for borrowed money or any other extensions of credits, including but not limited to any default under the Securities Purchase Agreement or the Credit Agreement.
3. Ranking and Liquidation Preference.
(a) As to all dividends and distribution on Capital Stock of the Corporation, (i) the Series C Preferred Stock will rank pari passu with the Series A Preferred Stock and the Series B Preferred Stock and will rank senior to, and shall have preference and priority with respect to any payment of any such dividend or distribution on, the Series D Preferred Stock, the Common Stock or any other shares of Capital Stock of the Corporation (all such Capital Stock ranking junior to the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stork in respect of dividends and distributions being referred to in this Exhibit B as "Junior Stock"); provided, however that the Corporation shall be permitted to issue Subordinated Securities as contemplated in subsection 4(h) of Exhibit C.
(b) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of all shares of Series C Preferred Stock then outstanding shall each be entitled to be paid in cash out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of Junior Stock by reason of their ownership thereof; an amount equal to the sum of the Initial Liquidation Value per share (subject to adjustment after certain partial redemptions as provided in Section 7 of this Exhibit B) plus any accrued and unpaid dividends (such sums being herein called the "Series C Preferred Stock Liquidation Payment"), and the holders of all shares of Series C Preferred Stock shall not be entitled to any further distribution or payment. If upon such liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, the assets of the Corporation to be distributed among the holders of the Capital Stock of the Corporation shall be insufficient to permit payment in full of the Series C Preferred Stock Liquidation Payment to the holders of Series C Preferred Stock, then the entire assets of the Corporation to be distributed to the holders of the Capital Stock of the Corporation shall be
distributed ratably among the holders of the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock in proportion to the Series A Preferred Stock and Series B Preferred Stock Liquidation Payment and the Series C Preferred Stock Liquidation Payment due under this Exhibit B to each such holder. Upon any such liquidation, dissolution or winding-up of the Corporation, but only after each holder of the Series A Preferred Stock, holders of Series B Preferred Stock and holder of Series C Preferred Stock shall have been paid in full the Series A Preferred Stock and Series B Preferred Stock Liquidation Payment or the Series C Preferred Stock Liquidation Payment, as the case may be, to which such holder is entitled, the remaining assets of the Corporation shall be distributed to the holders of Junior Stock.
(c) Written notice of such liquidation, dissolution or winding-up, stating a payment date, the amount of the Series C Preferred Stock Liquidation Payment and the place where the amounts distributed shall be payable, shall be given by mail, postage prepaid, not less than ten days prior to the payment date stated therein, to the holders of record of the Series C Preferred Stock, such notice to be addressed to each stockholder at his or its post office address as shown by the records of the Corporation.
(d) Neither the consolidation or merger of the Corporation into or with any other corporation or corporations, nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the Capital Stock of the Corporation, shall be deemed to be a liquidation, dissolution or winding-up of the Corporation within the meaning of any of the provisions of this Section 3.
4. Redemption.
(a) Redemption Price. Subject to Section 7 of this Exhibit B, the Series C Preferred Stock shall each be redeemable as provided in this Section 4 by paying for each share in cash on the redemption date the sum of the Initial Liquidation Value thereof plus any accrued and unpaid dividends through the redemption payment date, such sum being in this Exhibit B called in each case the "Redemption Price." Redemption payments (and dividend payments on Series C Preferred Stock) shall be accrued but not paid if the payment thereof is prohibited or would result in a default under any obligation of the Corporation or any subsidiary of the Corporation for borrowed money or any other extensions of credit, including but not limited to any default under the Securities Purchase Agreement or the Credit Agreement.
(b) Redeemed or Otherwise Acquired Shares to be Retired. Any shares of Series C Preferred Stock redeemed pursuant to this Section 4 or otherwise acquired by the Corporation in any manner whatsoever shall be permanently retired immediately on the acquisition thereof and shall not under any circumstances be reissued. The Corporation shall from time to time take such appropriate action as may be necessary to reduce the authorized number of shares of Series C Preferred Stock accordingly.
(c) Shares to be Redeemed. In case of a redemption of only a part of the outstanding shares of the Series C Preferred Stock, there shall be so redeemed from each registered holder as nearly as practicable, that proportion of all of the shares to be redeemed
which the number of shares held of record by such holder bears to the total number of shares of Series C Preferred Stock at the time outstanding.
(d) Mandatory Redemption. Subject to Section 4(a) and 4(c), on March 31, 2010 the Corporation shall purchase and redeem, at the Redemption Price, all of the outstanding shares of Series C Preferred Stock.
(e) Change of Control. In the event that any Change of Control shall occur or the Corporation shall have knowledge of any proposed Change of Control, the Corporation shall give written notice (the "Corporation Notice") to the holders of record of the Series C Preferred Stock. The Corporation Notice shall be delivered promptly upon receipt of such knowledge by the Corporation and in any event no more than sixty (60) days nor less then thirty (30) days prior to the occurrence of any Change of Control. The Corporation Notice shall (i) describe the facts and circumstances of such Change of Control in reasonable detail, (ii) make reference to this Section 4(e) and the right of the holders of record of Series C Preferred Stock to require payment on the terms and conditions provided for in this Section 4(e), and (iii) offer in writing to redeem the outstanding shares of Series C Preferred Stock at a redemption price equal to the Liquidation Preference thereof on the date of redemption. Each holder of shares of Series C Preferred Stock shall have the right to accept such offer and require prepayment of the shares of Series C Preferred Stock held by such holder by giving written notice to the Corporation not later than 25 days following receipt of the Corporation Notice. The Corporation shall redeem in accordance with this Section 4(e) all shares of Series C Preferred Stock held by holders who have accepted such offer which redemption shall occur on the date upon which the Change of Control giving rise to such request occurs, and no redemption requested pursuant to this Section 4(e) shall be effected unless the Change of Control giving rise to such request shall occur.
(f) Optional Redemptions. Subject to Sections 4(a) and 4(c) of this Exhibit B, the Corporation may purchase and redeem shares of Series C Preferred Stock at the Redemption Price prior to the date for mandatory redemption set forth in Section 4(e) of this Exhibit B on any date provided that (i) all accrued and unpaid dividends shall be paid with respect to any such redemption of the shares of Series C Preferred Stock and (ii) any consent required for such redemption shall have been obtained.
5. Notice of Redemption.
Notice of each redemption of Series C Preferred Stock pursuant to Section 4 of this Exhibit B, specifying the date and place of redemption and the number of shares which are to be redeemed, shall be mailed to each holder of record of shares to be redeemed at such holder's address as shown by the records of the Corporation not more than ninety (90) nor less than thirty (30) days prior to the date on which such redemption is to be made.
6. Dividends After Redemption Date.
Notice of redemption having been so mailed or a Mandatory Redemption having occurred, and provision for payment of the Redemption Price for such shares on the specified Redemption Date having been made by the Corporation, then, unless default be made in the payment of the Redemption Price for such shares when and as due (i) the shares of Series C
Preferred Stock designated for redemption shall not be entitled to any dividends accruing after the Redemption Date specified, (ii) on such Redemption Date all rights of the respective holders of such shares, as shareholders of the Corporation by reason of the ownership of such shares, shall cease, except the right to receive the Redemption Price for such shares without interest upon presentation, and (iii) such shares shall not after such Redemption Date be deemed to be outstanding. In case less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued without cost to the holder thereof representing the unredeemed shares.
7. All Past Annual Dividends Must Be Declared Prior to Redemption.
Except as set forth in this Section 7, the Corporation shall not purchase
or redeem shares of any Series C Preferred. Stock at the time outstanding unless
all dividends on all Series C Preferred Stock for all past periods shall have
been declared and issued. If applicable laws relating to the sources of funds
for the payment of accrued and unpaid dividends on any shares of Series C
Preferred Stock would prohibit the payment in full on a Redemption Date of the
dividends for any shares of Series C Preferred Stuck required to be redeemed by
Section 4 of this Exhibit B, (i) notwithstanding any provision herein to the
contrary, the aggregate Redemption Price payable in respect of all shares of
Series C Preferred Stock to be redeemed shall be deemed reduced by the amount of
accrued and unpaid dividends that the Corporation is prohibited by law from
paying, (ii) shares of Series C Preferred Stock to be redeemed on the applicable
Redemption Date shall otherwise be redeemed in accordance with the requirements
of this Section 7 of this Exhibit B, and (iii) the amount of such unpayable
accrued and unpaid dividends shall be added in equal amounts per share to the
accrued and unpaid dividends on the shares of Series C Preferred Stock remaining
outstanding in the hands of the holder thereof. If applicable laws would
prohibit the payment in full on the Redemption Date of the Redemption Price for
the shares of Series C Preferred Stock required to be redeemed pursuant to
Section 4 of this Exhibit B, (a) no such shares shall be redeemed, (b) the
Corporation shall nevertheless, to the extent legally permissible, pay to the
holders of such shares on the final Redemption Date the highest permissible
amount per share up to an amount equal to the applicable Liquidation Payment
less $0:41, (c) the Redemption Price and applicable Liquidation Payment of each
such share shall thereupon be reduced by the amount per share so paid pursuant
to the immediately preceding clause (b), (d) the Corporation shall purchase and
redeem all such shares on the soonest next date on which dividends ate required
to be paid pursuant to Section 2 of this Exhibit B and on which the
Corporation is no longer prohibited by law from paying in full the Redemption
Price for such shares, and (e) the obligation of the Corporation to pay
dividends under Section 2 of this Exhibit B shall continue until all
outstanding shares of Series C Preferred Stock are redeemed in accordance with
clause (d), except that dividends thereafter payable with respect to outstanding
shares of Series C Preferred Stock shall be reduced by the same percentage
reduction as the percentage reduction in the Redemption Price and Series C
Preferred Stock Liquidation Payment that takes place pursuant to this Section 7.
In no event shall the Corporation purchase or redeem the last share of Series C
Preferred Stock held by any holder unless the Corporation shall have paid to the
last holder of Series C Preferred Stock all accrued and unpaid dividends on all
shares of Series C Preferred Stock held by such holder at any time.
8. Voting Rights.
The Series C Preferred Stock shall not have voting rights except as expressly required by law or in any amendment to the Corporation's Certificate of Incorporation to alter or change the respective powers, designations, preferences or special rights of the shares of such Series C Preferred Stock.
EXHIBIT C
CERTIFICATE OF DESIGNATION FOR SERIES D CUMULATIVE CONVERTIBLE PREFERRED STOCK
Universal Technical Institute, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies that the Board of Directors of the Corporation, at a meeting duly called and held, did duly adopt the following resolutions:
RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation by Article IV of the Corporation's Certificate of Incorporation, as amended (the "Certificate"), one series of preferred stock of the Corporation is, and it hereby is, created out of the authorized but unissued shares of the Capital Stock of the Corporation, to be designated Series D Cumulative Convertible Preferred Stock (the "Series D Preferred Stock"), to consist of 2368 shares, par value $.0001 per share, of which the preferences and relative and other rights, and the qualifications, limitations or restrictions thereof, shall be (in addition to those set forth in the Certificate) as follows:
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in this
Section 1 shall have, for all purposes hereof, the meanings herein specified.
"Affiliate" of any specified Person shall mean any other Person (a) that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person, (b) that beneficially owns or holds 10% or more of the Voting Stock of such specified Person or (c) 10% or more of the Voting Stock (or in the case of a Person that is not a corporation, 10% or more of the Equity Interest) of which is beneficially owned or held by such specified Person or one of its subsidiaries. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Stock, by contract or otherwise.
"Business Day" means any day that is not a Saturday, Sunday or a day on which banking institutions in Arizona or New York are not required to be open for business.
"Capital Stock" shall mean any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, partnership interests and other indicia of ownership of a business entity.
"Change of Control" shall mean the occurrence of any of the following events: (i) all or substantially all of the Corporation's assets, on a consolidated basis, are sold as an entirety to any Person or related group of Persons or there shall be consummated any consolidation, merger, recapitalization or reorganization of the Corporation (A) in which the Corporation is not the continuing or surviving company (other than a consolidation or merger with a wholly-owned Subsidiary of the Corporation in which all shares of Common Stock outstanding immediately prior to the effectiveness thereof are changed into or exchanged for the same consideration) or (B) pursuant to which the Common Stock would be converted into cash, securities or other property, in any case, other than a consolidation or merger of the Corporation in which the stockholders of the Corporation immediately prior to the consolidation or merger have, directly
or indirectly, at least a majority of the voting securities of the transferee or continuing or surviving company immediately after such consolidation or merger, or (ii) any Person is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act, provided that such Person shall be deemed to have "beneficial ownership" of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the outstanding Capital Stock of the Corporation.
"Common Stock" shall mean all shares now or hereafter authorized of any class of common stock of the Corporation and any other stock of the Corporation, howsoever designated that has the right (subject always to prior rights of any class or series of Preferred Stock) to participate in the distribution of the assets and earnings of the Corporation without limit as to per share amount.
"Current Market Price" means, in respect of any share of Common Stock on any date herein specified, (i) if the shares of Common Stock are publicly traded, the average of the daily closing prices of the Common Stock for the twenty consecutive trading days ending five trading days prior to such date on the principal national securities exchange or stock market on which such shares are traded, or (ii) if the shares of Common Stock are not publicly traded, the Fair Market Value per share of Common Stock as of such date.
"Equity Interests" shall mean Capital Stock or warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
"Fair Market Value" of the Common Stock or any other property means the fair market value of such Common Stock or other property as determined (unless expressly otherwise provided herein) by mutual agreement between the Corporation and the holders of not less than a majority of the outstanding shares of Series D Preferred Stock or, if the parties are unable to agree, as determined by a nationally recognized independent investment banking firm selected by mutual agreement between the Corporation and the holders of not less than a majority of the outstanding shares of Series D Preferred Stock.
"Initial Series D Conversion Price" shall have the meaning given to it in Section 4(a).
"Junior Stock" shall have the meaning given to it in Section 3(a).
"Liquidation" shall mean the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
"Original Series D Issue Date" shall mean the date the first .share of Series D Preferred Stock is issued by the Corporation.
"Original Series D Issue Price" shall mean $19,302.60401 per share.
"Person" shall mean an individual or a corporation, association, partnership, joint venture, organization, business, trust, or any other entity or organization, including a government or any subdivision or agency thereof.
"Preferred Stock" shall mean all shares now or hereafter authorized of any class of preferred stock of the Corporation (other than the Series D Preferred Stock), howsoever designated that has the right to participate in the distribution of the assets and earnings of the Corporation prior to the Common Stock.
"Public Offering" means the consummation of a bona fide public offering by the Corporation of its Common Stock pursuant to a registration statement filed by the Corporation with the Securities and Exchange Commission, and underwritten by one or more reputable investment banks, in which the aggregate gross proceeds to the Corporation from such public offering shall be not less than $50,000,000.
"Qualifying Public Offering" means a Public Offering which (x) if the Public Offering occurs on or prior to the first anniversary of the Original Series D Issue Date, results in the sale of shares of Common Stock having a price per share equal to at least 150% of the then-applicable conversion price of the Series D Preferred Stock, or (y) if the Public Offering occurs after the first anniversary of the date of this Agreement, results in the sale of shares of Common Stock having a price per share equal to at least 200% of the then-applicable conversion price of the Series D Preferred Stock.
"Senior Stock" shall have the meaning given to it in Section 3(a).
"Stockholders Agreement" shall mean the Amended and Restated Stockholders Agreement, dated as of the Original Series D Issue Date, among the Corporation and certain of its stockholders (including but not limited to the purchasers of the Series D Preferred Stock), as the same may be amended, from time to time.
"Voting Stock" shall mean (i) with respect to the Corporation, Capital
Stock (including the Series D Preferred Stock but excluding any shares of
Preferred Stock) of the Corporation of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for the
election of corporate directors (or Persons performing similar functions) and
(ii) with respect to any Person other than the Corporation, Capital Stock of
such Person of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of corporate
directors (or Persons performing similar functions).
2. Dividends.
The holders of Series D Preferred Stock shall be entitled to receive annual dividends of 7.5% of the initial Liquidation Value (as defined below) of Series D Preferred Stock payable on September 30 of each year (the "Dividend Payment Date"), commencing on September 30, 2002. Dividends on the Series D Preferred Stock shall be cumulative and payable, whether or not declared, from and after the date of issue of the Series D Preferred Stock. Dividends on Series D Preferred Stock shall be paid only in cash. The initial "Liquidation Value" of each share of Series D Preferred Stock will be $_______ per share.
No dividends may be paid or set aside for such payment on Junior Stock for any period unless cumulative dividends to be paid hereunder prior to the date thereof have been paid on the Series D Preferred Stock.
3. Ranking and Liquidation Preference.
(a) As to all dividends and distribution on Capital Stock of the Corporation, (i) the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock will rank senior to, and shall have preference and priority with respect to any payment of any such dividend or distribution on, the Series D Preferred Stock, the Common Stock or any other shares of Capital Stock of the Corporation (all such Capital Stock ranking senior to the Series D Preferred Stock in respect of dividends and distributions being herein referred to as the "Senior Stock"); and (ii) the Series D Preferred Stock will rank senior to, and shall have preference and priority with respect to any payment of any such dividend or distribution on, the Common Stock or any other shares of Capital Stock of the Corporation (other than the Senior Stock) (all such Capital Stock ranking inferior to the Series D Preferred Stock being herein referred to as "Junior Stock").
(b) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of shares of Series D Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Stock, but before any payment shall be made to the holders of Junior Stock by reason of their ownership thereof, an amount equal to the Liquidation Value per share of Series D Preferred Stock plus any accrued and unpaid dividends thereon (such sum being herein called the "Series D Preferred Stock Liquidation Payment"), and the holders of all shares of Series D Preferred Stock shall not be entitled to any further distribution or payment; provided, however, that to the extent the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series D Preferred Stock the full amount to which they shall be entitled, the holders of shares of Series D Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
(c) Written notice of such liquidation, dissolution or winding up, stating a payment date, the amount of the Series D Preferred Stock Liquidation Payment and the place where the amounts distributed shall be payable, shall be given by mail, postage prepaid, not less than ten days prior to the payment date stated therein, to the holders of record of the Series D Preferred Stock, such notice to be addressed to each stockholder at his or its post office address as shown by the records of the Corporation.
(d) A Change of Control of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of any of the provisions of this Section 3.
4. Conversion. The shares of Series D Preferred Stock shall be convertible into shares of Common Stock as follows:
(a) Optional Conversion. Each share of Series D Preferred Stock shall be convertible, at the option of the holder thereof and without the payment of any additional consideration by the holder thereof, at any time and from time to time, into the number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Initial Series D Conversion Price (as hereafter defined) by the Current Conversion Price (as defined in Section 5 below) in effect at the time of conversion. The "Initial Series D Conversion Price" shall equal $19,302.60401 [the Original Series D Issue Price, per share].
(b) Automatic Conversion. Upon a Qualifying Public Offering each share of Series D Preferred Stock then outstanding shall automatically be converted into the number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Initial Series D Conversion Price by the Current Conversion Price.
(c) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of shares of Series D Preferred Stock. In lieu of any fractional share to which the holder would otherwise be entitled after determination of the aggregate full number of shares of Common Stock issuable in respect of the Series D Preferred Stock then being converted, the Corporation shall pay cash equal to such fraction multiplied by the then Current Market Price per share of Common Stock.
(d) Mechanics of Optional Conversion. In order for a holder of Series D Preferred Stock to convert such shares into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series D Preferred Stock at the office of the transfer agent for the Series D Preferred Stock (or if the Corporation serves as its own transfer agent, at the principal office of the Corporation) (as applicable, the "Transfer Office"), together with written notice that such holder elects to convert all or any number of the shares of the Series D Preferred Stock represented by such certificate or certificates. If reasonably required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date (the "Optional Conversion Date"). The Corporation shall, as soon as practicable after the Optional Conversion Date, issue and deliver at the Transfer Office to such holder of Series D Preferred Stock, or to his or its nominees, a certificate or certificates for the number of whole shares of Common Stock (and any shares of Series D Preferred Stock represented by the certificate delivered to the Corporation by the holder thereof that are not converted into Common Stock) issuable upon such conversion in accordance with the provisions hereof, together with cash in lieu of fractional shares calculated in accordance with paragraph (c) of this Section 4 and with payment of any accrued and unpaid dividends thereon. On and as of the Optional Conversion Date, the shares of Common Stock issuable upon such conversion shall be deemed to be outstanding, and the holder thereof shall be entitled to exercise and enjoy all rights with respect to, such shares of Common Stock, including the rights, if any, to receive notices and to vote. Shares of Series D Preferred
Stock converted into Common Stock will be deemed cancelled, and may not thereafter be issued or re-issued.
(e) Mechanics of Automatic Conversion. All holders of record of shares of Series D Preferred Stock will be given at least ten (10) but not more than thirty (30) business days' prior written notice of the date fixed (the "Automatic Conversion Date") and the place designated for automatic conversion of all shares of Series D Preferred Stock pursuant to this Section 4. Such notice will be sent by first class or registered mail, postage prepaid, to each record holder of Series D Preferred Stock at such holder's address last shown on the Company's share register. On or before the Automatic Conversion Date, each holder of shares of Series D Preferred Stock shall surrender his or its certificate or certificates for all such shares to the Corporation at the place designated in such notice. If reasonably required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing. On and after the Automatic Conversion Date, all rights with respect to the Series D Preferred Stock so converted, including the rights, if any, to receive notices and to vote, will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefor, to receive certificates for the number of shares of Common Stock into which such Series D Preferred Stock has been converted, payment of cash in lieu of fractional shares calculated in accordance with paragraph (c) of this Section 4, and payment of any accrued and unpaid dividends thereon. As soon as practicable after the Automatic Conversion Date and the surrender of the certificate or certificates representing shares of Series D Preferred Stock, the Corporation shall issue and deliver to such holder, or on his or its written order to his or its nominees, a certificate or certificates for the number of whole shares of Common Stock issuable upon such conversion in accordance with the provisions hereof, together with cash in lieu of fractional shares calculated in accordance with paragraph (c) of this Section 4 and with payment of any accrued and unpaid dividends thereon.
(f) Reservation of Shares. The Corporation shall at all times when the Series D Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series D Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series D Preferred Stock. Before taking any action which would cause Common Stock, upon the conversion of Series D Preferred Stock, to be issued below the then par value of the shares of Common Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock to the holders of Series D Preferred Stock.
(g) Treatment of Accrued and Unpaid Dividends. Upon any conversion of Series D Preferred Stock, no adjustment to the Initial Series D Conversion Price shall be made for accrued and unpaid dividends on the Series D Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion, such dividends to be payable pursuant to paragraph (h) below.
(h) Termination of Rights. All shares of Series D Preferred Stock which shall have been surrendered for conversion as herein provided or, as to shares of Series D Preferred Stock which are subject to automatic conversion pursuant to paragraph (b) above, which have not been so surrendered prior to the Automatic Conversion Date, shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall immediately cease and terminate on the Optional Conversion Date or the Automatic Conversion Date, as the case may be, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, payment of cash in lieu of any fractional shares calculated in accordance with paragraph (c) of this Section 4, and payment of any accrued and unpaid dividends thereon. All such accrued and unpaid dividends shall be paid on and including .the Optional Conversion Date or the Automatic Conversion Date, as the case may be.
(i) Issue Taxes. The issuance of certificates for shares of Common Stock upon conversion of the Series D Preferred Stock shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series D Preferred Stock which is being converted.
(j) Transfer Books. The Corporation will at no time close its transfer books against the transfer of any Series D Preferred Stock, or of any shares of Common Stock issued or issuable upon the conversion of any shares of Series D Preferred Stock, in any manner which interferes with the timely conversion of such Series D Preferred Stock, except as may otherwise be required to comply with applicable securities laws.
5. Adjustments to Conversion Price.
(a) Current Conversion Price. The Initial Series D Conversion Price shall be subject to adjustment from time to time and such conversion price as adjusted shall likewise be subject to further adjustment, all as hereinafter set forth. The term "Current Conversion Price" shall mean, as of any time, the Initial Series D Conversion Price in case no adjustment shall have been made pursuant to this Section 5, or the Initial Series D Conversion Price as adjusted pursuant to this Section 5, as the case may be.
(i) In case the Corporation shall at any time or from time to time after the Original Series D Issue Date (A) pay a dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine the outstanding shares of Common Stock into a smaller number of shares or (D) issue by reclassification of the shares of Common Stock any shares of Capital Stock of the Corporation, then, and in each such case, the Current Conversion Price in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Series D Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation which such holder would have owned or have been entitled to receive after the happening of any of the events, described above, had such shares of Series D Preferred Stock been
surrendered for conversion immediately prior to the happening of such
event or the record date therefor, whichever is earlier. An adjustment
made pursuant to this clause (i) shall become effective (x) in the case
of any such dividend or distribution, immediately after the close of
business on the record date for the determination of holders of shares
of Common Stock entitled to receive such dividend or distribution, or
(y) in the case of such subdivision, reclassification or combination,
at the close of business on the day upon which such corporate action
becomes effective. No adjustment shall be made pursuant to this clause
(i) in connection with any transaction to which paragraph (b) below
applies.
(ii) In case the Corporation shall at any time or from time to
time after the Original Series D Issue Date declare, order, pay or make
a dividend or other distribution (including, without limitation, any
distribution of stock or other securities or property or rights or
warrants to subscribe for securities of the Corporation or any of its
subsidiaries by way of dividend or spinoff), on its Common Stock, other
than dividends or distributions of shares of Common Stock which are
referred to in clause (i) of this paragraph (a), then, and in each such
case, provision shall be made so that the holders of shares of Series D
Preferred Stock shall receive, upon conversion thereof or at such
earlier time as the Board of Directors may specify, in addition to the
number of shares of Common Stock receivable thereupon, the amount of
securities or property that they would have received had their Series D
Preferred Stock been converted into Common stock immediately prior to
such event and had thereafter, during the period from such event to and
including the date such Series D Preferred Stock is converted, retained
such securities or other property receivable by them as aforesaid
during such period giving application to all adjustments called for
during such period. No adjustment shall be made pursuant to this clause
(ii) in connection with any transaction to which paragraph (b) applies.
(iii) If the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution and shall thereafter, and before such dividend or distribution is paid or delivered to stockholders entitled thereto, legally abandon its plan to pay or deliver such dividend or distribution, then no adjustment in the Current Conversion Price then in effect shall be made by reason of the taking of such record, and any such adjustment previously made as a result of the taking of such record shall be reversed.
(iv) If any event occurs as to which, in the opinion of the Board of Directors (including any directors elected solely by holders, of the Series D Preferred Stock), the provisions of this Section 5 are not strictly applicable or if strictly applicable would not fairly protect the rights of the holders of the Series D Preferred Stock in accordance with the essential intent and principles of such provisions, the Board of Directors (including any directors elected solely by holders of the Series D Preferred Stock) shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights of the holders of the Series D Preferred Stock.
(b) Good Faith. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of Section 4 and this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series D Preferred Stock against impairment.
6. Voting Rights.
The holders of outstanding shares of Series D Preferred Stock shall be entitled to vote together with the holders of shares of Common Stock, as a single class, on all matters on which holders of Common Stock are entitled to vote, with each share of Series D Preferred Stock voting on an as-if-converted to Common Stock basis. The holders of outstanding shares of Series D Preferred Stock shall not otherwise be entitled to vote on any matters, except (a) as expressly required by law, (b) as provided in the Stockholders Agreement or (c) as otherwise provided herein.
7. Certain Remedies. Any registered holder of Series D Preferred Stock may proceed to protect and enforce its rights and the rights of any other holders of Series D Preferred Stock with any and all remedies available at law or in equity.
EXHIBIT 3.3
BYLAWS
OF
UNIVERSAL TECHNICAL INSTITUTE INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington. County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors shall be held in the City of Phoenix, State of Arizona, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year 1998, shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which they shall elect by a vote in
accordance with the certificate incorporation, a board of directors, and transact such other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment in for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is
required, in which case such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of incorporation each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board shall be Four (4). The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, through less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the
failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the board.
Section 7. Special meetings of the board may be called by the President on four (4) days' notice to each director by mail or 48 hours' notice to each director either personally or by telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director, in which case special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of the sole director.
Section 8. At all meetings of the board a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation; provided further, that if there are three (3) directors present, they must act unanimously. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors
or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee,
shall have the power or authority in reference to amending the certificate of incorporation adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of incorporation or bylaw, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be elected by the Board of Directors and shall include a President and a Secretary. The Board of Directors may elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board of Directors may also elect a Treasurer and/or one or more Vice Presidents, Assistant Secretaries
and Assistant Treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual meeting of stockholders shall elect a President and a Secretary and may also elect Vice Presidents and a Treasurer.
Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their successors are chosen and qualified. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he shall be present. He shall have and may exercise such powers as are, from time to time, assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he shall be present. He shall have and may exercise such powers as are, from time to time, assigned to him by the Board and as may be provided by law.
THE PRESIDENT AND VICE PRESIDENT
Section 8. The President shall be the chief executive officer of the corporation and in the absence of the Chairman and Vice Chairman of the Board he shall preside at all meetings of the stockholders and the Board of Directors. He shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation.
Section 10. In the absence of the President or in the event of his inability or refusal to act, the Vice President, if any, (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.
Section 12. The Assistant Secretary, or, if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the corporation.
Section 15. If required by the Board of Directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such survey or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
Section 16. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the Chairman or Vice Chairman of the Board of Directors, or the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, certifying the number of shares owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of stock or more than one series of any class the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed of affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall indemnify its officers, directors, employees and agents to the full extent permitted by the General Corporation Law of Delaware. Expenses incurred by a director of the Corporation in defending a civil or criminal action, suit or proceeding by reason of the fact that he is or was a director of the Corporation (or was serving at the Corporation's request as a director or officer of another corporation) shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized by relevant sections of the General Corporation Law of Delaware.
ARTICLE VIII
AMENDMENT
Section 1. These bylaws may be altered, amended or repeated or new bylaws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the certificate of incorporation at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal bylaws is conferred upon the Board of Directors by the certificate of incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws.
Exhibit 3.4
AMENDED AND RESTATED
BYLAWS
OF
UNIVERSAL TECHNICAL INSTITUTE, INC.
A DELAWARE CORPORATION
[Effective ___________, 2003]
TABLE OF CONTENTS
Page ---- 1. MEETINGS OF STOCKHOLDERS........................................................... 1 1.1. Annual Meeting................................................................ 1 1.2. Special Meetings.............................................................. 1 1.3. Place and Time of Meetings.................................................... 1 1.4. Notice of Meeting; Waiver of Notice........................................... 1 1.5. Quorum; Voting; Validation of Meeting......................................... 2 1.6. Adjourned Meeting; Notice..................................................... 3 1.7. Voting........................................................................ 4 1.8. Record Date for Stockholder Notice............................................ 4 1.9. Proxies....................................................................... 5 1.10. List of Stockholders....................................................... 5 1.11. Notice of Stockholder Nominee.............................................. 6 1.12. Stockholder Proposals...................................................... 7 1.13. Public Disclosure; Conduct of Nominations and Proposals by Stockholders............................................................... 8 1.14. Meeting Required........................................................... 8 1.15. Organization............................................................... 8 1.16. Inspectors of Election..................................................... 9 2. BOARD OF DIRECTORS................................................................. 10 2.1. Number, Qualification, Election and Term of Directors......................... 10 2.2. Quorum and Manner of Acting................................................... 11 2.3. Place of Meetings............................................................. 11 2.4. Annual and Regular Meetings................................................... 11 2.5. Special Meetings.............................................................. 11 2.6. Notice of Meetings; Waiver of Notice.......................................... 11 2.7. Board or Committee Action Without a Meeting................................... 12 2.8. Participation in Board or Committee Meetings by Conference Telephone.......... 12 2.9. Resignation and Removal of Directors.......................................... 12 2.10. Vacancies.................................................................. 13 2.11. Compensation............................................................... 13 2.12. Notice to Members of the Board of Directors................................ 13 2.13. Organization............................................................... 14 3. COMMITTEES......................................................................... 14 3.1. Audit Committee............................................................... 14 3.2. Compensation Committee........................................................ 14 3.3. Corporate Governance and Nominating Committee................................. 14 3.4. Other Committees.............................................................. 15 3.5. Meetings and Action of Committees............................................. 15 3.6. Election Pursuant to Section 141(c)(2)........................................ 15 |
4. OFFICERS........................................................................... 15 4.1. Number; Security.............................................................. 15 4.2. Election; Term of Office; Salaries............................................ 16 4.3. Subordinate Officers.......................................................... 16 4.4. Resignation and Removal of Officers........................................... 16 4.5. Vacancies..................................................................... 16 4.6. Chairman of the Board......................................................... 16 4.7. Vice Chairman of the Board.................................................... 16 4.8. Chief Executive Officer....................................................... 17 4.9. President..................................................................... 17 4.10. Vice President............................................................. 17 4.11. Secretary.................................................................. 17 4.12. Treasurer.................................................................. 18 4.13. Chief Financial Officer.................................................... 19 5. BUSINESS COMBINATION............................................................... 19 5.1. Vote Required For Certain Business Combinations............................... 19 5.2. Business Combination Combinations Requiring Only Majority Stockholder Approval.......................................................... 20 5.3. Definitions................................................................... 21 5.4. Fiduciary Obligations......................................................... 24 5.5. Deliberation By Directors..................................................... 24 5.6. Amendment..................................................................... 25 6. SHARES............................................................................. 25 6.1. Shares of the Corporation..................................................... 25 6.2. Special Designation on Certificates........................................... 25 6.3. Lost, Stolen, Destroyed and Mutilated Certificates............................ 26 6.4. Stock Records................................................................. 26 6.5. Transfers..................................................................... 26 6.6. Regulations Governing Issuance and Transfers of Shares........................ 26 6.7. Transfer Agents and Registrars................................................ 27 6.8. Record Date for Purposes Other Than Notice and Voting......................... 27 6.9. Stock Repurchases............................................................. 27 7. ELECTION OF CERTAIN STATE LAWS..................................................... 28 7.1. Election Regarding Certain State Anti-Takeover Laws........................... 28 8. MISCELLANEOUS...................................................................... 28 8.1. Seal.......................................................................... 28 8.2. Fiscal Year................................................................... 28 8.3. Voting of Shares in Other Corporations........................................ 28 8.4. Checks; Drafts; Evidences of Indebtedness..................................... 29 8.5. Corporate Contracts and Instruments; How Executed............................. 29 8.6. Construction; Definitions..................................................... 29 8.7. Provisions Additional to Provisions of Law.................................... 29 8.8. Provisions Contrary to Provisions of Law...................................... 29 |
8.9. Amendments.................................................................... 29 8.10. Indemnification and Insurance.............................................. 30 |
AMENDED AND RESTATED
BYLAWS
OF
UNIVERSAL TECHNICAL INSTITUTE, INC.
Effective ___________, 2003
1. MEETINGS OF STOCKHOLDERS.
1.1. Annual Meeting. The annual meeting of stockholders of the corporation (the "Corporation") shall be held on such date and at such time fixed from time to time by the board of directors (the "Board"). The business to be transacted at the meeting shall be the election of directors and any other proper business as may be brought before the meeting. Any previously scheduled annual meeting of the stockholders may be postponed by resolution of the Board upon public notice given on or prior to the date previously scheduled for such annual meeting of stockholders.
1.2. Special Meetings. Subject to the rights of the holders of any series of preferred stock under the Certificate of Incorporation, as amended or restated, of the Corporation (the "Certificate of Incorporation"), special meetings of the stockholders may be called by (i) the Chairman of the Board, if there be one, (ii) a committee that is duly designated by the Board and shall be called by the Secretary by written request, or (iii) by resolution adopted by the affirmative vote of a majority of the Board. Only business related to the purposes set forth in the notice of the meeting may be transacted at a special meeting.
1.3. Place and Time of Meetings. Meetings of the stockholders may be held in or outside Delaware at the place and time specified by the Board; provided that the Board may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the "Delaware General Corporation Law").
1.4. Notice of Meeting; Waiver of Notice.
(a) Written or printed notice of each meeting of stockholders shall be given by or at the direction of the Secretary or the Chief Executive Officer of the Corporation to each stockholder entitled to vote at the meeting, except that (a) it shall not be necessary to give notice to any stockholder who properly waives notice before or after the meeting, whether in writing or by electronic transmission or otherwise, and (b) no notice of an adjourned meeting need be given except when required under Section 1.6 of these Bylaws or by law. Each notice of a meeting shall be given, personally or by mail or, as provided below, by means of electronic transmission, not less than ten (10) nor more than sixty (60) days before the meeting and shall state the time and place of the meeting, or if held by remote communications, the means of remote communication by which
stockholders and proxy holders may be deemed to be present in person and vote at
such meeting, and unless it is the annual meeting, shall state at whose
direction or request the meeting is called and the purposes for which it is
called. The attendance of any stockholder at a meeting, without protesting at
the beginning of the meeting that the meeting is not lawfully called or
convened, shall constitute a waiver of notice by him or her. Any previously
scheduled meeting of stockholders may be postponed, and (unless the Certificate
of Incorporation otherwise provides) any special meeting of stockholders may be
canceled, by resolution of the Board upon public disclosure (as defined in
Section 1.13(a)) given on or prior to the date previously scheduled for such
meeting of stockholders.
(b) Without limiting the manner by which notice otherwise may be
given effectively to stockholders, any notice to a stockholder may be given by a
form of electronic transmission consented to by the stockholder to whom the
notice is given. Any such consent shall be revocable by the stockholder by
written notice to the Corporation. Any such consent shall be deemed revoked (1)
if the Corporation is unable to deliver by electronic transmission two
consecutive notices given by the Corporation in accordance with such consent and
(2) such inability becomes known to the Secretary or an Assistant Secretary of
the Corporation or to the transfer agent, or other person responsible for the
giving of notice; provided, however, the inadvertent failure to treat such
inability as a revocation shall not invalidate any meeting or other action. For
purposes of these Bylaws, "electronic transmission" means any form of
communication, not directly involving the physical transmission of paper, that
creates a record that may be retained, retrieved and reviewed by a recipient
thereof, and that may be directly reproduced in paper form by such a recipient
through an automated process.
(c) Notice shall be deemed given, if mailed, when deposited in the United States mail with postage prepaid, if addressed to a stockholder at his or her address on the Corporation's records. Notice given by electronic transmission shall be deemed given: (1) if by facsimile, when directed to a number at which the stockholder has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (3) if by posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) by any other form of electronic transmission, when directed to the stockholder.
(d) An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given, whether by a form of electronic transmission or otherwise, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
1.5. Quorum; Voting; Validation of Meeting.
(a) The holders of a majority in voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the person presiding over the meeting or (ii) the stockholders by the vote of the holders of a majority of the stock, present in person or represented by proxy shall have power to adjourn the meeting in accordance with Section 1.6 of these Bylaws.
(b) When a quorum is present at any meeting, a plurality of the votes present in person or represented by proxy and entitled to vote on the election of a director shall be sufficient to elect directors, subject to the rights of the holders of preferred stock to elect directors under specified circumstances pursuant to the Certificate of Incorporation. On all other matters, the vote of the holders of a majority of the stock having voting power on such matter present in person or represented by proxy shall decide any question brought before such meetings, unless the question is one upon which, by express provision of the laws of the State of Delaware or of the Certificate of Incorporation or these Bylaws, a vote of a greater number or voting by classes is required, in which case such express provision shall govern and control the decision of the question.
(c) If a quorum is initially present, the stockholders may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken is approved by a majority of the stockholders initially constituting the quorum.
(d) The transactions of any meeting of stockholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy.
1.6. Adjourned Meeting; Notice.
(a) Any stockholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the voting power of the shares represented at that meeting, either in person or by proxy. In the absence of a quorum, no other business may be transacted at that meeting except as provided in Section 1.5 of these Bylaws.
(b) When any meeting of stockholders, either annual or special, is adjourned to another time or place or means of remote communication, notice need not be given of the adjourned meeting if the time and place, if any, thereof, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken. However, if a new record date for the adjourned meeting is fixed or if the adjournment is for more than thirty (30) days from the date set for the original meeting, then notice of the adjourned meeting shall be given. Notice of any such adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Section 1.4 of these Bylaws. At any adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting.
1.7. Voting.
(a) The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 1.8 of these Bylaws, subject to the provisions of Sections 217 and 218 of the Delaware General Corporation Law (relating to voting rights of fiduciaries, pledgors and joint owners, and to voting trusts and other voting agreements).
(b) Except as may be otherwise provided in the Certificate of Incorporation, by these Bylaws or as required by law, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder which has voting power upon the matter in question.
(c) Any stockholder entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or, except when the matter is the election of directors, may vote the remaining shares against the proposal; but if the stockholder fails to specify the number of shares which the stockholder is voting affirmatively or otherwise indicates how the number of shares to be voted affirmatively is to be determined, it will be conclusively presumed that the stockholder's approving vote is with respect to all shares which the stockholder is entitled to vote.
(d) Voting need not be by ballot unless requested by a stockholder at the meeting or ordered by the chairman of the meeting; however, all elections of directors shall be by written ballot, unless otherwise provided in the Certificate of Incorporation; provided, that if authorized by the Board, a written ballot may be submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxyholder.
1.8. Record Date for Stockholder Notice.
(a) For purposes of determining the stockholders entitled to notice of any meeting or to vote thereat, the Board may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting, and in such event only stockholders of record on the date so fixed are entitled to notice and to vote, notwithstanding any transfer of any shares on the books of the Corporation after the record date, except as otherwise provided in the Certificate of Incorporation, by these Bylaws, by agreement or by applicable law.
(b) If the Board does not so fix a record date, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting unless the Board
fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than thirty (30) days from the date set for the original meeting.
(d) The record date for any other lawful purpose shall be as provided in Section 6.8 of these Bylaws.
1.9. Proxies. Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy filed with the Secretary of the Corporation. A written proxy may be in the form of a telegram, cablegram, or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram, or other means of electronic transmission was authorized by the person. No such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the Delaware General Corporation Law. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by filing another duly executed proxy bearing a later date with the Secretary of the Corporation.
A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is received by the Secretary of the Corporation.
1.10. List of Stockholders. Not less than 10 days prior to the date of any meeting of stockholders, the Secretary of the Corporation shall prepare a complete list of stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of such stockholder; provided, that the Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. For a period of not less than 10 days prior to the meeting, the list shall be available during ordinary business hours for inspection by any stockholder for any purpose germane to the meeting. During this period, the list shall be kept either (1) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting or (2) during ordinary business hours, at the principal place of business of the Corporation. If the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.
1.11. Notice of Stockholder Nominee. Only persons who are nominated in accordance with the procedures set forth in this paragraph shall be eligible for election by the stockholders as directors of the Corporation. Nominations of persons for election to the Board may be made at a meeting of stockholders (a) by or at the direction of the Board, or (b) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation entitled to vote for the election of directors at such meeting who complies with the procedures set forth in this paragraph. Such nominations by any stockholder shall be made pursuant to timely notice in proper written form to the Secretary of the Corporation in accordance with this paragraph. To be timely, a stockholder's notice must be delivered to or mailed to and received by the Secretary at the principal executive offices of the Corporation not less than 90 days nor more than 120 days in advance of the first anniversary of the preceding year's annual meeting; provided, however, that in the event that (i) no annual meeting was held in the previous year or (ii) the date of the annual meeting has been changed by more than 30 days from the date of the previous year's meeting, or in the event of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first. In no event shall the public disclosure of an adjournment or postponement of a stockholders meeting commence a new time period for the giving of a stockholders notice as described above. To be in proper written form, such stockholders' notice to the Secretary shall set forth in writing (a) as to each person whom such stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (or any successor thereto) (the "Exchange Act"), including, without limitation, such person's written consent to being named in the proxy statement as a nominee and to serving as director if elected as well as (i) such person's name, age, business address and residence address, (ii) his or her principal occupation or employment, (iii) the class and number of shares of the Corporation that are beneficially owned by such person, and (iv) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder; and (b) as to such stockholder (i) the name and address, as they appear on the Corporation's books, of such stockholder and the beneficial owner, if any, on whose behalf the nomination is made, and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder and the beneficial owner, if any, on whose behalf the nomination is made, and any material interest of such stockholder and owner. At the request of the Board, any person nominated by the Board for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election by the stockholders as a director unless nominated in accordance with the procedures set forth in the Bylaws of the Corporation. The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws of
the Corporation, and if he or she shall so determine, he or she shall so declare at the meeting that the defective nomination shall be disregarded.
1.12. Stockholder Proposals. At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board. At any annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise properly brought before the meeting by or at the direction of the Board, or (c) by any stockholder who complies with the procedures set forth in this paragraph. For business properly to be brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder's notice must be delivered to or mailed to and received by the Secretary at the principal executive offices of the Corporation not less than 90 days nor more than 120 days in advance of the first anniversary of the preceding year's annual meeting; provided, however, that in the event that (1) no annual meeting was held in the previous year or (2) the date of the annual meeting has been changed by more than 30 days from the date of the previous year's meeting, not later than the close of business on the tenth day following the day on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first. In no event shall the public disclosure of an adjournment or postponement of a stockholders meeting commence a new time period for the giving of a stockholders notice as described above. To be in proper written form, such stockholder's notice to the Secretary shall set forth in writing as to each matter such stockholder proposed to bring before the annual meeting (a) a brief description of the business desired to be brought before the meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (c) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment) and the reasons for conducting such business at the meeting, (d) the class and number of shares of the Corporation which are owned beneficially by such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, (e) any material interest in such business of the stockholder or the beneficial owner, if any, on whose behalf the proposal is made, (f) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Exchange Act in such stockholder's capacity as a proponent of a stockholder proposal, (g) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business, and (h) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to approve or adopt the proposal or (2) otherwise to solicit proxies from stockholders in support of such proposal. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal at an annual meeting in compliance with Rule 14a-8
(or any successor thereof) promulgated under the Exchange Act and such stockholder's proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this paragraph. The chairman of an annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting in accordance with the provisions of this paragraph, and, if he or she should so determine, he or she shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.
1.13. Public Disclosure; Conduct of Nominations and Proposals by Stockholders.
(a) For purposes of Sections 1.4(a), 1.11 and 1.12 hereof, "public disclosure" shall mean disclosure in (i) a press release released by the Corporation to the Dow Jones News Service, Associated Press, Reuters or comparable national news service, (ii) on the Corporation's website, or (iii) in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(b) Notwithstanding the foregoing provisions of these Sections 1.11 and 1.12, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the Corporation to present a nomination or business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.
(c) Notwithstanding the foregoing provisions of Sections 1.11 and 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in Sections 1.11 and 1.12. Nothing in Sections 1.11 and 1.12 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of preferred stock to elect directors under specified circumstances pursuant to the Certificate of Incorporation.
1.14. Meeting Required. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, such vote may only be taken at an annual or special meeting with prior notice, except as provided in the Certificate of Incorporation. Stockholders shall not have the power to act by means of a written consent.
1.15. Organization.
(a) Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his or her absence by the Vice Chairman of the Board, if any, or in his or her absence, by the Chief Executive Officer, if any, or in his or her absence by a
chairman of the meeting, which chairman must be an officer or director of the Corporation and must be designated as chairman of the meeting by the Board. The Secretary, or in his or her absence an Assistant Secretary, or in his or her absence a person whom the person presiding over the meeting shall appoint, shall act as secretary of the meeting and keep a record of the proceedings thereof.
(b) The Board shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem appropriate. Subject to such rules and regulations of the Board, if any, the person presiding over the meeting shall have the right and authority to convene and adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of the person presiding over the meeting, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted proxies and such other persons as the person presiding over the meeting shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting and matters which are to be voted on by ballot. The person presiding over the meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if the person presiding over the meeting should so determine and declare, any such matter or business shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.
1.16. Inspectors of Election. Before any meeting of stockholders, the Board may, and shall if required by law, appoint one or more inspectors of election, who may be employees of the Corporation, to act at the meeting or its adjournment and to make a written report thereof. If any person appointed as inspector fails to appear or fails or refuses to act, then the person presiding over the meeting may, and upon the request of any stockholder or a stockholder's proxy, shall appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies and ballots;
(b) receive votes and ballots, including, if applicable, votes and ballots submitted by means of electronic transmission;
(c) hear and determine all challenges and questions in any way arising in connection with the right to vote;
(d) determine when the polls shall close;
(e) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspector or inspectors;
(f) certify their determination of the number of shares of the Corporation represented at the meeting and such inspectors' count of all votes and ballots, which certification and report shall specify such other information as may be required by law; and
(g) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.
Each inspector of election shall perform his or her duties
impartially, in good faith, to the best of his or her ability and as
expeditiously as is practical, and before entering upon the discharge of his or
her duties, shall take and sign an oath to execute faithfully the duties of
inspector of election with strict impartiality and according to the best of his
or her ability. In determining the validity and counting of proxies and ballots
cast at any meeting of stockholders of the Corporation, the inspectors may
consider such information as is permitted by applicable law. If there are three
(3) or more inspectors of election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. Any report or certificate made by the inspectors of election is prima facie
evidence of the facts stated therein.
2. BOARD OF DIRECTORS.
2.1. Number, Qualification, Election and Term of Directors. The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute, the Certificate of Incorporation or these Bylaws directed or required to be exercised or done exclusively by the stockholders. Subject to the rights of the holders of any series of preferred stock, the number of directors may be fixed or changed from time to time by resolution of a majority of the entire Board; provided the number shall be no less than three (3) and no more than nine (9), or, if the number is not fixed, the number shall be seven (7). No reduction in the number of directors shall have the effect of shortening the term of any incumbent director, and when so fixed, such number shall continue to be the authorized number of directors until changed by the Board by vote as aforesaid. The directors shall be divided into three (3) classes, Class I, Class II and Class III, each class to be as nearly equal in number as possible. The term of office of each director shall be until the third annual meeting following his or her election and until the election and qualification of his or her successor; provided, however, the directors first serving as Class I directors shall serve for a term expiring at the annual meeting next following September 30, 2003, the directors first serving as Class II directors shall serve for a term expiring at the second annual meeting next following September 30, 2003, and the directors first serving as Class III directors shall serve for a term expiring at the third annual meeting next following September 30, 2003. As used in these Bylaws, the term
"entire Board" means the total number of directors which the Corporation would have if there were no vacancies on the Board.
2.2. Quorum and Manner of Acting.
(a) A majority of the entire Board shall constitute a quorum for the transaction of business at any meeting, except as provided in Section 2.10 of these Bylaws. In the absence of a quorum a majority of the directors present may adjourn any meeting from time to time until a quorum is present. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the Board, except as provided in Section 5.1 of these Bylaws and subject to the provisions of the Certificate of Incorporation and applicable law.
(b) A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
2.3. Place of Meetings. Meetings of the Board may be held in or outside Delaware.
2.4. Annual and Regular Meetings. Annual meetings of the Board for
the election of officers and consideration of other matters shall be held either
(a) without notice immediately after the annual meeting of stockholders and at
the same place, or (b) as soon as practicable after the annual meeting of
stockholders, on notice as provided in Section 2.6 of these Bylaws. Regular
meetings of the Board may be held without notice and, unless otherwise specified
by the Board, shall be held in accordance with a schedule and at such locations
as determined from time to time by the Board, provided no less than five (5)
such meetings shall beheld each year. If the day fixed for a regular meeting is
a legal holiday, the meeting shall be held on the next business day.
2.5. Special Meetings. Special meetings of the Board may be called by the Chairman of the Board, the Chief Executive Officer or by a majority of the directors in office.
2.6. Notice of Meetings; Waiver of Notice. Notice of the time and place of each special meeting of the Board, and of each annual meeting not held immediately after the annual meeting of stockholders and at the same place, shall be given to each director in advance of the time set for such meeting as provided herein; provided, that if the meeting is to be held at the principal executive offices of the Corporation, the notice need not specify the place of the meeting. Except for amendments to the Bylaws, as provided under Section 8.9, notice of a special meeting need not state the purpose or purposes for which the meeting is called and, unless indicated in the notice thereof, any and all business may be transacted at a special meeting. Notice need not be given to any director who submits a signed waiver of notice before or after the meeting or who attends the meeting without protesting at the beginning of the meeting the transaction of any business because the meeting was not lawfully called or convened. Notice of any adjourned meeting need not be given, other than by announcement at the meeting at
which the adjournment is taken unless the meeting is adjourned for more than
twenty-four (24) hours. If the meeting is adjourned for more than twenty-four
(24) hours, then notice of the time and place of the adjourned meeting shall be
given before the adjourned meeting takes place, in the manner specified herein
to the directors who were not present at the time of adjournment. Notice of a
special meeting may be given by any one or more of the following methods and the
method used need not be the same for each director being notified:
(a) written notice sent by mail at least three (3) days prior to the meeting;
(b) personal service at least twenty-four (24) hours prior to the time of the meeting;
(c) telegraphic notice at least twenty-four (24) hours prior to the time of the meeting, said notice to be sent as a straight full-rate telegram;
(d) telephonic notice at least twenty-four (24) hours prior to the time of the meeting; or
(e) facsimile or other means of electronic transmission at least twenty-four (24) hours prior to the time of the meeting.
Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director.
2.7. Board or Committee Action Without a Meeting. Any action required or permitted to be taken by the Board or by any committee of the Board may be taken without a meeting if all of the members of the Board or of the committee individually or collectively consent in writing or by electronic transmission to the adoption of a resolution authorizing the action. Such action by written consent shall have the same force and effect as a unanimous vote of the Board. The resolution and the written consents or electronic transmission or transmissions by the members of the Board or the committee shall be filed with the minutes of the proceeding of the Board or of the committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
2.8. Participation in Board or Committee Meetings by Conference Telephone. Any or all members of the Board or of any committee of the Board may participate in a meeting of the Board or of the committee by means of a conference telephone or other communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at the meeting.
2.9. Resignation and Removal of Directors. Any director may resign at any time by delivering his or her resignation in writing, including by means of electronic transmission, to the President or Secretary of the Corporation, to take effect at the time specified in the resignation; the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. Subject to the Certificate of Incorporation, applicable law and the rights, if any, of the holders of shares of preferred stock then outstanding, any or all of the directors of the Corporation may be removed from office at any time by the stockholders only for cause and only by the affirmative vote of a majority of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors. A director may not be removed by the stockholders at a meeting unless the notice of the meeting states that the purpose, or one of the purposes, of the meeting is the removal of the director. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant thereto unless expressly provided otherwise by such terms.
2.10. Vacancies. Subject to applicable law and the terms of any one or more classes or series of preferred stock, any vacancy on the Board that results from an increase in the number of directors or resulting from the death, resignation, removal from office or any other cause may be filled by a majority of the Board then in office, although less than a quorum, or by a sole remaining director and not by the stockholders. Any director of any class elected to fill a vacancy resulting from an increase in the number of directors of such class shall hold office for a term that shall coincide with the remaining term of that class. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor. The Board may, by the affirmative vote of a majority of the directors then in office, decide to reduce the size of the Board to eliminate an existing vacancy thereon.
2.11. Compensation. The Board is authorized to fix such compensation for directors as it may determine, including a fee and reimbursement of expenses for attendance at any meeting of the directors or committees. A director may also be paid for serving the Corporation, its affiliates or its subsidiaries in other capacities.
2.12. Notice to Members of the Board of Directors. Each member of the Board shall file with the Secretary of the Corporation an address to which mail or telegraphic notices shall be sent, a telephone number to which a telephonic or facsimile notice may be transmitted and, at the sole discretion of a director, such electronic address to which other electronic transmissions may be sent. A notice mailed, telegraphed, telephoned or transmitted by facsimile or other means of electronic transmission in accordance with the instructions provided by the director shall be deemed sufficient notice. Such address or telephone number may be changed at any time and from time to time by a director by giving written notice of such change to the Secretary. Failure on the part of any director to keep an address and telephone number on file with the Secretary (but not including an address for other electronic transmissions) shall automatically constitute a waiver of notice of any regular or special meeting of the Board which might be held during the period of time that such address and telephone number are not on file with the Secretary. A notice shall be deemed to be mailed when deposited in the United States mail, postage
prepaid. A notice shall be deemed to be telegraphed when the notice is delivered to the transmitter of the telegram and either payment or provision for payment is made by the Corporation. Notice shall be deemed to be given by telephone if the notice is transmitted over the telephone to some person (whether or not such person is the director) or message recording device answering the telephone at the number which the director has placed on file with the Secretary. Notice shall be deemed to be given by facsimile or other means of electronic transmission when sent to the telephone number or other address which the director has placed on file with the Secretary.
2.13. Organization. Meetings of the Board shall be presided over by the Chairman of the Board, if any, or in his or her absence by the Vice Chairman of the Board, if any, or in his or her absence by the Chief Executive Officer, if any, or in his or her absence by the President, if any. In the absence of all such directors, a president pro tem chosen by a majority of the directors present shall preside at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the Chairman of the meeting may appoint any person to act as secretary of the meeting.
3. COMMITTEES.
3.1. Audit Committee. The Board by resolution shall designate an Audit Committee consisting of three directors or such number of members as may be specified by the Board, which shall review the internal financial controls of the Corporation, and the integrity of its financial reporting, and have such other powers and duties as the Board determines in accordance with applicable law and regulations. The Board shall adopt a charter, which may be amended from time to time, setting for the powers and duties of the Audit Committee. The members of the Audit Committee shall serve at the pleasure of the Board. All action of the Audit Committee shall be reported to the Board at its next meeting.
3.2. Compensation Committee. The Board by resolution shall designate a Compensation Committee consisting of such number of members as may be specified by the Board, which shall administer the Corporation's compensation plans and have such other powers and duties as the Board determines. The members of the Compensation Committee shall serve at the pleasure of the Board. All action of the Compensation Committee shall be reported to the Board at its next meeting. The Board shall adopt a charter, which may be amended from time to time, setting forth the powers and duties of the Compensation Committee.
3.3. Corporate Governance and Nominating Committee. The Board by resolution shall designate a Corporate Governance and Nominating Committee consisting of such number of members as may be specified by the Board, which shall nominate candidates for election to the Board and have such other powers and duties as the Board determines. The members of the Corporate Governance and Nominating Committee shall serve at the pleasure of the Board. All action of the Corporate Governance and Nominating Committee shall be reported to the Board at its next meeting. The Board shall adopt a Charter, which may be amended from time to time, setting forth the powers and duties of the Corporate Governance and Nominating Committee.
3.4. Other Committees. The Board, by resolution adopted by a majority of the entire Board, may designate other committees of directors of one or more directors, which shall serve at the Board's pleasure and have such powers and duties as the Board determines.
3.5. Meetings and Action of Committees.
(a) The Board may designate one or more directors as alternate members of any committee (other than the Audit Committee), who may replace any absent or disqualified member at any meeting of the committee. Each committee shall keep regular minutes of its meetings and report the same to the Board at its next meeting. Each committee may adopt rules of procedure and shall meet as provided by those rules or by resolutions of the Board.
(b) Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article 2 of these Bylaws, including Section 2.2 (quorum and manner of acting), Section 2.3 (place of meetings), Section 2.4 (annual and regular meetings), Section 2.5 (special meetings), 2.6 (notice of meetings and waiver of notice), Section 2.7 (board or committee action without a meeting), Section 2.8 (participation in Board or committee meetings by conference telephone), Section 2.12 (notice to members of the Board), and Section 2.13 (organization), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the Board and its members; provided, however, (i) that the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee, (ii) that special meetings of committees may also be called by resolution of the Board, (iii) that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee; (iv) that a majority of the members of a committee shall constitute a quorum for the transaction of business at any meeting; and (v) that the affirmative vote of a majority of the members of a committee shall be required to take action in respect of any matter presented to or requiring the approval of the committee.
3.6. Election Pursuant to Section 141(c)(2). By resolution of the Board, the Corporation has elected pursuant to Section 141(c) of the Delaware General Corporation Law to be governed by paragraph (2) of Section 141(c) in respect of committees of the Board.
4. OFFICERS.
4.1. Number; Security. The officers of the Corporation shall consist of a chief executive officer, a president, one or more vice presidents (including executive vice president(s) and senior vice president(s) if the Board so determines), a secretary and a treasurer and a chief financial officer who shall be chosen by the Board and such other officers, including but not limited to a chairman of the Board, a vice chairman of the Board, as the Board shall deem expedient, who shall be chosen in such manner and hold their offices for such terms as the Board may prescribe. Any two or more offices may be held by the same person. The Board may from time to time designate the Chief
Executive Officer, the President or any Executive Vice President as the Chief Operating Officer of the Corporation. Any Vice President, Treasurer or Assistant Treasurer, or Assistant Secretary, respectively, may exercise any of the powers of the President, the Chief Financial Officer, or the Secretary, respectively, as directed by the Board and shall perform such other duties as are imposed upon such officer by the Bylaws or the Board. [The Board may require any officer, agent or employee to give security for the faithful performance of his duties.]
4.2. Election; Term of Office; Salaries. The term of office and salary of each of the officers of the Corporation and the manner and time of the payment of such salaries shall be fixed and determined by the Board and may be altered by said Board from time to time at its pleasure, subject to the rights, if any, of said officers under any contract of employment; provided, that the Board may designate such responsibilities to the Compensation Committee and may also authorize the Chief Executive Officer or the President to establish the salaries of officers appointed pursuant to Section 4.3.
4.3. Subordinate Officers. The Board may appoint subordinate officers (including assistant secretaries and assistant treasurers), agents or employees, each of whom shall hold office for such period and have such powers and duties as the Board determines. The Board may delegate to any officer or to any committee the power to appoint and define the powers and duties of any subordinate officers, agents or employees.
4.4. Resignation and Removal of Officers. Any officer may resign at any time by delivering his resignation in writing to the Chief Executive Officer, President or Secretary of the Corporation, to take effect at the time specified in the resignation; the acceptance of a resignation, unless required by its terms, shall not be necessary to make it effective. Any officer elected or appointed by the Board or appointed by an officer or by a committee may be removed by the Board either with or without cause, and in the case of an officer appointed by an officer or by a committee, by the officer or committee who appointed him or her or by the President.
4.5. Vacancies. A vacancy in any office may be filled for the unexpired term in the manner prescribed in Sections 4.2 and 4.3 of these Bylaws for election or appointment to the office.
4.6. Chairman of the Board. The Chairman of the Board, if such an officer shall be chosen, shall have general supervision, direction and control of the Corporation's business and its officers, and, if present, preside at meetings of the stockholders and the Board and exercise and perform such other powers and duties as may from time to time be assigned to him by the Board or as may be prescribed by these Bylaws. The Chairman of the Board shall report to the Board.
4.7. Vice Chairman of the Board. The Vice Chairman of the Board, if there shall be one, shall, in the case of the absence, disability or death of the Chairman of the Board, exercise all the powers and perform all the duties of the Chairman of the Board.
The Vice Chairman shall have such other powers and perform such other duties as may be granted or prescribed by the Board.
4.8. Chief Executive Officer. Subject to the control of the Board, the Chief Executive Officer of the Corporation shall have general supervision over the business of the Corporation; the powers and duties of the Chief Executive Officer shall be:
(a) To affix the signature of the Corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation, and to sign certificates for shares of capital stock of the Corporation.
(b) To have such other powers and be subject to such other duties as the Board may from time to time prescribe.
4.9. President. The powers and duties of the President are:
(a) To affix the signature of the Corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the President, should be executed on behalf of the Corporation, and to sign certificates for shares of capital stock of the Corporation.
(b) To have such other powers and be subject to such other duties as the Board may from time to time prescribe.
4.10. Vice President. In case of the absence, disability or death of the President, the elected Vice President, or one of the elected Vice Presidents, shall exercise all the powers and perform all the duties of the President. If there is more than one elected vice president, the order in which the elected vice presidents shall succeed to the powers and duties of the president shall be as fixed by the Board. The elected Vice President or elected Vice Presidents shall have such other powers and perform such other duties as may be granted or prescribed by the Board.
Vice presidents appointed pursuant to Section 4.3 shall have such powers and duties as may be fixed by the Chairman of the Board or President, except that such appointed Vice Presidents may not exercise the powers and duties of the president. Each Vice President shall have such powers and duties as the Board or the president assigns to him or her.
4.11. Secretary. The powers and duties of the Secretary are:
(a) To keep a book of minutes at the principal office of the Corporation, or such other place as the Board may order, of all meetings of its directors and stockholders with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at stockholders' meetings and the proceedings thereof.
(b) To keep the seal of the Corporation, if any, and affix the same, if any, to all instruments which may require it.
(c) To keep or cause to be kept at the principal office of the Corporation, or at the office of the transfer agent or agents, a share register, or duplicate share registers, showing the names of the stockholders and their addresses, the number of and classes of shares, and the number and date of cancellation of every certificate surrendered for cancellation.
(d) To keep a supply of certificates for shares of the Corporation, to fill in all certificates issued, and to make a proper record of each such issuance; provided, that so long as the Corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the Corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents.
(e) To transfer upon the share books of the Corporation any and all shares of the Corporation; provided, that so long as the Corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the Corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents, and the method of transfer of each certificate shall be subject to the reasonable regulations of the transfer agent to which the certificate is presented for transfer, and also, if the Corporation then has one or more duly appointed and acting registrars, to the reasonable regulations of the registrar to which the new certificate is presented for registration; and provided, further that no certificate for shares of stock shall be issued or delivered or, if issued or delivered, shall have any validity whatsoever until and unless it has been signed or authenticated in the manner provided in Section 5.1 hereof.
(f) To make service and publication of all notices that may be necessary or proper, and without command or direction from anyone. In case of the absence, disability, refusal, or neglect of the Secretary to make service or publication of any notices, then such notices may be served and/or published by the President or a Vice President, or by any person thereunto authorized by either of them or by the Board or by the holders of a majority of the outstanding shares of the Corporation.
(g) To sign certificates for shares of capital stock of the Corporation.
(h) Generally to do and perform all such duties as pertain to the office of Secretary and as may be required by the Board.
4.12. Treasurer. The Treasurer shall be or shall be under the direction of the Chief Financial Officer of the Corporation, and shall be in charge of the Corporation's books and accounts. Subject to the control of the Board, he or she shall have such other powers and duties as the Board or the President assigns to him or her.
4.13. Chief Financial Officer. The powers and duties of the Chief Financial Officer are:
(a) To supervise the corporate-wide treasury functions and financial reporting to external bodies.
(b) To have the custody of all funds, securities, evidence of indebtedness and other valuable documents of the Corporation and, at the Chief Financial Officer's discretion, to cause any or all thereof to be deposited for account of the Corporation at such depositary as may be designated from time to time by the Board.
(c) To receive or cause to be received, and to give or cause to be given, receipts and acquittances for monies paid in for the account of the Corporation.
(d) To disburse, or cause to be disbursed, all funds of the Corporation as may be directed by the Board, taking proper vouchers for such disbursements.
(e) To render to the Chief Executive Officer and President, and to the Board, whenever they may require, accounts of all transactions and of the financial condition of the Corporation.
(f) Generally to do and perform all such duties as pertain to the office of Chief Financial Officer and as may be required by the Board.
5. BUSINESS COMBINATION.
5.1. Vote Required For Certain Business Combinations.
(a) In addition to any affirmative vote required by law, the Certificate of Incorporation, any agreement with any national securities exchange or otherwise, any "Business Combination" (as hereinafter defined) involving the Corporation shall be subject to approval in the manner set forth in this Article 5.
(b) Except as otherwise expressly provided in Section 5.2 herein, no Business Combination shall be consummated or effected unless such Business Combination shall have been approved by the affirmative vote of the holders of not less than sixty-six and two thirds percent (66-2/3%) of the total voting power of all outstanding shares of voting stock of the Corporation, voting as a single class. Such vote shall be required notwithstanding the fact that no vote for such transaction may be required by law or that approval by some lesser percentage of stockholders may be specified by or pursuant to law, the Bylaws, any agreement with any national securities exchange, or otherwise. Such vote shall be required in addition to any affirmative vote of the holders of any particular class or series of the capital stock of the Corporation required by or pursuant to law, the Certificate of Incorporation or otherwise.
5.2. Business Combination Combinations Requiring Only Majority Stockholder Approval.
(a) The approval required in Section 5.1 hereinabove shall not be required and the provisions of Section 1.5 of these Bylaws relating to the majority vote required for shareholder approval, if applicable, shall apply to any Business Combination, if any of the following conditions are satisfied:
(1) The Business Combination shall have been expressly approved by a majority of the "Continuing Directors" (as hereinafter defined) either in advance of or subsequent to the acquisition of outstanding shares of capital stock of the Corporation that caused the "Interested Person" (as hereinafter defined) involved to become an Interested Person; or
(2) All of the following five conditions have been met:
(i) The aggregate amount of the cash and the "Fair Market Value" (as hereinafter defined) as of the "Consummation Date" (as hereinafter defined) of all property, securities or other consideration to be received per share of capital stock of the Corporation incident to the consummation of such Business Combination by any holder of such stock, other than the Interested Person involved in such Business Combination, is not less than the highest of the following (the requirements of this Section 5.2(a)(2)(i) to be met with respect to all outstanding shares of all classes of the capital stock of the Corporation, whether or not the Interested Person has previously acquired shares of each particular class of such stock):
(A) The "Highest Per Share Price" (as hereinafter defined) or the "Highest Equivalent Price" (as hereinafter defined) paid by such Interested Person in acquiring any holdings of the Corporation's capital stock, plus an amount equivalent to interest compounded annually from the date of such purchase through the Consummation Date at the prime rate of interest as announced from time to time by Bank of America, N.A. (or such other bank as may be selected by a majority of the Continuing Directors), less the aggregate amount of any cash dividends paid and the Fair Market Value as of the date paid of any dividends paid other than in cash on each share of capital stock of the class in question from the date of such purchase through the Consummation Date in an amount up to but not exceeding the amount equivalent to interest as so calculated;
(B) The highest preferential amount per share to which the holders of shares of any class or series of preferred stock are entitled in the event of dissolution or liquidation of the Corporation; or
(C) The Fair Market Value of such shares as of the "Announcement Date" (as hereinafter defined).
(ii) The consideration to be received by holders of outstanding capital stock shall be paid in cash or in the same form as was previously paid in order to acquire such shares of such class of capital stock as are beneficially owned by the
Interested Person. If the Interested Person beneficially owns shares of any class of capital stock of the Corporation which were acquired with varying forms of consideration, the form of consideration to be received by holders of such class of capital stock shall be either cash or the form used to acquire the largest number of shares of such class of capital stock beneficially owned by the Interested Person.
(iii) After such Interested Person has become an Interested Person and prior to the consummation of the Business Combination: (A) except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding preferred stock; (B) there shall have been (i) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Continuing Directors, and (ii) such increase in such annual rate of dividends as is necessary to prevent any such reduction in the event of any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (C) such Interested Person shall not have become the beneficial owner of any additional shares of voting capital stock of the Corporation except as part of the transaction in which it became an Interested Person.
(iv) After such Interested Person has become an Interested Person, such Interested Person shall not have received the benefit, directly or indirectly (except proportionately solely in such Interested Person's capacity as a shareholder of the Corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.
(v) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the "Exchange Act" (as hereinafter defined) and the rules and regulations thereunder (or any subsequent provisions replacing the Exchange Act or such rules and regulations), shall have been mailed to all stockholders of the Corporation at least 30 days prior to the Consummation Date. Such statement shall contain at the front thereof, in a prominent place, a statement by the Continuing Directors of their position on the advisability (or inadvisability) of the proposed Business Combination. Such proxy or information statement shall be required for purposes of this Section 5.2(a)(2) whether or not it is required to be mailed pursuant to the provisions of the Exchange Act (or any subsequent provisions).
5.3. Definitions.
For the purposes of this Article 5:
(a) The term "Business Combination" shall mean (i) any merger, consolidation or exchange of shares of capital stock of the Corporation or any of its subsidiaries (as hereinafter defined) with or into an Interested Person, in each case
irrespective of which corporation or company is to be the surviving entity; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to or with an Interested Person (in a single transaction or a series of related transactions) other than in the ordinary course of business, of all or a substantial part of the assets of the Corporation (including without limitation any securities or assets of a subsidiary of the Corporation) or all or a substantial part of the assets of any of its subsidiaries; (iii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to or with the Corporation or to or with any of its subsidiaries (in a single transaction or a series of related transactions) other than in the ordinary course of business, of all or a substantial part of the assets of an Interested Person; (iv) the issuance or transfer by the Corporation or any of its subsidiaries of any securities of the Corporation or any of its subsidiaries to an Interested Person (other than an issuance or transfer of securities which is effected on a pro rata basis to all stockholders of the Corporation); (v) the acquisition by the Corporation or any of its subsidiaries from an Interested Person of any securities issued by an Interested Person (other than an issuance or transfer of securities which is effected on a pro rata basis to all stockholders of the Interested Person); (vi) any recapitalization or reclassification of shares of any class of capital stock of the Corporation or any merger or consolidation of the Corporation with any of its subsidiaries which would have the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of capital stock of the Corporation (or any securities convertible into any class of such capital stock) owned by any Interested Person; (vii) any merger or consolidation of the Corporation with any of its subsidiaries after which the provisions of this Article 5 of the Certificate of Incorporation shall not appear in the Certificate of Incorporation of the surviving entity; (viii) a plan of partial or complete liquidation or dissolution of the Corporation or spin off or sale of a substantial part of the assets of the Corporation or any of its subsidiaries proposed by or on behalf of an Interested Person; and (ix) any agreement, contract, plan, proposal or other arrangement providing for any of the foregoing.
(b) The term "Continuing Director" shall mean any Director of the Corporation who is not an "Affiliate," "Associate" or nominee of or member of a "Group" with the Interested Person (as such terms are hereinafter defined) and who either (i) held the office of Director prior to the date on which the Interested Person became an Interested Person, or (ii) is designated as a Continuing Director by a majority of the then Continuing Directors.
(c) The term "Interested Person" shall mean any individual, corporation, partnership or other person or entity which, at any time during the period commencing two (2) years prior to the Announcement Date through and including the Consummation Date, is or was a "Beneficial Owner" (as defined in Rule 13d(3) of the General Rules and Regulations under the Exchange Act as in effect on September 4, 2003) of shares of capital stock of the Corporation which, when combined with the shares of capital stock beneficially owned by any "Affiliates" or "Associates" (as defined in Rule 12b(2) of the Exchange Act as in effect on June 30, 2003) of such Interested Person or by other members of a "Group" (as defined in Section 13(d)(3) of the Exchange Act as in effect on June 30, 2003) of which such Interested Person is a member, collectively amount to ten percent (10%) or more of the total voting power of all outstanding shares of voting stock
of the Corporation. The term Interested Person shall also mean any Affiliate or Associate of any such Interested Person and any other member of a Group of which such Interested Person is a member, and shall also mean any person or entity which, upon consummation of a Business Combination, would be such an Affiliate, Associate or Group member. The term Interested Person shall not include the Corporation, any subsidiary of the Corporation, any employee benefit plan of the Corporation or of a subsidiary of the Corporation, or any trustee of or fiduciary with respect to any such plan acting in such capacity.
(d) The term "Consummation Date" shall mean the date on which the Business Combination in question is consummated or effected.
(e) The term "Fair Market Value" shall mean (i) in the case of stock, the highest closing sale price during the 30 day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors, and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Continuing Directors.
(f) The terms "Highest Per Share Price" and "Highest Equivalent Price" shall mean the following. The Highest Per Share Price shall mean the highest price that can be determined to have been paid during the relevant time period by the Interested Person involved for any share or shares of the class or series of capital stock in question. If the Interested Person has not purchased any shares of such class or series of capital stock of the Corporation during the relevant time period, the Highest Equivalent Price shall mean with respect to each class and series of capital stock of the Corporation, the amount determined by a majority of the Continuing Directors, on whatever basis they believe to be appropriate, to be the highest per share price equivalent of the highest price that can be determined to have been paid during the relevant time by the Interested Person involved for any share or shares of any other class or series of capital stock of the Corporation. In determining the Highest Per Share Price and Highest Equivalent Price, all purchases by such Interested Person or any Affiliate, Associate or Group member shall be taken into account regardless whether the shares were purchased before or after such Interested Person became an Interested Person. The Highest Per Share Price and the Highest Equivalent Price shall include any brokerage commissions, transfer taxes and soliciting dealers' fees paid by such Interested Person or any such Affiliate, Associate or Group member with respect to the shares of capital stock of the Corporation, and shall be appropriately adjusted to take into account any subsequent recapitalization, stock split, stock dividend or similar distribution. In the event any Business Combination involving
an Interested Person shall be proposed, the Continuing Directors shall determine the Highest Equivalent Price for each class and series of the capital stock of the Corporation of which there are shares issued and outstanding.
(g) The term "Announcement Date" shall mean the earlier of the date on which a Business Combination is first publicly proposed or announced or the Consummation Date of such Business Combination.
(h) The term "Exchange Act" shall mean the Securities Exchange Act of l934, as amended.
(i) Any corporation of which the Corporation owns, directly or indirectly, fifty percent (50%) or more of its voting stock shall be deemed to be a "subsidiary" of the Corporation.
(j) For the purposes of Section 5.2(a)(2)(i) hereinabove, the term "other consideration to be received" shall include, without limitation, Common Stock or other capital stock of the Corporation retained by stockholders of the Corporation (other than Interested Persons or other parties to such Business Combination) in the event of a Business Combination in which the Corporation is the surviving entity.
(k) Whether or not any proposed sale, lease, exchange, mortgage, pledge, transfer or other disposition of part of the assets of any entity involves a "substantial part" of the assets of such entity shall be conclusively determined by a majority of the Continuing Directors; provided that assets involved in any single transaction or series of related transactions having an aggregate Fair Market Value of more than fifteen percent (15%) of the total consolidated assets of an entity and the other members of the consolidated group, if any, of which it is a part as at the end of such entity's last full fiscal year prior to such determination shall always be deemed to constitute a "substantial part."
(l) An Interested Person shall be deemed to have acquired a share of the capital stock of the Corporation at the time when such Interested Person became the Beneficial Owner thereof.
(m) A majority of the then Continuing Directors shall have the right and power to make, in good faith, any determinations required under this Article 5, including without limitation (i) whether a transaction is a Business Combination, (ii) whether a person is an Interested Person, or (iii) whether the conditions set out in Section 5.2(a)(2) of this Article 5 have been satisfied with respect to any Business Combination.
5.4. Fiduciary Obligations. Nothing contained in this Article 5 shall be construed to relieve any Interested Person from any fiduciary obligation imposed by law.
5.5. Deliberation By Directors. The Directors of the Corporation, when evaluating any proposal or offer which would involve a Business Combination or the merger or consolidation of the Corporation or any of its subsidiaries with another corporation, the sale of all or substantially all of the assets of the Corporation or any of its
subsidiaries, a tender offer or exchange offer for any capital security of the Corporation or any of its subsidiaries or any similar transaction shall give due consideration to all factors they may consider relevant. Such factors may include, without limitation, (a) the financial and managerial resources and future prospects of the other party(s), the legal, economic, environmental and social effects of the proposed transaction on the Corporation's and its subsidiaries' employees, customers, suppliers and other affected persons and entities and on the communities and geographic areas in which the Corporation and its subsidiaries operate or are located, and the effect on any of the businesses and properties of the Corporation and its subsidiaries, and (b) the adequacy, both in amount and form, of the consideration offered in relation not only to the current market price of the Corporation's outstanding securities, but also the current value of the Corporation in a freely negotiated transaction and the Continuing Directors' estimate of the Corporation's future value (including the unrealized value of its properties, assets and prospects) as an independent going concern.
5.6. Amendment The provisions of this Article 5 shall not be amended, altered, changed or repealed nor may any provision inconsistent with any of such provisions be added to these Bylaws unless approved in accordance with Section 8.9 of these Bylaws.
6. SHARES.
6.1. Shares of the Corporation. The shares of the Corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors or by the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, representing the number of shares registered in certificate form. The signatures of any such officers thereon may be facsimiles. The seal of the Corporation shall be impressed, by original or by facsimile, printed or engraved, on all such certificates. The certificate shall also be signed by the transfer agent and a registrar and the signature of either the transfer agent or the registrar may also be facsimile, engraved or printed. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon any such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent, or registrar had not ceased to be such officer, transfer agent, or registrar at the date of its issue.
6.2. Special Designation on Certificates. If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights or each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the Delaware General Corporation Law, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
6.3. Lost, Stolen, Destroyed and Mutilated Certificates. The owner of any stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of any certificate therefor, and the Corporation may issue uncertificated shares or a new certificate for stock in the place of any certificate theretofore issued by it and alleged to have been lost, stolen or destroyed, and the Board may, in its discretion, require the owner of the lost, stolen or destroyed certificate or his or her legal representatives to give the Corporation a bond in such sum, limited or unlimited, and in such form and with such surety or sureties, as the Board shall in its uncontrolled discretion determine, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate, or the issuance of any such new certificate or uncertificated shares. The Board may, however, in its discretion refuse to issue any such new certificate or uncertificated shares except pursuant to legal proceedings under the laws of the State of Delaware in such case made and provided.
6.4. Stock Records. The Corporation or a transfer agent shall keep stock books in which shall be recorded the number of shares issued, the names of the owners of the shares, the number owned by them respectively, whether such shares are represented by certificates or are uncertificated, and the transfer of such shares with the date of transfer.
6.5. Transfers. Transfers of stock shall be made only on the stock transfer record of the Corporation upon surrender of the certificate or certificates being transferred which certificate shall be properly endorsed for transfer or accompanied by a duly executed stock power, except in the case of uncertificated shares, for which the transfer shall be made only upon receipt of transfer documentation reasonably acceptable to the Corporation. Whenever a certificate is endorsed by or accompanied by a stock power executed by someone other than the person or persons named in the certificate, or the transfer documentation for the uncertificated shares is executed by someone other than the holder of record thereof, evidence of authority to transfer same shall also be submitted with the certificate or transfer documentation. All certificates surrendered to the Corporation for transfer shall be canceled.
6.6. Regulations Governing Issuance and Transfers of Shares. The Board shall have the power and authority to make all such rules and regulations as it shall deem expedient concerning the issue, transfer and registration of shares of stock of the Corporation.
6.7. Transfer Agents and Registrars. The Board may appoint, or authorize one or more officers to appoint, one or more transfer agents and one or more registrars.
6.8. Record Date for Purposes Other Than Notice and Voting. For purposes of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted and which shall not be more than sixty (60) days before any such action. In that case, only stockholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date so fixed, except as otherwise provided in the Certificate of Incorporation, by these Bylaws, by agreement or by law. If the Board does not so fix a record date, then the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the applicable resolution.
6.9. Stock Repurchases.
(a) In addition to any affirmative vote of stockholders required
by any provision of law or the Certificate of Incorporation of this Corporation
or by these Bylaws, the Corporation shall not, directly or indirectly, purchase
or agree to purchase any equity security of a class of securities which is
registered pursuant to Section 12 of the Exchange Act issued by the Corporation
form any Person or two or more Persons who act as a partnership, limited
partnership, syndicate, or other group pursuant to any agreement, arrangement,
relationship, understanding or otherwise, whether or not in writing, for the
purpose of acquiring, owning or voting shares of the Corporation, who is the
Beneficial Owner of more than five percent (5%) of the aggregate voting power of
the Corporation, for more than the Average Market Price of the shares, unless
(i) the purchase or agreement to purchase is approved at a meeting of the
stockholders by the affirmative vote of the holders of a majority of the
aggregate voting power of all shares entitled to vote, except that no Interested
Shares shall be entitled to vote on the question of such approval or (ii) the
Corporation makes an offer of at least equal value per share to all holders of
shares of the same class or series and to all holders of any class or series
into which the securities may be converted.
(b) For purposes of this Bylaw, the following definitions apply:
(1) "Average Market Price" shall mean the average closing sale price during the thirty (30) trading days immediately preceding the purchase of the share in question, or if the Person or Persons have commenced a tender offer or have announced an intention to seek control of the Corporation, during the thirty (30) trading days preceding the earlier of the commencement of the tender offer or the making of the announcement, of a share on the composite tape for New York Stock Exchange listed shares or, if the shares are not quoted on the composite tape or not listed on the New York Stock Exchange, on the principal United States securities exchange registered under the Exchange Act on which the shares are listed or, if the share are not listed on any such
exchange, on the National Association of Securities Dealers, Inc. automated quotations national market system or, if the shares are not quoted on the National Association of Securities Dealers, Inc. automated quotations national market system, the average closing bid quotation, during the thirty (30) trading days preceding the purchase of the shares in question of a share on the National Association of Securities Dealers, Inc. automated quotations system or any system then in use, or if the Person or Persons have commenced a tender offer or have announced an intention to seek control of the Corporation, during the thirty (30) trading days preceding the earlier of the commencement of the tender offer or the making of the announcement, except that if no quotation is available, the average market price is the fair market value on the date of purchase of the shares in question of a share as determined in good faith by the Board of Directors of the Corporation.
(2) "Beneficial Owner" shall have the meaning ascribed to it in Rule 13(d)(3) and rule 13(d)(5) of the General Rules and Regulations under the Exchange Act, as in effect on June 30, 2003.
(3) "Interested Shares" shall mean all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors that are beneficially owned by any Person or Persons that is the direct or indirect Beneficial Owner of more than five percent (5%) of the aggregate voting power of the Corporation.
(4) "Person" shall mean any individual, partnership,
firm, corporation, association, trust, unincorporated organization, or other
entity, as well as any syndicate or group deemed to be a Person pursuant to
Section 13(d)(3) of the Exchange Act, as in effect on June 30, 2003, other than
the Corporation or any subsidiary of the Corporation.
7. ELECTION OF CERTAIN STATE LAWS.
7.1. Election Regarding Certain State Anti-Takeover Laws. The Corporation hereby expressly elects not to be governed by Section 203 of the Delaware General Corporation Law. The Corporation also elects not to be governed by A.R.S. Sections 10-2721 through 2743 or Sections 10-2704 through 2706. This election does not apply to any business combination of the Corporation with an interested stockholder whose share acquisition date is on or before the adoption date of these Bylaws.
8. MISCELLANEOUS.
8.1. Seal. The Board shall adopt a corporate seal, which shall be in the form of a circle and shall bear the Corporation's name and the year and state in which it was incorporated.
8.2. Fiscal Year. The Board may determine the Corporation's fiscal year. Until changed by the Board, the Corporation's fiscal year shall be October 1st through September 30th of the following year.
8.3. Voting of Shares in Other Corporations. Shares in other corporations which are held by the Corporation may be represented and voted by the President or a
Vice President of this Corporation or by proxy or proxies appointed by one of them. The Board may, however, appoint some other person to vote the shares.
8.4. Checks; Drafts; Evidences of Indebtedness. From time to time, the Board shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the Corporation, and only the persons so authorized shall sign or endorse those instruments.
8.5. Corporate Contracts and Instruments; How Executed. The Board, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances.
8.6. Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, the term "person" includes both a corporation and a natural person, and the masculine gender includes the feminine gender and vice versa.
8.7. Provisions Additional to Provisions of Law. All restrictions, limitations, requirements and other provisions of these Bylaws shall be construed, insofar as possible, as supplemental and additional to all provisions of law applicable to the subject matter thereof and shall be fully complied with in addition to the said provisions of law unless such compliance shall be illegal.
8.8. Provisions Contrary to Provisions of Law. Any article, section, subsection, subdivision, sentence, clause or phrase of these Bylaws which upon being construed in the manner provided in Section 8.7 hereof, shall be contrary to or inconsistent with any applicable provisions of law, shall not apply so long as said provisions of law shall remain in effect, but such result shall not affect the validity or applicability of any other portions of these Bylaws, it being hereby declared that these Bylaws would have been adopted and each article, section, subsection, subdivision, sentence, clause or phrase thereof, irrespective of the fact that any one or more articles, sections, subsections, subdivisions, sentences, clauses or phrases is or are illegal.
8.9. Amendments. These Bylaws may be repealed, altered or amended, or substituted bylaws may be adopted at any time, only by resolution duly adopted by a majority of the full Board, except for certain provisions concerning take-over or change of control, which may only be amended with the affirmative vote of two-thirds of the members of the Board, as prescribed in the Certificate of Incorporation.
Whenever an amendment or new bylaw is adopted, it shall be copied in the book of bylaws with the original bylaws, in the appropriate place. If any bylaw is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or the filing of the operative written consent(s) shall be stated in said book.
8.10. Indemnification and Insurance.
(a) Generally.
(1) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to serve at the request of the Corporation as a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer (which, for purposes hereof, shall include a trustee or similar capacity) of another Corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity.
(2) The Corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to serve at the request of the Corporation as an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity.
(3) The indemnification provided by this subsection (a) shall be from and against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the indemnitee or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, but shall only be provided if the indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action, suit or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
(4) Notwithstanding the foregoing provisions of this subsection (a), in the case of an action or suit by or in the right of the Corporation to procure a judgment in its favor (i) the indemnification provided by this subsection (a) shall be limited to expenses (including attorneys' fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit, and (ii) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless, and only to the extent that, the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.
(5) The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.
(b) Good Faith.
(1) For purposes of any determination under this Bylaw, a director or officer or, if applicable, employee or agent shall be deemed to have acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, to have had no reasonable cause to believe that his or her conduct was unlawful, if his or her action is based on information, opinions, reports and statements, including financial statements and other financial data, in each case prepared or presented by:
(i) one or more officers or employees of the Corporation whom the director, officer, employee or agent reasonably believed to be reliable and competent in the matters presented;
(ii) counsel, independent accountants or other persons as to matters which the director, officer, employee or agent reasonably believed to be within such person's professional competence; and
(iii) with respect to a director, a committee of the Board upon which such director does not serve, as to matters within such Committee's designated authority, which committee the director reasonably believes to merit confidence; so long as, in each case, the director acts without knowledge that would cause such reliance to be unwarranted.
(2) The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal proceeding, that he or she had reasonable cause to believe that his or her conduct was unlawful.
(3) The provisions of this paragraph (b) shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth by the Delaware General Corporation Law.
(c) Advancement of Expenses. The Corporation shall advance, prior to the final disposition of any proceeding, promptly following request therefor, all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under this Bylaw or otherwise. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (d) of this Bylaw, no advance shall be made by the Corporation if a determination is made (1) by the Board of directors by a majority vote of a quorum consisting of directors who were not parties to the proceeding, or (2) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Corporation.
(d) Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and officers under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the Corporation and the director or officer. Any right to indemnification or advances granted by this Bylaw to a director or officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his or her claim. The Corporation shall be entitled to raise as a defense to any such action that the claimant has not met the applicable standards of conduct that make it permissible for the Corporation to indemnify the claimant for the amount claimed. Neither the failure of the Corporation (including its Board of directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has or has not met the applicable standard of conduct.
(e) Non-Exclusivity of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding office. The Corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the Delaware General Corporation Law.
(f) Survival of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
(g) Insurance. The Corporation may, but shall not be obligated to, maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any loss indemnified pursuant to this Bylaw, regardless whether the Corporation would have the power to indemnify such person against such loss indemnified pursuant to this Bylaw under the Delaware General Corporation Law.
(h) Amendments. Any repeal or modification of this Bylaw shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the Corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director and officer to the full extent not prohibited by any applicable portion of this Bylaw that shall not have been invalidated, or by any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys' fees and related disbursements, other out-of-pocket costs and reasonable compensation for time spent by the indemnified party for which he or she is not otherwise compensated by the Corporation or any third party, provided that the rate of compensation and estimated time involved is approved by the Board, which approval shall not be unreasonably withheld), actually and reasonably incurred by the indemnified party in connection with either the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Bylaw, Section 145 or otherwise.
(3) The term the "corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Bylaw with respect to the resulting or surviving corporation as he or
she would have with respect to such constituent corporation if its separate existence had continued.
(4) References to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Bylaw.
Exhibit 4.3
August ___, 2003
Universal Technical Institute, Inc.
10851 North Black Canyon Road, Suite 600
Phoenix, Arizona 85029
Credit Suisse First Boston LLC
Banc of America Securities LLC
Jefferies & Company, Inc.
SunTrust Capital Markets, Inc.
Thomas Weisel Partners LLC
c/o Credit Suisse First Boston LLC Eleven Madison Avenue New York, NY 10010-3629 |
Dear Sirs:
As an inducement to the Underwriters to execute the Underwriting Agreement, pursuant to which an offering will be made that is intended to result in the establishment of a public market for Common Stock (the "SECURITIES") of Universal Technical Institute, Inc., and any successor (by merger or otherwise) thereto, (the "COMPANY"), the undersigned hereby agrees that from the date hereof and until 180 days after the public offering date set forth on the final prospectus used to sell the Securities (the "PUBLIC OFFERING DATE") pursuant to the Underwriting Agreement, to which you are or expect to become parties, the undersigned will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of Securities or securities convertible into or exchangeable or exercisable for any shares of Securities, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Securities, whether any such aforementioned transaction is to be settled by delivery of the Securities or such other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse First Boston LLC. In addition, the undersigned agrees that, without the prior written consent of Credit Suisse First Boston LLC, it will not, during the period commencing on the date hereof and ending 180 days after the Public Offering Date, make any demand for or exercise any right with respect to, the registration of any Securities or any security convertible into or exercisable or exchangeable for the Securities.
The exercise of options granted to the undersigned or the conversion or exchange, prior to or upon effectiveness of the registration statement filed with the Securities and Exchange Commission in connection with the offer and sale of the Securities, of shares of the Company's Series A, B, C and D preferred stock currently outstanding and held by the undersigned into shares of Securities will not be subject to or prohibited by this Agreement. Any Securities received upon such exercise of options or upon any conversion or exchange of such shares of preferred stock will nevertheless be subject to this Agreement. Any Securities acquired by the undersigned in the open market or in any issuer directed share program will not be subject to this Agreement. A transfer of Securities to a family member or trust may be made, provided the transferee agrees to be bound in writing by the terms of this Agreement.
In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of shares of Securities if such transfer would constitute a violation or breach of this Agreement.
This Agreement shall be binding on the undersigned and the successors, heirs, personal representatives and assigns of the undersigned. This Agreement shall lapse and become null and void if the Public Offering Date shall not have occurred on or before January 31, 2004.
Very truly yours,
...............................
Name:
EXHIBIT 10.1
EXECUTION COPY
SECOND AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT
Dated as of March 29, 2002
among
UTI HOLDINGS, INC.,
as Borrower,
-and-
UNIVERSAL TECHNICAL INSTITUTE, INC.,
as Parent,
with
ANTARES CAPITAL CORPORATION,
JP MORGAN CHASE BANK,
as Trustee of the Antares Funding Trust
created under a Trust Agreement dated as of November 30, 1999,
-and-
THE ROYAL BANK OF SCOTLAND PLC,
as Lenders
-and-
HELLER FINANCIAL, INC.,
as Agent and as a Lender
TABLE OF CONTENTS
PAGE SECTION 1 AMOUNTS AND TERMS OF LOANS.................................................................... 2 1.1 Loans......................................................................................... 2 (A) Term Loan A and Term Loan B.......................................................... 2 (B) Revolving Loans...................................................................... 4 (C) Letters of Credit and Risk Participation Agreements.................................. 7 (1) Maximum Amount.............................................................. 7 (2) Reimbursement............................................................... 8 (3) Conditions of Issuance of Letters of Credit or Risk Participation Agreements 8 (4) Request for Lender Letters of Credit or Risk Participation Agreements....... 9 (5) Confirmation of Obligations................................................. 9 (D) Notes................................................................................ 9 1.2 Interest and Related Fees..................................................................... 9 (A) Interest............................................................................. 9 (B) Commitment Fee....................................................................... 12 (C) Risk Participation Fee............................................................... 12 (D) Computation of Interest and Related Fees............................................. 13 (E) Default Rate of Interest............................................................. 13 (F) Excess Interest...................................................................... 13 (G) LIBOR Rate Election.................................................................. 13 1.3 Other Fees and Expenses....................................................................... 14 (A) Certain Fees......................................................................... 14 (B) Agency Fee........................................................................... 14 (C) LIBOR Breakage Fee................................................................... 14 (D) Expenses and Attorneys Fees.......................................................... 15 1.4 Payments...................................................................................... 15 1.5 Prepayments................................................................................... 16 (A) Voluntary Prepayment of Term Loans................................................... 16 (B) Prepayments from Excess Cash Flow.................................................... 16 (C) Prepayments from Asset Dispositions.................................................. 16 (D) Prepayment from Issuance of Securities............................................... 16 (E) Omitted.............................................................................. 17 (F) Application of Proceeds.............................................................. 17 |
TABLE OF CONTENTS
(CONTINUED)
PAGE (G) Risk Participation Liability......................................................... 17 1.6 Term of the Agreement......................................................................... 17 1.7 Loan Accounts................................................................................. 17 1.8 Yield Protection.............................................................................. 18 (A) Capital Adequacy and Other Adjustments............................................... 18 (B) Increased LIBOR Funding Costs........................................................ 18 1.9 Taxes......................................................................................... 19 (A) No Deductions........................................................................ 19 (B) Changes in Tax Laws.................................................................. 19 (C) Foreign Lenders...................................................................... 20 1.10 Optional Prepayment/Replacement of Lender in Respect of Increased Costs....................... 20 SECTION 2 AFFIRMATIVE COVENANTS......................................................................... 21 2.1 Compliance With Laws and Contractual Obligations.............................................. 21 2.2 Maintenance of Properties; Insurance.......................................................... 22 2.3 Inspection; Lender Meeting.................................................................... 23 2.4 Corporate Existence, Etc...................................................................... 23 2.5 Environmental Matters......................................................................... 23 2.6 Further Assurances............................................................................ 24 2.7 Use of Proceeds............................................................................... 24 SECTION 3 NEGATIVE COVENANTS............................................................................ 25 3.1 Indebtedness.................................................................................. 25 3.2 Liens and Related Matters..................................................................... 26 (A) No Liens............................................................................. 26 (B) No Negative Pledges.................................................................. 27 (C) No Restrictions on Subsidiary Distributions to Borrower.............................. 27 3.3 Investments; Joint Ventures................................................................... 27 3.4 Contingent Obligations........................................................................ 29 3.5 Restricted Junior Payments.................................................................... 30 3.6 Restriction on Fundamental Changes............................................................ 32 3.7 Disposal of Assets or Subsidiary Stock........................................................ 32 3.8 Transactions with Affiliates.................................................................. 33 3.9 Management Fees and Compensation.............................................................. 33 3.10 Conduct of Business........................................................................... 34 3.11 Changes Relating to Subordinated Indebtedness and Other Agreements............................ 34 |
TABLE OF CONTENTS
(CONTINUED)
PAGE 3.12 Fiscal Year................................................................................... 34 3.13 Press Releases; Public Offering Materials..................................................... 34 3.14 Subsidiaries.................................................................................. 35 SECTION 4 FINANCIAL COVENANTS/REPORTING................................................................. 35 4.1 Capital Expenditure Limits.................................................................... 35 4.2 Omitted....................................................................................... 35 4.3 EBITDA........................................................................................ 35 4.4 Fixed Charge Coverage......................................................................... 36 4.5 Total Interest Coverage....................................................................... 37 4.6 Omitted....................................................................................... 38 4.7 Total Indebtedness to TTM EBITDA Ratio........................................................ 38 4.8 Financial Statements and Other Reports........................................................ 39 (A) Monthly Financials................................................................... 39 (B) Year-End Financials.................................................................. 39 (C) Compliance Certificate............................................................... 39 (D) Omitted.............................................................................. 39 (E) Accountants' Reports................................................................. 39 (F) Omitted.............................................................................. 40 (G) DOE Letter of Credit Requirement..................................................... 40 (H) Additional Deliveries................................................................ 40 (I) Appraisals........................................................................... 40 (J) Projections.......................................................................... 40 (K) SEC Filings and Press Releases....................................................... 41 (L) Events of Default, Etc............................................................... 41 (M) Litigation........................................................................... 41 (N) Supplemented Schedules; Notice of Corporate Changes.................................. 41 (O) Other Information.................................................................... 42 4.9 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement............ 42 SECTION 5 REPRESENTATIONS AND WARRANTIES................................................................ 42 5.1 Disclosure.................................................................................... 42 5.2 No Material Adverse Effect.................................................................... 43 5.3 No Default.................................................................................... 43 5.4 Organization, Powers, Capitalization and Good Standing........................................ 43 |
TABLE OF CONTENTS
(CONTINUED)
PAGE (A) Organization and Powers.............................................................. 43 (B) Capitalization....................................................................... 44 (C) Binding Obligation................................................................... 44 (D) Qualification........................................................................ 44 5.5 Financial Statements.......................................................................... 44 5.6 Intellectual Property......................................................................... 44 5.7 Investigations, Audits, Etc................................................................... 45 5.8 Employee Matters.............................................................................. 45 5.9 Solvency...................................................................................... 45 5.10 Regulatory Compliance of Holdings and its Subsidiaries........................................ 45 5.11 Leases and Contracts; Indebtedness............................................................ 46 5.12 Fees.......................................................................................... 46 5.13 Existing Loan Documents....................................................................... 46 5.14 Margin Regulations............................................................................ 47 5.15 Environmental Matters......................................................................... 47 5.16 Subordinated Indebtedness and Seller Subordinated Notes....................................... 47 SECTION 6 DEFAULT, RIGHTS AND REMEDIES.................................................................. 48 6.1 Event of Default.............................................................................. 48 (A) Payment.............................................................................. 48 (B) Default in Other Agreements.......................................................... 48 (C) Breach of Certain Provisions......................................................... 48 (D) Breach of Warranty................................................................... 48 (E) Other Defaults Under Loan Documents.................................................. 48 (F) Involuntary Bankruptcy; Appointment of Receiver, Etc................................. 48 (G) Voluntary Bankruptcy; Appointment of Receiver, Etc................................... 49 (H) Governmental Liens................................................................... 49 (I) Judgment and Attachments............................................................. 49 (J) Dissolution.......................................................................... 49 (K) Solvency............................................................................. 49 (L) Injunction........................................................................... 49 (M) ERISA; Pension Plans................................................................. 49 (N) Environmental Matters................................................................ 50 (O) Invalidity of Loan Documents......................................................... 50 (P) Damage; Strike; Casualty............................................................. 50 |
TABLE OF CONTENTS
(CONTINUED)
PAGE (Q) Licenses and Permits................................................................. 50 (R) Failure of Security.................................................................. 50 (S) Business Activities.................................................................. 50 (T) Change in Control.................................................................... 50 (U) Loss of Funding, Accreditation....................................................... 51 (V) Subordinated Indebtedness............................................................ 51 6.2 Suspension of Commitments..................................................................... 51 6.3 Acceleration.................................................................................. 52 6.4 Performance by Agent.......................................................................... 52 6.5 Application of Proceeds....................................................................... 52 SECTION 7 CONDITIONS TO LOANS; CONDITIONS TO EFFECTIVENESS.............................................. 53 7.1 Conditions to Initial Loans under this Agreement.............................................. 53 7.2 Conditions to All Loans....................................................................... 54 7.3 Conditions to Effectiveness................................................................... 55 SECTION 8 ASSIGNMENT AND PARTICIPATION.................................................................. 55 8.1 Assignments and Participations in Loans and Notes............................................. 55 8.2 Agent......................................................................................... 57 (A) Appointment.......................................................................... 57 (B) Nature of Duties..................................................................... 58 (C) Rights, Exculpation, Etc............................................................. 58 (D) Reliance............................................................................. 59 (E) Indemnification...................................................................... 59 (F) Heller Individually.................................................................. 59 (G) Successor Agent...................................................................... 60 (1) Resignation................................................................. 60 (2) Appointment of Successor.................................................... 60 (3) Successor Agent............................................................. 60 (H) Collateral Matters................................................................... 60 (1) Release of Collateral....................................................... 60 (2) Confirmation of Authority; Execution of Releases............................ 61 (3) Absence of Duty............................................................. 61 (I) Agency for Perfection................................................................ 61 (J) Dissemination of Information......................................................... 62 (K) Notice of Default.................................................................... 62 |
TABLE OF CONTENTS
(CONTINUED)
PAGE 8.3 Amendments, Consents and Waivers for Certain Actions.......................................... 62 8.4 Set Off and Sharing of Payments............................................................... 62 8.5 Disbursement of Funds......................................................................... 63 8.6 Disbursements of Advances; Payment............................................................ 63 (A) Revolving Loan Advances, Payments and Settlements; Related Fee Payments.............. 63 (B) Term Loan Payments; Related Fee Payments............................................. 65 (C) Availability of Lender's Pro Rata Share.............................................. 65 (D) Return of Payments................................................................... 65 SECTION 9 MISCELLANEOUS................................................................................. 65 9.1 Indemnities................................................................................... 65 9.2 Amendments and Waivers........................................................................ 66 9.3 Notices....................................................................................... 66 9.4 Failure or Indulgence Not Waiver; Remedies Cumulative......................................... 68 9.5 Marshalling; Payments Set Aside............................................................... 68 9.6 Severability.................................................................................. 68 9.7 Lenders' Obligations Several; Independent Nature of Lenders' Rights........................... 68 9.8 Headings...................................................................................... 68 9.9 Applicable Law................................................................................ 68 9.10 Successors and Assigns........................................................................ 69 9.11 No Fiduciary Relationship..................................................................... 69 9.12 Construction.................................................................................. 69 9.13 Confidentiality; Dissemination of Information................................................. 69 9.14 Consent to Jurisdiction and Service of Process................................................ 70 9.15 Waiver of Jury Trial.......................................................................... 70 9.16 Survival of Warranties and Certain Agreements................................................. 71 9.17 Entire Agreement.............................................................................. 71 9.18 Counterparts.................................................................................. 71 9.19 Schedules and Exhibits........................................................................ 71 9.20 Consent of Lenders............................................................................ 71 9.21 No Novation................................................................................... 71 9.22 Historical References......................................................................... 72 SECTION 10 DEFINITIONS................................................................................... 72 10.1 Certain Defined Terms......................................................................... 72 |
TABLE OF CONTENTS
(CONTINUED)
PAGE 10.2 Other Definitional Provisions................................................................. 87 |
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit 1.2(G) - LIBOR Loan Request Exhibit 1.5(B) - Excess Cash Flow Computation Exhibit 3.2(A) - Form of Intercompany Note Exhibit 3.2(B) - Form of Intercompany Note (Borrower) Exhibit 4.8(C) - Compliance Certificate Exhibit 10.1(A) - Form of Amended and Restated Term Note A Form of Second Amended and Restated Term Note B Form of Revolving Note Exhibit 10.1(B) - Form of Lender Addition Agreement Exhibit 10.1(C) - Omitted Exhibit 10.1(D) - Form of Management Note Exhibit 10.1(E) - Form of Intercompany Intercreditor Letter Exhibit 10.1(F) - Form of Intercompany Security Agreement Exhibit 10.1(G) - Form of NTT/PTA Release SCHEDULES Schedule A - Exiting Lenders Schedule 1.2(E) - Excluded Defaults Schedule 2 - Purchased Securities Schedule 3.1(D) - Indebtedness Schedule 3.2(A)(10) - Liens Schedule 3.4 - Contingent Obligations Schedule 3.8 - Affiliate Transactions Schedule 3.9 - Management Fees and Compensation Schedule 3.10 - Business Description Schedule 5.3 - Violations, Conflicts, Breaches and Defaults Schedule 5.4(A) - Jurisdictions of Organization Schedule 5.4(B) - Capitalization Schedule 5.4(D) - Foreign Qualifications Schedule 5.6 - Intellectual Property Schedule 5.7 - Investigations and Audits Schedule 5.8 - Employee Matters Schedule 5.11 - Noncontravention Schedule 5.16 - Subordinated Indebtedness and Seller Subordinated Notes Schedule 7.1 - List of Closing Documents Schedule 10.1(A) - Pro Forma Schedule 10.1(B) - September 1999 Capital Contribution |
INDEX OF DEFINED TERMS
DEFINED TERM DEFINED IN SECTION ACCST Section 10.1 Accounting Changes Section 4.9 Accrediting Agency Section 10.1 Adjustment Date Section 1.2(A) Affected Lender Section 1.10 Affiliate Section 10.1 Agent Section 10.1 Agreement Section 10.1 Amended and Restated Credit Agreement Recitals Amendment and Restatement Date Section 10.1 Amendment No. 1 Section 10.1 Amendment No. 1 Date Section 10.1 Amendment No. 2 Section 10.1 Amendment No. 2 Date Section 10.1 Amendment No. 3 Section 10.1 Annuity Trust Section 10.1 Antares Preamble Antares Trustee Preamble Applicable Date Exhibit 4.8(C) Asset Disposition Section 10.1 Asset Purchase Agreement Section 10.1 Assigning Lender Section 8.3(C) Availability Section 10.1 Bankruptcy Code Section 10.1 Base Rate Section 1.2(A) Base Rate Loans Section 1.2(A) Base Rate Margin Section 1.2(A) Basel Accord Section 1.8 Borrower Preamble Business Day Section 10.1 Business Unit Disposition Section 10.1 Calculation Period Section 1.2(A) Capex Limit Section 4.1 Capital Expenditure Section 4.1 Cash Collateral Agreement Section 10.1 Cash Equivalents Section 3.3 Certificate of Exemption Section 1.9(C) Certifications and Accreditations Section 10.1 CEG Closing Note Section 10.1 CERCLA Section 10.1 (Def. of "Environmental Laws") Charlesbank Section 10.1 CHC/CEG Assets Section 10.1 Closing Date Section 10.1 Cohort Default Rate Section 10.1 Collateral Section 10.1 Collateralized DOE Letter of Credit Section 1.1(B) Common Stock Section 10.1 Companies Section 10.1 Contingent Obligation Section 3.4 Continuing Lenders Preamble |
INDEX OF DEFINED TERMS
(CONTINUED)
DEFINED TERM DEFINED IN SECTION Contractual Obligations Section 10.1 Convertible Preferred Stock Section 10.1 Convertible Preferred Stock Purchase Agreement Section 10.1 Current Stockholders Section 10.1 Daily Loan Balance Section 8.6(A)(3)(a) Daily Interest Amount Section 8.6(A)(3)(c) Daily Interest Rate Section 8.6(A)(3)(b) Default Section 10.1 DOE Section 10.1 DOE Exposure Section 1.1(B) DOE Issuer Section 1.1(B) (Def. of "DOE Letter of Credit") DOE Letter of Credit Section 1.1(B) DOE Risk Participation Liability Section 1.1(B) DOE Sublimit Section 1.1(B)(2) DOE Working Capital Loan Section 1.1(B) EBITDA Exhibit 4.8(C) Employment Agreements Section 10.1 Environmental Laws Section 10.1 Environmental Liabilities Section 10.1 Environmental Permits Section 10.1 ERISA Section 10.1 Event of Default Section 6.1 Excess Cash Flow Exhibit 4.8(C) Existing Lenders Recitals Existing Revolving Loans Section 1.1(B) Exiting Lenders Recitals Expiry Date Section 10.1 First Amended and Restated Credit Agreement Section 10.1 Fiscal Quarter Section 10.1 Fixed Charge Coverage Exhibit 4.8(C) Foreign Lender Section 1.9(C) Freely Available Cash and Cash Equivalents Section 10.1 Funding Date Section 7.2 GAAP Section 10.1 Governmental Authority Section 10.1 Hazardous Material Section 10.1 Heller Preamble Holdings Preamble Holdings Subordinated Indebtedness Section 10.1 Holdings Subordinated Indebtedness (JZEP) Section 10.1 Holdings Subordinated Indebtedness (NTT) Section 10.1 Holdings Subordinated Indebtedness (Sellers) Section 10.1 Holdings Subordinated Indebtedness Documents Section 10.1 Holdings Subordinated Indebtedness Documents (MCIT) Section 10.1 Holdings Subordinated Indebtedness Documents (NTT) Section 10.1 Incremental Term Loan A Section 1.1(A) Indebtedness Section 10.1 Indemnitees Section 9.1 Institution Section 10.1 |
INDEX OF DEFINED TERMS
(CONTINUED)
DEFINED TERM DEFINED IN SECTION Institution Subsidiary Section 10.1 Intellectual Property Section 5.6 Intercompany Intercreditor Letter Section 10.1 Intercompany Note Section 3.1(B)(2) Intercompany Security Agreement Section 10.1 Interest Expense Exhibit 4.8(C) Interest Period Section 1.2(A) Interest Ratio Section 8.6(A)(3)(d) Interest Settlement Date Section 8.6(A)(3) Investment Section 3.3 IRC Section 10.1 Jordan Section 10.1 Jordan Group Section 10.1 JZEP Section 10.1 Lender(s) Section 10.1 Lender Addition Agreement Section 10.1 Lender Letter of Credit Section 1.1(C) Letter of Non-Exemption Section 1.9(C) LIBOR Section 1.2(A) LIBOR Breakage Fee Section 1.3(C) LIBOR Loans Section 1.2(A) LIBOR Margin Section 1.2(A) Lien Section 10.1 Loan(s) Section 10.1 Loan Documents Section 10.1 Loan Party Section 10.1 Loan Year Section 10.1 Management Agreement Section 10.1 Management Note Section 10.1 Material Adverse Effect Section 10.1 Maximum DOE Limit Section 1.1(B) Maximum Non-DOE Limit Section 1.1(B) Maximum Revolver Loan Balance Section 1.1(B) MCIT Section 10.1 Modification No. 1 Section 10.1 Modification No. 2 Section 10.1 Modification No. 3 Section 10.1 Nascar Sale/Leaseback Section 10.1 Necessary Regulatory Authorities Section 10.1 Net Proceeds Section 10.1 (Def. of "Asset Disposition") Newco 2nd Recital New Lender Recitals 1999 Subscription Agreement Section 3.11 Non-Collateralized DOE Letter of Credit Section 1.1(B) Non-DOE Exposure Section 1.1(B) Non-DOE Letter of Credit Section 1.1(B) Non-DOE Risk Participation Liability Section 1.1(B) Non-DOE Sublimit Section 1.1(B)(1) Non-DOE Working Capital Loan Section 1.1(B) |
INDEX OF DEFINED TERMS
(CONTINUED)
DEFINED TERM DEFINED IN SECTION Non-Institution Subsidiary Section 10.1 Normalized Capital Expenditures Section 10.1 Note(s) Section 10.1 NTT Section 10.1 NTT/PTA Release Section 10.1 NTT Purchase Agreement Section 10.1 NTT Purchase Transaction Section 10.1 NTT Related Transactions Section 10.1 Obligations Section 10.1 Old CEG Section 10.1 Old CHC Section 10.1 Original Credit Agreement 1st Recital Original Term Loan B Section 1.1(A) Original Transaction Date Section 10.1 Penske Section 10.1 Penske/Charlesbank Related Transactions Section 10.1 Penske/Charlesbank Related Transaction Documents Section 10.1 Permitted Acquisition Section 10.1 Permitted Encumbrances Section 3.2(A) Person Section 10.1 Pledge Agreement Schedule 7.1 Preferred Stock Section 10.1 Pre-Acquisition Target EBITDA Section 10.1 Pro Forma Section 10.1 Projections Section 10.1 Pro Rata Share Section 10.1 Program Participation Agreement Section 10.1 PTA Section 10.1 Purchase Agreement (MCIT) Section 10.1 RBS Preamble Real Estate Section 10.1 Register Section 8.1 Regulations Section 10.1 Related Fund Section 8.1 Related Transactions Section 10.1 Related Transactions Documents Section 10.1 Release Section 10.1 Remaining Subordinated Indebtedness Section 10.1 Remaining Subordinated Indebtedness Documents Section 10.1 Replacement Lender Section 1.10(A) Required Lending Multiple Section 1.1(B) Required Revolving Lenders Section 10.1 Requisite Lenders Section 10.1 Responsible Officer Section 10.1 Restricted Junior Payment Section 3.5 Revolving Loan Commitment Section 1.1(B) Revolving Loans Section 1.1(B) Revolving Note Section 10.1 Risk Participation Agreement Section 1.1(C) |
INDEX OF DEFINED TERMS
(CONTINUED)
DEFINED TERM DEFINED IN SECTION Risk Participation Liability Section 1.1(B) Salomon Section 8.1 Scheduled Installments Section 1.1(A) Second Amendment and Restatement Date Section 10.1 Securities Purchase Agreement Section 10.1 Security Documents Section 10.1 Seller Subordinated Notes Section 10.1 Sellers Section 10.1 September 1999 Capital Contribution Section 10.1 Series C Preferred Stock Section 10.1 Settlement Date Section 8.6(A)(2) Sharp Section 10.1 Statement Section 4.8(B) Start-Up Expenses Section 10.1 Stockholders Agreement Section 10.1 Subject Subordinated Indebtedness Section 10.1 Subordinated Indebtedness Section 10.1 Subordinated Indebtedness Documents Section 10.1 Subsidiary Section 10.1 Target Business Section 10.1 (Def. of "Permitted Acquisition") Target Person Section 10.1 (Def. of "Permitted Acquisition") Tax Liabilities Section 1.9(A) Tax-Sharing Agreement Section 10.1 Term Loan A Section 1.1(A) Term Loan B Section 1.1(A) Term Loan B Prepayment Section 7.1(G) Term Loans Section 1.1(A) Term Note Section 10.1 Third Amendment Section 10.1 Third Amendment Date Section 10.1 Title IV Section 10.1 Total DOE Exposure Section 1.1(B) Total Indebtedness Exhibit 4.8(C) Total Interest Coverage Exhibit 4.8(C) Total Risk Participation Liability Section 1.1(B) Trusts Section 10.1 TTM EBITDA Section 1.2(A) UCC Section 10.1 Underlying DOE Letter of Credit Section 10.1 (Def. of "DOE Letter of Credit") Unitrust Section 10.1 UTI Related Transactions Section 1.1(B) UTI Transactions Section 10.1 White Note Section 10.1 Wholly-Owned Subsidiary Section 10.1 |
SECOND AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT
This SECOND AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT is dated as of March 29, 2002 and entered into by and among UTI HOLDINGS INC., an Arizona corporation ("BORROWER"), with its principal place of business at 3002 North 27th Avenue, Phoenix, Arizona 85017 and UNIVERSAL TECHNICAL INSTITUTE, INC., a Delaware corporation ("HOLDINGS"), with its principal place of business at 3002 North 27th Avenue, Phoenix, Arizona 85017, and ANTARES CAPITAL CORPORATION, a Delaware corporation ("ANTARES"), as a Lender (as hereinafter defined), JP MORGAN CHASE BANK, a New York banking corporation, as Trustee of the Antares Funding Trust created under a Trust Agreement dated as of November 30, 1999 ("ANTARES TRUSTEE"), as a Lender, and THE ROYAL BANK OF SCOTLAND PLC, a bank organized under the laws of Scotland ("RBS"), as a Lender, and HELLER FINANCIAL, INC., a Delaware corporation (in its individual capacity "HELLER"), with offices at 500 West Monroe Street, Chicago, Illinois 60661, as a Lender, and as agent for all Lenders, and such other persons executing this Agreement as Lenders. All terms used in the Recitals but not defined therein are used as defined in Section 10 of this Agreement.
R E C I T A L S:
WHEREAS, Borrower, Holdings, Agent and certain financial institutions, as lenders (the "EXISTING LENDERS"), are parties to an Amended and Restated Credit Agreement, dated as of June 30, 1998 as amended, by Amendment No. 1, dated as of September 30, 1998, Amendment No. 2, dated as of September 30, 1998, Amendment No. 3, dated as of September 30, 1999 and Amendment No. 4, dated as of December 11, 2001 (the "ORIGINAL CREDIT AGREEMENT" and as amended and restated by this Second Amendment and Restatement, this "AMENDED AND RESTATED CREDIT AGREEMENT" or this "AGREEMENT");
WHEREAS, the lenders identified on Schedule A (the "EXITING LENDERS") shall immediately prior to the effectiveness of this Agreement, assign all amounts owing to them under the Original Credit Agreement (other than the proceeds of the Term Loan B Prepayment and interest payable in connection therewith) to New Lenders (as hereinafter defined) and/or Continuing Lenders and all of their rights and obligations as a "Lender" under and as defined in the Original Credit Agreement to New Lenders and/or Continuing Lenders and cease to be parties to the Original Credit Agreement (but shall continue to be entitled to receive the proceeds of the Term Loan B Prepayment and interest payable in connection therewith);
WHEREAS, certain parties to this Agreement identified as "New Lenders" on the signature pages hereto ("NEW LENDERS") shall concurrently with the effectiveness of this Agreement become a party to the Original Credit Agreement by executing and delivering one or more counterparts of this Agreement and by becoming an assignee of an Exiting Lender and/or Continuing Lender;
WHEREAS, certain of the lenders party to the Original Credit Agreement identified as such on the signature pages hereto (the "CONTINUING LENDERS") shall continue as Lenders under this Agreement [and may assign rights and obligations under the Original Credit Agreement to one or more other Continuing Lenders or New Lenders and/or accept assignments of rights and obligations under the Original Credit Agreement from one or more other Continuing Lenders or New Lenders]; and
WHEREAS, Holdings and Borrower have requested Agent, the New Lenders and the
Continuing Lenders (collectively and severally, as more particularly defined in
Section 10, "LENDERS") to amend and restate the Original Credit Agreement to,
inter alia, provide for an increase of the Revolving Loan Commitment to
$20,000,000, extend the terms of the Revolving Loan Commitment, Term Loan A and
Term Loan B, provide for a prepayment of Term Loan B in the principal amount of
$24,788,500.00 and increase Term Loan A by $6,906,250.00; and
WHEREAS, Agent and Lenders are willing, subject to and upon the terms and conditions herein set forth, to so amend and restate the Original Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Borrower, Lenders and Agent hereby agree that the Original Credit Agreement (including, without limitation, the exhibits and schedules thereto) is, subject to the satisfaction of the conditions set forth in subsection 7.3 hereof, amended and restated in its entirety by this Agreement.
SECTION 1
AMOUNTS AND TERMS OF LOANS
1.1 LOANS. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrower and Holdings contained herein:
(A) TERM LOAN A AND TERM LOAN B. (a) As of the date hereof and immediately prior to the Second Amendment and Restatement Date,
(1) the outstanding principal balance of the term loan ("TERM LOAN A") in the original principal amount of $22,000,000 and originally advanced hereunder on January 23, 1998, is $13,093,750 and remains outstanding and the Borrower agrees that such principal amount is owing without defense, offset, recoupment or deduction and
(2) the outstanding principal balance of the term loan ("TERM LOAN B") in the original principal amount of $18,000,000 advanced hereunder on January 23, 1998 and of an additional $38,500,000 advanced hereunder on June 30, 1998 is $54,788,500.00, and the Borrower agrees that such principal amount is owing without defense, offset, recoupment or deduction,
(3) subject to the terms and conditions hereof, on the Second Amendment and Restatement Date, the Lenders severally and not jointly agree to lend to the Borrower their respective Pro Rata Shares ("INCREMENTAL TERM LOAN A") of an additional amount, to be added to and to become a part of Term Loan A equal to $6,906,250.00, and
(4) after giving effect to the advance of Incremental Term Loan A, the outstanding principal balance of Term Loan A will be $20,000,000 and after giving effect to the Term Loan B Prepayment, (as hereinafter defined) the outstanding principal balance of Term Loan B shall be $30,000,000 (Term Loan A and Term Loan B, hereinafter sometimes referred to individually as a "TERM LOAN" and collectively as "TERM LOANS").
Borrower shall repay Term Loan A and Term Loan B through periodic payments on the dates and in the amounts indicated below (together with the installments referred to in subsection 1.1(B)(2), "SCHEDULED INSTALLMENTS").
TERM LOAN A:
-------------------------------------------------- DATE SCHEDULED INSTALLMENT -------------------------------------------------- June 30, 2002 $ 425,000 -------------------------------------------------- September 30, 2002 $ 425,000 -------------------------------------------------- December 31, 2002 $ 425,000 -------------------------------------------------- March 31, 2003 $ 425,000 -------------------------------------------------- June 30, 2003 $ 675,000 -------------------------------------------------- September 30, 2003 $ 675,000 -------------------------------------------------- December 31, 2003 $ 675,000 -------------------------------------------------- March 31, 2004 $ 675,000 -------------------------------------------------- June 30, 2004 $ 925,000 -------------------------------------------------- September 30, 2004 $ 925,000 -------------------------------------------------- December 31, 2004 $ 925,000 -------------------------------------------------- March 31, 2005 $ 925,000 -------------------------------------------------- June 30, 2005 $1,300,000 -------------------------------------------------- September 30, 2005 $1,300,000 -------------------------------------------------- December 31, 2005 $1,300,000 -------------------------------------------------- March 31, 2006 $1,300,000 -------------------------------------------------- June 30, 2006 $1,675,000 -------------------------------------------------- September 30, 2006 $1,675,000 -------------------------------------------------- December 31, 2006 $1,675,000 -------------------------------------------------- March 31, 2007 $1,675,000 -------------------------------------------------- |
TERM LOAN B:
-------------------------------------------------- DATE SCHEDULED INSTALLMENT -------------------------------------------------- June 30, 2002 $ 75,000 -------------------------------------------------- September 30, 2002 $ 75,000 -------------------------------------------------- December 31, 2002 $ 75,000 -------------------------------------------------- March 31, 2003 $ 75,000 -------------------------------------------------- June 30, 2003 $ 75,000 -------------------------------------------------- September 30, 2003 $ 75,000 -------------------------------------------------- December 31, 2003 $ 75,000 -------------------------------------------------- March 31, 2004 $ 75,000 -------------------------------------------------- June 30, 2004 $ 75,000 -------------------------------------------------- September 30, 2004 $ 75,000 -------------------------------------------------- December 31, 2004 $ 75,000 -------------------------------------------------- March 31, 2005 $ 75,000 -------------------------------------------------- June 30, 2005 $ 75,000 -------------------------------------------------- September 30, 2005 $ 75,000 -------------------------------------------------- December 31, 2005 $ 75,000 -------------------------------------------------- March 31, 2006 $ 75,000 -------------------------------------------------- June 30, 2006 $ 75,000 -------------------------------------------------- September 30, 2006 $ 75,000 -------------------------------------------------- December 31, 2006 $ 75,000 -------------------------------------------------- March 31, 2007 $ 75,000 -------------------------------------------------- June 30, 2007 $3,125,000 -------------------------------------------------- September 30, 2007 $3,125,000 -------------------------------------------------- December 31, 2007 $3,125,000 -------------------------------------------------- March 31, 2008 $3,125,000 -------------------------------------------------- June 30, 2008 $4,000,000 -------------------------------------------------- September 30, 2008 $4,000,000 -------------------------------------------------- December 31, 2008 $4,000,000 -------------------------------------------------- March 31, 2009 $4,000,000 -------------------------------------------------- |
Amounts borrowed under this subsection 1.1(A) and repaid may not be reborrowed.
(B) REVOLVING LOANS.
(1) Subject to the satisfaction of the terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein, each Lender agrees, severally and not jointly, to lend to Borrower from the Second Amendment and Restatement Date to the Expiry Date its Pro Rata Share of the loans requested by Borrower to be made by Lenders under this subsection 1.1(B), up to an aggregate maximum principal amount for all Lenders of $20,000,000 outstanding at any one time (as the same may be reduced from time to time hereunder, the "REVOLVING LOAN COMMITMENT") which may be used for general corporate and working capital purposes (i) to reimburse drawings under DOE Letters of Credit ("DOE WORKING CAPITAL LOANS") and (ii) other than for reimbursement of drawings under DOE Letters of Credit ("NON-DOE WORKING CAPITAL LOANS"). The outstanding principal amount of DOE Working Capital
Loans, together with the DOE Risk Participation Liability, shall not exceed at any time the greater of (a) $10,000,000 and (b) an amount, not exceeding $15,000,000, equal to 10% of Title IV funding received by the Borrower's Institution Subsidiaries for the fiscal year of the Borrower ending most recently prior to such time (the "DOE SUBLIMIT"). The outstanding principal amount of Non-DOE Working Capital Loans, together with the Non-DOE Risk Participation Liability, shall not exceed at any time the amount by which the Revolving Loan Commitment exceeds the DOE Sublimit (the "NON-DOE SUBLIMIT"). The Revolving Loan made on the Second Amendment and Restatement Date shall not exceed $4,500,000 and only one Revolving Loan shall be made on the Second Amendment and Restatement Date. Advances or amounts outstanding under the Revolving Loan Commitment will be called "REVOLVING LOANS". Revolving Loans may be repaid and reborrowed until the Expiry Date. Borrower confirms that, immediately prior to the Second Amendment and Restatement Date, there are no Revolving Loans outstanding.
(2) No DOE Working Capital Loan shall be made and no DOE Letter of Credit shall be issued if, as a result of either thereof, the DOE Exposure would exceed the Maximum DOE Limit. No Non-DOE Working Capital Loan shall be made and no Non-DOE Letter of Credit shall be issued if, as a result of either thereof, the Non-DOE Exposure would exceed the Maximum Non-DOE Limit. No Revolving Loan shall be made and no Lender Letter of Credit or Risk Participation Agreement shall be issued if, as a result of either thereof, the outstanding balance of Revolving Loans would exceed the Maximum Revolver Loan Balance. If, at any time, the outstanding principal balance of Revolving Loans exceeds the Maximum Revolver Loan Balance, Borrower shall immediately repay Revolving Loans and/or immediately provide cash collateral to Agent on terms acceptable to Agent for Risk Participation Liability to eliminate such excess. If, at any time, the DOE Exposure exceeds the Maximum DOE Limit, Borrower shall immediately repay DOE Working Capital Loans and/or immediately cause any Non-Collateralized DOE Letters of Credit to become Collateralized DOE Letters of Credit, in an amount sufficient to eliminate such excess. If, at any time, the Non-DOE Exposure exceeds the Maximum Non-DOE Limit, Borrower shall immediately repay Non-DOE Working Capital Loans and/or immediately provide cash collateral to Agent on terms acceptable to Agent for Non-DOE Risk Participation Liability, in an amount sufficient to eliminate such excess.
Revolving Loans may be requested by Borrower in any amount with one (1) Business Day's prior notice required for Revolving Loans in amounts greater than or equal to $2,000,000. For Revolving Loans of less than $2,000,000, written or telephonic notice must be provided by 12:00 noon CST on the day on which the Revolving Loan is to be made, provided, that Borrower shall in any event be required to provide three (3) Business Days' prior written or telephonic notice to Agent of each LIBOR Loan by 12:00 noon CST on the third Business Day prior to the Funding Date for such LIBOR Loan. All Loans requested telephonically must be confirmed in writing within twenty-four (24) hours. Neither Agent nor any Lender shall incur any liability to Borrower for acting upon any telephonic notice that Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Borrower.
(3) For the purposes of this Agreement:
"COLLATERALIZED DOE LETTER OF CREDIT" means a DOE Letter of Credit for which Borrower shall have deposited cash collateral, pursuant to a Cash Collateral Agreement, in an amount equal to the DOE Risk Participation Liability arising under such DOE Letter of Credit.
"DOE EXPOSURE" means the sum, at any time of (i) the outstanding principal amount of DOE Working Capital Loans plus (ii) DOE Risk Participation Liability (after giving effect to the use of proceeds of any DOE Working Capital Loan included in (i) above).
"DOE LETTER OF CREDIT" means a Lender Letter of
Credit or Risk Participation Agreement issued in
respect of a letter of credit, which Lender Letter of
Credit or letter of credit shall have been issued (i)
for the benefit of DOE for the account of Borrower or
(ii) (x) for the benefit of the issuer ("DOE ISSUER")
of a letter of credit issued for the benefit of DOE
for the account of Borrower or any of its
Subsidiaries (an "UNDERLYING DOE LETTER OF CREDIT")
and (y) in respect of the DOE Issuer's liability in
respect of an Underlying DOE Letter of Credit; and
which Lender Letter of Credit, letter of credit, Risk
Participation Agreement and Underlying DOE Letter of
Credit, as applicable, shall be in form, scope and
substance satisfactory to Agent and Requisite
Lenders, and any amendment, renewal, extension or
renewal of such Lender Letter of Credit, letter of
credit, Risk Participation Agreement and Underlying
Letter of Credit, as applicable, which has been
consented to in writing by Agent and the Requisite
Lenders.
"DOE RISK PARTICIPATION LIABILITY" means Risk Participation Liability arising from a DOE Letter of Credit.
"MAXIMUM DOE LIMIT" means the lesser of (i) the Revolving Loan Commitment and (ii) the DOE Sublimit.
"MAXIMUM NON-DOE LIMIT" means the lesser of (i) the Revolving Loan Commitment and (ii) the Non-DOE Sublimit.
"MAXIMUM REVOLVER LOAN BALANCE" means (i) the
Revolving Loan Commitment less (ii) the Total Risk
Participation Liability.
"NON-COLLATERALIZED DOE LETTER OF CREDIT" means a DOE
Letter of Credit other than a Collateralized DOE
Letter of Credit.
"NON-DOE EXPOSURE" means the sum, at any time of (i) the outstanding principal amount of Non-DOE Working Capital Loans plus (ii) Non-DOE Risk Participation Liability (after giving effect to the use of proceeds of any Non-DOE Working Capital Loan included in (i) above).
"NON-DOE LETTER OF CREDIT" means a Lender Letter of Credit or Risk Participation Agreement other than a DOE Letter of Credit.
"NON-DOE RISK PARTICIPATION LIABILITY" means Risk
Participation Liability, other than DOE Risk
Participation Liability.
"RISK PARTICIPATION LIABILITY" means, as to each
Lender Letter of Credit and each Risk Participation
Agreement, all reimbursement obligations of Borrower
to the issuer of the Lender Letter of Credit or to
the issuer of the letter of credit with respect to
the transaction for which the Risk Participation
Agreement was executed and delivered, consisting of
(1) (a) the amount available to be drawn or which may
become available to be drawn; (b) all amounts which
have been paid and made available by the issuing bank
to the extent not reimbursed by Borrower, whether by
the making of a Revolving Loan or otherwise; and (c)
all accrued and unpaid interest, fees and expenses
with respect thereto less (2) the amount of cash
collateral held by Agent, on terms and conditions
acceptable to Agent, as collateral security for the
amounts referred to in (1) above and in which Agent
has a first priority perfected security interest. For
purposes of determining the outstanding amount of
Risk Participation Liability, the maximum amount
potentially owing under any Risk Participation
Agreement will be considered outstanding unless the
bank which is the beneficiary of such Risk
Participation Agreement reports daily activity to
Agent showing actual outstanding letters of credit
subject to such Risk Participation Agreement and
Borrower (i) has an operating account permitted
hereunder at the issuing bank or (ii) is directly
charged by the issuing bank for drawings under the
letters of credit underlying such Risk Participation
Liability and debits relating to applicable fees.
"TOTAL RISK PARTICIPATION LIABILITY" means at any
time, the Risk Participation Liability for all Lender
Letters of Credit and Risk Participation Agreements
outstanding at such time.
(C) LETTERS OF CREDIT AND RISK PARTICIPATION AGREEMENTS. The Revolving Loan Commitment may, in addition to advances under the Revolving Loan, be utilized, upon the request of Borrower, for (i) the issuance of standby letters of credit for the account of Borrower (to support obligations of Borrower or any of its Subsidiaries) by Agent or, at the request of Agent, by General Electric Capital Corporation (each such letter of credit, a "LENDER LETTER OF CREDIT") or (ii) the issuance by Agent or, at the request of Agent, by General Electric Capital Corporation of risk participation agreements (each such agreement, a "RISK PARTICIPATION AGREEMENT") to confirm payment to banks which issue standby letters of credit for the account of Borrower (in support of obligations of Borrower or any of its Subsidiaries). Where the context so requires, references to Agent in this subsection 1.1(C) shall apply to General Electric Capital Corporation to the extent that General Electric Capital Corporation issues a Lender Letter of Credit or a Risk Participation Agreement at the request of Agent.
(1) Maximum Amount. The aggregate amount of Non-DOE Risk Participation Liability with respect to all Lender Letters of Credit and Risk Participation Agreements outstanding for the account of Borrower at any time shall not exceed the Non-DOE Sublimit (and no Non-DOE Letter of Credit shall be issued if it would cause such limit to be exceeded) and the aggregate amount of DOE Risk Participation Liability outstanding for the account of Borrower at any time shall not exceed the DOE Sublimit (and no DOE Letter of Credit shall be issued if it would cause such limit to be exceeded). In no event shall any Lender Letter of Credit or Risk Participation Agreement be issued or be required to be issued hereunder if such issuance would be prohibited under Section 1.1(B)(2).
(2) Reimbursement. Borrower shall be irrevocably and unconditionally obligated forthwith without presentment, demand, protest or other formalities of any kind, to reimburse Agent for any amounts paid by Agent with respect to a Lender Letter of Credit or a Risk Participation Agreement issued for the account of Borrower, including all reasonable fees, costs and expenses paid by Agent to any bank that issues letters of credit. Borrower hereby authorizes and directs Agent, at Agent's option, to make a Revolving Loan in the amount of any payment made by Agent with respect to any Lender Letter of Credit or any Risk Participation Agreement. All amounts paid by Agent with respect to any Lender Letter of Credit or Risk Participation Agreement that are not immediately repaid by Borrower with the proceeds of a Revolving Loan or otherwise shall bear interest at the interest rate applicable to Revolving Loans calculated using the Base Rate. Each Lender agrees to fund its Pro Rata Share of any Revolving Loan made pursuant to this subsection 1.1(C)(2). If no such Revolving Loan is made, each Lender agrees to purchase, and shall be deemed to have purchased, a participation in such Lender Letter of Credit or Risk Participation Agreement, as the case may be, in an amount equal to its Pro Rata Share of the Risk Participation Liability of such Lender Letter of Credit or Risk Participation Agreement, as the case may be, and each Lender agrees to pay to Agent such Lender's Pro Rata Share of any payments made by Agent under such Lender Letter of Credit and Risk Participation Agreement. The obligation of each Lender to deliver to Agent an amount equal to its respective Pro Rata Share of a Revolving Loan or participation, as applicable, pursuant to the preceding two (2) sentences shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of Default or Default or the failure to satisfy any condition set forth in subsection 7.2. If any Lender fails to make available to Agent the amount of such Lender's Pro Rata Share of any payments made by Agent in respect of such Lender Letter of Credit or Risk Participation Agreement as provided in this subsection 1.1(C)(2), Agent shall be entitled to recover such amount on demand from such Lender together with interest at the Base Rate. As issuer of a Lender Letter of Credit or Risk Participation Agreement, Agent may require, as a condition to issuance thereof, that Borrower execute and deliver such letter of credit applications and reimbursement agreements as Agent may deem advisable.
(3) Conditions of Issuance of Letters of Credit or Risk Participation Agreements. In addition to all other terms and conditions set forth in this Agreement, the issuance by Agent of any Lender Letter of Credit or Risk Participation Agreement shall be subject to the conditions precedent that the Lender Letter of Credit, the Risk Participation Agreement or the letter of credit for which Borrower requests a Risk Participation Agreement shall support (i) a transaction (other than a Permitted Acquisition) entered into in the ordinary course of Borrower's or any of its Subsidiaries' business or (ii) an obligation to DOE (or an obligation to a DOE Issuer in respect of such DOE Issuer's liability arising from a letter of credit issued by such DOE Issuer for the benefit of DOE), and in any case, shall be in such form, be for such amount, and contain such terms and conditions as are reasonably satisfactory to Agent. The expiration date of each Lender Letter of Credit and each letter of credit to be issued under a Risk Participation Agreement shall be on a date which is the earliest of (a) one year from its date of issuance, (b) the date thirty (30) days prior to the date set forth in clause (c) of the definition of the term "Expiry Date". Each Risk Participation
Agreement shall provide that the agreement terminates and all demand or claims for payment must be presented by a date certain, which date will be no later than the date thirty (30) days prior to the date set forth in clause (c) of the definition of the term "Expiry Date".
(4) Request for Lender Letters of Credit or Risk Participation Agreements. Borrower shall give Agent at least three (3) Business Days prior notice specifying the date a Lender Letter of Credit or Risk Participation Agreement (or a letter of credit to be issued under a Risk Participation Agreement) is requested to be issued, identifying the beneficiary and indicating (x) the nature of the transactions proposed to be supported thereby and (y) whether or not the request is for a DOE Letter of Credit. After the issuance of a Risk Participation Agreement in favor of a bank that will issue letters of credit for the account of Borrower, Borrower shall give Agent at least two (2) Business Days prior written notice specifying the date a letter of credit is to be issued under a Risk Participation Agreement (five (5) Business Days in the case of the first letter of credit to be issued under a particular Risk Participation Agreement), identifying the beneficiary and describing the nature of the transactions proposed to be supported thereby. Any notice described in this paragraph shall be accompanied by the form of the Lender Letter of Credit or the letter of credit to which such Risk Participation Agreement relates.
(5) Confirmation of Obligations. Borrower hereby confirms that immediately prior to the Second Amendment and Restatement Date, an Underlying DOE Letter of Credit (No. UTIHCF110900004) in the original principal amount of $6,400,000 has been issued by Agent, and that Borrower is obligated to reimburse Agent for any amounts paid by Agent with respect to such Underlying DOE Letter of Credit in accordance with the terms of the Original Credit Agreement (and from and after the Second Amendment and Restatement Date, this Agreement) without offset, defense, claim, counterclaim, cross-claim or right of set-off or recoupment.
(D) NOTES. Borrower shall execute and deliver to each Lender in replacement for the promissory notes issued pursuant to the Original Credit Agreement (i) a Note to evidence the Revolving Loans, such Note to such Lender to be in the principal amount of such Lender's Pro Rata Share of the Revolving Loan Commitment, and (ii) an amended and restated Note to evidence Term Loan A, and an amended and restated Note to evidence Term Loan B, each such Note to such Lender to be in the principal amount of such Lender's Pro Rata Share of each such Term Loan. In the event of an assignment under subsection 8.1, Borrower shall, upon surrender of the assigning Lender's Notes, issue new Notes to reflect the interests of the assigning Lender and the Person to which interests are to be assigned. All Notes shall be dated and delivered the Second Amendment and Restatement Date. Upon receipt of such amended and restated Notes, each Lender shall return to Borrower on the Second Amendment and Restatement Date any and all Notes issued prior to the Second Amendment and Restatement Date in respect of the Revolving Loans and Term Loan A and Term Loan B.
1.2 INTEREST AND RELATED FEES.
(A) INTEREST. Subject to subsection 1.2(E), from the date the Loans are made, and from the date Obligations (other than Loans) become due, depending upon Borrower's election
from time to time, as permitted herein, to have portions of the Loans accrue interest based upon the LIBOR, the Loans and such other Obligations shall bear interest at the rates set forth below:
(1) If a Base Rate Loan or an Obligation other than a Loan, then at the sum of the Base Rate plus the Base Rate Margin; or
(2) If a LIBOR Loan, then at the sum of the LIBOR plus the LIBOR Margin.
"ADJUSTMENT DATE" means the date which is the first day of a calendar month next following the delivery to Agent pursuant to subsection 4.8(C) of a Compliance Certificate in respect of any March, June, September or December.
"BASE RATE" means a variable rate of interest per annum equal to the rate of interest from time to time published by the Board of Governors of the Federal Reserve System in Federal Reserve statistical release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan rate. Base Rate also includes rates published in any successor publications of the Federal Reserve System reporting the Bank prime loan rate or its equivalent. The statistical release generally sets forth a Bank prime loan rate for each business day. The applicable Bank prime loan rate for any date not set forth shall be the rate set forth for the last preceding date. In the event the Board of Governors of the Federal Reserve System ceases to publish a Bank prime loan rate or equivalent, the term "BASE RATE" shall mean a variable rate of interest per annum equal to the highest of the "prime rate", "reference rate", "base rate" or other similar rate as determined by Agent announced from time to time by any of Bankers Trust Company, Citibank, N.A. or JP Morgan Chase Bank (with the understanding that any such rate may merely be a reference rate and may not necessarily represent the lowest or best rate actually charged to any customer by such bank).
"BASE RATE LOANS" means Loans other than LIBOR Loans.
"BASE RATE MARGIN" means, (i) as of the day immediately preceding the Second Amendment and Restatement Date, (x) in the case of Term Loan B, 1.50% or (y) in the case of Obligations other than Term Loan B, 1.00%, (ii) for the period commencing on the Second Amendment and Restatement Date and ending on the day immediately preceding the Adjustment Date occurring on or most recently after the date that is six months after the Second Amendment and Restatement Date, (x) in the case of Term Loan B, 2.50% or (y) in the case of Obligations other than Term Loan B, 2.00%, and (iii) for each Calculation Period which begins on or after such Adjustment Date the applicable percent per annum set forth in the pricing table below opposite Total Indebtedness to TTM EBITDA for the fiscal quarter reflected in the Compliance Certificate delivered on or most recently prior to such Calculation Period.
"CALCULATION PERIOD" means each period beginning on an Adjustment Date and ending on the day immediately preceding the immediately succeeding Adjustment Date.
"LIBOR" means, for each Interest Period, a rate per annum equal to:
(a) the offered rate for deposits in U.S. dollars in an amount comparable to the amount of the applicable Loan in the London interbank market which is published by the British Bankers' Association, and that currently appears on Telerate Page 3750, or any
other source available to Agent, as of 11:00 a.m. (London time) on the day which is two (2) Business Days prior to the first day of the relevant Interest Period for a term comparable to such Interest Period; or if, for any reason, such a rate is not published by the British Bankers' Association on Telerate or any other source available to Agent, the rate per annum equal to the average rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which Agent determines that U.S. dollars in an amount comparable to the amount of the applicable Loans are being offered to prime banks at approximately 11:00 a.m. (London time) on the day which is two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period for settlement in immediately available funds by leading banks in the London interbank market selected by Agent; divided by
(b) a number equal to 1.0 minus the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day which is two (2) Business Days prior to the beginning of such Interest Period (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) which are required to be maintained by a member bank of the Federal Reserve System; such rate to be rounded upward to the next whole multiple of one-sixteenth of one percent (.0625%).
"LIBOR LOANS" means Loans bearing interest at rates determined by reference to the LIBOR.
"LIBOR MARGIN" means, (i) for all LIBOR Loans through the day immediately preceding the Second Amendment and Restatement Date, (x) and constituting Term Loan B or a portion thereof, 3.00% or (y) and constituting a Loan or portion thereof other than Term Loan B or a portion thereof, 2.50%, (ii) for all LIBOR Loans for the period beginning on the Second Amendment and Restatement Date and ending on the day immediately preceding the Adjustment Date occurring on or most recently after the date that is six months after the Second Amendment and Restatement Date, (x) and constituting Term Loan B or a portion thereof, 3.75% or (y) constituting a Loan or portion thereof other than Term Loan B or a portion thereof, 3.25%, and (iii) for all LIBOR Loans for any period after such Adjustment Date the applicable percent per annum set forth in the pricing table below opposite Total Indebtedness to TTM EBITDA for the fiscal quarter reflected in the Compliance Certificate delivered on or most recently prior to such Calculation Period.
"TOTAL INDEBTEDNESS TO TTM EBITDA RATIO" means, for any fiscal
quarter, the ratio of (A) Total Indebtedness as of the last
day of such fiscal quarter, to (B) TTM EBITDA for the twelve
(12) month period ending on the last day of such fiscal
quarter.
"TTM EBITDA" means the sum of (i) EBITDA for Holdings and its Subsidiaries (per attachment 4.3 to Exhibit 4.8(C)) for the most recent period of four full fiscal quarters in respect of which financial statements under subsection 4.8(A) have been delivered to Agent and Lenders (including that of any Target Person or Target Business included in such financial statements and including that of any Subsidiary acquired during such period as if such Subsidiary had been acquired on the first day of such period) plus
(ii) Pre-Acquisition Target EBITDA for any one or more Target Persons or Target Businesses.
PRICING TABLE
BASE RATE MARGIN LIBOR MARGIN ------------------------- ------------------------- OBLIGATIONS LOANS OTHER OTHER THAN THAN TOTAL DEBT TO TTM EBITDA TERM LOAN B TERM LOAN B TERM LOAN B TERM LOAN B ------------------------ ----------- ----------- ----------- ----------- > 3.00x 2.25% 2.75% 3.50% 4.00% > 2.50 and < than = to 3.00x 2.00% 2.50% 3.25% 3.75% > 2.00 and < than = to 2.50x 1.75% 2.25% 3.00% 3.50% < than = to 2.00x 1.50% 2.00% 2.75% 3.25% |
If Borrower shall fail to deliver a Compliance Certificate by the date required pursuant to subsection 4.8(C), effective as of the tenth Business Day following the date on which such Compliance Certificate was due, each applicable Base Rate Margin and each applicable LIBOR Rate Margin shall be conclusively presumed to equal the highest applicable Base Rate Margin and the highest applicable LIBOR Margin specified in the pricing table set forth above until such time as Borrower shall have delivered such Compliance Certificate.
Each LIBOR Loan may be obtained for a one (1), two (2), three
(3), or six (6) month period (each being an "INTEREST
PERIOD"). With respect to all LIBOR Loans: (a) the Interest
Period will commence on the date that the LIBOR Loan is made
or the date on which a Base Rate Loan is converted into a
LIBOR Loan, as applicable, or in the case of immediately
successive Interest Periods, each successive Interest Period
shall commence on the day on which the next preceding Interest
Period expires, (b) if the Interest Period expires on a day
that is not a Business Day, then it will expire on the next
Business Day and (c) no Interest Period shall extend beyond
March 31, 2009.
(B) COMMITMENT FEE. From the Closing Date, Borrower shall pay Agent, for the benefit of all Lenders committed to make Revolving Loans (based upon their respective Pro Rata Shares), a fee in an amount equal to (1)(a) the Revolving Loan Commitment less (b) the sum of (i) the average daily balance of the Revolving Loans during the preceding fiscal quarter or portion thereof plus (ii) the average daily aggregate amount of outstanding Total Risk Participation Liability during the preceding fiscal quarter or portion thereof, multiplied by (2) until the Second Amendment and Restatement Date three eighths of one percent (.375%) per annum and from and after the Second Amendment and Restatement Date one-half of one percent (.500%) per annum. Such fee is to be paid quarterly in arrears on the first day of each fiscal quarter and on the Expiry Date.
(C) RISK PARTICIPATION FEE. From the Closing Date, Borrower shall pay Agent, for the benefit of all Lenders committed to make Revolving Loans (based upon their respective Pro Rata Shares), a per annum fee (i) for all periods until (but excluding) the Second Amendment and Restatement Date, for each (x) Lender Letter of Credit and each Risk Participation Agreement (in each case, other than any which constitutes a Collateralized
DOE Letter of Credit) from the date of issuance to the date of termination equal to the average daily outstanding amount of the Risk Participation Liability arising therefrom multiplied by 2.00% per annum and (y) each Collateralized DOE Letter of Credit from the date of issuance (or the date a DOE Letter of Credit became a Collateralized DOE Letter of Credit, whichever is later) to the date of termination (or until the Second Amendment and Restatement Date, if earlier) equal to the average outstanding amount of Risk Participation Liability arising therefrom multiplied by 20 basis points (0.2%) or (ii) for all periods from and after the Second Amendment and Restatement Date, for each Lender Letter of Credit and each Risk Participation Agreement, the LIBOR Margin applicable to Term Loan A and Revolving Loan in effect on such day. Such fee is to be paid quarterly in arrears on the first day of each fiscal quarter and on the Expiry Date. Borrower shall also reimburse Agent for any and all fees and expenses paid by any Lender to the issuer of any letter of credit that is in any way related to a Risk Participation Agreement.
(D) COMPUTATION OF INTEREST AND RELATED FEES. Interest on all
Loans and all other Obligations and any per annum fees set
forth in this subsection 1.2 shall be calculated daily on the
basis of a three hundred sixty (360) day year for the actual
number of days elapsed in the period during which it accrues.
The date of funding a Base Rate Loan and the first day of an
Interest Period with respect to a LIBOR Loan shall be included
in the calculation of interest. The date of payment of a Base
Rate Loan and the last day of an Interest Period with respect
to a LIBOR Loan shall be excluded from the calculation of
interest. If a Loan is repaid on the same day that it is made,
one (1) days' interest shall be charged. Interest on all Base
Rate Loans is payable in arrears on the first day of each
fiscal quarter and on the Expiry Date, whether by acceleration
or otherwise. Interest on LIBOR Loans shall be payable on the
last day of the applicable Interest Period, unless the
Interest Period is greater than three (3) months, in which
case interest will be payable on the last day of each three
(3) month interval. In addition, interest on LIBOR Loans is
due and payable on the Expiry Date, whether by acceleration or
otherwise.
(E) DEFAULT RATE OF INTEREST. At the election of Agent or Requisite Lenders, after the occurrence of an Event of Default, other than an Event of Default listed on Schedule 1.2(E) and for so long as it continues, the Loans and other Obligations shall bear interest at a rate that is two percent (2.00%) in excess of the rates otherwise payable under this Agreement. Furthermore, during any period in which any such Event of Default is continuing, as the Interest Periods for LIBOR Loans then in effect expire, such Loans shall be converted at Agent's discretion into Base Rate Loans and the LIBOR election will not be available to Borrower until all such Events of Default are cured or waived.
(F) EXCESS INTEREST. Under no circumstances will the rate of interest chargeable be in excess of the maximum amount permitted by applicable law. If excess interest is charged and paid in error, then the excess amount will be promptly refunded.
(G) LIBOR RATE ELECTION. All Loans shall constitute Base Rate Loans and remain so for at least three (3) Business Days following the Second Amendment and Restatement Date. Thereafter, Borrower, by written or telephonic notice to Agent by 12:00 noon CST on the third Business Day prior to the Funding Date for the applicable LIBOR Loans requested thereby in each instance, may request that Revolving Loans to be made be LIBOR Loans and that outstanding portions of any Term Loan be converted to LIBOR Loans. Once given, a LIBOR Loan request shall be irrevocable and Borrower shall be bound thereby. Upon the expiration of an Interest Period, in the absence of a new LIBOR Loan request
submitted to Agent not less than three (3) Business Days prior to the end of such Interest Period, the LIBOR Loan then maturing shall be automatically converted to a Base Rate Loan. There may be no more than six (6) LIBOR Loans outstanding at any one time. Loans which are not the subject of a LIBOR Loan request shall be Base Rate Loans. Agent will notify the Lenders, by telephonic or facsimile notice, of each LIBOR request received by Agent not less than two (2) Business Days prior to the Funding Date of the LIBOR Loan requested thereby. Notwithstanding any other provision of this Agreement, if any Lender shall notify Agent that any change of law makes it unlawful or any change in circumstance makes it impossible for such Lender to perform its obligations hereunder to make LIBOR Loans, (i) any obligation of such Lender to make, maintain, renew or fund LIBOR Loans shall be suspended until Agent shall notify Borrower and Lenders that the circumstances causing such suspension no longer exist and (ii) Borrower shall forthwith prepay in full the LIBOR Loans of such Lender then outstanding, together with interest accrued thereon, unless Borrower, within ten (10) Business Days of notice from Agent and in accordance with this subsection 1.2(G), shall have simultaneously converted all LIBOR Loans of such Lender to Base Rate Loans such that the circumstances giving rise to such notice no longer exist. Notwithstanding anything to the contrary contained herein, all Interest Periods under the Original Credit Agreement shall end on the Second Amendment and Restatement Date and all interest accrued and unpaid on the Loans and other Obligations accrued through the Second Amendment and Restatement Date shall become due and payable on the Second Amendment and Restatement Date.
1.3 OTHER FEES AND EXPENSES.
(A) CERTAIN FEES. Borrower shall pay to Agent, for the account of the Lenders pro rata (based on their respective Revolving Loan Commitments and Commitments for Term Loan A and Term Loan B), on the Second Amendment and Restatement Date, a closing fee in an amount equal to 1.75% of $70,000,000 and a fee in an amount equal to $350,000. In addition, Borrower shall pay all fees required by any fee letter with Agent or Heller.
(B) AGENCY FEE. Borrower shall pay to Agent, for Agent's account, on the Second Amendment and Restatement Date and on each anniversary of the Second Amendment and Restatement Date, an "agency fee" in the amount of $70,000.
(C) LIBOR BREAKAGE FEE. Upon any payment of a LIBOR Loan on any day that is not the last day of the Interest Period applicable thereto (regardless of the source of such prepayment and whether voluntary, by acceleration or otherwise) or upon failure of Borrower to borrow a LIBOR Loan on the date scheduled for borrowing for any reason, Borrower shall pay Agent, for the benefit of all affected Lenders, an amount (the "LIBOR BREAKAGE FEE") equal to the amount of any losses, expenses and liabilities (including, without limitation, any loss (including interest paid) sustained by each such affected Lender in connection with the re-employment of such funds) that any such affected Lender may sustain as a result of the payment of such LIBOR Loan on a day that is not the last day of the Interest Period applicable thereto or the failure of Borrower so to borrow. Interest paid on the Second Amendment and Restatement Date as required by subsection 1.2(G) shall be deemed to have been paid on a date other than the last day of an Interest Period, notwithstanding the provisions of subsection 1.2(G) that provide that all Interest Periods end on such date (except in the case of any Interest Period that would
have ended on the Second Amendment and Restatement Date without regard to such provision of subsection 1.2(G)).
(D) EXPENSES AND ATTORNEYS FEES. Borrower agrees to pay on demand all reasonable and documented fees, costs and expenses (including those of one firm of attorneys and local or special counsel hired by such one firm) incurred by Agent in connection with any matters contemplated by or arising out of the Loan Documents, in connection with the examination, review, due diligence investigation, documentation, negotiation and closing of the transactions contemplated herein and to promptly pay all reasonable and documented fees, costs and expenses (including those of one firm of attorneys and local or special counsel hired by such one firm) incurred by Agent in connection with the continued administration (excluding any fees, costs and expenses incurred by Agent in connection with assignments and participations in Loans and Notes) of the Loan Documents including any amendments, modifications and waivers. Furthermore, Borrower agrees to pay on demand reasonable and documented fees, costs and expenses in connection with the negotiation, preparation and closing of this Agreement for each Lender other than Agent in amount not to exceed, in the aggregate for each such Lender, $3,500. Without limiting the foregoing, all such fees, costs and expenses incurred through the date the parties hereto sign this Agreement shall be paid on such date. Borrower agrees to promptly pay all reasonable and documented fees, costs and expenses (including those of attorneys) incurred by Agent and Lenders in connection with any action to enforce any Loan Document or to collect any payments due from Borrower or any other Loan Party. All fees, costs and expenses for which Borrower is responsible under this subsection 1.3(D) shall be deemed part of the Obligations when incurred, shall bear interest, shall be payable in accordance with the final two sentences of subsection 1.4 and shall be secured by the Collateral.
1.4 PAYMENTS. All payments by Borrower of the Obligations shall be made in same day funds and delivered to Agent, for the benefit of Agent and Lenders, as applicable, by wire transfer to the following account or such other place as Agent may from time to time designate.
ABA No. 0710-0001-3
Account Number 55-00540
Bank One, N.A.
1 Bank One Plaza
Chicago, IL 60670
Reference: Heller Corporate Finance Group for the benefit of UTI Holdings, Inc.
Borrower shall receive credit on the day of receipt for funds received by Agent by 1:00 p.m. CST. In the absence of timely receipt, such funds shall be deemed to have been paid on the next Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day and such extension of time shall be included in the computation of the amount of interest and fees due hereunder.
Borrower hereby authorizes Lenders to make Revolving Loans, on the basis of their Pro Rata Shares, for the payment of Scheduled Installments, interest, commitment fees, Risk Participation Liability fees, LIBOR Breakage Fees and other fees, and Risk Participation Liability payments. Prior to an Event of Default, other fees, costs and expenses (including those of attorneys) reimbursable to Agent pursuant to subsections 1.3(A) through (D) or elsewhere in any Loan Document may be debited to the Revolving
Loan which debit, in the case of subsection 1.3(D), shall be after fifteen (15) days' notice. After the occurrence and during the continuation of an Event of Default, no notice of any debit will be required.
1.5 PREPAYMENTS.
(A) VOLUNTARY PREPAYMENT OF TERM LOANS. At any time, Borrower may prepay the Term Loans in whole or in part, without penalty, but with LIBOR Breakage Fees, if applicable, which prepayment shall be applied in accordance with subsection 1.5(F) or as may otherwise be agreed to between Borrower and Agent.
(B) PREPAYMENTS FROM EXCESS CASH FLOW. Within one hundred twenty
(120) days after the end of each of its fiscal years,
beginning with the fiscal year ending September 30, 2003,
Borrower shall prepay the Loans in an amount equal to
seventy-five percent (75%) of the Excess Cash Flow for such
fiscal year pursuant to the calculation on Exhibit 1.5(B);
provided, that if at the end of any fiscal year of Borrower,
the ratio of Total Indebtedness to TTM EBITDA is less than
2.0x, Borrower shall prepay the Loans in an amount equal to
fifty percent (50%) of the Excess Cash Flow for such fiscal
year pursuant to the calculation on Exhibit 1.5(B). The
calculation shall be based on the audited financial statements
for Holdings and its Subsidiaries. The payments shall be
applied in accordance with subsection 1.5(F).
(C) PREPAYMENTS FROM ASSET DISPOSITIONS. (i) Immediately (except as provided below in this paragraph (C)) upon receipt of the Net Proceeds from the sale of any current assets (as determined in accordance with GAAP) in the ordinary course of business, which Net Proceeds exceed $750,000 in any fiscal year, Borrower shall prepay the outstanding principal balance of the Revolving Loan by the amount equal to that portion of such Net Proceeds in excess of $750,000. (ii) Immediately upon receipt of the Net Proceeds from the sale of any assets, other than current assets (as determined in accordance with GAAP) in the ordinary course of business, which Net Proceeds exceed $750,000 in any fiscal year, Borrower shall prepay the Loans in an amount equal to that portion of such Net Proceeds in excess of $750,000, which payments under this clause (ii) shall be applied in accordance with subsection 1.5(F). (iii) In the event that any sale includes both current and non-current assets, the Net Proceeds shall be apportioned by Borrower with the consent of Agent. Notwithstanding the foregoing, (x) Borrower may reinvest, within one hundred eighty (180) days, the Net Proceeds of any sale of assets in productive assets of a kind then used or usable in the business of Borrower and the requirement to make a prepayment under this paragraph (C) with the balance, if any, of any such Net Proceeds otherwise required to be so prepaid shall be postponed until the expiration of such 180 day period or the date on which Borrower determines not so to reinvest, whichever is earlier and (y) the provisions of this subsection 1.5(C) shall not apply to the receipt of Net Proceeds arising from the Nascar Sale/Leaseback.
(D) PREPAYMENT FROM ISSUANCE OF SECURITIES. Immediately upon the
receipt by Holdings, Borrower or any of its Subsidiaries of
the proceeds of the issuance of equity securities (other than
(1) proceeds of the issuance of equity securities received on
or before the Second Amendment and Restatement Date, (2)
proceeds from the issuance of equity securities to members of
the management of Holdings, Borrower or any of their
Subsidiaries, (3) proceeds of the issuance of equity
securities to Borrower or any Subsidiary, (4) proceeds in an
amount not to exceed $15,000,000 in the aggregate from the
issuance of common stock or Qualified Preferred Stock in
Holdings pursuant to a sale that is exempt from the
registration requirements of the Securities Act of 1933, as
amended, as a private placement and is not registered, provided such proceeds are invested in Borrower or any Subsidiary of Borrower, and (5) subject to the limitations of subsection 6.1(T), proceeds from the issuance of common stock or Qualified Preferred Stock in Holdings in connection with a Permitted Acquisition), Borrower shall prepay the Loans in an amount equal to such proceeds, net of underwriting discounts and commissions, taxes, costs and expenses associated with the Management Agreement and other reasonable costs associated therewith. The payments shall be applied in accordance with subsection 1.5(F).
(E) OMITTED.
(F) APPLICATION OF PROCEEDS. With respect to the mandatory prepayments described in subsections 1.5(B), 1.5(C)(ii) and 1.5(D), such prepayments shall first, be applied in payment of the Term Loans pro rata against all remaining Scheduled Installments of the Term Loans and, at any time after the Term Loans shall have been prepaid in full, such prepayments shall be applied second, to reduce the outstanding principal balance of the Revolving Loans and third, to cash collateralize any Lender Letters of Credit. Upon such payment in full of all Revolving Loans and full cash collateralization of all Lender Letters of Credit, the Revolving Loan Commitment shall terminate.
(G) RISK PARTICIPATION LIABILITY. In the event any Lender Letters
of Credit or Risk Participation Agreements are outstanding at
the time that Borrower prepays the Obligations or terminates
the Revolving Loan Commitment, Borrower shall (1) deposit with
Agent for the benefit of all Lenders with a Revolving Loan
Commitment cash in an amount equal to 103% of the aggregate
outstanding Risk Participation Liability to be available to
Agent to reimburse payments of drafts drawn under such Letters
of Credit and pay any fees and expenses related thereto and
(2) prepay the fee payable under subsection 1.2(C) with
respect to such Lender Letters of Credit or Risk Participation
Agreements for their full remaining terms. Upon termination of
any such Lender Letter of Credit or Risk Participation
Agreement, the unearned portion of such prepaid fee
attributable to such Lender Letter of Credit or Risk
Participation Agreement shall be refunded to Borrower.
1.6 TERM OF THE AGREEMENT. All of the Obligations shall become due and payable as otherwise set forth herein, but in any event, all of the remaining Obligations (other than in respect of principal of and interest on Term Loan B to the extent not otherwise then due and payable) shall become due and payable on the date set forth in clause (c) of the definition of the term "Expiry Date". Except as otherwise set forth herein, all Obligations in respect of Term Loan B, and any other Obligations which were not required to be paid on the date set forth in clause (c) of the definition of "Expiry Date" shall become due and payable as otherwise provided herein and in any event shall become due and payable on March 31, 2009. On March 31, 2009 and following repayment in full of the Obligations, this Agreement will terminate. Notwithstanding any such termination, until all Obligations have been fully paid in cash and satisfied (and there shall be no Lender Letters of Credit or Risk Participation Agreements outstanding), Agent, for the benefit of Agent and Lenders, shall be entitled to retain the security interests in the Collateral granted under the Security Documents and the ability to exercise all rights and remedies available to them under the Loan Documents and applicable laws.
1.7 LOAN ACCOUNTS. Agent will maintain loan account records for (a) all Loans, interest charges and payments thereof, (b) all Risk Participation Liability, (c) the charging and payment of all fees, costs and expenses and (d) all other debits and credits pursuant to this Agreement. The balance in the loan accounts shall be presumptive evidence of the amounts due and owing to Lenders, provided that any failure by
Agent to so record shall not limit or affect Borrower's obligation to pay. Within five (5) days of the first of each month, Agent shall provide Borrower with a statement for each loan account setting forth the principal of each account and interest due thereon. Borrower must deliver a written objection within sixty (60) days after receipt of the statement or the statement will be presumptive evidence of the Obligations absent manifest error. During the continuance of an Event of Default, Borrower irrevocably waives the right to direct the application of any and all payments and Borrower hereby irrevocably agrees that Agent shall have the continuing exclusive right to apply and reapply payments in any manner it deems appropriate.
1.8 YIELD PROTECTION.
(A) CAPITAL ADEQUACY AND OTHER ADJUSTMENTS. In the event that any Lender shall have determined that the adoption after the date hereof of any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance (excluding compliance with the implementation at the national level of the Basel Accord) by any Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) from any central bank or governmental agency or body having jurisdiction does or shall have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender or any corporation controlling such Lender and thereby reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder, then Borrower shall from time to time within thirty (30) days after notice and demand from such Lender (together with the certificate referred to in the next sentence and with a copy to Agent) pay to Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of such cost showing in reasonable detail the basis of the computation of such cost submitted by such Lender to Borrower and Agent shall, absent manifest error, be final, conclusive and binding for all purposes. No Lender shall be entitled to compensation under this subsection 1.8 to the extent the increase or reduction in respect of which compensation is claimed shall result from an event described in this subsection 1.8 which occurred more than 180 days prior to the issuance by such Lender of such notice and demand. For purposes, of this Section 1.8, "BASEL ACCORD" shall mean the proposals for risk-based capital framework described by the Basel Committee on Bank Regulations and Supervisory Practices in its paper entitled "International Convergence of Capital Measurement and Capital Standards" dated July 1988, as in effect on the date hereof.
(B) INCREASED LIBOR FUNDING COSTS. Subject to Section 1.10, if the
introduction of or the interpretation of any law, rule, or
regulation, in each case, after the date of this Agreement
would increase the reserve requirement or otherwise increase
the cost to any Lender of making or maintaining a LIBOR Loan,
then Agent, on behalf of all affected Lenders, shall submit a
certificate to Borrower demonstrating the calculation of the
increased cost and requiring payment thereof by Borrower to
Agent for the benefit of the affected Lenders within thirty
(30) days after the date of the certificate, and the Borrower
shall make such payment within such thirty (30) day period.
There are no limitations on the number of times such
certificate may be submitted, provided, however, that each
affected Lender shall take reasonable steps (which shall not
require any affected Lender to incur any unreimbursed cost or
expense) to avoid or minimize such increase in costs to the
extent that such avoidance or minimization is not inconsistent
with such affected
Lender's internal policies or legal or statutory restrictions and which such affected Lender has reasonably determined does not cause such affected Lender to suffer any disadvantage or burden. A certificate as to the amount of such cost and showing the basis of the computation of such cost submitted by Agent on behalf of all such affected Lenders to Borrower shall, absent manifest error, be final, conclusive and binding for all purposes.
1.9 TAXES.
(A) NO DEDUCTIONS. Any and all payments or reimbursements made hereunder or under the Notes shall be made free and clear of and without deduction for any and all taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto excluding such taxes imposed on net income, herein "TAX LIABILITIES"), excluding, however, taxes imposed on the net income of a Lender or Agent. If Borrower shall be required by law to deduct any such amounts from or in respect of any sum payable hereunder to any Lender or Agent, then the sum payable hereunder shall be increased as may be necessary so that, after making all required deductions, such Lender or Agent receives an amount equal to the sum it would have received had no such deductions been made.
(B) CHANGES IN TAX LAWS. In the event that, subsequent to the Closing Date, (1) any changes in any existing law, regulation, treaty or directive or in the interpretation or application thereof, (2) any new law, regulation, treaty or directive enacted or any interpretation or application thereof, or (3) compliance by Agent or any Lender with any request or directive (whether or not having the force of law) from any Governmental Authority, agency or instrumentality:
(1) does or shall subject Agent or any Lender to any tax of any kind whatsoever with respect to this Agreement, the other Loan Documents or any Loans made or Lender Letters of Credit or Risk Participation Agreements issued hereunder, or change the basis of taxation of payments to Agent or such Lender of principal, fees, interest or any other amount payable hereunder (except for net income taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally by federal, state or local taxing authorities with respect to interest or commitment or other fees payable hereunder or changes in the rate of tax on the overall net income of Agent or such Lender); or
(2) does or shall impose on Agent or any Lender any other condition or increased cost in connection with the transactions contemplated hereby or participations herein;
and the result of any of the foregoing is to increase the cost to Agent or any such Lender of issuing any Lender Letter of Credit or Risk Participation Agreement or making or continuing any Loan hereunder, as the case may be, or to reduce any amount receivable hereunder, then, in any such case, Borrower shall promptly pay to Agent or such Lender, upon its demand, any additional amounts necessary to compensate Agent or such Lender, on an after-tax basis, for such additional cost or reduced amount receivable, as determined by Agent or such Lender with respect to this Agreement or the other Loan Documents. If Agent or such Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify Borrower of the event by reason of which Agent or such Lender has become so entitled. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by Agent or such Lender to Borrower and Agent shall, absent manifest error, be final, conclusive and binding for all purposes.
(C) FOREIGN LENDERS. Each Lender organized under the laws of a jurisdiction outside the United States (a "FOREIGN LENDER") as to which payments to be made under this Agreement or under the Notes are exempt from United States withholding tax or are subject to United States withholding tax at a reduced rate under an applicable statute or tax treaty shall provide to Borrower and Agent (1) a properly completed and executed Internal Revenue Service Form W8-ECI or W8-BEN or other applicable form, certificate or document prescribed by the Internal Revenue Service of the United States certifying as to such Foreign Lender's entitlement to such exemption or reduced rate of withholding with respect to payments to be made to such Foreign Lender under this Agreement and under the Notes and any other documents or information required in connection therewith (a "CERTIFICATE OF EXEMPTION") or (2) a letter from any such Foreign Lender stating that it is not entitled to any such exemption or reduced rate of withholding (a "LETTER OF NON-EXEMPTION"). Prior to becoming a Lender under this Agreement and within fifteen (15) days after a reasonable written request of Borrower or Agent from time to time thereafter, each Foreign Lender that becomes a Lender under this Agreement shall provide a Certificate of Exemption or a Letter of Non-Exemption to Borrower and Agent.
If a Foreign Lender is entitled to an exemption with respect to payments to be made to such Foreign Lender under this Agreement (or to a reduced rate of withholding) and does not provide a Certificate of Exemption to Borrower and Agent within the time periods set forth in the preceding paragraph, Borrower shall withhold taxes from payments to such Foreign Lender at the applicable statutory rates and Borrower shall not be required to pay any additional amounts as a result of such withholding, provided that all such withholding shall cease upon delivery by such Foreign Lender of a Certificate of Exemption to Borrower and Agent.
1.10 OPTIONAL PREPAYMENT/REPLACEMENT OF LENDER IN RESPECT OF INCREASED COSTS. If any Lender (an "AFFECTED LENDER") (i) is subject to increased costs or taxes under subsections 1.8 or 1.9 and Agent makes demand upon Borrower in respect thereof, (ii) is unable to fund or maintain LIBOR Loans as described in subsection 1.2(G), (iii) defaults in its obligation to make Loans in accordance with the terms of this Credit Agreement or (iv) in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by subsection 9.2 (other than with respect to increasing the amount of the applicable Commitments or outstanding Term Loans of any of the Lenders), does not provide its consent when required to approve such proposed change, waiver, discharge or termination even though the consent of the Requisite Lenders (or, as applicable, the Requisite Revolving Lenders) is obtained, the Borrower may, so long as no Default or Event of Default has occurred and is then continuing, within thirty (30) days of receipt of such demand, notice or default, as the case may be, by notice (a "REPLACEMENT NOTICE") to the Agent and such Affected Lender, do the following:
(A) Borrower may request the Affected Lender to reasonably cooperate with the Borrower in obtaining a replacement Lender reasonably satisfactory to the Agent or its successor and the Borrower (the "REPLACEMENT LENDER");
(B) Borrower may request the non-Affected Lenders to acquire and assume all of the Affected Lender's Loans and Commitment as provided herein, but none of such Lenders shall be under an obligation to do so;
(C) Borrower may obtain, at Borrower's expense, a Replacement Lender for such Affected Lender, which Replacement Lender shall be reasonably satisfactory to Agent. In the event Borrower obtains a Replacement Lender within ninety (90) days following notice of its intention to do so, the Affected Lender shall sell and assign its Loans and its obligations under the Revolving Loan Commitment to such Replacement Lender, and the Affected Lender shall pay all principal of, and interest and fees accrued and unpaid on or with respect to, the Loans to the Replacement Lender; provided that Borrower has reimbursed such Affected Lender for its increased costs and all Obligations (other than principal, interest and fees) for which it is entitled to reimbursement or payment under this Agreement through the date of such sale and assignment; or
(D) Borrower may prepay in full all outstanding Obligations owed to such Affected Lender and terminate such Affected Lender's Pro Rata Share of the Revolving Loan Commitment, in which case the Revolving Loan Commitment will be reduced by the amount of such Pro Rata Share. Borrower shall, within ninety (90) days following notice of its intention to do so, prepay in full all outstanding Obligations owed to such Affected Lender (including such Affected Lender's increased costs for which it is entitled to reimbursement under this Agreement through the date of such prepayment), and terminate such Affected Lender's obligations under the Revolving Loan Commitment.
SECTION 2
AFFIRMATIVE COVENANTS
Each of Borrower and Holdings covenants and agrees that so long as the Revolving Loan Commitment is in effect and until payment in full of all Obligations and termination of all Lender Letters of Credit and Risk Participation Agreements, unless Requisite Lenders shall otherwise give their prior written consent, each of Borrower and Holdings shall perform and comply with, and shall cause each of its Subsidiaries to perform and comply with, all covenants in this Section 2 applicable to such Person.
2.1 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS.
(A) Each of Holdings and Borrower shall (1) (i) subject to
specific representations regarding Environmental Laws, comply
with and shall cause each of their respective Subsidiaries to
comply with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority
(including, without limitation, laws, rules, regulations and
orders relating to taxes, employer and employee contributions,
securities, employee retirement and welfare benefits,
environmental protection matters and employee health and
safety) as now in effect and which may be imposed in the
future in all jurisdictions in which Holdings, Borrower or any
of their respective Subsidiaries are now doing business or may
hereafter be doing business which failure to comply could not
reasonably be expected to have a Material Adverse Effect and
(ii) comply with the obligations, covenants and conditions
contained in all Contractual Obligations of the Borrower or
such Subsidiary, as applicable other than those laws, rules,
regulations, orders and provisions of such Contractual
Obligations the noncompliance with which could not reasonably
be expected to have, either individually or in the aggregate,
a Material Adverse Effect, and (2) subject to specific
representations regarding Environmental Laws, maintain or
obtain and shall cause each of its Subsidiaries to maintain or
obtain, all licenses, qualifications and permits now held or
hereafter required to be held by Holdings, Borrower or any of
their respective Subsidiaries, for which the loss, suspension,
revocation or failure to obtain or renew, could not reasonably
be expected to
have a Material Adverse Effect. This subsection 2.1 shall not preclude Holdings, Borrower or any of their respective Subsidiaries from contesting any regulatory action, taxes or other payments, if they are being diligently contested in good faith and if appropriate expense provisions have been recorded in conformity with GAAP and no Lien which can have priority over Agent's Lien in any Collateral or in respect of any Loan shall have attached to any assets of Holdings, Borrower or any of its Subsidiaries. Each of Holdings and Borrower represents and warrants that as of the date hereof, subject to specific representations regarding Environmental Laws, it (i) is in compliance in all material respects and each of their respective Subsidiaries is in compliance with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority as now in effect and all Contractual Obligations the noncompliance with which could not reasonably be expected to have a Material Adverse Effect, and (ii) maintains and each of their respective Subsidiaries maintains all material licenses, qualifications and permits referred to above for which the loss, suspension, revocation or failure to obtain or renew could reasonably be expected to have a Material Adverse Effect.
(B) Without limitation of any other portion of this subsection 2.1, Holdings, Borrower, each Subsidiary thereof and each Institution shall maintain all necessary permits, licenses, franchises, authorizations and clearances of governmental or regulatory authorities as are required or necessary (1) to operate in the states in which the Institutions are located as of the Second Amendment and Restatement Date or may thereafter be located, (2) to participate in federal student assistance programs under Title IV and (3) to own, lease and operate their respective properties and to conduct their business, in each case, in a manner no less advantageous to Holdings, Borrower, each Subsidiary thereof and each Institution as conducted by Holdings and its Subsidiaries immediately prior to the Second Amendment and Restatement Date;
(C) without limitation of any other portion of this subsection 2.1, each Institution shall maintain in full force and effect a Program Participation Agreement for each Institution and will comply in all material respects with each such Program Participation Agreement;
(D) without limitation of any other portion of this subsection 2.1, each Institution shall apply for recertification of eligibility to participate in federal student financial assistance programs under Title IV where such reapplication is necessary to assure that no Program Participation Agreement will expire;
(E) without limitation of any other portion of this subsection 2.1, Holdings, Borrower, each Subsidiary thereof and each Institution shall comply in all material respects with the applicable provisions of Title IV and the Regulations, including Sections 668.171-668.175 of the Regulations and with all applicable laws of each state in which it is located that regulates educational institutions; and
(F) Without limitation of any other portion of this subsection 2.1, each Institution shall obtain and maintain all required accreditations for such Institution from each Accrediting Agency and shall obtain and maintain all licenses that are required to operate in each state in which each Institution is located and that are necessary and appropriate for each Institution to remain eligible for Title IV funding.
2.2 MAINTENANCE OF PROPERTIES; INSURANCE. Holdings shall maintain or cause to be maintained in good repair, working order and condition all material properties used in the business of Holdings and its Subsidiaries and will make or cause to be made all appropriate repairs, renewals and replacements
thereof. Holdings shall maintain or cause to be maintained, with financially
sound and reputable insurers, public liability and property damage insurance
with respect to its business and properties and the business and properties of
its Subsidiaries against loss or damage of the kinds reasonable for the business
risks and in amounts reasonably acceptable to Agent and will deliver evidence
thereof to Agent if and as requested by Agent. Holdings shall maintain or cause
to be maintained, with financially sound and reputable insurers, business
interruption insurance in amounts acceptable to Agent. Holdings shall cause,
pursuant to endorsements and assignments in form and substance reasonably
satisfactory to Agent, Agent, for the benefit of Agent and Lenders, (i) to be
named as lender's loss payee in the case of casualty insurance, Agent for the
benefit of Agent and Lenders, (ii) to be named as additional insured in the case
of all liability insurance and Agent, for the benefit of Agent and Lenders, and
(iii) to be named as assignee (pursuant to assignment agreements, in form, scope
and substance satisfactory to Agent) in the case of all business interruption
insurance. Provided no Event of Default has occurred and is continuing, the
Agent and Lenders shall make any proceeds of insurance available to Borrower for
restoration of any casualty or reinvestment in accordance with Section 1.5(C).
Holdings represents and warrants that it and each of its Subsidiaries currently
maintains all material properties as set forth above and maintains all insurance
described above.
2.3 INSPECTION; LENDER MEETING. Upon reasonable notice, (except during the continuation of a Default or an Event of Default, in which case no notice will be required) each of Holdings and Borrower shall permit any authorized representatives of Agent to visit and inspect any of the properties of Holdings, Borrower or any of their respective Subsidiaries, including its and their financial and accounting records, and to make copies and take extracts therefrom, and to discuss its and their affairs, finances and business with its and their officers and certified public accountants, at such reasonable times during normal business hours and as often as may be reasonably requested. Representatives of each Lender will be permitted to accompany representatives of Agent during each visit, inspection and discussion referred to in the immediately preceding sentence. Without in any way limiting the foregoing, Holdings shall participate and shall cause its and its Subsidiaries key management personnel to participate in a meeting with Agent and Lenders at least once during each year, which meeting shall be held at such time and such place as may be reasonably requested by Agent. Holdings shall pay the reasonable travel costs and lodging expenses of Agent and Lenders for such meetings.
2.4 CORPORATE EXISTENCE, ETC. Except as otherwise permitted by subsections 3.6 and 3.7, each of Holdings and Borrower shall, and shall cause each of their respective Subsidiaries to, at all times preserve and keep in full force and effect its corporate existence and all rights and franchises material to its business.
2.5 ENVIRONMENTAL MATTERS. Each of Holdings and Borrower shall, and shall cause each of their respective Subsidiaries and each other Person within their respective control, to: (a) conduct its operations in compliance with all Environmental Laws and Environmental Permits, except for such noncompliance that would not result in Environmental Liabilities which could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect; (b) implement any and all investigation, remediation, removal and response actions that are appropriate or necessary to maintain the value and marketability of the Real Estate or to otherwise comply with Environmental Laws and Environmental Permits pertaining to the presence, generation, treatment, storage, use, disposal, transportation or Release of any Hazardous Material on, at, in, under, above, to, from or about any of its Real Estate; (c) notify Agent promptly after such Loan Party becomes aware of any violation of Environmental Laws or Environmental Permits or any Release on, at, in, under, above, to, from or about any Real Estate that is reasonably likely to result in Environmental Liabilities in excess of $100,000; and (d) promptly forward to Agent a copy of any order, notice, request for information or any communication or report received by such Loan Party or Person in connection with any such violation or Release or any other matter relating to any Environmental Laws or Environmental Permits that could reasonably be expected to result in
Environmental Liabilities in excess of $100,000, in each case whether or not the Environmental Protection Agency or any Governmental Authority has taken or threatened any action in connection with any such violation, Release or other matter. If Agent at any time has a reasonable basis to believe that there may be a violation of any Environmental Laws or Environmental Permits by Holdings, Borrower, any of their respective Subsidiaries or any Person within their respective control or any Environmental Liability arising thereunder, or a Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, that, in each case, could reasonably be expected to have a Material Adverse Effect, then each Loan Party shall, or shall cause such Person to, upon Agent's written request (i) cause the performance of such environmental audits including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at Borrower's expense, as Agent may from time to time reasonably request, which shall be conducted by reputable environmental consulting firms reasonably acceptable to Agent and shall be in form and substance reasonably acceptable to Agent, and (ii) permit Agent or its representatives to have reasonable access to all Real Estate for the purpose of conducting such environmental audits and testing as Agent deems appropriate, including subsurface sampling of soil and groundwater. Borrower shall reimburse Agent for the costs of such audits and tests and the same will constitute a part of the Obligations secured hereunder.
2.6 FURTHER ASSURANCES.
(A) Each of Holdings and Borrower shall and shall cause each of their respective present and future Subsidiaries (other than any Institution Subsidiary of Borrower) to, from time to time, execute such guaranties, financing statements, documents, security agreements and reports as Agent or Requisite Lenders at any time may reasonably request to evidence, perfect or otherwise implement the guaranties and security for repayment of the Obligations contemplated by the Loan Documents.
(B) At Agent's or Requisite Lenders' request, Holdings and Borrower shall cause any of their respective Subsidiaries (other than any Institution Subsidiary of Borrower) promptly to guaranty the Obligations and to grant to Agent, for the benefit of Agent and Lenders, a first priority, perfected security interest in the real, personal and mixed property (other than interests as lessee in real property) of such Subsidiary to secure the Obligations. The documentation for such guaranty or security shall be substantially similar to the Loan Documents executed or amended and restated concurrently with this Agreement with such modifications as are reasonably requested by Agent and shall include such legal opinions as Agent shall reasonably require.
2.7 USE OF PROCEEDS. Proceeds of the Loans shall be used by Borrower (A) in the case of Incremental Term Loan A and the initial Revolving Loan made on the Closing Date, to the prepayment of Term Loan B, Subject Subordinated Indebtedness, certain fees and certain expenses and (B) in the case of subsequent Revolving Loans, for working capital purposes of Borrower and its Subsidiaries as more particularly described in Section 1.1(B)(1), provided, that in the event that Borrower transfers any proceeds of Revolving Loans to any Subsidiary of Borrower, such transfer shall be in the form of a loan to such transferee evidenced by an Intercompany Note of the transferee issued in accordance with subsection 3.1(B)(2) and pledged to Agent, in each case, to the extent not prohibited by the Regulations and otherwise as contributions to such Subsidiary of common equity. Nothing contained in this subsection 2.7 shall permit any payment or transfer of funds otherwise prohibited by this Agreement.
SECTION 3
NEGATIVE COVENANTS
Each of Borrower and Holdings covenants and agrees that so long as the Revolving Loan Commitment is in effect and until payment in full in cash of all Obligations and termination of all Lender Letters of Credit and Risk Participation Agreements, unless Requisite Lenders shall otherwise give their prior written consent, each of Borrower and Holdings shall perform and comply with, and shall cause its Subsidiaries to perform and comply with, all covenants in this Section 3 applicable to such Person.
3.1 INDEBTEDNESS. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries directly or indirectly to create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except:
(A) the Obligations;
(B) intercompany Indebtedness among Holdings and its Subsidiaries; provided, that the obligations of each obligor of such Indebtedness shall: (1) to the extent not physically delivered in pledge to the Agent, be subordinated in right of payment to the Obligations from and after such time as any portion of the Obligations shall become due and payable (whether at stated maturity, by acceleration or otherwise); (2) be evidenced by promissory notes (each an "INTERCOMPANY NOTE"), which shall have been (to the extent not prohibited by the Regulations) pledged to Agent, for the benefit of Agent and Lenders, as security for the Obligations pursuant to written agreements in form, scope and substance satisfactory to Agent; and (3) have such other terms and provisions as Agent or Requisite Lenders may reasonably require;
(C) the Remaining Subordinated Indebtedness;
(D) Indebtedness of Holdings and its Subsidiaries existing as of the Second Amendment and Restatement Date and described on Schedule 3.1(D) less any payments of principal made on or after the Second Amendment and Restatement Date thereon;
(E) Indebtedness of Borrower and its Subsidiaries in respect of purchase money obligations or capitalized lease obligations so long as the aggregate principal (or notional) principal Indebtedness outstanding does not exceed $10,000,000 at any time;
(F) Indebtedness described in clauses (g) and (h) of the definition of "Permitted Acquisition" of Borrower or the Institution Subsidiary thereof that is the subject of such Permitted Acquisition;
(G) Indebtedness secured by Permitted Liens described in clauses
(1), (2), (3), (4) and (6) of clause (A) of subsection 3.2;
(H) OMITTED;
(I) Indebtedness of Borrower so long as the aggregate principal Indebtedness outstanding does not exceed $5,000,000 at any time;
(J) Indebtedness of Holdings arising under the Management Agreement and of Holdings and its Subsidiaries arising under the Tax Sharing Agreement; and
(K) Indebtedness of Holdings evidenced by Management Notes.
3.2 LIENS AND RELATED MATTERS.
(A) NO LIENS. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries directly or indirectly to create, incur, assume or permit to exist any Lien on or with respect to any property or asset (including any document or instrument with respect to goods or accounts receivable) of Holdings, Borrower or any of their respective Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, except Permitted Encumbrances. "PERMITTED ENCUMBRANCES" means the following:
(1) Liens for taxes, assessments or other governmental charges not yet due and payable;
(2) statutory Liens incurred by Borrower or any of its Subsidiaries of landlords, carriers, warehousemen, mechanics, materials and other similar liens imposed by law, which are incurred in the ordinary course of business for sums not more than thirty (30) days delinquent or which are being contested in good faith; provided that a reserve or other appropriate provision shall have been made therefor and the aggregate amount of liabilities secured by such Liens is less than $2,000,000;
(3) Liens (other than any Lien imposed by the Employee Retirement Income Security Act of 1974 or any rule or regulation promulgated thereunder) 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, stay, customs and appeal bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);
(4) deposits, in an aggregate amount not to exceed $1,000,000, made by Holdings or any of its Subsidiaries in the ordinary course of business to secure liability to insurance carriers;
(5) Liens granted by Borrower or any of its Subsidiaries for purchase money obligations and capital leases; provided that: (a) the purchase or acquisition by lease of the asset subject to any such Lien is permitted under subsection 4.1; (b) the Indebtedness secured by any such Lien is permitted under subsection 3.1(E); and (c) any such Lien encumbers only the asset so purchased or leased and secures only such Indebtedness;
(6) any attachment or judgment Lien not constituting an Event of Default under subsection 6.1(I);
(7) easements, rights of way, restrictions, and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of Holdings or any of its Subsidiaries;
(8) any interest or title of a lessor or sublessor under any operating lease;
(9) Liens in favor of Agent, for the benefit of Agent and Lenders;
(10) Liens created by Holdings or its Subsidiaries prior to the Second Amendment and Restatement Date securing Indebtedness permitted under subsection 3.1(D) and set forth on Schedule 3.2(A)(10) hereto;
(11) Liens on assets of the Institution Subsidiary acquired in a Permitted Acquisition as described in clauses (g) and (h) of the definition of "Permitted Acquisition";
(12) OMITTED;
(13) OMITTED;
(14) OMITTED; and
(15) Liens granted by (i) an Institution Subsidiary to another Institution Subsidiary to secure Indebtedness, evidenced by an Intercompany Note, substantially in the form of Exhibit 3.2(A), of such Institution Subsidiary to the order of such other Institution Subsidiary, or (ii) Borrower or a Subsidiary (other than an Institution Subsidiary) of Borrower to the order of an Institution Subsidiary to secure Indebtedness of Borrower or such Subsidiary, evidenced by an Intercompany Note in the form of Exhibit 3.2(B), to such Institution Subsidiary, so long as any Lien described in clause (i) or (ii) of this paragraph 15 is (x) granted pursuant to an Intercompany Security Agreement and (y) subject to an Intercompany Intercreditor Letter.
(B) NO NEGATIVE PLEDGES. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries directly or indirectly to enter into or assume any agreement (other than the Loan Documents and Remaining Subordinated Indebtedness Documents) prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired.
(C) NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO BORROWER.
Except as provided herein, each of Holdings and Borrower shall
not and shall not suffer or permit any of their respective
Subsidiaries directly or indirectly to create or otherwise
cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any
such Subsidiary to: (1) pay dividends or make any other
distribution on any of such Subsidiary's capital stock owned
by Borrower or any Subsidiary of Borrower; (2) subject to
subordination provisions for the benefit of Agent and Lenders,
pay any Indebtedness owed to Borrower or any other Subsidiary;
(3) make loans or advances to Borrower or any of its
Subsidiaries; or (4) transfer any of its property or assets to
Borrower or any of its Subsidiaries.
3.3 INVESTMENTS; JOINT VENTURES. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries directly or indirectly to make or own any Investment in any Person except:
(A) Borrower and its Subsidiaries may make and own Investments in Cash Equivalents; provided that such Cash Equivalents are not subject to setoff rights;
(B) Borrower may make intercompany loans to (i) any Subsidiary of Borrower, to the extent the Indebtedness created thereby is permitted by subsection 3.1, in order to provide for the cash requirements of such Subsidiary in the ordinary course of business (to the extent the use of the proceeds of such intercompany loans are otherwise not prohibited by this Agreement), and (ii) so long as no Default or Event of Default is continuing, Holdings, to the extent the Indebtedness created thereby is permitted by subsection 3.1, to the extent, and as and when, needed in order to permit Holdings to make interest payments required under, and permitted by the subordination provisions of, the Sharp Note;
(C) Borrower and its Subsidiaries may make loans and advances to employees for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed $500,000 in the aggregate at any time outstanding;
(D) Non-cash proceeds of asset sales permitted under subsection
3.7 (so long as such non-cash proceeds, unless representing
proceeds of a sale by an Institution Subsidiary of Borrower,
are subjected to a perfected Lien in favor of Agent pursuant
to documentation acceptable to Agent);
(E) Investments (w) by Holdings in the White Note, (x) by Holdings and Borrower existing on the Second Amendment and Restatement Date in the capital stock of their respective Subsidiaries and Investments by Holdings in the common stock of Borrower, (y) by Borrower in its Subsidiaries with proceeds of Revolving Loans as permitted by subsection 2.7 and (z) by Holdings and its Subsidiaries existing on the Second Amendment and Restatement Date and set forth on subschedule 7.1(B)(4);
(F) Investments by Borrower and its Wholly-Owned Subsidiaries in Permitted Acquisitions;
(G) Investments constituting Restricted Junior Payments permitted under subsection 3.5;
(H) OMITTED;
(I) OMITTED;
(J) so long as no Default or Event of Default is continuing, Borrower may make Investments after the Second Amendment and Restatement Date not to exceed $3,000,000 in the aggregate outstanding at any time;
(K) OMITTED; and
(L) Investment by Holdings or Borrower through the conversion of an Intercompany Note of Holdings or any of its Subsidiaries into common equity in such entity as permitted by Subsection 3.5(K) hereof.
"INVESTMENT" means (i) any direct or indirect purchase or other acquisition by Holdings or any of its Subsidiaries of any beneficial interest in, including stock, partnership interest, membership interest or other equity securities of, any other Person; and (ii) any direct or indirect loan, advance or capital contribution by Holdings or any of its Subsidiaries to any other Person, including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business. The amount of any Investment outstanding at any time shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment less the amount of cash paid to Borrower in respect of, and as a return of capital on, such Investment.
"CASH EQUIVALENTS" means: (i) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year from the date of acquisition thereof;
(ii) commercial paper maturing no more than one (1) year from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Ratings Group, a division of McGraw-Hill Companies, or at least P-1 from
Moody's Investors Service, Inc.; (iii) certificates of deposit or bankers'
acceptances maturing within one (1) year from the date of issuance thereof
issued by, or overnight reverse repurchase agreements from, any commercial bank
organized under the laws of the United States of America or any state thereof or
the District of Columbia having combined capital and surplus of not less than
$500,000,000; (iv) time deposits maturing no more than thirty (30) days from the
date of creation thereof with commercial banks having membership in the Federal
Deposit Insurance Corporation in amounts not exceeding the lesser of $100,000 or
the maximum amount of insurance applicable to the aggregate amount of Holdings'
or its Subsidiary's deposits at such institution; and (v) deposits or
investments in mutual or similar funds offered or sponsored by brokerage or
other companies having membership in the Securities Investor Protection
Corporation in amounts not exceeding the lesser of $100,000 or the maximum
amount of insurance applicable to the aggregate amount of Holdings' or its
Subsidiary's deposits at such institution.
3.4 CONTINGENT OBLIGATIONS. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries directly or indirectly to create or become or be liable with respect to any Contingent Obligation except those:
(A) resulting from endorsement of negotiable instruments for collection in the ordinary course of business;
(B) existing on the Second Amendment and Restatement Date and described in Schedule 3.4 annexed hereto;
(C) arising with respect to customary indemnification obligations incurred in connection with Asset Dispositions;
(D) incurred by Borrower or any of its Subsidiaries in the ordinary course of business with respect to fiduciary, surety and appeal bonds, performance and return-of-money bonds and other similar obligations not exceeding at any time outstanding $10,000,000 in aggregate liability;
(E) incurred (other than by any Subsidiary of Borrower and other than incurred in respect of the Remaining Subordinated Indebtedness) with respect to Indebtedness permitted by subsection 3.1;
(F) arising under the Security Documents;
(G) arising under the Employment Agreements;
(H) not permitted by clauses (A) through (G) above, so long as any such Contingent Obligations, in the aggregate at any time outstanding, do not exceed $4,000,000;
(I) of the Institution Subsidiary acquired in, and arising in respect of, a Permitted Acquisition;
(J) OMITTED;
(K) OMITTED;
(L) OMITTED;
(M) arising under the Related Transactions Documents, as in effect on the Second Amendment and Restatement Date; and
(N) of Borrower and Holdings arising in connection with the Nascar Sale/Leaseback.
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or indirect liability of that Person: (i) with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; or (iii) under any foreign exchange contract, currency swap agreement, interest rate swap agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates. Contingent Obligations shall also include (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (c) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed.
3.5 RESTRICTED JUNIOR PAYMENTS. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries directly or indirectly to declare, order, pay, make or set apart any sum for any Restricted Junior Payment, except that:
(A) Borrower may make payments and distributions to Holdings to permit Holdings to pay federal and state income taxes then due and owing, franchise taxes and other similar licensing expenses incurred in the ordinary course of business pursuant to and provided in the Tax Sharing Agreement;
(B) any Wholly-Owned Subsidiary of Borrower may make Restricted Junior Payments to Borrower with respect to the common stock of such Wholly-Owned Subsidiary;
(C) Borrower may make Restricted Junior Payments to Holdings to the extent, and as and when needed in order to permit Holdings to pay, when due and payable, accounting and legal fees incurred in the ordinary course of Holdings' business and filing, registration and reporting fees and expenses associated with state and federal qualifications and other state, federal or regulatory compliance matters of Holdings;
(D) so long as no Event of Default is continuing or would arise as a result of any such Restricted Junior Payment and after giving effect to any such payment Availability under the Revolving Loan Commitment plus Freely Available Cash and Cash Equivalents shall equal at least $2,500,000, Borrower may make Restricted Junior Payments to the extent, and as and when, needed (together with any previously deferred interest payments), in order to permit Holdings to make interest payments, and payment of principal on or after September 30, 2009, to be paid only in cash as required under the Sharp Note;
(E) so long as no Default or Event of Default is continuing or would arise therefrom, loans (evidenced by one or more Intercompany Notes) from Borrower to Holdings to the extent necessary, after taking into account interest received by Holdings on the White Note (which interest so received shall be used by Holdings solely to pay interest on the CEG Closing Note or as provided below in this clause (E)), to pay interest which is then due and payable on the CEG Closing Note and which loan shall be used by Holdings for the payment of such interest so long as any such loan is repaid from such interest under the White Note when such interest is received by Holdings;
(F) only (i) (a) so long as no Event of Default under subsection 6.1(A) or 6.1(U) is continuing or would occur as a result of any such Restricted Junior Payment; (b) so long as no Compliance Certificate is overdue; and (c) so long as no Event of Default under subsection 6.1(C) (as it relates to subsections 4.3, 4.4, 4.5, 4.7, 4.8(A) and 4.8(B)) is continuing as evidenced by a Compliance Certificate (which must be for the period most recently delivered prior to such payment), then, if all of the foregoing conditions have been satisfied, Borrower may make Restricted Junior Payments to the extent, and as and when needed in order to permit Holdings to pay (x) the fees payable under section 2 of the Management Agreement, but not in excess of the amount then permitted to be paid under subsection 3.9 and (y) reimbursement by Holdings of out-of-pocket expenses required to be reimbursed under the terms of the Management Agreement, and, in each case, subject to the delivery of the above mentioned Compliance Certificate and (ii) so long as no Event of Default is continuing, any other amounts payable under the Management Agreement;
(G) so long as no Event of Default arising under subsection 6.1(A)
is continuing or would occur as a result of any such Restricted Junior Payment, Borrower may make Restricted Junior Payments to Holdings to permit Holdings to pay director fees, not in excess of $120,000 in any fiscal year;
(H) Holdings and Subsidiaries of Borrower may make payments in respect of Intercompany Notes to the extent not prohibited by the subordination provisions, if any, thereof;
(I) so long as (a) no Event of Default is continuing or would arise as a result of any such Restricted Junior Payment, (b) after giving effect to any such payment (i) Availability under the Revolving Loan Commitment plus Freely Available Cash and Cash Equivalents shall equal at least $2,500,000, (ii) the Fixed Charge Coverage for Holdings and its Subsidiaries for the period of four consecutive quarters ending on or most recently prior to the date of such payment as if such payment were made on the last date of such fiscal period shall be equal to or greater than 1.2 : 1.0, (iii) the Total Indebtedness of Holdings and its Subsidiaries at the time of such payment to TTM EBITDA of Holdings and its Subsidiaries for the period of four consecutive fiscal quarters ending on or most recently prior to the date of such payment as if such payment were made on the last date of such fiscal period shall be equal to or less than 1.50 : 1.0, and (c) the Borrower shall
have delivered to Agent a Compliance Certificate evidencing compliance with the foregoing requirements, the Borrower may pay a Junior Restricted Payment to Holdings, once in each fiscal year, in order to permit Holdings to make a payment of accrued dividends on the Convertible Preferred Stock once in each fiscal year;
(J) so long as no Event of Default is continuing or would occur as a result of such Restricted Junior Payment, Borrower may make Restricted Junior Payments to provide funds to Holdings to (i) purchase shares pursuant to the terms of the Stockholders Agreement and (ii) make regularly scheduled payments on Management Notes, so long as the Restricted Junior Payments provided for pursuant to clauses (i) and (ii) of this subsection 3.5(J) shall not exceed an aggregate amount, after the Second Amendment and Restatement Date, of $2,500,000; and
(K) as of the last day of any fiscal year, Borrower or any
Subsidiary thereof may cause any one or more of its
Intercompany Notes to be converted to common equity in
Borrower or such Subsidiary, as applicable, to the extent
necessary for Borrower or such Subsidiary to comply with
Section 668.15(b)(7)(i)(A) of the Regulations.
"RESTRICTED JUNIOR PAYMENT" means: (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Borrower
or any of its Subsidiaries now or hereafter outstanding, except a dividend
payable solely in shares of that class of stock to the holders of that class;
(ii) any redemption, conversion, exchange, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
shares of any class of stock of Borrower or any of its Subsidiaries now or
hereafter outstanding; (iii) any payment or prepayment of interest on, principal
of, premium, if any, redemption, conversion, exchange, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, any subordinated
indebtedness of Borrower or any of its Subsidiaries excluding payments required
and permitted to be made under any Intercompany Note; and (iv) any payment made
to retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock of Borrower or any of its
Subsidiaries now or hereafter outstanding.
3.6 RESTRICTION ON FUNDAMENTAL CHANGES. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries directly or indirectly to: (a) amend, modify or waive any term or provision of its articles of incorporation or by-laws in any manner reasonably likely to have a material adverse effect on any Lender or any provision of its articles of incorporation relating to, or its certificates of designations pertaining to, preferred stock unless required by law; (b) enter into any transaction of merger or consolidation (other than a merger of a Wholly-Owned Subsidiary of Borrower into or with another Wholly-Owned Subsidiary of Borrower or the merger of a Target Person with a Wholly-Owned Subsidiary of Borrower to effect a Permitted Acquisition); (c) liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution); or (d) acquire by purchase or otherwise all or any substantial part of the business or assets of any other Person other than pursuant to a Permitted Acquisition.
3.7 DISPOSAL OF ASSETS OR SUBSIDIARY STOCK. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries directly or indirectly to: convey, sell, lease, sublease, transfer or otherwise dispose of, or grant any Person an option to acquire, in one transaction or a series of transactions, any of its property, business or assets, or the capital stock of or other equity interests in any of its Subsidiaries, whether now owned or hereafter acquired, except for (a) bona fide sales by Borrower or any of its Subsidiaries of inventory to customers for fair value in the ordinary course of business and dispositions of obsolete equipment not used or useful in the business, (b) the Nascar Sale/Leaseback and (c) Asset Dispositions by Borrower or any of its Subsidiaries if all of the following conditions are met: (i) such Asset Disposition does not constitute a Business Unit Disposition; (ii) such Asset Disposition
does not constitute the conveyance, sale, lease, sublease, transfer or other disposition of, or grant of an option to acquire, (x) less than 100% of the shares of each class of capital of any Subsidiary of Borrower or (y) any shares of any class of capital stock of Borrower; (iii) the consideration received is at least equal to the fair market value of such assets as determined (x) in the case of an Asset Disposition to an Affiliate of Holdings (other than Asset Dispositions to such Affiliates in the ordinary course of business aggregating, in any fiscal year, not more than $100,000 (higher of total consideration for such Asset Dispositions or book value of the assets subject to such Asset Dispositions)), by a third-party appraisal satisfactory to Agent or (y) in the case of Asset Dispositions other than to any such Affiliate (other than such Asset Dispositions not in excess of $750,000 in total consideration in any fiscal year), as determined by Holdings with the approval of the Requisite Lenders, such approval not to be withheld unreasonably; (iv) at least 85% of the consideration received is cash; (v) the Net Proceeds of such Asset Disposition are applied as required by subsection 1.5(C); (vi) after giving effect to the sale or other disposition of the assets included within the Asset Disposition and the repayment of Indebtedness with the proceeds thereof, Holdings and its Subsidiaries are in compliance on a pro forma basis with the covenants set forth in Section 4 recomputed for the most recently ended month for which information is available and is in compliance with all other terms and conditions contained in this Agreement; and (vii) no Default or Event of Default then exists or shall result from such sale or other disposition.
3.8 TRANSACTIONS WITH AFFILIATES. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries directly or indirectly to enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate (excluding the Remaining Subordinated Indebtedness Documents, the other Related Transaction Documents, the Tax Sharing Agreement, the Management Agreement, and the Employment Agreements and the Transition Agreement) or with any director, officer or employee of Holdings or any Subsidiary thereof, except (a) as set forth on Schedule 3.8, (b) as set forth on Schedule 3.9, subject to the provisions of subsection 3.9, or (c) transactions in the ordinary course of and pursuant to the reasonable requirements of the business of Holdings, Borrower or any of their respective Subsidiaries and upon fair and reasonable terms which, if such transaction involves more than $250,000 in the aggregate, are fully disclosed to Agent and in any event (and regardless of the amount involved) are no less favorable to Holdings, Borrower or such Subsidiary than would have been obtainable in a comparable arm's length transaction with a Person that is not an Affiliate; provided, however that nothing in this subsection 3.8 shall prohibit Borrower or Holdings from making payments otherwise permitted by subsection 3.5, and such payments need not be listed on Schedule 3.8. Notwithstanding the foregoing, upon the election of Agent no payments may be made with respect to any items set forth on Schedule 3.8 upon the occurrence and during the continuation of a Default or Event of Default.
3.9 MANAGEMENT FEES AND COMPENSATION. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries directly or indirectly to pay any management, consulting, disposition, investment banking or similar fees to any Affiliate or to any director, officer or employee of Holdings, Borrower or any Subsidiary thereof except as set forth on Schedule 3.9; provided that notwithstanding the foregoing, on the Second Amendment and Restatement Date, Holdings may pay all fees and other amounts described in Sections 2.3(B), 2.3(D) and 2.4 of the Convertible Preferred Stock Purchase Agreement; provided, further, that fees payable under Section 2 of, and other amounts payable under, the Management Agreement as in effect on the Second Amendment and Restatement Date for periods ending after September 30, 2001 shall be permitted to be paid only to the extent that Borrower is entitled to make a Restricted Junior Payment to Holdings for such purpose. Notwithstanding the foregoing, upon the election of Agent no payments may be made with respect to any items set forth on Schedule 3.9 upon the occurrence and during the continuation of a Default or Event of Default arising under subsection 6.1(A).
3.10 CONDUCT OF BUSINESS. Each of Holdings and Borrower shall not suffer or permit any of their respective Subsidiaries directly or indirectly to engage in any business other than businesses of the type described on Schedule 3.10. Holdings will not engage in any business activity, except its consummation of the financing contemplated hereby, the financing contemplated by the Remaining Subordinated Indebtedness Documents, its ownership of Borrower, its ownership of intellectual property used in the business of the Borrower and its Subsidiaries and its performance from time to time of its obligations under the Loan Documents and the Related Transactions Documents to which it is a party and the other documents referred to in subsection 3.11 to which it is a party, and activities incidental thereto.
3.11 CHANGES RELATING TO SUBORDINATED INDEBTEDNESS AND OTHER AGREEMENTS.
Each of Holdings and Borrower shall not and shall not suffer or permit any of
their respective Subsidiaries directly or indirectly to change or amend (A) the
terms of the Remaining Subordinated Indebtedness if the effect of such amendment
is to: (1) increase the interest rate on such Indebtedness; (2) foreshorten the
dates upon which payments of principal or interest are due on such Indebtedness;
(3) change any event of default or change any covenant with respect to such
Indebtedness in a manner which is adverse to any Loan Party; (4) change the
prepayment provisions of such Indebtedness in a manner which is adverse to any
Lender; (5) add any event of default or add any covenant; (6) change any of the
subordination provisions thereof (or the subordination terms of any guaranty
thereof) or change any provision which restricts Holdings, Borrower or any of
their respective Subsidiaries from amending any of the Loan Documents or
incurring Obligations or Liens in respect thereof; or (7) change or amend any
other term if such change or amendment described in this clause (7) would
materially increase the obligations of the obligor or confer additional material
rights on the holder of such Indebtedness in a manner adverse to Holdings,
Borrower or any of their respective Subsidiaries or Agent or Lenders, (B) any of
the terms of the Convertible Preferred Stock Purchase Agreement, that certain
Subscription Agreement dated September 30, 1999 by the shareholders listed
therein and Holdings (the "1999 SUBSCRIPTION AGREEMENT"), the Asset Purchase
Agreement, the Securities Purchase Agreement, any Redemption Agreement or the
Exchange Agreement (each as defined therein), the Preferred Stock, the Tax
Sharing Agreement, the Management Agreement or the NTT Purchase Agreement, in
each case under this clause (B), in a manner which is materially adverse to any
Lender or (C) any of the terms of the CEG Closing Note.
3.12 FISCAL YEAR. Neither Holdings, nor Borrower nor any other Subsidiary of Holdings shall change its fiscal year.
3.13 PRESS RELEASES; PUBLIC OFFERING MATERIALS. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries to issue any press releases or other public disclosure, including but not limited to any prospectus, proxy statement or other material filed with any governmental entity relating to a public offering of the capital stock of Holdings, Borrower or any of their respective Subsidiaries, using the name of Agent or any Lender or any of their respective affiliates or referring to this Agreement, the other Loan Documents or the Related Transactions Documents without at least two Business Days' prior notice to Agent or the appropriate Lender and without the prior written consent of Agent or the appropriate Lender, which consent shall not be withheld unreasonably, unless (and only to the extent that) Holdings, Borrower or the relevant Subsidiary is required to do so under law and then, in any event, Holdings or the relevant Subsidiary shall consult with Agent or the appropriate Lender before issuing such press release or other public disclosure. Any tombstone or similar advertising material relating to the financing transactions contemplated by this Agreement to be published by Agent or any Lender shall be subject to the prior written consent of Borrower (not to be withheld unreasonably) following at least two Business Days' prior notice to Borrower. Agent and Lenders reserve the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.
3.14 SUBSIDIARIES. Each of Holdings and Borrower shall not and shall not suffer or permit any of their respective Subsidiaries directly or indirectly to establish, create or acquire any new Subsidiary except as part of a Permitted Acquisition or the opening of an Institution (which is not owned and operated by Borrower and its Subsidiaries as of the Second Amendment and Restatement Date.
SECTION 4
FINANCIAL COVENANTS/REPORTING
Each of Borrower and Holdings covenants and agrees that so long as the Revolving Loan Commitment is in effect and until payment in full in cash of all Obligations and termination of all Lender Letters of Credit and Risk Participation Agreements, unless Requisite Lenders shall otherwise give their prior written consent, each of Borrower and Holdings shall perform and comply with, and shall cause each of its Subsidiaries to perform and comply with, all covenants in this Section 4 applicable to such Person.
4.1 CAPITAL EXPENDITURE LIMITS. The aggregate amount of all Capital Expenditures of Holdings and its Subsidiaries will not exceed $9,000,000 annually for each fiscal year of Holdings (the "CAPEX LIMIT"), and no Capital Expenditures shall be made other than by Borrower and Subsidiaries of Borrower;. Notwithstanding the foregoing, in the event Borrower and Subsidiaries of Borrower do not expend the entire Capex Limit permitted in any fiscal year, Borrower and its Subsidiaries may carry forward to the immediately succeeding fiscal year 100% of the unutilized portion (not to exceed $3,000,000) of the Capex Limit. All Capital Expenditures made by Borrower and its Subsidiaries shall first be applied to reduce the applicable Capex Limit and then to reduce the carry forward from the previous fiscal year, if any. "CAPITAL EXPENDITURES" will be calculated as illustrated on Exhibit 4.8(C). For purposes of those calculations, Capital Expenditures of Holdings and its Subsidiaries for the fiscal quarter ending on the last day of September, 2001, shall be deemed to be $1,310,000, Capital Expenditures of Holdings and its Subsidiaries for the fiscal quarter ending on the last day of December, 2001, shall be deemed to be $3,079,000, and Capital Expenditures of Holdings and its Subsidiaries for the month ending January, 2002, shall be deemed to be $1,223,000
4.2 OMITTED.
4.3 EBITDA. Borrower shall not permit EBITDA for any period of four consecutive fiscal quarters ending on the last day of any month set forth below to be less than the amount set forth below for such period:
------------------------------------------------------ PERIOD AMOUNT ------------------------------------------------------ June 30, 2002 $18,000,000 ------------------------------------------------------ September 30, 2002 $18,000,000 ------------------------------------------------------ December 31, 2002 $18,125,000 ------------------------------------------------------ March 31, 2003 $18,250,000 ------------------------------------------------------ June 30, 2003 $18,375,000 ------------------------------------------------------ September 30, 2003 $18,500,000 ------------------------------------------------------ December 31, 2003 $18,750,000 ------------------------------------------------------ March 31, 2004 $19,000,000 ------------------------------------------------------ June 30, 2004 $19,250,000 ------------------------------------------------------ September 30, 2004 $19,500,000 ------------------------------------------------------ December 31, 2004 $20,000,000 ------------------------------------------------------ March 31, 2005 $20,500,000 ------------------------------------------------------ June 30, 2005 $21,000,000 ------------------------------------------------------ September 30, 2005 $21,500,000 ------------------------------------------------------ |
------------------------------------------------------ PERIOD AMOUNT ------------------------------------------------------ December 31, 2005 $22,750,000 ------------------------------------------------------ March 31, 2006 $22,750,000 ------------------------------------------------------ June, 30, 2006 $22,750,000 ------------------------------------------------------ September 30, 2006 $22,750,000 ------------------------------------------------------ December 31, 2006 $23,750,000 ------------------------------------------------------ March 31, 2007 $23,750,000 ------------------------------------------------------ June 30, 2007 $23,750,000 ------------------------------------------------------ September 30, 2007 $23,750,000 ------------------------------------------------------ December 31, 2007 $24,500,000 ------------------------------------------------------ March 31, 2008 $24,500,000 ------------------------------------------------------ June 30, 2008 $24,500,000 ------------------------------------------------------ September 30, 2008 $24,500,000 ------------------------------------------------------ December 31, 2008 $25,000,000 ------------------------------------------------------ March 31, 2009 $25,000,000 ------------------------------------------------------ |
"EBITDA" will be calculated as illustrated on Exhibit 4.8(C). For purposes of those calculations, EBITDA for the Borrower for the fiscal quarter ending on the last day of September, 2001, shall be deemed to be $5,267,000, EBITDA for the Borrower for the fiscal quarter ending on the last day of December, 2001, shall be deemed to be $8,313,000, and EBITDA for the Borrower for the month ending January, 2002, shall be deemed to be $3,592,000.
4.4 FIXED CHARGE COVERAGE. Holdings and Borrower shall not suffer or permit Fixed Charge Coverage of Holdings and its Subsidiaries for any period of four consecutive fiscal quarters ending on the last day of any month set forth below to be less than the amount set forth opposite such period:
------------------------------------------------------ PERIOD AMOUNT ------------------------------------------------------ June 30, 2002 1.00 : 1.00 ------------------------------------------------------ September 30, 2002 1.00 : 1.00 ------------------------------------------------------ December 31, 2002 1.00 : 1.00 ------------------------------------------------------ March 31, 2003 1.00 : 1.00 ------------------------------------------------------ June 30, 2003 1.00 : 1.00 ------------------------------------------------------ September 30, 2003 1.00 : 1.00 ------------------------------------------------------ December 31, 2003 1.02 : 1.00 ------------------------------------------------------ March 31, 2004 1.03 : 1.00 ------------------------------------------------------ June 30, 2004 1.04 : 1.00 ------------------------------------------------------ September 30, 2004 1.05 : 1.00 ------------------------------------------------------ December 31, 2004 1.07 : 1.00 ------------------------------------------------------ March 31, 2005 1.08 : 1.00 ------------------------------------------------------ June 30, 2005 1.09 : 1.00 ------------------------------------------------------ September 30, 2005 1.10 : 1.00 ------------------------------------------------------ December 31, 2005 1.10 : 1.00 ------------------------------------------------------ March 31, 2006 1.10 : 1.00 ------------------------------------------------------ June, 30, 2006 1.10 : 1.00 ------------------------------------------------------ September 30, 2006 1.10 : 1.00 ------------------------------------------------------ December 31, 2006 1.10 : 1.00 ------------------------------------------------------ March 31, 2007 1.10 : 1.00 ------------------------------------------------------ June 30, 2007 1.10 : 1.00 ------------------------------------------------------ September 30, 2007 1.10 : 1.00 ------------------------------------------------------ |
------------------------------------------------------ PERIOD AMOUNT ------------------------------------------------------ December 31, 2007 1.10 : 1.00 ------------------------------------------------------ March 31, 2008 1.10 : 1.00 ------------------------------------------------------ June 30, 2008 1.10 : 1.00 ------------------------------------------------------ September 30, 2008 1.10 : 1.00 ------------------------------------------------------ December 31, 2008 1.10 : 1.00 ------------------------------------------------------ March 31, 2009 1.10 : 1.00 ------------------------------------------------------ |
"FIXED CHARGE COVERAGE" will be calculated as illustrated on Exhibit 4.8(C). For purposes of those calculations, Fixed Charges for the Borrower for the fiscal quarter ending on the last day of September, 2001, shall be deemed to be $608,000, Fixed Charges for the Borrower for the fiscal quarter ending on the last day of December, 2001, shall be deemed to be $1,209,000, and Fixed Charges for the Borrower for the month ending January, 2002, shall be deemed to be $588,000, and Interest Expenses for the four consecutive fiscal quarters ending on the last day of June, 2002, shall be deemed to be Interest Expenses for the fiscal quarter ending on said day multiplied by four, Interest Expenses for the four consecutive fiscal quarters ending on the last day of September, 2002, shall be deemed to be the sum of Interest Expenses for the fiscal quarters ending on the last day of June, 2002, and the last day of September, 2002, multiplied by two, and Interest Expenses for the four consecutive fiscal quarters ending on the last day of December, 2002, shall be deemed to be the sum of Interest Expenses for the fiscal quarters ending on the last day of June, 2002, the last day of September, 2002, and the last day of December, 2002, multiplied by 1.33.
4.5 TOTAL INTEREST COVERAGE. Holdings and Borrower shall not suffer or permit Total Interest Coverage of Holdings and its Subsidiaries for any period of four consecutive fiscal quarters ending on the last day of any month set forth below to be less than the amount set forth opposite such period:
------------------------------------------------------ Period Amount ------------------------------------------------------ June 30, 2002 3.00 : 1.00 ------------------------------------------------------ September 30, 2002 3.00 : 1.00 ------------------------------------------------------ December 31, 2002 3.00 : 1.00 ------------------------------------------------------ March 31, 2003 3.00 : 1.00 ------------------------------------------------------ June 30, 2003 3.00 : 1.00 ------------------------------------------------------ September 30, 2003 3.00 : 1.00 ------------------------------------------------------ December 31, 2003 3.00 : 1.00 ------------------------------------------------------ March 31, 2004 3.00 : 1.00 ------------------------------------------------------ June 30, 2004 3.00 : 1.00 ------------------------------------------------------ September 30, 2004 3.00 : 1.00 ------------------------------------------------------ December 31, 2004 3.00 : 1.00 ------------------------------------------------------ March 31, 2005 3.00 : 1.00 ------------------------------------------------------ June 30, 2005 3.00 : 1.00 ------------------------------------------------------ September 30, 2005 3.00 : 1.00 ------------------------------------------------------ December 31, 2005 3.00 : 1.00 ------------------------------------------------------ March 31, 2006 3.00 : 1.00 ------------------------------------------------------ June, 30, 2006 3.00 : 1.00 ------------------------------------------------------ September 30, 2006 3.00 : 1.00 ------------------------------------------------------ December 31, 2006 3.00 : 1.00 ------------------------------------------------------ March 31, 2007 3.00 : 1.00 ------------------------------------------------------ June 30, 2007 3.00 : 1.00 ------------------------------------------------------ September 30, 2007 3.00 : 1.00 ------------------------------------------------------ |
------------------------------------------------------ Period Amount ------------------------------------------------------ December 31, 2007 3.00 : 1.00 ------------------------------------------------------ March 31, 2008 3.00 : 1.00 ------------------------------------------------------ June 30, 2008 3.00 : 1.00 ------------------------------------------------------ September 30, 2008 3.00 : 1.00 ------------------------------------------------------ December 31, 2008 3.00 : 1.00 ------------------------------------------------------ March 31, 2009 3.00 : 1.00 ------------------------------------------------------ |
"TOTAL INTEREST COVERAGE" will be calculated as illustrated on Exhibit 4.8(C). For purposes of those calculations, Interest Expenses for the four consecutive fiscal quarters ending on the last day of June, 2002, shall be deemed to be Interest Expenses for the fiscal quarter ending on said day multiplied by four, Interest Expenses for the four consecutive fiscal quarters ending on the last day of September, 2002, shall be deemed to be the sum of Interest Expenses for the fiscal quarters ending on the last day of June, 2002, and the last day of September, 2002, multiplied by two, and Interest Expenses for the four consecutive fiscal quarters ending on the last day of December, 2002, shall be deemed to be the sum of Interest Expenses for the fiscal quarters ending on the last day of June, 2002, the last day of September, 2002, and the last day of December, 2002, multiplied by 1.33.
4.6 OMITTED.
4.7 TOTAL INDEBTEDNESS TO TTM EBITDA RATIO. Holdings and Borrower shall not suffer or permit as of the last day of any fiscal quarter ending on the last day of any month set forth below the ratio of (a) Total Indebtedness of Holdings and its Subsidiaries to (b) TTM EBITDA of Holdings and its Subsidiaries for the period of four consecutive fiscal quarters ending on the last day of such fiscal quarter, to be greater than the amount set forth below opposite such day:
------------------------------------------------------ PERIOD AMOUNT ------------------------------------------------------ June 30, 2002 3.25 : 1.00 ------------------------------------------------------ September 30, 2002 3.25 : 1.00 ------------------------------------------------------ December 31, 2002 3.25 : 1.00 ------------------------------------------------------ March 31, 2003 3.25 : 1.00 ------------------------------------------------------ June 30, 2003 3.18 : 1.00 ------------------------------------------------------ September 30, 2003 3.12 : 1.00 ------------------------------------------------------ December 31, 2003 3.06 : 1.00 ------------------------------------------------------ March 31, 2004 3.00 : 1.00 ------------------------------------------------------ June 30, 2004 2.93 : 1.00 ------------------------------------------------------ September 30, 2004 2.87 : 1.00 ------------------------------------------------------ December 31, 2004 2.81 : 1.00 ------------------------------------------------------ March 31, 2005 2.75 : 1.00 ------------------------------------------------------ June 30, 2005 2.50 : 1.00 ------------------------------------------------------ September 30, 2005 2.50 : 1.00 ------------------------------------------------------ December 31, 2005 2.50 : 1.00 ------------------------------------------------------ March 31, 2006 2.50 : 1.00 ------------------------------------------------------ June, 30, 2006 2.00 : 1.00 ------------------------------------------------------ September 30, 2006 2.00 : 1.00 ------------------------------------------------------ December 31, 2006 2.00 : 1.00 ------------------------------------------------------ March 31, 2007 2.00 : 1.00 ------------------------------------------------------ June 30, 2007 1.75 : 1.00 ------------------------------------------------------ September 30, 2007 1.75 : 1.00 ------------------------------------------------------ |
------------------------------------------------------ PERIOD AMOUNT ------------------------------------------------------ December 31, 2007 1.75 : 1.00 ------------------------------------------------------ March 31, 2008 1.75 : 1.00 ------------------------------------------------------ June 30, 2008 1.75 : 1.00 ------------------------------------------------------ September 30, 2008 1.75 : 1.00 ------------------------------------------------------ December 31, 2008 1.75 : 1.00 ------------------------------------------------------ March 31, 2009 1.75 : 1.00 ------------------------------------------------------ |
4.8 FINANCIAL STATEMENTS AND OTHER REPORTS. Holdings shall maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP (it being understood that monthly financial statements are not required to have footnote disclosures and are subject to year end adjustments). Holdings will deliver each of the financial statements and other reports described below to Agent and each Lender.
(A) MONTHLY FINANCIALS. As soon as available and in any event within forty-five (45) days after the end of each month (including the last month of each fiscal year), Holdings will deliver (1) the consolidated and consolidating balance sheets of Holdings and its Subsidiaries, as at the end of such month, and the related consolidated and consolidating statements of income, stockholders' equity and cash flow for such month and for the period from the beginning of the then current fiscal year of Holdings to the end of such month, which shall also set forth EBITDA for such month and for the trailing 12-month period and (2) a comparison of such monthly financials to the corresponding figures for the corresponding month of the prior fiscal year and the most recent Projections for the current fiscal year delivered pursuant to subsection 4.8(J) and (3) a detail of non-recurring items included in the TTM EBITDA and a comparison of these non-recurring items with those of the prior year.
(B) YEAR-END FINANCIALS. As soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Holdings, Holdings will deliver (1) the consolidated balance sheets of Holdings and its Subsidiaries, as at the end of such year, and the related consolidated and consolidating statements of income, stockholders' equity and cash flow for such fiscal year and (2) a report with respect to the financial statements from a firm of Certified Public Accountants selected by Holdings and reasonably acceptable to Agent, which report shall be prepared in accordance with Statement of Auditing Standards No. 58 (the "STATEMENT") entitled "Reports on Audited Financial Statements" and such report shall be "Unqualified" (as such term is defined in such Statement).
(C) COMPLIANCE CERTIFICATE. Together with each delivery of financial statements of Holdings and its Subsidiaries pursuant to subsections 4.8(A) and 4.8(B) above, Holdings will deliver a fully and properly completed Compliance Certificate substantially in the form of Exhibit 4.8(C).
(D) OMITTED.
(E) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, Holdings will deliver copies of all significant reports submitted by Holdings' firm of certified public accountants in connection with each annual, interim or special audit or review of any type of the financial statements or related internal control systems of Holdings made by such
accountants, including any comment letter submitted by such accountants to management in connection with their services.
(F) OMITTED.
(G) DOE LETTER OF CREDIT REQUIREMENT. If the DOE demands, requests or requires (or gives notice of same) of any change to the letter of credit requirement that Borrower or any of its Institution Subsidiaries must provide for the fiscal year of Borrower ending most recently prior to such demand, request or requirement received by Borrower's Institution Subsidiaries (in the case of such a demand, request or requirement on Borrower) or such Institution Subsidiary (in the case of such a demand, request or requirement on an Institution Subsidiary), the Borrower shall promptly inform Agent of such requirement and in no event shall such notice be received later than seven (7) business days following Borrower's knowledge of such demand, request or requirement or of such notice from the DOE.
(H) ADDITIONAL DELIVERIES. As soon as available and in no event
later than thirty (30) days after the last day of each of
Holdings' fiscal years, Holdings will deliver evidence that:
(i) to the extent Holdings and its Subsidiaries must comply
with Sections 668.8(d)(3) and 668.8(e) of the Regulations, no
less than 70% of the students who enrolled in the educational
programs offered by the Institutions graduated from such
programs, as calculated by the method set forth at Section
668.8(f) of the Regulations, (ii) to the extent Holdings and
its Subsidiaries must comply with Sections 668.8(d)(3) and
668.8(e) of the Regulations, no less than 70% of the students
who graduated from such educational programs offered by each
of the Institutions secured employment in a field related to
such program within six months of completing the program, as
calculated by the method set forth at Section 668.8(g) of the
Regulations, (iii) the Cohort Default Rate for each of the
Institutions, as determined by the DOE, did not exceed 25% for
three (3) consecutive years, and (iv) the Institutions have
derived no more than 90% of their revenues from Title IV,
Higher Education Act program funds, as calculated by the
formula set forth at Section 600.5(d) of the Regulations.
(I) APPRAISALS. (i) From time to time, if Agent or any Lender determines that obtaining appraisals is necessary in order for Agent or such Lender to comply with applicable laws or regulations, Agent will, at Borrower's expense, obtain appraisal reports in form and substance and from appraisers satisfactory to Agent stating the then current fair market values of all or any portion of the Real Estate owned by Borrower or any of its Subsidiaries. In addition to the foregoing, from time to time while an Event of Default is continuing, Agent may require Borrower to obtain and deliver to Agent appraisal reports in form and substance and from appraisers satisfactory to Agent stating the then current market values of all or any portion of the Real Estate and personal property owned by Borrower or any of its Subsidiaries. (ii) At the Borrower's expense, the Agent shall have the right once per year, unless there exists a Default or an Event of Default (in which case, Agent shall have the right as often as it may request), (x) to audit the existence and condition of the Collateral and (y) to review compliance with the Loan Documents.
(J) PROJECTIONS. As soon as available and in any event no later than thirty (30) days after the last day of each of Holdings' fiscal years, Holdings will deliver Projections of Holdings and its Subsidiaries for the forthcoming fiscal year, on a month by month basis.
(K) SEC FILINGS AND PRESS RELEASES. Promptly upon their becoming available, Holdings will deliver copies of (1) all financial statements, reports, notices and proxy statements sent or made available by Holdings or any of its Subsidiaries to its public security holders (including, without limitation, the holders of Holdings Subordinated Indebtedness), (2) all regular and periodic reports and all registration statements and prospectuses, if any, filed by Holdings or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority, and (3) all press releases and other statements made available by Holdings or any of its Subsidiaries to its public security holders concerning developments in the business of any such Person.
(L) EVENTS OF DEFAULT, ETC. Promptly upon any Responsible Officer of Holdings or any of its Subsidiaries obtaining knowledge of any of the following events or conditions, Borrower shall deliver copies of all notices given or received by Holdings or any of its Subsidiaries with respect to any such event or condition and a certificate of Holdings' or such Subsidiary's chief executive officer specifying the nature and period of existence of such event or condition and what action Holdings or such Subsidiary has taken, is taking and proposes to take with respect thereto: (1) any condition or event that constitutes an Event of Default or Default; (2) any notice that any Person has given to Borrower or any of its Subsidiaries or any other action taken with respect to a claimed default or event or condition of the type referred to in subsection 6.1(B); or (3) any event or condition that could reasonably be expected to result in any Material Adverse Effect.
(M) LITIGATION. Within ten (10) days following the date any
officer of Holdings or any of its Subsidiaries obtains
knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration against
or affecting Holdings or any of its Subsidiaries or any
property of Holdings or any of its Subsidiaries not previously
disclosed by Holdings or any of its Subsidiaries to Agent or
(2) any material development in any action, suit, proceeding,
governmental investigation or arbitration at any time pending
against or affecting Holdings or any of its Subsidiaries or
any property of Holdings or any of its Subsidiaries which, in
the case of (1) or (2), could reasonably be expected to have a
Material Adverse Effect, Holdings or such Subsidiary will give
notice thereof to Agent and provide such other information as
may be reasonably available to them to enable Agent and its
counsel to evaluate such matter.
(N) SUPPLEMENTED SCHEDULES; NOTICE OF CORPORATE CHANGES. Annually, concurrently with Holdings' delivery of the Projections required by subsection 4.8(J), Holdings shall supplement in writing and deliver revisions of the Schedules annexed to this Agreement to the extent necessary to disclose new or changed facts or circumstances after the Second Amendment and Restatement Date; provided that subsequent disclosures shall not constitute a cure or waiver of any Default or Event of Default resulting from the matters disclosed. Holdings shall provide prompt written notice of (1) all jurisdictions in which Holdings or any of its Subsidiaries becomes qualified after the Second Amendment and Restatement Date to transact business, (2) any material change after the Second Amendment and Restatement Date in the authorized and issued capital stock or other equity interests of Holdings or any of its Subsidiaries or any other material amendment to their charter, by-laws or other organization documents and (3) any Subsidiary created or acquired by Holdings or any of its Subsidiaries after the Second Amendment and Restatement Date, such notice, in each case, to identify the applicable jurisdictions, capital structures or Subsidiaries, as applicable.
(O) OTHER INFORMATION. With reasonable promptness, Holdings will deliver such other information and data with respect to Holdings or any of its Subsidiaries as from time to time may be reasonably requested by Agent.
4.9 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
UNDER AGREEMENT. For purposes of this Agreement, all accounting terms not
otherwise defined herein shall have the meanings assigned to such terms in
conformity with GAAP. Financial statements and other information furnished to
Agent pursuant to subsection 4.8 shall be prepared in accordance with GAAP as in
effect at the time of such preparation. No "Accounting Changes" (as defined
below) shall affect financial covenants, standards or terms in this Agreement;
provided that Holdings shall prepare footnotes to each Compliance Certificate
and the financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). "ACCOUNTING CHANGES" means: (a)
changes in accounting principles required by GAAP and implemented by Borrower;
(b) changes in accounting principles recommended by Holdings' certified public
accountants and implemented by Holdings; (c) changes in carrying value of
Holdings' or any of its Subsidiaries' assets, liabilities or equity accounts
resulting from (i) the application of purchase accounting principles (A.P.B. 16
and/or 17 or SFAS 141, as applicable, and EITF 88-16 and FASB 109) to the
Related Transactions or (ii) as the result of any other adjustments that, in
each case, were applicable to, but not included in, the Pro Forma and (d)
changes in the manner in which prepaid student acquisition costs are capitalized
and subsequently expensed.
SECTION 5
REPRESENTATIONS AND WARRANTIES
In order to induce Agent and Lenders to enter into this Agreement, to make Loans and to issue Lender Letters of Credit and Risk Participation Agreements, Holdings and Borrower represent and warrant to Agent and each Lender that the following statements are and, after giving effect to the Related Transactions, will be true, correct and complete:
5.1 DISCLOSURE. No representation or warranty of Holdings or any of its Subsidiaries contained in this Agreement, the financial statements referred to in subsection 5.5, the other Related Transactions Documents or any other document, certificate or written statement furnished to Agent or any Lender by or on behalf of any such Person for use in connection with the Loan Documents or the Related Transactions Documents contains ((x) in the case of the Related Transactions Documents and documents, certificates and written statements furnished in connection therewith, as of the date first made or as of the date such document, certificate or written statement was delivered or (y) in the case of this Agreement, the other Loan Documents or any document, certificate or written statement furnished in connection therewith, as of the date made, repeated or delivered, as applicable) any untrue statement of a material fact or omitted, omits or will omit (in each case, as of the respective dates specified in (x) or (y) above) to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast, projection or expressions of opinion, each of Holdings and the Borrower represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule. It is recognized that such projections, estimates and forecasts are subject to significant contingencies and uncertainties, many of which are beyond the control of Holdings and Borrower and that no assurances are given that such projections, estimates and forecasts will be achieved.
5.2 NO MATERIAL ADVERSE EFFECT. Since September 30, 2001, there have been no events or changes in facts or circumstances affecting Holdings or any of its Subsidiaries which individually or in the aggregate have had or could reasonably be expected to have a Material Adverse Effect and that have not been disclosed herein or in the attached Schedules.
5.3 NO DEFAULT.
(A) The consummation of the UTI Related Transactions did not as of the Closing Date and will not violate, the consummation of the NTT Related Transactions did not and will not violate, and the consummation of the Penske/Charlesbank Related Transactions does not conflict with, result in a breach of, or constitute a default (with due notice or lapse of time or both) under any contract of Holdings or any of its Subsidiaries or of the Companies except if such violations, conflicts, breaches or defaults have either been waived on or before the Closing Date with respect to the UTI Related Transactions, the Amendment and Restatement Date with respect to the NTT Related Transactions, or the Second Amendment and Restatement Date with respect to the Penske/Charlesbank Related Transactions, and are disclosed on Schedule 5.3 or could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.
(B) Each component of the Related Transactions (including, without limitation, the redemptions) were consummated, as of the Closing Date, with respect to the UTI Related Transactions, as of the Amendment and Restatement Date with respect to the NTT Related Transactions or as of the Second Amendment and Restatement Date with respect to the Penske/Charlesbank Related Transactions (a) in accordance with the respective terms of the applicable Related Transaction Documents in the form supplied to Agent, without modification, waiver or amendment, except those which had the prior written consent of Agent or which, neither individually or in the aggregate, were material, (b) in compliance with all applicable laws, including, without limitation, Title IV and the Regulations, the Delaware General Corporation Law, the Code, all regulations of the IRC and the United States Department of Labor applicable to employee stock ownership plans, the Regulations and the laws pursuant to which the Regulations were promulgated, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the corporate laws of each state in which any corporation now controlled by Holdings is or was prior to its merger with Holdings or an entity controlled by Holdings incorporated, and the laws of all states in which any Institution is located applicable to such Institution.
(C) Neither the execution, delivery or performance by Holdings or any of its Subsidiaries of this Agreement or any other Loan Document (i) contravenes (x) any law or regulation (including, without limitation, the laws and regulations referred to above in this paragraph, Regulations T, U and X of the Board of Governors of the Federal Reserve System and the Investment Company Act of 1940, as amended) or (y) any contract, agreement, indenture, lease or other instrument to which Holdings or any Subsidiary is a party or by which any of their respective assets is bound, or (ii) requires any consent of, filing or registration with or approval from any governmental entity or authority, except as disclosed on Schedule 5.3.
5.4 ORGANIZATION, POWERS, CAPITALIZATION AND GOOD STANDING.
(A) ORGANIZATION AND POWERS. Each of Holdings and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation (which jurisdiction is set forth on Schedule 5.4(A)). Each of Holdings and
each of its Subsidiaries has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, to enter into each Related Transactions Document and Loan Documents to which it is a party and to carry out the Related Transactions and the Obligations.
(B) CAPITALIZATION. Immediately after giving effect to the consummation of the Penske/Charlesbank Related Transactions on the Second Amendment and Restatement Date, (i) the authorized capital stock of each of Holdings and each of its Subsidiaries is as set forth on Schedule 5.4(B), (ii) all issued and outstanding shares of capital stock of each of Holdings and each of its Subsidiaries are duly authorized and validly issued, fully paid, nonassessable, free and clear of all Liens other than those in favor of Agent, for the benefit of Agent and Lenders, and such shares were issued in compliance with all applicable state and federal laws concerning the issuance of securities, (iii) the capital stock of each of Holdings and each of its Subsidiaries is owned by the stockholders and in the amounts set forth on Schedule 5.4(B), (iv) no shares of the capital stock of Holdings or any of its Subsidiaries, other than those described above, are issued and outstanding and (v) except as set forth on Schedule 5.4(B), there are no preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from Holdings or any of its Subsidiaries, of any shares of capital stock or other securities of any such entity.
(C) BINDING OBLIGATION. This Agreement, the other Loan Documents and the Related Transactions Documents are the legally valid and binding obligations of the applicable parties thereto, each enforceable against each of such parties, as applicable, in accordance with their respective terms.
(D) QUALIFICATION. Each of Holdings and each of its Subsidiaries is duly qualified and in good standing wherever necessary to carry on its business and operations, except in jurisdictions in which the failure to be qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. All jurisdictions in which each of Holdings and each of its Subsidiaries is qualified to do business are set forth on Schedule 5.4(D).
5.5 FINANCIAL STATEMENTS. All financial statements concerning Holdings and its Subsidiaries which have been or will hereafter be furnished to Agent pursuant to this Agreement, including those listed below, have been or will be prepared in accordance with GAAP consistently applied (except as disclosed therein; it being understood that monthly financial statements are not required to have footnote disclosures and are subject to year-end adjustments) and do or will present fairly the financial condition of the corporations covered thereby as at the dates thereof and the results of their operations for the periods then ended.
(A) The audited balance sheets at September 30, 2001 (including all notes thereto) and related statements of income of Holdings and its Subsidiaries for the fiscal year then ended, certified by PricewaterhouseCoopers LLP.
(B) The unaudited balance sheets at January 31, 2002 (including all notes thereto) and related statements of income for the four months then ended.
5.6 INTELLECTUAL PROPERTY. Holdings and each of its Subsidiaries owns, is licensed to use or otherwise has the right to use, all patents, trademarks, trade names, copyrights, technology, know-how and processes used in or necessary for the conduct of its business as currently conducted that are material
to the condition (financial or other), business or operations of Holdings and its Subsidiaries (collectively called "INTELLECTUAL PROPERTY") and all such Intellectual Property is identified on Schedule 5.6 (other than software licenses granted by third party vendors) and fully protected and/or duly and properly registered, filed or issued in the appropriate office and jurisdictions for such registrations, filings or issuances. Except as disclosed in Schedule 5.6, the use of such Intellectual Property by Holdings and its Subsidiaries does not and has not been alleged by any Person to infringe on the rights of any Person.
5.7 INVESTIGATIONS, AUDITS, ETC. Except as set forth on Schedule 5.7 or Subschedule 7.1(B)(1), none of Holdings or any of its Subsidiaries, is the subject of (x) any review or audit by the Internal Revenue Service or any investigation by a Governmental Authority or Necessary Regulatory Authority concerning the violation or possible violation of any law or (y) any litigation, judgment, action, charge, claim, demand, suit, petition, or arbitration which could reasonably be expected to result in a Material Adverse Effect.
5.8 EMPLOYEE MATTERS. Except as set forth on Schedule 5.8, (a) none of Holdings or any of its Subsidiaries nor any of their respective employees is subject to any collective bargaining agreement, (b) no petition for certification or union election is pending with respect to the employees of Holdings or any of its Subsidiaries and no union or collective bargaining unit has sought such certification or recognition with respect to the employees of Holdings or any of its Subsidiaries and (c) there are no strikes, slowdowns, work stoppages or controversies pending or, to the best knowledge of Borrower after due inquiry, threatened between Holdings or any of its Subsidiaries and their respective employees, other than employee grievances arising in the ordinary course of business which could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Except as set forth on Schedule 5.8, neither Holdings nor any of its Subsidiaries is party to an employment contract. Except as set forth on Subschedule 7.1(B)(2) neither Holdings nor any member of its controlled group or person under common control with Holdings, within the meaning of Title I or Title IV of ERISA or section 412, 414 (b) or 414(c) of the IRC, maintained or is required to contribute to any "employee benefit plan" as defined in Section 3(3) of ERISA or "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA).
5.9 SOLVENCY. Each of Holdings and each of its Subsidiaries (a) owns and will own assets the fair saleable value of which are (i) greater than the total amount of liabilities (including contingent liabilities) of Holdings or such Subsidiary, as the case may be, and (ii) greater than the amount that will be required to pay the probable liabilities of Holdings or such Subsidiary's, as the case may be, then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to Holdings or such Subsidiary, as the case may be; (b) has capital that is not unreasonably small in relation to its business as presently conducted or after giving effect to any contemplated transaction; and (c) does not intend to incur and does not believe that it will incur debts beyond its ability to pay such debts as they become due.
5.10 REGULATORY COMPLIANCE OF HOLDINGS AND ITS SUBSIDIARIES.
(A) Holdings, its Subsidiaries and each Institution have all necessary permits, licenses, franchises, authorizations and clearances of governmental or regulatory authorities as are required or necessary (1) to operate in the states (and locations therein) in which the Institutions are located, (2) to participate in federal student assistance programs under Title IV and (3) to own, lease and operate their respective properties and to conduct their business, in each case, in a manner no less advantageous to Holdings, its Subsidiaries and each Institution as conducted as of the time immediately prior to the Original Transaction Date (or, with respect to Newco, immediately prior to the Amendment and Restatement Date);
(B) Each Institution has in full force and effect a Program Participation Agreement for each Institution and is in compliance in all material respects with each such Program Participation Agreement;
(C) Each Institution has applied for recertification of eligibility to participate in federal student financial assistance programs under Title IV where such reapplication was necessary to assure that no Program Participation Agreement would expire;
(D) Each Institution is in compliance in all material respects with Title IV and the Regulations, including Section 668.16 and 668.171 - 668.175 of the Regulations, and with all applicable laws of each state in which it is located that regulates educational institutions;
(E) no accreditations or state licensees held by Holdings, its Subsidiaries or any Institution as of the time immediately prior to the Original Transaction Date (or, with respect to the Companies, the Amendment and Restatement Date) or thereafter acquired have been suspended, revoked, terminated, not renewed or continued, discontinued or canceled;
(F) Holdings and its Subsidiaries have obtained assurances from each Necessary Regulatory Authority that the Penske/Charlesbank Related Transactions did not constitute a "change of ownership" or a "change of control" under each Necessary Regulatory Authorities' laws, regulations or standards, or, in the event that a Necessary Regulatory Authority did treat the Penske/Charlesbank Related Transactions as a change of ownership or a change of control, Holdings and its Subsidiaries have timely filed all required notifications and applications necessary to secure such Necessary Regulatory Authorities' consent to the transactions contemplated thereby, and no Necessary Regulatory Authority has refused such consent; and
(G) the representations and warranties of Holdings set forth in
Section 3.9 of the Convertible Preferred Stock Purchase
Agreement are true and correct as of the Second Amendment and
Restatement Date.
5.11 LEASES AND CONTRACTS; INDEBTEDNESS. Except as set forth on Schedule 5.11, upon consummation of the Penske/Charlesbank Related Transactions and after giving effect thereto all leases of real and personal property and all material agreements (including, without limitation, debt agreements and capital leases) to which Holdings or any of its Subsidiaries is a party are in full force and effect without default or right of the lessor or other obligee to terminate or accelerate thereunder.
5.12 FEES. Except as set forth on subschedule 7.1(B)(3) hereto, no fees are currently payable in connection with the UTI Related Transactions, the NTT Related Transactions, the Penske/Charlesbank Related Transactions or the financing contemplated by this Agreement, the Original Credit Agreement, by Holdings or any of its Subsidiaries to Affiliates of Holdings.
5.13 EXISTING LOAN DOCUMENTS. Each of the Loan Documents delivered by Holdings, Borrower and their Subsidiaries on the Second Amendment and Restatement Date and the provisions thereof (including the Original Credit Agreement, as amended and restated hereby, and the amended and restated Notes being delivered hereunder (a) are and remain legal, valid and binding obligations of the respective parties thereto, enforceable in accordance with their terms, (b) have not been modified, supplemented or waived (except as modified pursuant to the terms of this Agreement or agreements supplied by the Agent) and (c) remain in full force and effect. The obligations of Holdings and the Non-Institution Subsidiaries under the Guaranties delivered on the Closing Date and amended or amended and restated as of the Second Amendment and Restatement Date are hereby confirmed and such agreements are and remain
legal, valid and binding obligations of the respective parties thereto, enforceable in accordance with their terms and in full force and effect without offset, defense, claims, counterclaims, cross-claims or right of set-off or recoupment.
5.14 MARGIN REGULATIONS. No part of the proceeds of any Loan will be used for "buying" or "carrying" "margin stock" within the respective meanings of such terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect or for any other purpose that violates the provisions of the regulations of the Board of Governors of the Federal Reserve System. If requested by Agent, Borrower will furnish to Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.
5.15 ENVIRONMENTAL MATTERS.
(A) Except as set forth on Schedule 5.7: (i) Holdings and each of its Subsidiaries are and have been in compliance with all Environmental Laws, except for such noncompliance that would not result in Environmental Liabilities which could reasonably be expected to have a Material Adverse Effect; (ii) Holdings and each of its Subsidiaries have obtained, and are in compliance with, all Environmental Permits required by Environmental Laws for the operations of their respective businesses as presently conducted or as proposed to be conducted, except where the failure to so obtain or comply with such Environmental Permits would not result in Environmental Liabilities which could reasonably be expected to have a Material Adverse Effect, and all such Environmental Permits are valid, uncontested and in good standing; (iii) neither Holdings nor any of its Subsidiaries is involved in operations or knows of any facts, circumstances or conditions, including any Releases of Hazardous Materials, that are likely to result in any Environmental Liabilities of such Loan Party which could reasonably be expected to have a Material Adverse Effect; (iv) there is no Litigation arising under or related to any Environmental Laws, Environmental Permits or Hazardous Material that seeks damages, penalties, fines, costs or expenses in excess of $100,000 or injunctive relief against, or that alleges criminal misconduct by, Holdings or any of its Subsidiaries; (v) no notice has been received by Holdings or any of its Subsidiaries identifying it as a "potentially responsible party" or requesting information under CERCLA or analogous state statutes, and to the knowledge of Holdings and each of its Subsidiaries, there are no facts, circumstances or conditions that could reasonably be expected to result in Holdings or any of its Subsidiaries being identified as a "potentially responsible party" under CERCLA or analogous state statutes; and (vi) Holdings and each of its Subsidiaries have provided to Agent copies of all existing material environmental reports, reviews and audits and all material written information pertaining to actual or potential Environmental Liabilities, in each case relating to Holdings or any of its Subsidiaries.
(B) Holdings and each of its Subsidiaries hereby acknowledge and agree that Agent (i) is not now, and has not ever been, in control of any the affairs of Holdings or any of its Subsidiaries, and (ii) does not have the capacity through the provisions of the Loan Documents or otherwise to influence any the conduct of Holdings or any of its Subsidiaries with respect to compliance with Environmental Laws or Environmental Permits.
5.16 SUBORDINATED INDEBTEDNESS AND SELLER SUBORDINATED NOTES. Schedule 5.16 hereto sets forth a list of all Subordinated Indebtedness and each Seller Subordinated Note outstanding immediately prior to the Second Amendment and Restatement Date.
SECTION 6
DEFAULT, RIGHTS AND REMEDIES
6.1 EVENT OF DEFAULT. "EVENT OF DEFAULT" means the occurrence or existence of any one or more of the following:
(A) PAYMENT. Failure of Borrower to pay any payment or prepayment of principal of any Loan when due, or to repay when required any DOE Working Capital Loan, Non-DOE Working Capital Loan, or any Revolving Loan to reduce its principal balance to the Maximum DOE Limit, Maximum Non-DOE Limit or Maximum Revolver Loan Balance, or to reduce the amount outstanding under the Revolving Loan Commitment as required by subsection 1.5(G) or to provide cash collateral for any Risk Participation Liability when required or to reimburse Agent for any payment made by Agent under or in respect of any Lender Letters of Credit or Risk Participation Agreements when due or failure to pay, within five (5) days after the due date, any interest on any Loan or any other amount due under this Agreement or any of the other Loan Documents; or
(B) DEFAULT IN OTHER AGREEMENTS. (1) Failure of Holdings or any of its Subsidiaries to pay when due or within any applicable grace period any principal or interest on Indebtedness (other than the Loans) or any Contingent Obligations or (2) breach or default of Holdings or any of its Subsidiaries with respect to any Indebtedness (other than the Loans) or any Contingent Obligations, if the effect of such breach or default is to cause or to permit the holder or holders (or any requisite percentage thereof) then to cause, Indebtedness and/or Contingent Obligations having an individual principal amount in excess of $2,000,000 or having an aggregate principal amount in excess of $5,000,000 to become or be declared due prior to their stated maturity; or
(C) BREACH OF CERTAIN PROVISIONS. Failure of Holdings or any of its Subsidiaries to perform or comply with any term or condition contained in (i) that portion of subsection 2.2 relating to the obligation to maintain insurance, (ii) subsection 2.3, (iii) Section 3 or (iv) Section 4; or
(D) BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by Holdings or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by such Person in writing pursuant or in connection with any Loan Document is false in any material respect on the date made; or
(E) OTHER DEFAULTS UNDER LOAN DOCUMENTS. Holdings or any of its Subsidiaries defaults in the performance of or compliance with any term contained in this Agreement or the other Loan Documents and such default is not remedied or waived within thirty (30) days after receipt by Borrower of notice from Agent or Requisite Lenders of such default (other than occurrences described in other provisions of this subsection 6.1 for which a different grace or cure period is specified or which constitute immediate Events of Default); or
(F) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) A court enters a decree or order for relief with respect to Holdings or any of its Subsidiaries in an involuntary case under the Bankruptcy Code, which decree or order is not stayed or other similar relief is not granted under any applicable federal or state law; or (2) the continuance of any of the following events for sixty (60) days unless dismissed, bonded or discharged: (a) an involuntary case is commenced against Holdings or any of its Subsidiaries under any
applicable bankruptcy, insolvency or other similar law now or hereafter in effect; or (b) a decree or order of a court for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Holdings or any of its Subsidiaries or over all or a substantial part of its property, is entered; or (c) an interim receiver, trustee or other custodian is appointed without the consent of Holdings or any of its Subsidiaries, for all or a substantial part of the property of such Person; or
(G) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) An order for relief is entered with respect to Holdings or any of its Subsidiaries or Holdings or any of its Subsidiaries commences a voluntary case under the Bankruptcy Code, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or (2) Holdings or any of its Subsidiaries makes assignment for the benefit of creditors; or (3) the Board of Directors of Holdings or any of its Subsidiaries adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 6.1(G); or
(H) GOVERNMENTAL LIENS. Any lien, levy or assessment is filed or recorded with respect to or otherwise imposed upon all or any part of the Collateral or the assets of Holdings or any of its Subsidiaries by the United States or any department or instrumentality thereof or by any state, county, municipality or other governmental agency (other than Permitted Encumbrances); or
(I) JUDGMENT AND ATTACHMENTS. Any money judgment, writ or warrant of attachment, or similar process (other than those described in subsection 6.1(H)) involving (1) an amount in any individual case in excess of $2,500,000 or (2) an amount in the aggregate at any time in excess of $2,500,000 (in either case not adequately covered by insurance as to which the insurance company has acknowledged coverage) is entered or filed against Holdings or any of its Subsidiaries or any of their respective assets and remains undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days or in any event later than five (5) Business Days prior to the date of any proposed sale thereunder; or
(J) DISSOLUTION. Any order, judgment or decree is entered against Holdings or any of its Subsidiaries decreeing the dissolution or split up of Holdings or such Subsidiary and such order remains undischarged or unstayed for a period in excess of fifteen (15) days; or
(K) SOLVENCY. Holdings or any of its Subsidiaries ceases to be solvent (as represented in subsection 5.9) or admits in writing its present or prospective inability to pay its debts as they become due; or
(L) INJUNCTION. Holdings or any of its Subsidiaries is enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of its business and such order continues for more than thirty (30) days; or
(M) ERISA; PENSION PLANS. (1) Holdings or any of its Subsidiaries or any of its Affiliates fails to make full payment when due of all amounts which, under the provisions of any employee benefit plans or any applicable provisions of the IRC, any such Person is required to pay as contributions thereto and such failure results in or is likely to result in a
Material Adverse Effect; or (2) an accumulated funding deficiency in excess of $750,000 occurs or exists, whether or not waived, with respect to any such employee benefit plans; or (3) any employee benefit plan loses its status as a qualified plan under the IRC which results in or could reasonably be expected to result in a Material Adverse Effect and any such failure, deficiency or loss continues for more than twenty (20) consecutive days; or
(N) ENVIRONMENTAL MATTERS. Holdings or any of its Subsidiaries fails to: obtain or maintain any operating licenses or permits required by environmental authorities; begin, continue or complete any remediation activities as required by any environmental authorities; store or dispose of any hazardous materials in accordance with applicable environmental laws and regulations; or comply with any other environmental laws; in each case, if such failure could reasonably be expected to have a Material Adverse Effect and any such failure remains unremedied for more than thirty (30) consecutive days; or
(O) INVALIDITY OF LOAN DOCUMENTS. Any of the Loan Documents for any reason, other than a partial or full release in accordance with the terms thereof, ceases to be in full force and effect or is declared to be null and void (other than solely as a result of action taken by Agent of any Lender), or Holdings or any Subsidiary denies that it has any further liability under any Loan Documents to which it is party, or gives notice to such effect; or
(P) DAMAGE; STRIKE; CASUALTY. Any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes, for more than twenty (20) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of Holdings or any of its Subsidiaries if any such event or circumstance could reasonably be expected to have a Material Adverse Effect; or
(Q) LICENSES AND PERMITS. The loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by Holdings or any of its Subsidiaries, if such loss, suspension, revocation or failure to renew could reasonably be expected to have a Material Adverse Effect, and any such loss, suspension or revocation continues for more than twenty (20) consecutive days; or
(R) FAILURE OF SECURITY. Agent, for the benefit of Agent and Lenders, does not have or ceases to have a valid and perfected first priority security interest in the Collateral (subject to Permitted Encumbrances) or any substantial portion thereof, in each case, for any reason other than the failure of Agent to take any action within its control; or
(S) BUSINESS ACTIVITIES. (1) Holdings engages in any type of business activity other than the ownership of stock of Borrower and performance of its obligations under the Related Transactions Documents and Loan Documents to which it is a party or (2) Borrower shall engage in any business other than the ownership of stock in its other Subsidiaries and performance of its obligations under the Related Transactions Documents and Loan Documents to which it is a party; or
(T) CHANGE IN CONTROL. If (1) the Jordan Group, JZEP, Penske, Charlesbank, John White and Robert Hartman (including trusts, partnerships or other entities created by John White or Robert Hartman solely for the benefit, if any, of their respective family members), together, beneficially and of record shall own and control, directly or indirectly, less than a majority (on a fully diluted basis) of the issued and outstanding shares of each class of common stock of Holdings entitled (without regard to the
occurrence of any contingency) to vote for the election of the members of the board of directors of Holdings, (2) the Jordan Group, JZEP, Penske and Charlesbank shall own and control less than 51% (on a fully diluted basis) of the issued and outstanding shares of any class of capital stock of Holdings entitled (without regard to the occurrence of any contingency) to vote for the election of the members of the board of directors of Holdings, (3) any person or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended, (other than John White or Robert Hartman (including such trusts)) shall own or control a greater percentage (on a fully diluted basis) of the issued and outstanding shares of any class of common stock of Holdings entitled (without regard to the occurrence of any contingency) to vote for the election of the members of the board of directors of Holdings than that percentage (on a fully diluted basis) held by the Jordan Group, JZEP, Penske and Charlesbank (combined), (4) Holdings, beneficially and of record, shall own and control less than one hundred percent (100%) of the issued and outstanding shares of any class of capital stock of Borrower, (5) Borrower, beneficially and of record, shall own and control less than one hundred percent (100%) of the issued and outstanding shares of any class of capital stock of any Subsidiary of Borrower, (6) Borrower ceases to beneficially and of record own and control one hundred percent (100%) of the issued and outstanding shares of each class of capital stock of each Subsidiary of Borrower acquired or created after the Second Amendment and Restatement Date or (7) a "Change of Control" (as defined in the Charter of Holdings or the certificate of designation of preferences and rights of any Preferred Stock) shall occur; or
(U) LOSS OF FUNDING, ACCREDITATION. If (i) any accreditation necessary for Title IV eligibility held by any Institution as of the Original Transaction Date or any accreditation acquired after the Original Transaction Date shall be cancelled, not renewed or continued, revoked, terminated or suspended for any in excess of forty-five (45) consecutive days (ii) the ability of any Institution to participate in the federal student financial assistance program under Title IV shall be cancelled, not renewed or continued, revoked, terminated or suspended for any period in excess of forty-five (45) consecutive days, (iii) any permit, license, franchise, authorization or clearance of any governmental or regulatory agency necessary for Holdings, any Subsidiary thereof or any Institution to operate in the states and locations therein in which the Institutions are located as of the Second Amendment and Restatement Date or in any location of any Institution which location was established after the Second Amendment and Restatement Date shall be cancelled, not renewed or continued, revoked, terminated or suspended for any period in excess of forty-five (45) consecutive days, which could reasonably be expected to have a Material Adverse Effect, (iv) any Institution shall default under any Program Participation Agreement or under the laws or regulations of any federal, state or local governmental entity applicable to Holdings, any Subsidiary thereof or such Institution, which default could reasonably be expected to result in any event referred to in clause (i), (ii) or (iii) of this paragraph (U) or in a Material Adverse Effect or (v) the Borrower or any of its Institution Subsidiaries fails to provide a letter of credit or guaranty required by the DOE.
(V) SUBORDINATED INDEBTEDNESS. The failure of Holdings or any of its Subsidiaries or any other creditor of Borrower or any of its Subsidiaries to comply with the terms of any subordination or intercreditor agreement or any subordination provisions of any note or other document running to the benefit of Agent or Lenders.
6.2 SUSPENSION OF COMMITMENTS. Upon the occurrence and during the continuation of any Default or Event of Default, Agent and each Lender without notice or demand, may immediately cease making
additional Loans and issuing Lender Letters of Credit and Risk Participation Agreements and cause its obligation to lend its Pro Rata Share of the Revolving Loan Commitment to be suspended; provided that, in the case of a Default, if the subject condition or event is waived, cured or removed by Requisite Lenders within any applicable grace or cure period, any suspended portion of the Revolving Loan Commitment shall be reinstated. Each Lender may alternatively suspend only a portion of its obligation to lend its Pro Rata Share of the Revolving Loan Commitment.
6.3 ACCELERATION. Upon the occurrence of any Event of Default described in the foregoing subsection 6.1(F) or 6.1(G), the unpaid principal amount of and accrued interest and fees on the Term Loans and the Revolving Loans, payments under the Lender Letters of Credit and Risk Participation Agreements and all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by Borrower, and the obligations of Agent and Lenders to make Revolving Loans and issue Lender Letters of Credit and Risk Participation Agreements shall thereupon terminate. Upon the occurrence and during the continuance of any other Event of Default, Agent may, and upon written demand by Requisite Lenders shall, by written notice to Borrower (a) declare all or any portion of the Loans and all or some of the other Obligations to be, and the same shall forthwith become, immediately due and payable together with accrued interest thereon, and the obligations of Agent and Lenders to make Revolving Loans and issue Lender Letters of Credit and Risk Participation Agreements shall thereupon terminate and (b) demand that Borrower immediately deposit with Agent an amount equal to the Total Risk Participation Liability to enable Agent to make payments under the Lender Letters of Credit and Risk Participation Agreements when required and such amount shall become immediately due and payable.
6.4 PERFORMANCE BY AGENT. If any Loan Party shall fail to perform any covenant, duty or agreement contained in any of the Loan Documents, Agent may perform or attempt to perform such covenant, duty or agreement on behalf of such Person after the expiration of any cure or grace periods set forth herein. In such event, Holdings or any of its Subsidiaries shall, at the request of Agent, promptly pay any amount reasonably expended by Agent in such performance or attempted performance to Agent, together with interest thereon at the rate of interest in effect upon the occurrence of an Event of Default as specified in subsection 1.2(E) from the date of such expenditure until paid. Notwithstanding the foregoing, it is expressly agreed that Agent shall not have any liability or responsibility for the performance of any obligation of Holdings or any of its Subsidiaries under this Agreement or any other Loan Document.
6.5 APPLICATION OF PROCEEDS. Notwithstanding anything to the contrary
contained in this Agreement, upon the occurrence and during the continuance of
an Event of Default other than an Event of Default listed on Schedule 1.2(E),
(a) Borrower irrevocably waives the right to direct the application of any and
all payments at any time or times thereafter received by Agent from or on behalf
of Borrower, and Agent shall have the continuing and exclusive right to apply
and to reapply any and all payments received at any time or times after the
occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Agent may deem advisable notwithstanding any
previous application by Agent and (b) in the absence of a specific determination
by Agent with respect thereto, the proceeds of any sale of, or other realization
upon, all or any part of the Collateral shall be applied: first, to all fees,
costs and expenses incurred by or owing to Agent and any Lender with respect to
this Agreement, the other Loan Documents or the Collateral; second, to accrued
and unpaid interest on the Obligations (including any interest which but for the
provisions of the Bankruptcy Code, would have accrued on such amounts); third,
to the principal amount of the Obligations outstanding (including cash
collateral for Risk Participation Liability); and fourth, to any other
indebtedness or obligations of Borrower owing to Agent or any Lender under the
Loan Documents. Any balance remaining shall be delivered to Borrower or to
whomever may be lawfully entitled to receive such balance or as a court of
competent jurisdiction may direct.
SECTION 7
CONDITIONS TO LOANS; CONDITIONS TO EFFECTIVENESS
The obligations of Lenders to make Loans and of Agent to issue Lender Letters of Credit and Risk Participation Agreements are subject to satisfaction of all of the applicable conditions set forth below.
7.1 CONDITIONS TO INITIAL LOANS UNDER THIS AGREEMENT. The obligations of Lenders to make Incremental Term Loan A and the initial Revolving Loan made on or after the Second Amendment and Restatement Date and of Agent to issue any Lender Letters of Credit and Risk Participation Agreements on the Second Amendment and Restatement Date are, in addition to the conditions precedent specified in subsection 7.2, subject to:
(A) the delivery of all documents listed on Schedule 7.1, all in form and substance satisfactory to Agent;
(B) the condition that such assignments by Exiting Lenders and/or Continuing Lenders of the rights and obligations under the Original Credit Agreement to Lenders as may be necessary to consummate the transactions contemplated hereby shall have been completed and evidenced by such documentation required by the Original Credit Agreement and otherwise in form and substance satisfactory to Agent;
(C) the condition that, upon receipt of the proceeds of the Penske/Charlesbank Related Transactions, Incremental Term Loan A and a Revolving Loan of not more than $5,500,000, Holdings and Borrower shall have sufficient funds to satisfy in full all Subject Subordinated Indebtedness, make the Term Loans B Prepayment and to pay all costs and all expenses incurred (whether or not billed) in connection with the Penske/Charlesbank Related Transactions and the financing contemplated by this Agreement;
(D) the condition that all Subordinated Indebtedness, other than the Holdings Subordinated Indebtedness (NTT) and the CEG Closing Note, shall have been paid and satisfied in full in cash and all Subordinated Indebtedness Documents relating to such satisfied Subordinated Indebtedness shall have been terminated and released;
(E) the condition that (i) the Penske/Charlesbank Related
Transactions shall have been consummated in accordance with
all applicable laws and regulations and in accordance with the
applicable Penske/Charlesbank Related Transactions Documents,
without waiver or amendment of any material term (except with
the prior written consent of Agent and the Lenders), (ii) the
Convertible Preferred Stock shall have been issued in
accordance with the Penske/Charlesbank Related Transaction
Documents without waiver or amendment of any material term
(except with the prior written consent of Agent and Lenders)
and (iii) the aggregate proceeds from the sale thereof shall
have been applied to the satisfaction of the Subject
Subordinated Indebtedness and to the payment of costs, fees
and expenses incurred in connection with the
Penske/Charlesbank Related Transactions and the financing
contemplated by this Agreement;
(F) the condition that all holders of the Remaining Subordinated Indebtedness shall have consented to the amendment and restatement of the Original Credit Agreement, pursuant to the terms hereof;
(G) the condition that Borrower shall have paid or prepaid (i) all accrued and unpaid interest on the Obligations as of the Second Amendment and Restatement Date, (ii) $24,788,500.00 in respect of principal of Term Loan B (the "TERM LOAN B PREPAYMENT"), (iii) any accrued commitment fee (as such fee is set forth in subsection 1.2(B) of the Original Credit Agreement) that has not been paid as of the Second Amendment and Restatement Date and (iv) $153,300 in respect of the unpaid portion of the amendment fee in respect of Amendment No. 3 (as such fee is set forth in the last sentence of subsection 1.3(A) of the Original Credit Agreement) that has not been paid as of the Second Amendment and Restatement Date (to be allocated among the Existing Lenders as determined by Agent);
(H) the condition that (i) Holdings and its Subsidiaries have obtained assurances from each Necessary Regulatory Authority that the Penske/Charlesbank Related Transactions did not constitute a "change of ownership" or a "change of control" under each Necessary Regulatory Authorities' laws, regulations or standards or (ii) in the event that a Necessary Regulatory Authority did treat the Penske/Charlesbank Related Transactions as a change of ownership or a change of control, Holdings and its Subsidiaries have timely filed all required notifications and applications necessary to secure such Necessary Regulatory Authorities' consent to the transactions contemplated thereby, and no Necessary Regulatory Authority has refused such consent;
(I) the condition that the Holdings Subordinated Indebtedness Documents governing the Remaining Subordinated Indebtedness shall have been amended in a manner satisfactory to the Agent and Requisite Lenders;
(J) the condition that Holdings shall have certified to Agent and Lenders that to the best of its knowledge all representations and warranties made to Holdings in the Penske/Charlesbank Related Transaction Document were true and correct in all material respects as of the date made and as of the Second Amendment and Restatement Date;
(K) the condition that no Revolving Loans are outstanding immediately prior to the Second Amendment and Restatement Date; and
(L) the condition that (assuming the effectiveness of this amendment and restatement) all amounts payable to Agent and the Lenders through the Second Amendment and Restatement Date under subsection 1.3 shall have been paid.
7.2 CONDITIONS TO ALL LOANS. The obligations of Lenders to make Loans and of Agent to issue Lender Letters of Credit and Risk Participation Agreements on any date ("FUNDING DATE"), including, without limitation, the Second Amendment and Restatement Date, are subject to the further conditions precedent set forth below.
(A) Except in the case of a Revolving Loan referred to in subsection 1.1(C)(2), Agent shall have received, in accordance with the provisions of subsection 1.1, a notice requesting an advance of a Revolving Loan or issuance of a Lender Letter of Credit or Risk Participation Agreement.
(B) Except in the case of a Revolving Loan referred to in subsection 1.1(C)(2), the representations and warranties contained in Section 5 of this Agreement and elsewhere herein and in the Loan Documents shall be (and each request by Borrower for a Loan or a Lender Letter of Credit or Risk Participation Agreement shall constitute a representation
and warranty by Borrower that such representations and warranties are) true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except for any representation or warranty limited by its terms to a specific date and taking into account any amendments to the Schedules or Exhibits as a result of any disclosures made in writing by Borrower to Agent after the Second Amendment and Restatement Date and approved by Agent in writing.
(C) Except in the case of a Revolving Loan referred to in subsection 1.1(C)(2), no event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated (or notice requesting issuance of a Lender Letter of Credit or Risk Participation Agreement) that would constitute an Event of Default or a Default and no circumstance described in subsection 1.1(B)(2) shall exist. In the case of a Revolving Loan referred to in subsection 1.1(C)(2), no Event of Default under subsection 6.1(F) or subsection 6.1(G) and no acceleration of the Obligations shall have occurred.
(D) Except in the case of a Revolving Loan referred to in subsection 1.1(C)(2), no order, judgment or decree of any court, arbitrator or Governmental Authority shall purport to enjoin or restrain any Lender from making any Loan or Agent from issuing any Lender Letter of Credit or Risk Participation Agreement.
7.3 CONDITIONS TO EFFECTIVENESS. This amendment and restatement of the Original Credit Agreement shall not become effective unless and until the following conditions are satisfied in full (as determined by Agent) or, with the prior written consent of Agent and Lenders, waived:
(A) All conditions to borrowing under subsection 7.1 and subsection 7.2 shall be satisfied.
(B) This Agreement shall have been executed and delivered by the Continuing Lenders, the New Lenders, Agent, Borrower and Holdings.
SECTION 8
ASSIGNMENT AND PARTICIPATION
8.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND NOTES. Each Lender (including Heller) may at its own cost assign, subject to the terms of a Lender Addition Agreement, its rights and delegate its obligations under this Agreement to another Person; provided that (a) (i) such Lender (excluding Heller) shall first obtain the written consent of Agent, which consent shall not be unreasonably withheld and (ii) such Lender (including Heller) shall first obtain the prior written consent of Borrower (unless such assignment is being made to a Person which is already a Lender or is being made to an Affiliate of such Lender), which consent shall not be unreasonably withheld; (b) no portion of the Revolving Loan Commitment or Term Loans being assigned shall in any event be less than the lesser of (i) $5,000,000 and (ii) the entire amount of the portion of the Revolving Loan Commitment or applicable Term Loan of the assigning Lender; and (c) upon the consummation of each such assignment the assigning Lender shall pay Agent an administrative fee of $3,500; provided, further, that any sale or assignment by Antares or Heller to Salomon Brothers Holding Company, Inc. ("SALOMON") for the purposes of warehousing or otherwise holding loans and by Salomon or Antares to Mariner CDO 2002, Ltd. and/or Nova CDO 2001, Ltd. shall be permitted and shall not be subject to the minimum assignment amount specified in this Agreement (it being understood that any sale or assignment so permitted shall nonetheless be subject to the $3,500 fee payable to Agent under clause (c) of this sentence). The administrative fee referred to in clause (c) of the preceding sentence shall not apply to an assignment from a Lender to an Affiliate of such Lender. In the case of an assignment authorized under this subsection 8.1, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as it would if it were an initial Lender hereunder. The assigning Lender shall be relieved of its obligations hereunder with respect to its Pro Rata Share of the Revolving Loan Commitment or assigned portion thereof. Borrower hereby acknowledges and agrees that any assignment will give rise to a direct obligation of Borrower to the assignee and that the assignee shall be considered to be a "LENDER".
Agent shall maintain at its office in Chicago, Illinois a copy of each Lender Addition Agreement delivered to it and a register for the recordation of the names and addresses of Lenders, and the commitments of, and principal amount of the Loans owing to each Lender pursuant to the terms hereof from time to time (the "REGISTER"). The entries in the Register shall be presumptive evidence of the amounts due and owing to Lender in the absence of manifest error. Borrower, Agent and each Lender may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrower and any Lender, at any reasonable time upon reasonable prior notice.
Upon its receipt of a duly completed Lender Addition Agreement executed by an assigning Lender and its assignee (together with the Notes subject to such assignment) and the administrative fee referred to above, Agent shall (subject to the consent of Agent and Borrower to such assignment, if required) (1) accept such Lender Addition Agreement, (2) record the information contained therein in the Register to reflect such Lender Addition Agreement and (3) give prompt notice thereof to Borrower and Lenders. Upon request by Agent, Borrower shall promptly execute and deliver to Agent Notes evidencing the Obligations owed by Borrower to the assignee and, if applicable, the assigning Lender, after giving effect to the assignment. Agent shall cancel the Notes delivered to it by the assigning Lender and deliver the new Notes to the assignee and, unless the assigning Lender has assigned all of its interests under this Agreement, the assigning Lender.
Each Lender (including Heller) may at its own cost sell participations in all or
any part of its Pro Rata Share of the Revolving Loan Commitment and the Term
Loans to another Person, provided that (a) such Lender (excluding Heller) shall
first obtain the prior written consent of Agent, which consent shall not be
unreasonably withheld; (b) such Lender (including Heller) shall first obtain the
prior written consent of Borrower (unless such participation is being sold to a
Person which is already a Lender or a participant in the Loans or is being made
to an Affiliate of such Lender) which consent shall not be unreasonably
withheld; and (c) any such participation shall be in a minimum amount of
$5,000,000, and provided, further, that all amounts payable by Borrower
hereunder shall be determined as if that Lender had not sold such participation
and the holder of any such participation shall not be entitled to require such
Lender to take or omit to take any action hereunder except action directly
effecting (i) any reduction in the principal amount, interest rate or fees
payable with respect to any Loan in which such holder participates; (ii) any
extension of the Expiry Date, any extension of the date on which any Scheduled
Installment is to be paid or any change of any date fixed for any payment of
interest or fees payable with respect to any Loan in which such holder
participates; (iii) any change of the aggregate unpaid principal amount of the
Loans; (iv) any change of the percentage of Lenders which shall be required for
Lenders or any of them to take any action hereunder; (v) any release of
Collateral (except if the sale or disposition of such Collateral is permitted
under this Agreement or any other Loan Document); (vi) any amendment or waiver
of this subsection 8.1 or the definitions of the terms used in this subsection
8.1 insofar as the definitions affect the substance of this subsection 8.1;
(vii) any consent to the assignment, delegation or other transfer by any Loan
Party of any of its rights and obligations under any Loan Document; and (viii)
any change in the form in which interest is required to be paid. Borrower hereby
acknowledges and agrees that any participation will give rise to a direct
obligation of Borrower to the participant for purposes of subsections 1.8, 1.9,
8.4 and 9.1 and the participant shall be considered a "Lender" for such
purposes.
Notwithstanding any other provision of this Agreement, any Lender may at any
time, following written notice to Agent, (1) pledge the Obligations held by it
or create a security interest in all or any portion of its rights under this
Agreement or the other Loan Documents in favor of any Person; provided, however,
that (a) no such pledge or grant of security interest to any Person shall
release such Lender from its obligations hereunder or under any other Loan
Document and (b) the acquisition of title to such Lender's Obligations pursuant
to any foreclosure or other exercise of remedies by such Person shall be subject
to the provisions of this Agreement and the other Loan Documents in all respects
including, without limitation, any consent required by this subsection 8.1 and
(2) assign all or any portion of its funded loans to an Affiliate of such Lender
which is at least 50% owned by such Lender or its parent company, to one or more
other Lenders or to a Related Fund. For purposes of this paragraph, a "RELATED
FUND" shall mean, with respect to any Lender, a fund or other investment vehicle
that invests in commercial loans and is managed by such Lender or by the same
investment advisor that manages such Lender or by an Affiliate of such
investment advisor.
Except as otherwise provided in this subsection 8.1 no Lender shall, as between Borrower and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of a participation in, all or any part of the Loans, the Notes or other Obligations owed to such Lender. Each Lender may furnish any information concerning Holdings and its Subsidiaries or as to the Related Transactions in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants), subject to the provisions of subsection 9.13.
Holdings and its Subsidiaries agree that each of them will use its reasonable best efforts to assist and cooperate with Agent and any Lender in any manner reasonably requested by Agent or such Lender to effect the sale of a participation or an assignment described above, including without limitation assistance in the preparation of appropriate disclosure documents or placement memoranda.
Agent shall provide Borrower with written notice of the name and address of any new Lender after the date hereof and will identify the amount of each assignment or participation and the type of Loan in which each new Lender has an interest and the amount and percentage of its Revolving Loan Commitment, if any.
Notwithstanding anything contained in this Agreement to the contrary, so long as the Requisite Lenders shall remain capable of making LIBOR Loans, no Person shall become a "Lender" hereunder unless such Person shall also be capable of making LIBOR Loans.
8.2 AGENT.
(A) APPOINTMENT. Each Lender hereby designates and appoints Heller as its Agent under this Agreement and the other Loan Documents, and each Lender hereby irrevocably authorizes Agent to take such action or to refrain from taking such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers as are set forth herein or therein, together with such other powers as are reasonably incidental thereto. Agent is authorized and empowered to amend, modify, or waive any provisions of this Agreement or the other Loan Documents on behalf of Lenders subject to the requirement that certain of Lenders' consent be obtained in certain instances as provided in subsections 8.3 and 9.2. Agent agrees to act as such on the express conditions contained in this subsection 8.2. The provisions of this subsection 8.2 are solely for the benefit of Agent and Lenders and neither Borrower nor any Loan Party shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, Agent shall act solely as agent
of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for Borrower or any other Loan Party. Agent may perform any of its duties hereunder, or under the Loan Documents, by or through its agents or employees.
(B) NATURE OF DUTIES. The duties of Agent shall be mechanical and administrative in nature. Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender and Agent expressly. Nothing in this Agreement or any of the Loan Documents, express or implied, is intended to or shall be construed to impose upon Agent any obligations in respect of this Agreement or any of the Loan Documents except as expressly set forth herein or therein. Each Lender shall make its own independent investigation of the financial condition and affairs of Borrower and each other Loan Party in connection with the extension of credit hereunder and shall make its own appraisal of the creditworthiness of Borrower and each other Loan Party, and Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto (other than as expressly required herein). If Agent seeks the consent or approval of any Lenders to the taking or refraining from taking any action hereunder, then Agent shall send notice thereof to each Lender. Agent shall promptly notify each Lender any time that the Requisite Lenders have instructed Agent to act or refrain from acting pursuant hereto.
(C) RIGHTS, EXCULPATION, ETC. Neither Agent nor any of its officers, directors, employees or agents shall be liable to any Lender for any action taken or omitted by them hereunder or under any of the Loan Documents, or in connection herewith or therewith, except that Agent shall be liable with respect to its own gross negligence or willful misconduct. Agent shall not be liable for any apportionment or distribution of payments made by it in good faith and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Lender to whom payment was due but not made, shall be to recover from other Lenders any payment in excess of the amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them). In performing its functions and duties hereunder, Agent shall exercise the same care which it would in dealing with loans for its own account, but neither Agent nor any of its officers, directors, employees or agents shall be responsible to any Lender for any recitals, statements, representations or warranties herein or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, or sufficiency of this Agreement or any of the Loan Documents or the transactions contemplated thereby, or for the financial condition of any Loan Party. Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any of the Loan Documents or the financial condition of any Loan Party, or the existence or possible existence of any Default or Event of Default. Agent may at any time request instructions from Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the Loan Documents Agent is permitted or required to take or to grant, and if such instructions are promptly requested, Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Loan Documents until it shall have received such instructions from Requisite Lenders or all of the Lenders, as applicable. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting under this Agreement, the Notes, or any of the other Loan Documents in accordance with the instructions of Requisite
Lenders. Agent shall have no obligation to take any action if it believes, in good faith, that such action exposes Agent to any liability for which it has not received satisfactory indemnification in accordance with subsection 8.2(E).
(D) RELIANCE. Agent shall be entitled to rely, and shall be fully protected in relying, upon any written or oral notices, statements, certificates, orders or other documents or any telephone message or other communication (including any writing, telex, telecopy or telegram) believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the Loan Documents and its duties hereunder or thereunder, upon advice of counsel selected by it. Agent shall be entitled to rely upon the advice of legal counsel, independent accountants, and other experts selected by Agent in its sole discretion.
(E) INDEMNIFICATION. Lenders will reimburse and indemnify Agent for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, attorneys' fees and expenses), advances or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this Agreement or any of the Loan Documents or any action taken or omitted by Agent under this Agreement or any of the Loan Documents, in proportion to each Lender's Pro Rata Share (in each case, to the extent not paid by the Loan parties); provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements resulting from Agent's gross negligence or willful misconduct. If any indemnity furnished to Agent for any purpose shall, in the opinion of Agent, be insufficient or become impaired, Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The obligations of Lenders under this subsection 8.2(E) shall survive the payment in full of the Obligations (including termination of the Total Risk Participation Liability) and the termination of this Agreement.
(F) HELLER INDIVIDUALLY. With respect to its obligations under the Revolving Loan Commitment, the Loans made by it, and the Notes issued to it, Heller shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender. The terms "Lenders" or "Requisite Lenders" or any similar terms shall, unless the context clearly otherwise indicates, include Heller in its individual capacity as a Lender or one of the Requisite Lenders. Heller, either directly or through strategic affiliations, may lend money to, acquire equity or other ownership interests in, provide advisory services to and generally engage in any kind of banking, trust or other business with any Loan Party as if it were not acting as Agent pursuant hereto and without any duty to account therefor to Lenders. Heller, either directly or through strategic affiliations, may accept fees and other consideration from any Loan Party for services in connection with this Agreement or otherwise without having to account for the same to Lenders. Each Lender understands and acknowledges that General Electric Capital Corporation, the parent corporation of Agent, is an equity investor in Penske.
(G) SUCCESSOR AGENT.
(1) Resignation. Agent may resign from the performance of all its agency functions and duties hereunder at any time by giving at least thirty (30) Business Days' prior written notice to Borrower and the Lenders. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to clause (2) below or as otherwise provided below. Heller will resign as Agent at such time as it holds no Loans, and its Commitments to make Revolving Loans and Term Loans and its Risk Participation Liability equals zero.
(2) Appointment of Successor. Upon any such notice of resignation pursuant to clause (1) above, Requisite Lenders shall, upon receipt of Borrower's prior consent which shall not be unreasonably withheld, appoint a successor Agent. If a successor Agent shall not have been so appointed within the thirty (30) Business Day period, referred to in clause (1) above, the retiring Agent, upon notice to Borrower, shall then appoint a successor Agent who shall serve as Agent until such time, if any, as Requisite Lenders, upon receipt of Borrower's prior written consent which shall not be unreasonably withheld, appoint a successor Agent as provided above.
(3) Successor Agent. Upon the acceptance of any appointment as Agent under the Loan Documents by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Agent's resignation as Agent under the Loan Documents, the provisions of this subsection 8.2 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under the Loan Documents.
(H) COLLATERAL MATTERS.
(1) Release of Collateral. Lenders hereby irrevocably
authorize Agent, at its option and in its discretion,
to release any Lien granted to or held by Agent upon
any property covered by the Security Documents (i)
upon termination of the Revolving Loan Commitment and
payment and satisfaction of all Obligations
including, without limitation, termination of the
Total Risk Participation Liability (other than
contingent indemnification Obligations not then due
and payable); (ii) constituting property being sold
or disposed of if Borrower certifies to Agent that
the sale or disposition is made in compliance with
the provisions of this Agreement (and Agent may rely
in good faith conclusively on any such certificate,
without further inquiry); (iii) constituting property
leased to Borrower or another Loan Party under a
lease which has expired or been terminated in a
transaction permitted under this Agreement or is
about to expire and which has not been, and is not
intended by Borrower to be, renewed or extended; or
(iv) in accordance with the provisions of the
succeeding sentence. Agent may release or compromise
any Collateral and the proceeds thereof having a
value not greater than ten percent (10%) of the total
book value of all Collateral, either in a single
transaction or in a series of related transactions,
with the consent of Lenders owning an aggregate of at
least eighty percent (80%) of the Revolving Loan
Commitment and the outstanding Term Loans, provided
that in no event will Agent, acting under the
authority granted to it pursuant to this sentence,
release
or compromise Collateral or the proceeds thereof having a total book value in excess of twenty percent (20%) of the book value of all Collateral, as determined by Agent, during any calendar year. Notwithstanding the foregoing, the Agent is authorized and directed to execute and deliver the NTT/PTA Release.
(2) Confirmation of Authority; Execution of Releases. Without in any manner limiting Agent's authority to act without any specific or further authorization or consent by Lenders (as set forth in subsection 8.2(H)(1)), each Lender agrees to confirm in writing, upon request by Agent or Borrower or any other Loan Party, the authority to release any property covered by the Security Documents conferred upon Agent under clause (i) through (iii) of subsection 8.2(H)(1). Upon receipt by Agent of confirmation from the requisite percentage of Lenders required by subsection 8.2(H)(1), if any, of its authority to release or compromise any particular item or types of property covered by the Security Documents, and upon at least ten (10) Business Days prior written request by Borrower or any other Loan Party, Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release or compromise of the Liens granted to Agent, for the benefit of Agent and Lenders, upon such Collateral, provided that (i) Agent shall not be required to execute any such document on terms which, in Agent's opinion, would expose Agent to liability or create any obligation or entail any consequence other than the release or compromise of such Liens without recourse or warranty, and (ii) such release or compromise shall not in any manner discharge, affect or impair the Obligations or any Liens upon (or obligations of any Loan Party, in respect of), all interests retained by any Loan Party, including (without limitation) the proceeds of any sale, all of which shall continue to constitute part of the property covered by the Security Documents.
(3) Absence of Duty. Agent shall have no obligation whatsoever to any Lender or any other Person to assure that the property covered by the Security Documents exists or is owned by Borrower or any other Loan Party or is cared for, protected or insured or has been encumbered or that the Liens granted to Agent have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this subsection 8.2(H) or in any of the Loan Documents, it being understood and agreed that in respect of the property covered by the Security Documents or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its discretion, given Agent's own interest in property covered by the Security Documents as one of the Lenders and that Agent shall have no duty or liability whatsoever to any of the other Lenders, provided that Agent shall exercise the same care which it would in dealing with loans for its own account.
(I) AGENCY FOR PERFECTION. Agent and each Lender hereby appoint each other Lender as agent for the purpose of perfecting Agent's security interest in assets which, in accordance with Article 9 of the Uniform Commercial Code in any applicable jurisdiction, can be perfected only by possession and each Lender hereby or by executing and delivering a Lender Addition Agreement accepts such appointment. Should any Lender (other than Agent) obtain possession of any such Collateral, such Lender shall
notify Agent thereof, and, promptly upon Agent's request therefor, shall deliver such Collateral to Agent or in accordance with Agent's instructions. Each Lender agrees that it will not have any right individually to enforce or seek to enforce any Security Document or to realize upon any collateral security for the Loans, it being understood and agreed that such rights and remedies may be exercised only by Agent.
(J) DISSEMINATION OF INFORMATION. Agent will use its best efforts to provide Lenders with any information received by Agent from Holdings or its Subsidiaries which is required to be provided to a Lender hereunder, provided that Agent shall not be liable to Lenders for any failure to do so, except to the extent that such failure is attributable to Agent's gross negligence or willful misconduct.
(K) NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default except with respect to defaults in the payment of principal, interest and fees required to be paid to Agent for the account of Lenders, unless Agent shall have received written notice from a Lender or Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". Agent will notify each Lender of its receipt of any such notice. Agent shall take such action with respect to such Default or Event of Default as may be requested by Requisite Lenders in accordance with Section 6. Unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interests of Lenders.
8.3 AMENDMENTS, CONSENTS AND WAIVERS FOR CERTAIN ACTIONS.
(A) Except as otherwise provided in this subsection 8.3, in subsection 9.2 or in any Lender Addition Agreement and except as to matters set forth in other subsections hereof or in any other Loan Document as requiring only Agent's consent, the consent of Requisite Lenders and Borrower will be required to amend, modify, terminate, or waive any provision of this Agreement or any of the other Loan Documents.
(B) In the event Agent requests the consent of a Lender and does
not receive a written consent or denial thereof within ten
(10) Business Days after such Lender's receipt of such
request, then such Lender will be deemed to have denied the
giving of such consent.
(C) In the event Agent requests the consent of a Lender and such consent is denied, then Heller or the Lender which assigned its interest in the Loans to such Lender (the "ASSIGNING LENDER") may, at its option, require such Lender to reassign its interest in the Loans to Heller or the Assigning Lender, as applicable, for a price equal to the then outstanding principal amount thereof plus accrued and unpaid interest, fees and expenses due such Lender, which interest, fees and expenses will be paid when collected from Borrower. In the event that Heller or the Assigning Lender elects to require any Lender to reassign its interest to Heller or the Assigning Lender, Heller or the Assigning Lender, as applicable, will so notify such Lender in writing within forty-five (45) days following such Lender's denial, and such Lender will reassign its interest to Heller or the Assigning Lender, as applicable, no later than five (5) days following receipt of such notice. The Consent of Borrower shall not be required for any assignment under this paragraph (C).
8.4 SET OFF AND SHARING OF PAYMENTS. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, during the continuance of any Event of
Default, each Lender is hereby authorized by Holdings and Borrower at any time or from time to time, with reasonably prompt subsequent notice to Holdings and Borrower (any prior or contemporaneous notice being hereby expressly waived) to set off and to appropriate and to apply any and all (A) balances held by such Lender at any of its offices for the account of Holdings or any of its Subsidiaries (other than any Institution Subsidiary of Borrower) (regardless of whether such balances are then due to Holdings or any of its Subsidiaries), and (B) other property at any time held or owing by such Lender to or for the credit or for the account of Holdings or any of its Subsidiaries (other than any Institution Subsidiary of Borrower), against and on account of any of the Obligations; except that no Lender shall exercise any such right without the prior written consent of Agent. Any Lender exercising a right to set off shall, to the extent the amount of any such set off exceeds its Pro Rata Share of the amount received in connection therewith by all Lenders, purchase for cash (and the other Lenders shall sell) interests in each such other Lender's Pro Rata Share of the Obligations as would be necessary to cause such Lender to share such excess with each other Lender in accordance with their respective Pro Rata Shares. Each of Holdings and Borrower agrees, to the fullest extent permitted by law, that any Lender may exercise its right to set off with respect to amounts in excess of its Pro Rata Share of the Obligations and upon doing so shall deliver such excess to Agent for the benefit of all Lenders in accordance with their Pro Rata Shares.
8.5 DISBURSEMENT OF FUNDS. Agent may, on behalf of Lenders, disburse funds to Borrower for Loans requested. Each Lender shall reimburse Agent on demand for all funds disbursed on its behalf by Agent, or if Agent so requests, each Lender will remit to Agent its Pro Rata Share of any Loan before Agent disburses same to Borrower. If Agent elects to require that each Lender make funds available to Agent, prior to a disbursement by Agent to Borrower, Agent shall advise each Lender by telephone or telecopy of the amount of such Lender's Pro Rata Share of the Loan requested by Borrower no later than 12:00 noon CST on the Funding Date applicable thereto, and each such Lender shall pay Agent such Lender's Pro Rata Share of such requested Loan, in same day funds, by wire transfer to Agent's account on such Funding Date. If any Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent's demand, Agent shall promptly notify Borrower, and Borrower shall immediately repay such amount to Agent. Any repayment required pursuant to this subsection 8.5 shall be without premium or penalty. Nothing in this subsection 8.5 or elsewhere in this Agreement or the other Loan Documents, including without limitation the provisions of subsection 8.6, shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfil its commitments hereunder or to prejudice any rights that Agent or Borrower may have against any Lender as a result of any default by such Lender hereunder.
8.6 DISBURSEMENTS OF ADVANCES; PAYMENT.
(A) REVOLVING LOAN ADVANCES, PAYMENTS AND SETTLEMENTS; RELATED FEE
PAYMENTS.
(1) The Revolving Loan balance may fluctuate from day to day through Agent's disbursement of funds to, and receipt of funds from, Borrower. In order to minimize the frequency of transfers of funds between Agent and each Lender notwithstanding terms to the contrary set forth in Section 1 or subsection 8.5, Revolving Loan advances and payments will be settled among Agent and Lenders according to the procedures described in this subsection 8.6. Notwithstanding these procedures, each Lender's obligation to fund its portion of any advances made by Agent to Borrower will commence on the date such advances are made by Agent. Such payments will be made by such Lender without set-off, counterclaim or reduction of any kind.
(2) On the second (2nd) Business Day of each week, or more frequently (including daily), if Agent so elects (each such day being a "SETTLEMENT DATE"), Agent will
advise each Lender by telephone or telecopy of the amount of each such Lender's Pro Rata Share of the Revolving Loan balance as of the close of business of the (2nd) second Business Day immediately preceding the Settlement Date. In the event that payments are necessary to adjust the amount of such Lender's required Pro Rata Share of the Revolving Loan balance to such Lender's actual Pro Rata Share of the Revolving Loan balance as of any Settlement Date, the party from which such payment is due will pay the other, in same day funds, by wire transfer to the other's account not later than 3:00 p.m. CST on the Business Day following the Settlement Date.
(3) For purposes of this subsection 8.6(A)(3), the following terms will have the meanings indicated:
(a) "DAILY LOAN BALANCE" means an amount calculated as of the end of each calendar day by subtracting (i) the cumulative principal amount paid by Agent to a Lender on a Loan from the Closing Date through and including such calendar day, from (ii) the cumulative principal amount on a Loan advanced by such Lender to Agent on that Loan from the Closing Date through and including such calendar day.
(b) "DAILY INTEREST RATE" means an amount calculated by dividing the interest rate payable to a Lender on a Loan (as set forth in subsection 1.2) as of each calendar day by three hundred sixty (360).
(c) "DAILY INTEREST AMOUNT" means an amount calculated by multiplying the Daily Loan Balance of a Loan by the associated Daily Interest Rate on that Loan.
(d) "INTEREST RATIO" means a number calculated by dividing the total amount of the interest on a Loan received by Agent with respect to the immediately preceding month by the total amount of interest on that Loan due from Borrower during the immediately preceding month.
On the first (1st) Business Day of each month ("INTEREST SETTLEMENT DATE"), Agent will advise each Lender by telephone, telex, or telecopy of the amount of such Lender's Pro Rata Share of interest and fees on each of the Revolving Loans and in respect of Risk Participating Liability as of the end of the last day of the immediately preceding month. Provided that such Lender has made all payments required to be made by it under this Agreement, Agent will pay to such Lender, by wire transfer to such Lender's account (as specified by such Lender on the signature page of this Agreement or the applicable Lender Addition Agreement, as amended by such Lender from time to time after the date hereof pursuant to the notice provisions contained herein or in the applicable Lender Addition Agreement) not later than 3:00 p.m. CST on the next Business Day following the Interest Settlement Date, such Lender's Pro Rata Share of interest and fees on each of the Loans. Such Lender's Pro Rata Share of interest on each Loan will be calculated for that Loan by adding together the Daily Interest Amounts for each calendar day of the prior month for that Loan and multiplying the total thereof by the Interest Ratio for that Loan. Such Lender's Pro Rata Share of each of the commitment fee described in subsection 1.2(B) and the Risk Participation Liability fee described in subsection 1.2(C) shall be paid and calculated in a manner consistent with the payment and calculation of interest as described in this subsection 8.6(A).
(B) TERM LOAN PAYMENTS; RELATED FEE PAYMENTS. Payments of principal, interest and fees in respect of the Term Loans, and payment of all other fees and expenses not otherwise described in subsection 8.6(A) will be settled on the Business Day received by Agent in accordance with the provisions of Section 1.
(C) AVAILABILITY OF LENDER'S PRO RATA SHARE.
(1) Unless Agent has been notified by a Lender prior to a Funding Date of such Lender's intention not to fund its Pro Rata Share of the Loan amount requested by Borrower, Agent may assume that such Lender will make such amount available to Agent on the Business Day following the next Settlement Date. If such amount is not, in fact, made available to Agent by such Lender when due, Agent will be entitled to recover such amount on demand from such Lender without set-off, counterclaim or deduction of any kind.
(2) Nothing contained in this subsection 8.6(C) will be deemed to relieve a Lender of its obligation to fulfil its commitments or to prejudice any rights Agent or Borrower may have against such Lender as a result of any default by such Lender under this Agreement.
(3) Without limiting the generality of the foregoing, each Lender shall be obligated to fund its Pro Rata Share of any Revolving Loan made after any Event of Default or acceleration of the Obligations with respect to any draw on a Lender Letter of Credit or a Risk Participation Agreement.
(D) RETURN OF PAYMENTS.
(1) If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from Borrower and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender without set-off, counterclaim or deduction of any kind.
(2) If Agent determines at any time that any amount received by Agent under this Agreement must be returned to Borrower or paid to any other person pursuant to any solvency law or otherwise, then, notwithstanding any other term or condition of this Agreement, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to Borrower or such other Person, without set-off, counterclaim or deduction of any kind.
SECTION 9
MISCELLANEOUS
9.1 INDEMNITIES. Borrower agrees to indemnify, pay, and hold Agent, each Lender and their respective officers, directors, employees, agents, and attorneys (the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits and claims of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Indemnitee as a result of its being a party to this Agreement or the transactions contemplated by this Agreement or otherwise relating to any of the Related Transactions; provided that Borrower shall have no obligation to
an Indemnitee hereunder with respect to liabilities arising from the gross negligence or willful misconduct of that Indemnitee as determined by a court of competent jurisdiction. If and to the extent that the foregoing undertaking may be unenforceable for any reason, Borrower agrees to make the maximum contribution to the payment and satisfaction thereof that is permissible under applicable law. This subsection and other indemnification provisions contained within the Loan Documents shall survive the termination of this Agreement, payment of the Loans, termination of the Total Risk Participation Liability and payment of all other Obligations.
9.2 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
amendment, modification, termination or waiver of any provision of this
Agreement, the Notes or any of the other Loan Documents, or consent to any
departure by any Loan Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by Requisite Lenders (or Agent, if
expressly set forth herein, in any Note or in any other Loan Document) and the
applicable Loan Party; provided, that except to the extent permitted by the
applicable Lender Addition Agreement, no amendment, modification, termination or
waiver shall, unless in writing and signed by all Lenders, do any of the
following: (a) increase any Lender's Pro Rata Share of the Revolving Loan
Commitment; (b) reduce the principal of, rate of interest on or fees payable
with respect to any Loan or Risk Participation Liability; (c) extend the Expiry
Date, extend the date on which any Scheduled Installment is to be paid or change
any date fixed for any payment of interest or fees; (d) change the aggregate
unpaid principal amount of the Loans; (e) change the percentage of Lenders which
shall be required for Lenders or any of them to take any action hereunder; (f)
release Collateral (except if the sale or disposition of such Collateral is
permitted under this Agreement or any other Loan Document); (g) amend or waive
this subsection 9.2 or the definitions of the terms used in this subsection 9.2
insofar as the definitions affect the substance of this subsection 9.2; (h)
consent to the assignment, delegation or other transfer by any Loan Party of any
of its rights and obligations under any Loan Document; (i) change the form in
which interest is required to be paid and (j) increase "Maximum Revolver Loan
Balance", any component thereof or any sublimit contained therein; and provided,
further, that no amendment, modification, termination or waiver affecting the
rights or duties of Agent under any Loan Document or in respect of any Lender
Letter of Credit or Risk Participation Agreement shall in any event be
effective, unless in writing and signed by Agent, in addition to Lenders
required hereinabove to take such action. Notwithstanding anything to the
contrary in this subsection 9.2, Agent and Borrower may execute amendments to
this Agreement and the other Loan Documents for the purpose of correcting
typographical errors without the consent of the Lenders. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No amendment,
modification, termination or waiver shall be required for Agent to take
additional Collateral pursuant to any Loan Document. No amendment, modification,
termination or waiver of any provision of any Note shall be effective without
the written concurrence of the holder of that Note. No notice to or demand on
Borrower or any other Loan Party in any case shall entitle Borrower or any other
Loan Party to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this subsection 9.2 shall be binding upon each
holder of the Notes at the time outstanding, each future holder of the Notes,
and, if signed by a Loan Party, on such Loan Party. Notwithstanding the
foregoing, while the Revolving Loan Commitment is in effect, no waiver of any
Default or Event of Default shall result in the condition referred to in clause
(C) of subsection 7.2 being satisfied as a result of such waiver unless such
waiver shall have been approved in writing by the Requisite Revolving Lenders;
furthermore, no amendment or waiver of the provisions of this sentence shall be
effective unless such amendment or waiver shall have been approved in writing by
the Requisite Lenders and the Requisite Revolving Lenders.
9.3 NOTICES. Any notice or other communication required shall be in writing addressed to the respective party as set forth below and may be personally served, telecopied, sent by overnight courier service or U.S. mail and shall be deemed to have been given: (a) if delivered in person, when delivered; (b) if delivered by telecopy, on the date of transmission if transmitted on a Business Day before 4:00 p.m.
CST; (c) if delivered by overnight courier, two (2) days after delivery to the courier properly addressed; or (d) if delivered by U.S. mail, four (4) Business Days after deposit with postage prepaid and properly addressed.
Notices shall be addressed as follows:
If to Borrower or Holdings:
Universal Technical Institute, Inc.
c/o The Jordan Company 767 Fifth Avenue, 48th Floor New York, New York 10153
Attn: A. Richard Caputo, Jr.
Telecopy: (212) 755-5263
With a copy to:
Universal Technical Institute, Inc. 10851 N. Black Canyon Hwy, Suite 600 Phoenix, Arizona 85029
Attn: Robert D. Hartman Telecopy: (602) 254-9278
With a copy to:
Mayer, Brown Rowe & Maw
555 College Avenue
Palo Alto, California 94306
Attn: Martin J. Collins
Telecopy: (650) 331-2060
If to Agent or Heller:
HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
Attn: Account Manager Corporate Finance Telecopy: (312) 441-7367 |
With a copy to:
HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
Attn: Legal Services Corporate Finance Telecopy: (312) 441-7367 |
If to a Lender:
To the address set forth on the signature page hereto or in the applicable Lender Addition Agreement
9.4 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Agent or any Lender to exercise, nor any partial exercise of, any power, right or privilege hereunder or under any other Loan Documents shall impair such power, right, or privilege or be construed to be a waiver of any Default or Event of Default. All rights and remedies existing hereunder or under any other Loan Document are cumulative to and not exclusive of any rights or remedies otherwise available.
9.5 MARSHALLING; PAYMENTS SET ASIDE. Neither Agent nor any Lender shall be under any obligation to marshall any assets in payment of any or all of the Obligations. To the extent that Borrower makes payment(s) or Agent enforces its Liens or Agent or any Lender exercises its right of set-off, and such payment(s) or the proceeds of such enforcement or set-off is subsequently invalidated, declared to be fraudulent or preferential, set aside, or required to be repaid by anyone, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or set-off had not occurred.
9.6 SEVERABILITY. The invalidity, illegality, or unenforceability in any jurisdiction of any provision under the Loan Documents shall not affect or impair the remaining provisions in the Loan Documents.
9.7 LENDERS' OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS. The obligation of each Lender hereunder is several and not joint and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. In the event that any Lender at any time should fail to make a Loan as herein provided, the Lenders, or any of them, at their sole option, may make the Loan that was to have been made by the Lender so failing to make such Loan. Nothing contained in any Loan Document and no action taken by Agent or any Lender pursuant hereto or thereto shall be deemed to constitute Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt.
9.8 HEADINGS. Section and subsection headings are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purposes or be given substantive effect.
9.9 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (WHICH PRINCIPLES SHALL BE DEEMED NOT TO INCLUDE SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS).
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that none of Holdings or Borrower may assign its rights or obligations hereunder without the written consent of all Lenders.
9.11 NO FIDUCIARY RELATIONSHIP. No provision in the Loan Documents and no course of dealing between the parties shall be deemed to create any fiduciary duty owing to Holdings or Borrower or any other Loan Party by Agent or any Lender. Borrower agrees that neither Agent nor any Lender shall have liability to Borrower (whether sounding in tort, contract or otherwise) for losses suffered by Borrower in connection with, arising out of, or in any way related to the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless and to the extent that it is determined that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought as determined by a court of competent jurisdiction. Neither Agent nor any Lender shall have any liability with respect to, and Borrower hereby waives, releases and agrees not to sue for, any special, indirect or consequential damages suffered by Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby.
9.12 CONSTRUCTION. Agent, each Lender, Holdings and Borrower acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review the Loan Documents with its legal counsel and that the Loan Documents shall be construed as if jointly drafted by Agent, each Lender, Holdings and Borrower.
9.13 CONFIDENTIALITY; DISSEMINATION OF INFORMATION.
(A) Agent and the Lenders shall hold all nonpublic information obtained pursuant to the requirements of this Agreement in accordance with such Person's customary procedures of handling confidential information of this nature, it being agreed that such confidential information and other information are intended to be used solely in connection with evaluation of the performance of Holdings and its Subsidiaries by Agent, the Lenders and Transferees and prospective Transferees under the Loan Documents and the enforcement of rights and obligations under the Loan Documents, and are not to be used (without the prior written consent of Borrower) for any other purpose, including in connection with extending of credit to, analyzing or advising any competitor of the Borrower provided, however, any Lender may make disclosure as required or requested by any regulatory body or Governmental Authority or representative thereof or pursuant to legal process. In no event shall the Agent or any Lender be obligated or required to return any materials furnished by Holdings or Borrower.
(B) Each of Holdings and the Borrower authorizes each Lender to disclose to any participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any prospective Transferee any and all information in such Lender's possession concerning Holdings, the Borrower and its Subsidiaries and the Collateral; provided that prior to any such disclosure, such prospective Transferee shall agree to preserve in accordance with Section 9.13 the confidentiality of any confidential information described therein; and provided, further, each prospective Transferee shall be required to agree that if it does not become a participant or assignee it shall return or destroy all written materials furnished to it in connection with this Agreement.
9.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
(A) EACH OF HOLDINGS AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST HOLDINGS OR BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY HOLDINGS OR BORROWER AGAINST AGENT OR ANY LENDER OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK CITY, NEW YORK.
(B) EACH OF HOLDINGS AND BORROWER DESIGNATES AND APPOINTS CT CORPORATION SYSTEM AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY HOLDINGS AND BORROWER WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY EACH OF HOLDINGS AND BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO HOLDINGS AND BORROWER AT ITS ADDRESS PROVIDED IN SUBSECTION 9.3 EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY HOLDINGS OR BORROWER REFUSES TO ACCEPT SERVICE, EACH OF HOLDINGS AND BORROWER HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
9.15 WAIVER OF JURY TRIAL. EACH OF HOLDINGS, BORROWER, AGENT AND EACH LENDER HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF HOLDINGS, BORROWER, AGENT AND EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF HOLDINGS, BORROWER, AGENT AND EACH LENDER FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS OR THE LENDER LETTERS OF CREDIT OR RISK PARTICIPATION AGREEMENTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. EACH OF HOLDINGS, BORROWER, AGENT AND EACH LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF AGENT AND EACH LENDER.
9.16 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, the making of the Loans, issuances of Lender Letters of Credit and Risk Participation Agreements and the execution and delivery of the Notes. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Borrower set forth in subsections 1.3(D), 1.8 and 9.1 shall survive the payment of the Loans, and other obligations, termination of the Total Risk Participation Liability and the termination of this Agreement. The agreements contained in subsections 1.3(D), 1.8 and 9.1 of the Original Credit Agreement shall continue in full force and effect as to each Lender under the Original Credit Agreement, notwithstanding the amendment and restatement of the Original Credit Agreement hereby.
9.17 ENTIRE AGREEMENT. This Agreement, the Notes and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, understandings, whether oral or written, relating to the subject matter hereof and may not be contradicted or varied by evidence of prior, contemporaneous or subsequent oral agreements or discussions of the parties hereto.
9.18 COUNTERPARTS. This Agreement and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument.
9.19 SCHEDULES AND EXHIBITS. The Schedules and Exhibits attached to the Original Credit Agreement shall be deemed attached hereto, except in the case of any Schedule or Exhibit attached hereto, which Schedule or Exhibit attached hereto shall supersede any Schedule or Exhibit attached to the Original Credit Agreement and bearing the same identifying number(s) and/or letter(s).
9.20 CONSENT OF LENDERS. Each Lender hereby consents for purposes of Section 3.11, to the amendment of the Holdings Subordinated Indebtedness Documents as contemplated by subsection 7.1(J).
9.21 NO NOVATION. Notwithstanding anything contained herein, this Agreement is not intended to and does not serve to effect a novation of the Obligations. Instead, it is the express intention of the parties hereto to reaffirm the indebtedness created under the Original Credit Agreement, which indebtedness is evidenced by the note or notes provided for therein and secured by the Collateral. Borrower acknowledges and confirms that the liens and security interests granted pursuant to the Loan Documents secure the indebtedness, liabilities and obligations of Borrower to Agent and Lenders under this
Agreement and that the term "Obligations" as used in the Loan Documents (or any other term used in the Loan Documents to describe or refer to the indebtedness, liabilities and obligations of Borrower to Agent and Lenders) includes, without limitation, the indebtedness, liabilities and obligations of Borrower under the Notes to be delivered hereunder and under this Agreement, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time. The Loan Documents and all agreements, instruments and documents executed or delivered in connection with any of the foregoing shall each be deemed to be amended to the extent necessary to give effect to the provisions of this Agreement. Cross-references in the Loan Documents to particular section numbers of the Original Credit Agreement shall be deemed to be cross-references to the corresponding sections, as applicable, of this Agreement.
9.22 HISTORICAL REFERENCES. It is understood and agreed that neither NTT nor PTA are parties to this Agreement or any other Loan Document (and have been released therefrom), that all references to NTT and PTA (and the "COMPANIES") in this Agreement and the other Loan Documents are for historical purposes only, and that notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, there shall be no Default or Event of Default (or other breach of this Agreement or any other Loan Document or any cause of action by any Lender or Agent) based on any statement, representation, warranty or covenant (including any misstatement, misrepresentation or breach of warranty or covenant) by or as to NTT, PTA, the NTT Management Participation Letter, NTT Purchase Agreement, NTT Purchase Transaction and NTT Related Transactions in this Agreement or any other Loan Document, or any failure of NTT or PTA to perform any obligation under any Loan Document, including any that have previously occurred.
SECTION 10
DEFINITIONS
10.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Agreement as so defined. Terms defined in the preamble and recitals to this Agreement are used in this Agreement as so defined.
"ACCREDITING AGENCY" means any nationally recognized accrediting agency which, as of the Original Transaction Date has accredited, or after the Original Transaction Date shall accredit, any Institution and shall include, without limitation, the Accrediting Commission of Career Schools and Colleges of Technology.
"ACCSCT" means the Accrediting Commission of Career Schools and Colleges of Technology.
"AFFILIATE" means any Person: (a) directly or indirectly controlling, controlled by, or under common control with, Holdings or Borrower; (b) directly or indirectly owning or holding ten percent (10%) or more of any equity interest in Holdings or Borrower; or (c) ten percent (10%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by Holdings or Borrower. For purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or by contract or otherwise.
"AGENT" means Heller in its capacity as agent for the Lenders under this Agreement and each of the other Loan Documents and any successor in such capacity appointed pursuant to subsection 8.2.
"AGREEMENT" means this Second Amended and Restated Credit Agreement (including all schedules and exhibits hereto).
"AMENDMENT AND RESTATEMENT DATE" means June 30, 1998.
"AMENDMENT NO. 1" means Amendment No. 1 to the Amended and Restated Credit Agreement, dated as of September 30, 1998.
"AMENDMENT NO. 1 DATE" means September 30, 1998.
"AMENDMENT NO. 2" means Amendment No. 2 to the Amended and Restated Credit Agreement, dated as of September 30, 1998.
"AMENDMENT NO. 2 DATE" means September 30, 1998.
"AMENDMENT NO. 3" means Amendment No. 3 to the Amended and Restated Credit Agreement dated as of September 30, 1999.
"ANNUITY TRUST" means Nelson Sharp 1998 Charitable Remainder Annuity Trust, a Colorado charitable trust.
"ASSET DISPOSITION" means the disposition whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise of any
of the following: (i) any of the capital stock of any of Borrower's
Subsidiaries or (ii) any or all of the assets of Holdings or any of its
Subsidiaries other than sales of inventory in the ordinary course of
business. "NET PROCEEDS" means cash proceeds received by Holdings or
any of its Subsidiaries from any Asset Disposition (including insurance
proceeds, awards of condemnation, and payments under notes or other
debt securities received in connection with any Asset Disposition), net
of (a) the costs of such sale, lease, transfer or other disposition
(including, but not limited to, taxes attributable to such sale, lease
or transfer and costs and expenses payable under the Management
Agreement, (b) amounts applied to repayment of Indebtedness (other than
the Obligations) secured by a Lien on the asset or property disposed,
(c) an appropriate reserve for income taxes in accordance with GAAP
after taking into account all available credits and deductions, and (d)
reasonable and customary reserves established by Holdings associated
with an Asset Disposition, which reserves shall be subject to Agent's
reasonable approval.
"ASSET PURCHASE AGREEMENT" means the Asset Purchase Agreement, dated as of September 30, 1997 (as amended, modified or supplemented from time to time in accordance with its terms and the terms hereof) by and among Old CHC, Old CEG, Holdings, The Clinton Harley Corporation, and Clinton Education Group, Inc., whereby Holdings purchased all of the assets of Old CHC and Old CEG (the "CHC/CEG ASSETS").
"AVAILABILITY" means, at any time, the amount, if any, by which the Maximum Revolver Loan Balance exceeds the sum of the outstanding principal amount of the Revolving Loans, at such time.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy", as amended from time to time or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, and all rules and regulations promulgated thereunder.
"BORROWER" has the meaning ascribed to that term in the preamble of this Agreement.
"BUSINESS DAY" means (a) for all purposes other than as covered by clause (b) below, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the Commonwealth of Pennsylvania, or the States of Illinois, Arizona, New York, Florida, Colorado or Texas or is a day on which banking institutions located in any such states are closed, and (b) with respect to all notices, determinations, fundings and payments in connection with Loans bearing interest at the LIBOR, any day that is a Business Day described in clause (a) above and that is also a day for trading by and between banks in Dollar deposits in the applicable interbank LIBOR market.
"BUSINESS UNIT DISPOSITION" means the conveyance, sale, lease,
sublease, transfer, other disposition or grant of an option to acquire
(x) assets of Holdings or any of its Subsidiaries or (y) the equity
interests in any Subsidiary of Holdings, which assets described in
clause (x) or Subsidiary described in clause (y) accounted for, as
determined in accordance with GAAP, more than 5% of the gross revenues
of Holdings and its Subsidiaries determined in accordance with GAAP on
a consolidated basis for the most recent period of twelve consecutive
months.
"CASH COLLATERAL AGREEMENT" means a cash collateral agreement between Borrower and Agent in form and substance satisfactory to Agent.
"CERTIFICATIONS AND ACCREDITATIONS" means all certifications, accreditations, licenses, permits and other authorizations, including Program Participation Agreements, necessary to allow individuals enrolled in training programs conducted by the Institution Subsidiaries to qualify for educational loans, grants and other forms of student financial assistance from governmental agencies and other sources referred to in the catalogs and advertising literature of Holdings and its Subsidiaries, including, without limitation, all Certifications and Accreditations necessary for the Institution Subsidiaries to participate in student financial aid programs administered by the DOE pursuant to Title IV.
"CEG CLOSING NOTE" means the subordinated promissory note of Holdings, dated September 30, 1997, issued to Old CEG, in the original principal amount of $4,000,000.
"CHARLESBANK" means affiliates of Charlesbank Capital Partners, LLC, including but not limited to, Charlesbank Equity Fund V, Limited Partnership, a Massachusetts limited partnership, and each of their respective principals, employees, partners and family members and trusts for the benefit of any of the foregoing and their respective Subsidiaries.
"CHC/CEG ASSETS" is defined in the definition of Asset Purchase Agreement.
"CLOSING DATE" means January 23, 1998.
"COHORT DEFAULT RATE" means, as to any Institution, the percentage of students or former students of such Institution who default on loans received through the Federal Family Education Loan or Federal Direct Loan Programs, or any other applicable program under Title IV, before the end of the Federal fiscal year after the year in which such students or former students enter repayment for such loans, as further described in Section 668.17(d) of the Regulations.
"COLLATERAL" means, collectively: (a) all capital stock and other property pledged pursuant to the Security Documents; (b) all "Collateral" as defined in the Security Documents; (c) all real property mortgaged pursuant to the Security Documents; and (d) any property or interest provided in addition to or in substitution for any of the foregoing.
"COMMON STOCK" means the common stock, $1 par value per share, of Borrower outstanding on the Closing Date or thereafter issued.
"COMPANIES" means and includes PTA and NTT.
"CONTRACTUAL OBLIGATIONS," as applied to any Person, means any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject, including, without limitation, the Related Transactions Documents.
"CONVERTIBLE PREFERRED STOCK" means the 7.5% Series D convertible preferred stock of Holdings and convertible, at the option of the holders or upon an initial public offering, for 42.5% of the fully diluted issued and outstanding common stock of Holdings.
"CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT" means the Preferred
Stock Purchase Agreement, dated as of January 8, 2002 among Holdings,
Penske and Charlesbank, as originally in effect or as amended, modified
or supplemented as permitted hereby.
"CURRENT STOCKHOLDERS" means the Stockholders of Holdings existing on the Closing Date.
"DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period.
"DOE" means the United States Department of Education.
"EMPLOYMENT AGREEMENTS" means the Amended and Restated Non-Interference Agreements, each dated as of the Amendment No. 1 Date, between Borrower on the one hand and John C. White and Robert D. Hartman, respectively on the other hand, as in effect on the Amendment No. 1 Date.
"ENVIRONMENTAL LAWS" means all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules, standards and regulations, now or hereafter in effect, and any applicable judicial or administrative interpretation thereof, including any applicable judicial or administrative order, consent decree, order or judgment, imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. Sections 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sections 136 et seq.); the Solid Waste Disposal Act (42 U.S.C. Sections 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. Sections 2601 et seq.); the Clean Air Act (42 U.S.C. Sections 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. Sections 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. Sections 300(f) et seq.), and any and all regulations promulgated thereunder, and all analogous state, local and foreign counterparts or equivalents and any transfer of ownership notification or approval statutes.
"ENVIRONMENTAL LIABILITIES" means, with respect to any Person, all liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs,
capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including any arising under or related to any Environmental Laws, Environmental Permits, or in connection with any Release or threatened Release or presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property.
"ENVIRONMENTAL PERMITS" means all permits, licenses, authorizations, certificates, approvals or registrations required by any Governmental Authority under any Environmental Laws.
"ERISA" means at any time the Employee Retirement Income Security Act of 1974 and the regulations promulgated and rulings issued thereunder, all as the same shall be in effect at such time.
"EXPIRY DATE" means the earlier of (a) the suspension (subject to reinstatement) of the Lenders' obligations to make Revolving Loans pursuant to subsection 6.2, (b) the acceleration of the Obligations pursuant to subsection 6.3 or (c) March 31, 2007.
"FIRST AMENDED AND RESTATED CREDIT AGREEMENT" means the Original Credit Agreement as in effect as of June 30, 1998 (and after giving effect to the first amendment and restatement occurring on or about such date).
"FISCAL QUARTER" or "FISCAL QUARTER" means each quarterly period ending on the last day of March, June, September or December.
"FREELY AVAILABLE CASH AND CASH EQUIVALENTS" means, at any time, the excess, if any, of (i) the aggregate amount of cash on hand and Cash Equivalents (excluding cash securing any Collateralized DOE Letter of Credit), in each case, free of all Liens (other than in favor of Agent as security for the Obligations) of Borrower and its Subsidiaries at such time, in each case, immediately available to Borrower or its Subsidiaries, as applicable, on demand over (ii) the aggregate amount of cash on hand and Cash Equivalents (free of all Liens) required by the DOE to be maintained by Borrower and its Subsidiaries as of the last day of Borrower's most recent fiscal year ending on or prior to such time or such more recent time (on or prior to such time) as DOE shall have revised such requirement.
"GAAP" means generally accepted accounting principles as set forth in statements from Auditing Standards No. 69 entitled "The Meaning of Present Fairly in Conformance with Generally Accepted Accounting Principles in the Independent Auditors Reports'" issued by the Auditing Standards Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board that are applicable to the circumstances as of the date of determination.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
"HAZARDOUS MATERIAL" means any substance, material or waste that is regulated by, or forms the basis of liability now or hereafter under, any Environmental Laws, including any material or
substance that is (a) defined as a "solid waste," "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "pollutant," "contaminant," "hazardous constituent," "special waste," "toxic substance" or other similar term or phrase under any Environmental Laws, or (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyl's (PCB's), or any radioactive substance.
"HOLDINGS SUBORDINATED INDEBTEDNESS" means, collectively, the Holdings Subordinated Indebtedness (Sellers), the Holdings Subordinated Indebtedness (NTT) and the Holdings Subordinated Indebtedness (JZEP).
"HOLDINGS SUBORDINATED INDEBTEDNESS (JZEP)" means the $19,400,000 in principal amount of 13.50% subordinated indebtedness issued by Holdings pursuant to the terms of the Holdings Subordinated Indebtedness Documents (MCIT) and held, as of the Amendment No. 1 Date, by JZEP (and excludes the Holding Subordinated Indebtedness (Sellers)).
"HOLDINGS SUBORDINATED INDEBTEDNESS (NTT)" means $5,250,000 in principal amount of 8.00% convertible subordinated indebtedness issued by Holdings to Nelson Sharp and any indebtedness issued in lieu of payment of interest pursuant to the terms of the Holding Subordinated Indebtedness Documents (NTT).
"HOLDINGS SUBORDINATED INDEBTEDNESS (SELLERS)" means the $4,000,000 in original principal amount of 13.5% junior subordinated indebtedness exchanged on the Amendment No. 1 Date, for a like principal amount of 13.5% promissory notes of Holdings issued on January 23, 1998, together with all accrued interest added to the principal thereof pursuant to paragraph (B) thereof as in effect on the Amendment No. 1 Date.
"HOLDINGS SUBORDINATED INDEBTEDNESS DOCUMENTS" means, collectively, the Holdings Subordinated Indebtedness Documents (MCIT) and the Holdings Subordinated Indebtedness Documents (NTT).
"HOLDINGS SUBORDINATED INDEBTEDNESS DOCUMENTS (MCIT)" means (i) the Purchase Agreement (MCIT) and each other "Purchase Document" (as defined in such Purchase Agreement (MCIT) as of the Amendment No. 1 Date) and (ii) the Seller Subordinated Notes; in each case, as amended, modified or supplemented from time to time in accordance with their respective terms and the terms of this Agreement.
"HOLDINGS SUBORDINATED INDEBTEDNESS DOCUMENTS (NTT)" means the Sharp Note and each other document executed in connection therewith, in each case, as amended, modified or supplemented from time to time in accordance with its terms and with the terms of this Agreement.
"INDEBTEDNESS", as applied to any Person, means: (a) all indebtedness for borrowed money; (b) that portion of obligations with respect to capital leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (d) any obligation owed for all or any part of the deferred purchase price of property or services if the purchase price is due more than six (6) months from the date the obligation is incurred or is evidenced by a note or similar written instrument; and (e) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; provided, however, that "Indebtedness" shall not include (i) unsecured liabilities incurred
in the ordinary course of business, which are not evidenced by a note or other instrument and which are not described in clause (d) of this definition, or (ii) liabilities under leases which, under GAAP, are operating leases.
"INSTITUTION" means each eligible institution (now or hereafter owned or operated by Holdings or any of its Subsidiaries or prior to the Original Transaction Date by Old CHC and Old CEG) as defined under the Higher Education Act of 1965, as amended.
"INSTITUTION SUBSIDIARY" means any Subsidiary of Borrower which operates an Institution and has no other material business.
"INSTRUCTING LENDERS" means Lenders having (a) sixty-six and two-thirds percent (66-2/3%) or more of the sum of the Revolving Loan Commitment and the outstanding principal balance of the Term Loans or, (b) if the Revolving Loan Commitment has been terminated, sixty-six and two-thirds (66-2/3%) or more of the aggregate outstanding principal balance of the Loans and Risk Participation Liability.
"INTERCOMPANY INTERCREDITOR LETTER" means a letter agreement among the applicable debtor, the applicable secured party and the Agent, substantially in the form of Exhibit 10.1(E) (with blanks appropriately completed), as such letter agreement may be amended, modified or supplemented from time to time in accordance with its terms.
"INTERCOMPANY NOTE" has the meaning assigned to that term in subsection 3.1(B)(2).
"INTERCOMPANY SECURITY AGREEMENT" means a security agreement in favor of an Institutional Subsidiary, substantially in the form of Exhibit 10.1(F), as such security agreement may be amended, modified or supplemented from time to time in accordance with its terms and the terms of an applicable Intercompany Intercreditor Letter.
"IRC" means the Internal Revenue Code of 1986, as amended from time to time and all rules and regulations promulgated thereunder.
"JORDAN" means The Jordan Company.
"JORDAN GROUP" means The Jordan Company, Jordan/Zalaznick Capital Corporation and their respective principals, employees, partners and family members and trusts for the benefit of any of the foregoing, and Leucadia National Corporation and their respective Subsidiaries.
"JZEP" means JZ Equity Partners PLC (f/k/a MCIT PLC), a public company incorporated under the laws of England and Wales.
"LENDER" or "LENDERS" means the New Lenders and the Continuing Lenders, together with their respective successors and permitted assigns pursuant to subsection 8.1.
"LENDER ADDITION AGREEMENT" means an agreement, substantially in the form of Exhibit 10.1(B), among Agent, a Lender and such Lender's assignee regarding their respective rights and obligations with respect to assignments of the Loans, the Revolving Loan Commitment and other interests under this Agreement and the other Loan Documents.
"LIEN" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary (including any conditional sale or other title retention agreement
and any lease in the nature thereof), and any agreement to give any lien, mortgage, pledge, security interest, charge or encumbrance.
"LOAN" or "LOANS" means an advance or advances under the Revolving Loan Commitment or any Term Loan.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security Documents, each reimbursement agreement relating to a Lender Letter of Credit or Risk Participation Agreement and all other instruments, documents and agreements executed by or on behalf of any Loan Party and delivered on the Closing Date or concurrently herewith or at any time hereafter to or for the benefit of Agent or any Lender in connection with the Loans and other transactions contemplated by this Agreement, all as amended, supplemented or modified from time to time.
"LOAN PARTY" means, collectively, Holdings, Borrower, and any other Person (other than Agent and any Lender) which is or becomes a party to any Loan Document.
"LOAN YEAR" means each period of one year, beginning on the Closing Date and on each anniversary thereof.
"MANAGEMENT AGREEMENT" means the Management Consulting Agreement dated
as of September 30, 1997, between Holdings and TJC Management
Corporation as in effect on the Original Transaction Date, as amended
by that certain side letter dated September 30, 1998, that certain side
letter dated September 30, 1999 (the "SECOND SIDE LETTER") by TJC
Management Corporation and Holdings and that certain side letter, dated
[the Second Amendment and Restatement Date] among TJC Management
Corporation, Penske, Charlesbank Capital Partners, LLC and Holdings.
"MANAGEMENT NOTE" means a promissory note, substantially in the form of Exhibit 10.1(D) hereto, issued by Holdings pursuant to the Stockholders Agreement.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse effect upon the business, operations, properties, assets or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole or (b) the impairment of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party or of Agent or any Lender to enforce any Loan Document or collect any of the Obligations.
"MCIT" means JZEP.
"MODIFICATION NO. 1" means the letter agreement, dated as of the Amendment and Restatement Date, from Holdings to JZEP, amending and modifying the Purchase Agreement (MCIT).
"MODIFICATION NO. 2" means the letter agreement, dated as of June 26, 1998, from Holdings to JZEP, amending and modifying the Purchase Agreement (MCIT).
"MODIFICATION NO. 3" means the letter agreement, dated as of the Amendment No. 1 Date, from Holdings to JZEP, amending and modifying the Purchase Agreement (MCIT).
"NASCAR SALE/LEASEBACK" means the sale and leaseback of certain property located in Mooresville, North Carolina pursuant to the terms of that certain Holdback Agreement and certain Lease Agreement, each dated as of February 11, 2002 by an between Speed (NC) QRS
14-70, Inc., a Delaware corporation, Universal Technical Institute of North Carolina, Inc. (formerly known as Nascar Technical Institute, Inc.), a Delaware corporation, and the Borrower.
"NECESSARY REGULATORY AUTHORITIES" means each of (i) the DOE; (ii) the ACCSCT; (iii) the Arizona State Board for Private Postsecondary Education; (iv) the California Bureau of Private Postsecondary and Vocational Education; (v) the Florida Commission for Independent Education; (vi) the Illinois State Board of Education; (vii) the North Carolina Community College System; (viii) the Texas Workforce Commission; and (ix) the Texas Higher Education Coordinating Board.
"NET PROCEEDS" has the meaning assigned to that term in the definition of "Asset Disposition."
"NON-INSTITUTION SUBSIDIARY" means any Subsidiary that is not an Institution Subsidiary.
"NOTE" or "NOTES" means one or more of the notes of Borrower substantially in the form of Exhibit 10.1(A), or any combination thereof.
"NTT" means National Technology Transfer, Inc., a Delaware corporation.
"NTT MANAGEMENT PARTICIPATION LETTER" means the side letter between Nelson Sharp and Holdings, dated June 12, 1998, related to NTT Management equity participation.
"NTT/PTA RELEASE" means the release in the form of Exhibit 10.1(G) hereto.
"NTT PURCHASE AGREEMENT" means the Stock Purchase Agreement, dated as of June 12, 1998, as amended, modified or supplemented from time to time in accordance with its terms and the terms hereof by and among NTT Acquisition, Inc., the Trusts and Nelson R. Sharp.
"NTT PURCHASE TRANSACTION" means the purchase by NTT Acquisition, Inc. of 100% of the capital stock of NTT.
"NTT RELATED TRANSACTIONS" means the NTT Purchase Transaction, the issuance of the Holdings Subordinated Indebtedness (NTT) and the payment of all fees, costs and expenses incurred by Holdings and its Subsidiaries in connection with the foregoing and the financing contemplated hereby.
"OBLIGATIONS" means all obligations, liabilities and indebtedness of every nature of each Loan Party from time to time owed to Agent (including, for this purpose General Electric Capital Corporation to the extent it has issued a Lender Letter of Credit or Risk Participation Agreement at the request of Heller, as Agent) or any Lender under the Loan Documents including the principal amount of all debts, claims and indebtedness, accrued and unpaid interest (including, without limitation, interest accrued after the commencement of a proceeding under the Bankruptcy Code in which any Loan Party is a debtor, whether or not a claim in respect of such interest is an allowed claim in such proceeding), and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable whether before or after the filing of a proceeding under the Bankruptcy Code by or against any Loan Party.
"OLD CEG" means Clinton Education Group Inc., an Arizona corporation.
"OLD CHC" means The Clinton Harley Corporation, a Delaware corporation.
"ORIGINAL TRANSACTION DATE" means September 30, 1997.
"PENSKE" means Penske Capital Partners, LLC and its affiliates, including but not limited to, Worldwide Training Group, LLC, a Delaware limited liability company, and each of their respective principals, employees, partners and family members and trusts for the benefit of any of the foregoing and their respective Subsidiaries.
"PENSKE/CHARLESBANK RELATED TRANSACTIONS" means the purchase from Holdings by Penske and Charlesbank of Convertible Preferred Stock for not less than $45,500,000 in cash and the other transactions contemplated by the Convertible Preferred Stock Purchase Agreement.
"PENSKE/CHARLESBANK RELATED TRANSACTION DOCUMENTS" means the Convertible Preferred Stock Purchase Agreement and the certificates of designation for the Convertible Preferred Stock.
"PERMITTED ACQUISITION" means an acquisition (i) by Borrower of all of the issued and outstanding capital stock or other equity interests (and all options, warrants and other rights in respect thereof) of any Person incorporated or organized under the laws of any state of the United States of America, or (ii) by a wholly-owned Subsidiary (other than an Institution Subsidiary) of Borrower of all or substantially all of the assets of any Person, to the extent that:
(a) in the case of an acquisition described in (i) above, the business of such Person ("TARGET PERSON") consists solely of the operation (or operation and ownership) of an Institution within the United States of America, or in the case of an acquisition described in (ii) above, the assets purchased ("TARGET BUSINESS") constitute a business consisting solely of the operation (or ownership and operation) of an Institution in the United States of America;
(b) financial statements for the Target Person or Target Business are delivered to Agent and Lenders and are reasonably acceptable to the Instructing Lenders and demonstrate to the reasonable satisfaction of the Instructing Lenders that the Target Person or Target Business, as the case may be, had positive Pre-Acquisition Target EBITDA (calculated in accordance with attachment 4.3 to the Compliance Certificate) for a period of not less than 12 months prior to the acquisition;
(c) projections for Holdings and its Subsidiaries after giving effect to such acquisition, are delivered to Agent and the Lenders and are acceptable to the Instructing Lenders and demonstrate to the reasonable satisfaction of the Instructing Lenders that Holdings and its Subsidiaries (including the Target Person or Target Business, as the case may be) shall be in compliance with the covenants contained in Section 4 hereof through the date described in clause (c) of the definition of "Expiry Date";
(d) Agent shall be satisfied that all requisite consents from all governmental agencies (including, without limitation, for continuation of Title IV funding) and Accrediting Agencies for the consummation of such acquisition have been obtained and that the Target Person or Target Business, as the case may be, shall have been in substantial compliance with the Regulations, all state laws and regulations applicable to Institutions and all rules and regulations of all applicable Accrediting Agencies;
(e) for each of the three (3) completed fiscal years of the Target Person or Target Business, as the case may be, ending most recently prior to the date of such acquisition, such Target Person or Target Business, as the case may be, has derived not more than 89% of its
revenues from Title IV program funds, as calculated by the formula set forth in Section 600.5(d) of the Regulations;
(f) in none of the three (3) completed fiscal years of the Target Person or Target Business, as the case may be, ending most recently prior to the date of such acquisition, was the Cohort Default Rate of the Institutions operated (or owned and operated) by such Target Person or constituting such Target Business, as the case may be, in excess of 25%;
(g) the total consideration provided for such acquisition by Holdings and its Subsidiaries (including, without limitation, Indebtedness and other liabilities and Liens assumed or attaching to purchased assets, and Indebtedness (on terms and pursuant to documentation reasonably acceptable to the Instructing Lenders, which Indebtedness, in any event, must be unsecured and subordinated on terms acceptable to the Instructing Lenders and any Liens which survive such acquisition shall be subject to an intercreditor agreement in favor of Agent on terms and conditions and pursuant to documents satisfactory to the Instructing Lenders) issued to the seller of the Target Person or Target Business, as the case may be, in connection with such acquisition) shall not exceed $5,000,000 for such acquisition and the total consideration for such acquisition and all acquisitions consummated in such fiscal year shall not exceed $7,500,000 in the aggregate;
(h) Instructing Lenders shall be satisfied with the terms of and all documentation in connection with such acquisition, including, without limitation, all documents evidencing, governing or creating Indebtedness or Liens assumed, incurred, issued or otherwise constituting consideration for such acquisition or surviving the acquisition, and all employment, management, non-competition and similar agreements, and Agent shall have completed, with results reasonably satisfactory to Instructing Lenders, such due diligence with respect to the Target Person or Target Business, as the case may be, as Instructing Lenders shall have determined;
(i) Agent shall have received not less than thirty (30) days' prior written notice of such acquisition, and shall have, at least fifteen (15) days prior to the consummation of such acquisition, received projections, in form and substance satisfactory to Instructing Lenders and all other financial information and pro forma financial information necessary to determine if such acquisition is a Permitted Acquisition;
(j) after giving effect to such acquisition and the financing thereof, Availability plus Freely Available Cash and Cash Equivalents is $2,500,000 or greater; and
(k) concurrently with the consummation of such acquisition, Agent shall have been furnished with (x) in the case of a Target Person, a first priority perfected security interest in all capital stock (or other equity interests) of such Target Person, all distributions in respect thereof and all proceeds thereof and such documents, opinions, stock certificates, stock powers and other documents as Agent shall have requested in connection therewith and (y) to the extent permitted by the Regulations and not adverse to the Borrower insofar as the DOE is concerned in the case of a Target Business, a first priority perfected security interest on all assets constituting such Target Business and all proceeds thereof, and such documents, opinions, stock certificates, stock powers and other documents as Agent shall have requested in connection therewith.
"PERSON" means and includes natural persons, corporations, limited liability companies, limited partnerships, limited liability partnerships, limited liability companies, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental person, the successor functional equivalent of such Person).
"PRE-ACQUISITION TARGET EBITDA" for any Target Person or Target Business means, at any time, EBITDA for any Target Person or Target Business (calculated in a manner consistent with the calculation of EBITDA as provided in attachment 4.3 to Exhibit 4.8(C) with such adjustments thereto as may be agreed upon between Borrower and Agent) for the period of twelve full fiscal months ending on or most recently prior to such time, to the extent such EBITDA has not been included in EBITDA of Holdings and its Subsidiaries for such period of twelve full fiscal months (per attachment 4.3 to Exhibit 4.8(C).
"PREFERRED STOCK" means the Convertible Preferred Stock, the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock of Holdings.
"PRO FORMA" means the unaudited consolidated and consolidating balance sheet of Holdings and its Subsidiaries prepared in accordance with GAAP as of the Second Amendment and Restatement Date after giving effect to the Penske/Charlesbank Related Transactions. The Pro Forma is annexed hereto as Schedule 10.1(A).
"PRO FORMA BASIS" means after giving pro forma effect to (x) any acquisition or sale of a person, business or asset, related incurrence, repayment or refinancing of Indebtedness, capital expenditures or other related transactions, including any restructuring charges which would otherwise be accounted for as adjustments permitted by Regulation S-X under the Securities Act of 1933, as amended, or on a pro forma basis under GAAP, or (y) any issue, repayment or refinancing of any Indebtedness and the application of the proceeds therefrom, in each case, as if such acquisition or sale and related transactions, restructurings, consolidations, cost savings, reductions, issue, repayment or refinancing were realized on the first day of the relevant period.
"PROGRAM PARTICIPATION AGREEMENT" means a program participation agreement as described in Section 668.14 of the Regulations.
"PROJECTIONS" means Holdings forecasted consolidated and consolidating:
(a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared on a
division by division and Subsidiary by Subsidiary basis on a consistent
basis with historical financial statements of Holdings and its
Subsidiaries, together with appropriate supporting details and a
statement of underlying assumptions. The Projections represent and will
represent as of the date thereof the good faith estimate of Holdings
and its senior management concerning the most probable course of its
business. It is recognized that such projections, estimates and
forecasts are subject to significant contingencies and uncertainties,
many of which are beyond the control of Holdings and Borrower and that
no assurances are given that such projections, estimates and forecasts
will be achieved.
"PRO RATA SHARE" means (a) with respect to a Lender's obligation to lend a portion of Term Loan A (including Incremental Term Loan A) or Term Loan B and receive payments of interest and principal with respect thereto, the percentage obtained by dividing (i) such Lender's commitment to make a portion of such Term Loan, as set forth on the signature page of this Agreement opposite such Lender's signature or in the most recent Lender Addition Agreement, if any, executed by such Lender, by (ii) all such commitments of all Lenders to make such Term Loan, (b) with respect to a Lender's obligation to make Revolving Loans and receive payments of
interest and principal with respect thereto (and with respect to the
related commitment fee described in subsection 1.2(B)) and with respect
to a Lender's obligation to share in any Risk Participation Liability
(and with respect to the related Risk Participation Liability fee
described in subsection 1.2(C)), the percentage obtained by dividing
(i) such Lender's commitment to make Revolving Loans, as set forth on
the signature page of this agreement opposite such Lender's signature
or in the most recent Lender Addition Agreement, if any, executed by
such Lender, by (ii) all such commitments of all Lenders to make
Revolving Loans and (c) with respect to all other matters (including
without limitation the indemnification obligations arising under
subsection 8.2(E)), the percentage obtained by dividing (i) the sum of
the then outstanding portions of the Term Loans which were funded by
such Lender, plus the commitment of such Lender to make Revolving
Loans, as set forth on the signature page of this Agreement opposite
such Lender's signature or in the most recent Lender Addition
Agreement, if any, executed by such Lender, by (ii) the sum of the then
outstanding Term Loans, plus the aggregate Revolving Loan Commitment.
"PTA" means Performance Training Associates, Inc., a Delaware corporation.
"PURCHASE AGREEMENT (MCIT)" means the Purchase Agreement, dated the Closing Date, between Holdings, as Issuer, and MCIT, as purchaser, for the 13.5% senior subordinated notes of Holdings due 2006 and 2008 in the aggregate principal amount of $19,400,000, as amended by Modification No. 1, Modification No. 2 and Modification No. 3 and as further amended, modified or supplemented in accordance with its terms and the terms of this Agreement.
"QUALIFIED PREFERRED STOCK" means preferred stock of Holdings which by
its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event,
(i) has no requirement for the payment of dividends in cash prior to
March 31, 2009 and (ii) does not mature, is not mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, and is not
redeemable at the option of the holder thereof, in whole or in part, in
any case, on or prior to March 31, 2009.
"REAL ESTATE" means any real property owned, operated, leased or occupied by any Loan Party, any Institution Subsidiary or any other Person within the control of any Loan Party.
"REGULATIONS" means the regulations promulgated by the DOE under Title IV.
"RELATED TRANSACTIONS" means the UTI Related Transactions, the NTT Related Transactions and the Penske/Charlesbank Related Transactions.
"RELATED TRANSACTIONS DOCUMENTS" means, collectively: (a) any or all of
the stock certificates, notes, debentures or other instruments
representing securities bought, sold or issued, or loans made, to
facilitate the consummation of the Related Transactions; (b) the
indentures or other documents pursuant to which such stock, notes,
debentures or other instruments are issued or to be issued; (c) each
document governing the issuance of, or setting forth the terms of, such
stock, notes, debentures or other instruments, including, without
limitation, the provisions governing the Preferred Stock; (d) any
stockholders, registration rights or intercreditor agreement among or
between the holders of such stock, notes, debentures or other
instruments; (e) the Convertible Preferred Stock Purchase Agreement,
the Securities Purchase Agreement, the Asset Purchase Agreement, the
"Related Agreements" (as defined in the Securities Purchase Agreement
and Asset Purchase Agreement), the NTT Purchase Agreement and all
documents, instruments and agreements executed in connection therewith;
(f) all other instruments, documents and agreements executed in
connection with the Related Transactions, but excluding all Loan
Documents; and (g) the Holdings Subordinated Indebtedness Documents; in the case of each of the documents described in (a) through (g), on terms and conditions satisfactory to Agent and as in effect on the Second Amendment and Restatement Date or as amended, modified or supplemented from time to time in accordance with their respective terms and the terms hereof.
"RELEASE" means any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material in the indoor or outdoor environment, including the movement of Hazardous Material through or in the air, soil, surface water, ground water or property.
"REMAINING SUBORDINATED INDEBTEDNESS" means Subordinated Indebtedness outstanding immediately prior to the Second Amendment and Restatement Date other than Subject Subordinated Indebtedness.
"REMAINING SUBORDINATED INDEBTEDNESS DOCUMENTS" the Holdings
Subordinated Indebtedness Documents (NTT) and the CEG Closing Note.
"REQUISITE LENDERS" means Lenders having (a) fifty-one percent (51%) or more of the sum of the Revolving Loan Commitment and the outstanding principal balance of the Term Loans or, (b) if the Revolving Loan Commitment has been terminated, fifty-one percent (51%) or more of the aggregate outstanding principal balance of the Loans and Risk Participation Liability.
"REQUISITE REVOLVING LENDERS" means Lenders having fifty-one percent (51%) or more of the Revolving Loan Commitment.
"RESPONSIBLE OFFICER" means the chairman, chief executive officer, chief financial officer, president, any vice-president, secretary, assistant secretary, treasurer or assistant treasurer or any director of Borrower or Holdings, as the case may be.
"REVOLVING NOTE" means a Note of the Borrower issued in respect of a Revolving Loan and Substantially in the form included in Exhibit 10.1(A).
"SECOND AMENDMENT AND RESTATEMENT DATE" means the date and time that the conditions set forth in subsection 7.3 are satisfied.
"SECURITIES PURCHASE AGREEMENT" means the Agreement for the Purchase of Securities, dated as of September 30, 1997, by and among Holdings and the current stockholders as described therein.
"SECURITY DOCUMENTS" means all instruments, documents and agreements executed by or on behalf of any Loan Party to guaranty or provide collateral security with respect to the Obligations including, without limitation, any security agreement or pledge agreement, any guaranty of the Obligations, any mortgage, and all instruments, documents and agreements executed pursuant to the terms of the foregoing.
"SELLER SUBORDINATED NOTES" has the meaning provided in the Purchase Agreement (MCIT) as in effect on the Amendment No. 1 Date.
"SELLERS" means Sharp and the Trusts.
"SEPTEMBER 1999 CAPITAL CONTRIBUTION" means the capital contribution of cash on the Third Amendment Date equal to (a) $2,354,000 by the non-management purchasers listed in the 1999 Subscription Agreement to Holdings in exchange for the shares of Series C Preferred Stock and common stock of Holdings as set forth on Schedule 10.1(B) attached hereto and (b) $1,733,260.28 by certain of Holding's management stockholders to Holdings in exchange for the shares of Series C Preferred Stock and common stock of Holdings as set forth on Schedule 10.1(B) attached hereto.
"SERIES C PREFERRED STOCK" means all shares of Series C Preferred Stock of Holdings.
"SHARP" means Nelson R. Sharp.
"SHARP NOTE" means that certain 8.00% convertible promissory note of Holdings, dated June 30, 1998, issued to Sharp in the original principal amount of $5,250,000, as amended through the Second Amendment and Restatement Date and evidencing the Holding Subordinated Indebtedness (NTT).
"START-UP EXPENSES" means expenses (a) not exceeding $1,500,000 in the aggregate in the fiscal year ended September 30, 1998, incurred by Borrower and its Subsidiaries in connection with the establishment of satellite campuses, the formation of Clinton Education Group and the formation of the Mercedes and BMW facilities, (b) not exceeding $1,000,000 in the aggregate beginning in the fiscal year ending September 30, 1999 through and including December 31, 2000, incurred by the Borrower and its Subsidiaries in connection with prospective NASCAR and Ford programs, and (c) and losses not exceeding $2,532,000 in the aggregate in the fiscal year ended September 30, 2002 in connection with the establishment of satellite campuses, and (d) and losses not exceeding $420,000 in the aggregate in the fiscal quarter ended December 31, 2002; in each case, to the extent taken into account in the determination of net income of Holdings and its Subsidiaries.
"STOCKHOLDERS AGREEMENT" means the Amended and Restated Universal Technical Institute, Inc. Stockholders Agreement, dated as of March 29, 2002, as amended, modified or supplemented from time to time in accordance with its terms.
"SUBJECT SUBORDINATED INDEBTEDNESS" means the Subordinated Indebtedness required to be satisfied as a condition precedent under subsection 7.1(C).
"SUBORDINATED INDEBTEDNESS" means the Holdings Subordinated Indebtedness and the obligations under the Indebtedness evidenced by the CEG Closing Note.
"SUBORDINATED INDEBTEDNESS DOCUMENTS" means the Holdings Subordinated Indebtedness Documents, and all documents evidencing, governing or securing all other Subordinated Indebtedness.
"SUBSIDIARY" means, with respect to any Person, any corporation, partnership, association or other business entity of which more than fifty percent (50%) of the total voting power of shares of stock (or equivalent ownership or controlling interest) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof.
"TARGET BUSINESS" has the meaning assigned to that term in the definition of "Permitted Acquisition".
"TARGET PERSON" has the meaning assigned to that term in the definition of "Permitted Acquisition".
"TAX SHARING AGREEMENT" means the tax-sharing agreement, dated as of September 30 1997, among Holdings, Borrower and the Subsidiaries of Holdings listed therein as in effect on the Closing Date.
"TERM NOTE" means a Note of the Borrower in respect of a Term Loan and substantially in the form included in Exhibit 10.1(A).
"THIRD AMENDMENT" shall mean the Third Amendment to the First Amended and Restated Credit Agreement, among Holdings, Borrower, National Technology Transfer, Inc., Agent and Lenders.
"THIRD AMENDMENT DATE" shall mean the effective date of the Third Amendment.
"TITLE IV" means Title IV of the Higher Education Act of 1965, as amended.
"TRANSITION AGREEMENT" means the Employment and Non-Interference Agreement between Borrower and Nelson R. Sharp, dated as of and as in effect on June 30, 1998.
"TRUSTS" means and includes the Unitrust and the Annuity Trust.
"UCC" means the Uniform Commercial Code as in effect in the State of New York.
"UNITRUST" means Nelson Sharp 1998 Charitable Remainder Unitrust, a Colorado charitable remainder trust.
"UTI RELATED TRANSACTIONS" means the UTI Transactions, the issuance of Holdings Subordinated Indebtedness (JZEP) on January 23, 1998 and Preferred Stock, and the payment of all fees, costs and expenses incurred by Holdings and its Subsidiaries in connection with the foregoing.
"UTI TRANSACTIONS" means the acquisition and recapitalization transactions contemplated by the Asset Purchase Agreement and the Securities Purchase Agreement.
"WHITE NOTE" means that certain promissory note of White's Family Corporation, LLC, dated September 30, 1997, issued to Holdings in the original principal amount of $4,000,050.
"WHOLLY-OWNED SUBSIDIARY" means, as to any Person, a Subsidiary, all of the shares of each class of capital stock of such Subsidiary is beneficially owned and controlled by such Person.
10.2 OTHER DEFINITIONAL PROVISIONS. References to "Sections", "subsections", "Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and Schedules, respectively, of this Agreement unless otherwise specifically provided. Any of the terms defined in subsection 10.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Agreement, "hereof", "herein", "hereto", "hereunder" and the like mean and refer to this Agreement as a whole and not merely to the specific section, paragraph or clause in which the respective word appears;
words importing any gender include the other gender; references to "writing" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "including", "includes" and "include" shall be deemed to be followed by the words "without limitation"; references to agreements and other contractual instruments shall be deemed to include subsequent amendments, assignments, and other modifications thereto, but only to the extent such amendments, assignments and other modifications are not prohibited by the terms of this Agreement or any other Loan Document; references to Persons include their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.
[Remainder of page left blank intentionally; signatures on following pages.]
Witness the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above.
UTI HOLDINGS, INC.,
as Borrower
By: _______________________________________
Name: A. Richard Caputo, Jr.
Title: Vice President
UNIVERSAL TECHNICAL INSTITUTE,
INC., as Parent
By: _______________________________________
Name: A. Richard Caputo, Jr.
Title: Vice President
HELLER FINANCIAL, INC.,
as Agent and a Continuing Lender
By: _______________________________________
Name: Luis Acosta
Title: Senior Vice President
Commitment to make Revolving Loans:
$8,571,428.57
Percentage of Revolving Loan Commitment:
42.8571429%
Commitment to make original Term Loan A:
$5,611,607.15 (Fully Advanced)
Percentage of Term Loan A:
42.8571429%
Commitment to make Incremental Term Loan A:
$2,959,821.42
Percentage of Incremental Term Loan A:
42.8571429%
Commitment to make Original Term Loan B:
$14,657,142.86 (Fully Advanced)
Percentage of Original Term Loan B:
47.1428571%
ANTARES CAPITAL CORPORATION,
Continuing Lender
By: ______________________________________
Name:
Title:
Commitment to make Revolving Loans:
$5,714,285.71
Percentage of Revolving Loan Commitment:
28.5714286%
Commitment to make original Term Loan A:
$1,907,946.43 (Fully Advanced)
Percentage of Term Loan A:
14.5714286%
Commitment to make Incremental Term Loan A:
$1,006,339.28
Percentage of Incremental Term Loan A:
14.5714286%
Commitment to make Original Term Loan B:
$4,371,428.57 (Fully Advanced)
Percentage of Original Term Loan B:
18.5714286%
JP MORGAN CHASE BANK,
AS TRUSTEE OF THE ANTARES FUNDING TRUST
CREATED UNDER A TRUST AGREEMENT DATED AS OF
NOVEMBER 30, 1999
New Lender
By:________________________________________
Name:
Title:
Commitment to make Revolving Loans:
$0
Percentage of Revolving Loan Commitment:
0%
Commitment to make original Term Loan A:
$1,047,500 (Fully Advanced)
Percentage of Term Loan A:
8.0000000%
Commitment to make Incremental Term Loan A:
$552,500
Percentage of Incremental Term Loan A:
8.0000000%
Commitment to make Original Term Loan B:
$2,400,000 (Fully Advanced)
Percentage of Original Term Loan B:
5.7142857%
THE ROYAL BANK OF SCOTLAND PLC,
New Lender
By: _______________________________________
Name:
Title:
Commitment to make Revolving Loans:
$5,714,285.71
Percentage of Revolving Loan Commitment:
28.5714286%
Commitment to make original Term Loan A:
$3,741,071.43 (Fully Advanced)
Percentage of Term Loan A:
28.5714286%
Commitment to make Incremental Term Loan A:
$1,973,214.28
Percentage of Incremental Term Loan A:
28.5714286%
Commitment to make Original Term Loan B:
$8,571,428.57 (Fully Advanced)
Percentage of Original Term Loan B:
28.5714286%
LIBOR RATE LOAN REQUEST
EXHIBIT 1.2(G)
[INSERT NAME AND ADDRESS OF BORROWER]
[ ], 200[ ]
Heller Financial, Inc., as Agent
500 West Monroe Street
Chicago, Illinois 60661
Attention: Portfolio Analyst
Corporate Finance Group
Ladies and Gentlemen:
We refer to the Second Amendment and Restatement of Credit Agreement dated as of
[ ], 2002 (as the same has been or may hereafter be amended, modified or
supplemented, the "CREDIT AGREEMENT") among Heller Financial, Inc., a Delaware
corporation, as Agent and a Lender ("AGENT"), UTI Holdings, Inc. and Universal
Technical Institute, Inc., and the other Lenders party thereto from time to
time. Capitalized terms used but not defined herein have the meanings given to
them in the Credit Agreement.
Pursuant to subsection 1.2(G) of the Credit Agreement, Borrower hereby:
(1) gives notice that on [ ], [200[ ]] it desires to borrow
an aggregate principal amount of $[ ], which shall be a
LIBOR Loan. The LIBOR Loan shall have an Interest Period of
[ ] months [INSERT ONE, TWO, THREE OR SIX]; or
(2) makes a request to:
(a) convert $[ ] [of presently outstanding [Base Rate/LIBOR] Revolving
Loans] [of the presently outstanding Term Loan, which is presently a [Base
Rate/LIBOR Rate with an Interest Period expiration date of [ ], [200[ ]]]] to
[Base Rate/LIBOR] Loans on [ ], [200[ ]]. If converting to LIBOR Loans, the
Interest Period for such LIBOR Loans is requested to be a [one/two/three/six]
month period.
(b) continue as LIBOR Loans $[ ] of presently outstanding LIBOR Loans constituting [Revolving Loans/a portion of the Term Loan] with an Interest Period expiration date of [ ], [200[ ]]. The Interest Period for such LIBOR Loans is requested to be a [one/two/three/six] month period.
The undersigned hereby certifies that, both before and after giving effect to the advance, conversion or continuation request above (i) all of the representations and warranties contained in the Credit Agreement and the other Loan Documents, together with all supplemental disclosures delivered to Agent prior to the date hereof, are true, correct and complete in all material respects as of the date hereof (except for any representation or warranty limited by its terms to a specific date and taking into account amendments to Schedules or Exhibits as a result of any disclosures made in writing by Borrower after the Second Amendment and Restatement Date and approved by Agent in writing) and (ii) no Default or Event of Default has occurred and is continuing on the date hereof.
EXHIBIT 1.2(G)
Sincerely,
UTI HOLDINGS, INC.
By: __________________________________
Name:
Title:
EXHIBIT 1.2(G)-2
EXCESS CASH FLOW COMPUTATION
EXHIBIT 1.5(B)
This certificate is given by UTI Holdings, Inc., an Arizona corporation ("BORROWER") and Universal Technical Institute, Inc. ("HOLDINGS"), pursuant to subsection 1.5(B) of that certain Second Amended and Restated Credit Agreement dated as of [ ], 2002 (as the same has been or may hereafter be amended, modified or supplemented, the "CREDIT AGREEMENT") among Heller Financial, Inc., a Delaware corporation, as Agent and a Lender ("AGENT"), Borrower and Holdings and the other Lenders party thereto from time to time. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.
The officer executing this certificate is the Chief Financial Officer [CHIEF EXECUTIVE OFFICER] of each of Borrower and Holdings and as such is duly authorized to execute and deliver this certificate on behalf of Holdings and its Subsidiaries. By executing this certificate such officer hereby certifies to Agent and Lenders that:
(a) set forth below is a schedule of Excess Cash Flow for the year ended [ ], [200[ ]] and the calculation of the required repayment of $[ ];
(b) the schedule set forth below is based on the audited financial statements which have been delivered to Agent and Lenders in accordance with subsection 4.8(B)
IN WITNESS WHEREOF, Borrower and Holdings have caused this Certificate to be executed by their Chief Financial Officer [CHIEF EXECUTIVE OFFICER] this [ ] day of [ ], 200[ ].
UTI HOLDINGS, INC.
UNIVERSAL TECHNICAL INSTITUTE, INC.
By: __________________________________
Chief Financial Officer
[Chief Executive Officer]
EXHIBIT 1.5(B)
SCHEDULE OF EXCESS CASH FLOW
ATTACHMENT TO EXCESS CASH FLOW COMPUTATION
Excess Cash Flow is defined as follows:
EBITDA (as calculated on attachment 4.3 of Exhibit 4.8(C) to the Credit Agreement ("EXHIBIT 4.8(C)") $ -------------- Less: Any provision for (or plus any benefit from) income or franchise taxes included in the determination of net income -------------- Unfinanced Capital Expenditures (as calculated on Exhibit 4.8(C)) -------------- Other Capitalized Costs, defined as the gross amount capitalized, for any fiscal period, as long term assets (net of cash received in respect of long term assets), other than (a) Capital Expenditures and (b) fees and expenses capitalized with respect to the Related Transactions -------------- Scheduled principal payments with respect to Indebtedness actually paid in cash (excluding mandatory prepayments required by subsection 1.5) -------------- Total Interest Expenses (as calculated on Exhibit 4.8(C)) -------------- The aggregate of all voluntary prepayments of the Term Loans made in accordance with subsection 1.5(A) of the Credit Agreement -------------- Restricted Junior Payments made in cash and permitted under subsection 3.5 of the Credit Agreement -------------- Plus: Decrease (increase) in Working Capital (defined below) -------------- Decreases (increases) in long term deferred tax assets -------------- Increases (decreases) in long term deferred tax liabilities -------------- Increases (decreases) in long term portion of accrued liabilities and other long-term liabilities, excluding Indebtedness -------------- Fees paid for the period under the Management Agreement in compliance with this Agreement and director's fees paid for the period in compliance with this Agreement -------------- |
EXHIBIT 1.5(B)-2
Start-Up Expenses for the period -------------- Expenditures pursuant to the last sentence of subsection 4.9 applicable to, but not included in, the Pro Forma; including expenditures during the period made in connection with the Related Transactions and payment of liabilities existing on the Closing Date -------------- $200,000 Excess Cash Flow $ ============== Prepayment percent 75%(1) Prepayment amount $ ============== |
EXHIBIT 1.5(B)-3
Decrease (increase) in Working Capital, for the purposes of the calculation of Excess Cash Flow, means the following:
BEG. OF PERIOD END OF PERIOD Current assets: $ $ ---------------------- -------------------- Less: Freely Available Cash and Cash Equivalents ---------------------- -------------------- Amounts due from Affiliates ---------------------- -------------------- Adjusted current assets ---------------------- -------------------- Current liabilities: $ $ ---------------------- -------------------- Less: Revolving Loans* ---------------------- -------------------- Current portion of Indebtedness* ---------------------- -------------------- Amounts due to Affiliates ---------------------- -------------------- Adjusted current liabilities $ $ ---------------------- -------------------- Working Capital $ $ ====================== -------------------- Decrease (Increase) in Working Capital [BEGINNING OF PERIOD-END OF PERIOD WORKING CAPITAL] $ ==================== |
* To the extent included in current liabilities.
EXHIBIT 1.5(B)-4
FORM OF INTERCOMPANY NOTE
EXHIBIT 3.2(A)
PROMISSORY NOTE
Revolver
$________________ September 30, 1998
Phoenix, Arizona
FOR VALUE RECEIVED, _______________________, a(n) _____________ ______ corporation ("MAKER"), promises to pay to the order of ____________ _________, a(n) _________________ corporation ("HOLDER"), at ___________________ _______, __________________, or such other place as the Holder hereof may, from time to time, specify in writing, the principal sum of ___________________________ and _____/100 DOLLARS ($___________________.__________) or such lesser amount as may have been advanced by Holder to Maker and be outstanding hereunder at September 30, 1998, together with interest, as provided in this Promissory Note ("NOTE").
1. Demand. The unpaid principal amount of this Note will be payable on demand.
2. Remedies of Holder. Upon the occurrence and during the continuance of an Event of Default, as defined herein, the remaining payments of principal, at the option of the holder hereof, shall at once become due and payable, and the principal sum hereof shall bear interest at the rate of percent ( %) per annum so long as such Default remains uncured. In addition, Holder shall have any and all rights available to it, at law, in equity or otherwise, and such rights will be cumulative and non-exclusive.
3. [Omitted]
4. Event of Default. Each of the following will constitute an event of default ("EVENT OF DEFAULT") under this Note:
(a) Failure by Maker to pay any amounts under this Note when due and such failure continues uncured for a period of ten (10) days after delivery of written notice to Maker.
(b) Maker's (i) admission in writing of its inability to pay its obligations as they become due, (ii) assignment for the benefit of its creditors, or (iii) application for, consent to or acquiescence in, the appointment of a trustee, receiver or other custodian for Maker, the property of Maker or any part thereof, or in the absence of any application, consent or acquiescence, the appointment of a trustee, receiver or other custodian for Maker or a substantial part of the property of Maker, which appointment is not discharged within sixty (60) days.
(c) Commencement of any case under Title 11 of the United States Code or any other bankruptcy, reorganization, receivership, custodianship, or similar proceeding under any state or federal law by or against Maker and, with respect to any such case or proceeding that is involuntary, such case or proceeding is not dismissed within ninety (90) days of the filing thereof.
EXHIBIT 3.2(A)
(d) Commencement of any litigation or proceeding before any court, government or governmental agency, body or instrumentality (federal, state, local or foreign) against or affecting Maker, and such litigation or proceeding substantially impairs the ability of Maker to perform its obligations under the Note.
5. [Omitted]
6. General Provisions.
(a) Successors and Assigns. This note will be binding upon and inure to the benefit of Holder, Maker and their respective successors, assigns, executors, heirs, devisees, and beneficiaries.
(b) Modification. This Note may not be modified except in writing signed by Maker and Holder.
(c) Time of Essence. Time is of the essence with regard to each and every term, condition, and obligation of the Maker of this Note.
(d) Non-Waiver. Failure or delay in exercising any right or option hereunder given to Holder will not constitute a waiver of any such right or option or waiver of any other right or option under this Note.
(e) Applicable Law. This Note is governed by the laws of the State of Arizona. Maker promises to pay all costs and expenses of collection, including reasonable attorneys' fees, in the event this Note is placed in the hands of an attorney for collection, and such collection is affected without suit. The prevailing party in any litigation, arbitration or other proceedings arising out of this Note shall be reimbursed by the other party for all costs and expenses incurred in such proceedings, including reasonable attorneys' fees.
(f) Severability. If at any time any provision of this Note is or becomes illegal, invalid or unenforceable in any respect, the legality, validity and enforceability of the remaining provisions of this Note will not be affected and such remaining provisions will remain in full force and effect.
(g) Waiver of Maker's Rights. Maker hereby expressly waives demand, presentment for payment, protest, notice of protest and diligence in collection, and consents to the time said payment or any part thereof is to be made and may be extended by the Holder hereof.
(h) Notices. All notices or other communications required or provided to be sent by either party shall be in writing, shall be delivered by one or more of the following methods and shall be effective as indicated below:
1. By hand delivery, in which event notice is deemed to be effective on the date that notice is received; or
2. By United States Postal Service certified or registered mail, postage prepaid, in which event notice is deemed to be effective on the date which is three (3) days after the date on which notice is mailed; or
EXHIBIT 3.2(A)-2
3. By overnight delivery by a commercial entity which is in the business of providing overnight delivery service (fees prepaid) or by overnight United States Postal Service delivery (fees prepaid), in which event notice is deemed to be effective on the date following the date on which notice is properly deposited with such commercial entity or with the United States Postal Service; or
4. By electronic facsimile process, in which event notice is deemed to be effective on the date of electronic transmission properly made (if transmission is made before 12:00 o'clock noon, sender's time), or on the next day after the date of electronic transmission properly made (if transmission is made after 12:00 o'clock noon, sender's time).
Notices shall be sent to the addresses shown below or at such other address or addresses (but neither party may designate a post office box for receipt of notices) as the parties may, from time to time, specify in writing, such changes to be made in a like manner:
(i) Interest. Notwithstanding any provision herein or in any document or instrument now or hereafter securing this Note, the total liability for payments in the nature of interest shall not exceed the limits now imposed by applicable law. The contracted rate of interest shall consist of the sum of the interest rate stated herein, and any charges to obtain this loan, other charges, fees, goods, penalties, things in action, or sums or things of value paid by Maker to Holder, to the extent that such charges are considered to be interest. Any sums collected by Holder deemed to be interest in excess of the legal rate shall, at the option of Holder (i) be returned to Maker or (ii) to the extent permitted by applicable law, be applied by Holder in payment of the outstanding principal balance under this Note.
7. Security. This Note is and shall be secured by security interest in all of the Maker's assets, now existing or hereafter acquired.
MAKER:
By: __________________________________ Its: _________________________________
EXHIBIT 3.2(A)-3
FORM OF INTERCOMPANY NOTE (BORROWER)
EXHIBIT 3.2(B)
PROMISSORY NOTE
Revolver
$________________ September 30, 1998
Phoenix, Arizona
FOR VALUE RECEIVED, ____________________, a(n)________________________
_______ _____corporation ("MAKER"), promises to pay to the order of____________________________________ _______, a(n) _________________ corporation ("HOLDER"), at __________________________________ ______, _________________, or such other place as the Holder hereof may, from time to time, specify in writing, the principal sum of __________________________________________________ and ____/100 DOLLARS ($________________________._________) or such lesser principal amount as may have been advanced by Holder to Maker and be outstanding hereunder at September 30, 1998, together with interest, as provided in this Promissory Note ("NOTE").
1. Demand. The unpaid principal amount of this Note will be payable on demand.
2. Remedies of Holder. Upon the occurrence and during the continuance of an Event of Default, as defined herein, the remaining payments of principal, at the option of the holder hereof, shall at once become due and payable, and the principal sum hereof shall bear interest at the rate of percent ( %) per annum so long as such Default remains uncured. In addition, Holder shall have any and all rights available to it, at law, in equity or otherwise, and such rights will be cumulative and non-exclusive.
3. [Omitted]
4. Event of Default. Each of the following will constitute an event of default ("EVENT OF DEFAULT") under this Note:
(a) Failure by Maker to pay any amounts under this Note when due and such failure continues uncured for a period of ten (10) days after delivery of written notice to Maker.
(b) Maker's (i) admission in writing of its inability to pay its obligations as they become due, (ii) assignment for the benefit of its creditors, or (iii) application for, consent to or acquiescence in, the appointment of a trustee, receiver or other custodian for Maker, the property of Maker or any part thereof, or in the absence of any application, consent or acquiescence, the appointment of a trustee, receiver or other custodian for Maker or a substantial part of the property of Maker, which appointment is not discharged within sixty (60) days.
(c) Commencement of any case under Title 11 of the United States Code or any other bankruptcy, reorganization, receivership, custodianship, or similar proceeding under any state or federal law by or against Maker and, with respect to any such case or proceeding that is involuntary, such case or proceeding is not dismissed within ninety (90) days of the filing thereof.
EXHIBIT 3.2(B)
(d) Commencement of any litigation or proceeding before any court, government or governmental agency, body or instrumentality (federal, state, local or foreign) against or affecting Maker, and such litigation or proceeding substantially impairs the ability of Maker to perform its obligations under the Note.
5. [Omitted]
6. General Provisions.
(a) Successors and Assigns. This note will be binding upon and inure to the benefit of Holder, Maker and their respective successors, assigns, executors, heirs, devisees, and beneficiaries.
(b) Modification. This Note may not be modified except in writing signed by Maker and Holder.
(c) Time of Essence. Time is of the essence with regard to each and every term, condition, and obligation of the Maker of this Note.
(d) Non-Waiver. Failure or delay in exercising any right or option hereunder given to Holder will not constitute a waiver of any such right or option or waiver of any other right or option under this Note.
(e) Applicable Law. This Note is governed by the laws of the State of Arizona. Maker promises to pay all costs and expenses of collection, including reasonable attorneys' fees, in the event this Note is placed in the hands of an attorney for collection, and such collection is affected without suit. The prevailing party in any litigation, arbitration or other proceedings arising out of this Note shall be reimbursed by the other party for all costs and expenses incurred in such proceedings, including reasonable attorneys' fees.
(f) Severability. If at any time any provision of this Note is or becomes illegal, invalid or unenforceable in any respect, the legality, validity and enforceability of the remaining provisions of this Note will not be affected and such remaining provisions will remain in full force and effect.
(g) Waiver of Maker's Rights. Maker hereby expressly waives demand, presentment for payment, protest, notice of protest and diligence in collection, and consents to the time said payment or any part thereof is to be made and may be extended by the Holder hereof.
(h) Notices. All notices or other communications required or provided to be sent by either party shall be in writing, shall be delivered by one or more of the following methods and shall be effective as indicated below:
1. By hand delivery, in which event notice is deemed to be effective on the date that notice is received; or
2. By United States Postal Service certified or registered mail, postage prepaid, in which event notice is deemed to be effective on the date which is three (3) days after the date on which notice is mailed; or
EXHIBIT 3.2(B)-2
3. By overnight delivery by a commercial entity which is in the business of providing overnight delivery service (fees prepaid) or by overnight United States Postal Service delivery (fees prepaid), in which event notice is deemed to be effective on the date following the date on which notice is properly deposited with such commercial entity or with the United States Postal Service; or
4. By electronic facsimile process, in which event notice is deemed to be effective on the date of electronic transmission properly made (if transmission is made before 12:00 o'clock noon, sender's time), or on the next day after the date of electronic transmission properly made (if transmission is made after 12:00 o'clock noon, sender's time).
Notices shall be sent to the addresses shown below or at such other address or addresses (but neither party may designate a post office box for receipt of notices) as the parties may, from time to time, specify in writing, such changes to be made in a like manner:
(i) Interest. Notwithstanding any provision herein or in any document or instrument now or hereafter securing this Note, the total liability for payments in the nature of interest shall not exceed the limits now imposed by applicable law. The contracted rate of interest shall consist of the sum of the interest rate stated herein, and any charges to obtain this loan, other charges, fees, goods, penalties, things in action, or sums or things of value paid by Maker to Holder, to the extent that such charges are considered to be interest. Any sums collected by Holder deemed to be interest in excess of the legal rate shall, at the option of Holder (i) be returned to Maker or (ii) to the extent permitted by applicable law, be applied by Holder in payment of the outstanding principal balance under this Note.
7. Security. This Note is and shall be secured by security interest in all of the Maker's assets, now existing or hereafter acquired.
8. Subordination.
8.1 All indebtedness evidenced hereby, including, without limitation, principal hereof, interest accrued or to accrue hereon and fees and expenses payable hereunder ("JUNIOR INDEBTEDNESS") shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of Superior Indebtedness.
EXHIBIT 3.2(B)-3
For the purposes hereof, the term "SUPERIOR
INDEBTEDNESS":
(a) shall mean all indebtedness, direct or indirect, absolute or contingent, heretofore or hereafter incurred by the Maker under or in connection with that certain Amended and Restated Credit Agreement, dated as of June 30, 1998, among UTI Holdings, Inc., Universal Technical Institute, Inc., NTT Acquisition, Inc., Antares Capital Corporation, Balanced High-Yield Fund I Ltd., BHF-Bank Aktiengesellschaft and Heller Financial Inc., any guarantee of the "Obligations" (as defined therein) or any other "Loan Documents" (as defined therein) as such agreement, guarantee or any one or more Loan Documents may be amended, modified, restated, replaced, renewed, extended, refinanced or refunded from time to time and all refinancings and refundings of any or all such indebtedness; and
(b) shall include, without limitation, any interest, and any and all reasonable expenses, payable in respect of any of the foregoing in clause (a) above subsequent to the commencement of any proceeding against or with respect to the Maker under Title 11 of the United States Code, as amended from time to time or any successors thereto (the "BANKRUPTCY ACT") whether or not such interest is an allowed claim in any such proceeding.
For the purposes here, "indebtedness" shall include principal, interest, fees, indemnities and any expenses, if any, incurred with respect thereto.
8.2 No payment under Junior Indebtedness shall be made by the Maker if and so long as any portion of the Superior Indebtedness has become and remains due and payable. The provisions of this Section 8.2 shall not be applicable to any payment governed by Section 8.3 hereof.
8.3 Upon (i) any payment being required to be made by the Maker under Junior Indebtedness upon any declaration of acceleration of the principal amount thereof or any demand for payment thereof or (ii) any payment or distribution of assets of the Maker of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of the Maker, whether voluntary or involuntary or in bankruptcy, insolvency, receivership, or other proceedings; and upon any such declaration of acceleration or dissolution or winding up or liquidation or reorganization, any distribution of assets of the Maker of any kind or character, whether in cash, property or securities, to which the holders of Junior Indebtedness would be entitled except for the provisions hereof, all principal, premium, if any, and interest due or to become due and all other amounts payable under Superior Indebtedness shall be paid by the Maker or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the holders of Junior Indebtedness if received by them, directly to the holders of Superior Indebtedness of the Maker (pro rata to each such holder on the basis of the respective amounts of such Superior Indebtedness held by such holder), or their representatives to the extent necessary to pay all such Superior Indebtedness in full, in cash, after giving effect to any concurrent payment of distribution to or for the benefit of the holders of such Superior
EXHIBIT 3.2(B)-4
Indebtedness, before any payment or distribution is made to the holders of Junior Indebtedness. In furtherance of the foregoing, but not by way of limitation thereof, if the Maker shall file or have filed against it a petition under any chapter of the Bankruptcy Act or an order for relief shall be entered as to the Maker thereunder, with the result that the Maker is excused from the obligation to pay all or any part of the interest otherwise payable in respect of any Superior Indebtedness during the period subsequent to the commencement of any such proceeding under the Bankruptcy Act, each holder of Junior Indebtedness by his acceptance hereof does hereby agree that all or such part of such interest, as the case may be, shall be payable out of, and to that extent diminish and be at the expense of reorganization dividends or other distributions in respect of such Junior Indebtedness.
8.4 If any payment or distribution of assets of the Maker of any kind or character, whether in cash, property or securities, not permitted by the foregoing shall be received by the holders of Junior Indebtedness before all Superior Indebtedness is paid in full in cash and all commitments under which any Superior Indebtedness can be created have expired or terminated, such payment or distribution shall be held for the benefit of, and shall be paid over or delivered to, the holders of such Superior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Superior Indebtedness may have been issued or under which such instruments are pledged or issued, as their respective interests may appear, for application to the payment of all Superior Indebtedness remaining unpaid to the extent necessary to pay all such Superior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Superior Indebtedness.
8.5 The provisions hereof are solely for the purpose of defining the relative rights of the holders of Superior Indebtedness on the one hand and the holders of Junior Indebtedness on the other hand, and nothing herein shall impair, as between the Maker and the holder of any Junior Indebtedness, the obligations of the Maker under Junior Indebtedness, which are unconditional and absolute, nor shall anything herein prevent the holders of any Junior Indebtedness from exercising all remedies otherwise permitted by applicable law or hereunder upon default hereunder, all subject to the rights, if any, hereunder of holders of Superior Indebtedness to receive cash, property or securities otherwise payable or deliverable to the holders of Junior Indebtedness.
8.6 Each holder of Junior Indebtedness by his acceptance hereof acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Superior Indebtedness, whether such Superior Indebtedness was created or acquired before or after the issuance of this Junior Indebtedness, to acquire and/or continue to hold such Superior Indebtedness and such holder of Superior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and/or continuing to hold such Superior Indebtedness.
8.7 Subject to the payment in full in cash of all Superior Indebtedness, the holders of Junior Indebtedness shall be subrogated to the rights of the holders of Superior
EXHIBIT 3.2(B)-5
Indebtedness to receive payments or distributions of assets of the Maker applicable to the Superior Indebtedness until the Superior Indebtedness shall be paid in full, and no such payments or distributions to the holders of Superior Indebtedness shall, as among the Maker, its creditors other than the holders of Superior Indebtedness and the holders of Junior Indebtedness, be deemed to be a payment by the Maker to or on account of the Junior Indebtedness.
8.8 Notwithstanding anything to the contrary contained
herein, in the event the Maker fails to make any
payment required under this Note which would have
been due but for the provisions of this Section 8,
the Maker shall (a) notify the Holder of the
circumstances justifying such nonpayment, (b) provide
the Holder with reasonable periodic updates
concerning such circumstances, (c) take commercially
reasonable steps to eliminate such circumstances, and
(d) make such payment as soon as thereafter permitted
under this Section 8. The Maker represents to the
Holder that there currently exists no breach or
default under any Superior Indebtedness and, further,
that neither the execution, delivery nor payment of
this Note in accordance herewith shall constitute
such a breach or default.
8.9 Returned Payments. Without limiting any other provision of this Section 8, Superior Indebtedness shall not be deemed to have been paid in full for purposes of this Section 8, if any payment in respect thereof shall have been restored or returned to the payor or its trustee in dissolution, liquidation or reorganization of the payor (or a settlement of any claim or potential claim made in connection with any such proceeding), or as required or agreed upon or as a result of the appointment of a custodian, receiver, trustee or other officer with respect to the payor or any substantial part of its property or otherwise, and the provisions of this Section 8 shall be reinstated as to any Superior Indebtedness as to which any such restoration or return shall have occurred.
8.10 Certain Powers of Holders of Superior Indebtedness. Without notice to or further consent by it, (a) the liability of any Maker in respect of the Superior Indebtedness may, in whole or in part, be renewed, extended, modified, released, replaced, refinanced or refunded by the holders of Superior Indebtedness and the documents and instruments creating or evidencing the Superior Indebtedness may be amended or supplemented, as such holders of Superior Indebtedness may deem advisable, (b) any collateral and/or security interests in respect of Superior Indebtedness may, from time to time, in whole or in part, be exchanged, released, not perfected, not timely perfected, sold or surrendered by the holders of Superior Indebtedness, (c) the amount of the Superior Indebtedness may, from time to time, be increased through further loans, or otherwise, (d) any deposit balance or balances to the credit of any Maker may, from time to time, in whole or in part, be surrendered or released by the holders of Superior Indebtedness, and (e) any of the provisions hereof may be waived partially or entirely by the holders of Superior Indebtedness, all without impairing or in any way affecting the subordination of the Junior Indebtedness contained in this Section 8; nor shall the subordination of the Junior Indebtedness herein contained be impaired or affected in any way by any other actions, inaction or omission in respect of the Superior Indebtedness or this Section 8.
EXHIBIT 3.2(B)-6
MAKER:
By: __________________________________ Its: _________________________________
EXHIBIT 3.2(B)-7
COMPLIANCE CERTIFICATE
EXHIBIT 4.8(C)
This certificate is given by Universal Technical Institute, Inc., a Delaware corporation ("HOLDINGS") and UTI Holdings, Inc., an Arizona corporation ("BORROWER"), pursuant to subsection 4.8(C) of that certain Second Amended and Restated Credit Agreement dated as of [ ], 2002 (as the same has been or may hereafter be amended, modified or supplemented, the "CREDIT AGREEMENT") among Heller Financial, Inc., a Delaware corporation, as Agent and a Lender ("AGENT"), Borrower and Holdings and the other Lenders party thereto from time to time. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.
The officer executing this certificate is the Chief Financial Officer [CHIEF EXECUTIVE OFFICER] of each of Holdings and Borrower and as such is duly authorized to execute and deliver this certificate on behalf of Holdings and Borrower. By executing this certificate such officer hereby certifies to Agent and Lenders that:
(a) the financial statements delivered with this certificate in accordance with subsection 4.8(A) and/or 4.8(B) of the Credit Agreement fairly present in all material respects the results of operations and financial condition of Holdings and its Subsidiaries as of the dates of such financial statements;
(b) I have reviewed the terms of the Credit Agreement and the Notes and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and conditions of Holdings and its Subsidiaries during the accounting period covered by such financial statements;
(c) such review has not disclosed the existence during or at the end of such accounting period, and I have no knowledge of the existence as of the date hereof, of any condition or event that constitutes a Default or an Event of Default, except as set forth in Exhibit A hereto which includes a description of the nature and period of existence of such Default or an Event of Default and what action Holdings and its Subsidiaries has taken, is undertaking and proposes to take with respect thereto;
(d) Borrower is in compliance with the covenants contained in
Section 4 of the Credit Agreement, as demonstrated below,
except as set forth below or described in Exhibit A hereto;
and
(e) the Total Indebtedness to TTM EBITDA Ratio, as demonstrated on attachment 4.7 is [ ] to [ ].
EXHIBIT 4.8(C)
IN WITNESS WHEREOF, Holdings has caused this Certificate to be executed by its Chief Financial Officer [CHIEF EXECUTIVE OFFICER] this [ ] day of [ ], 200[ ].
UTI HOLDINGS, INC.
UNIVERSAL TECHNICAL INSTITUTE, INC.
By: __________________________________
Chief Financial Officer
[Chief Executive Officer]
EXHIBIT 4.8(C)-2
4.1 CAPITAL EXPENDITURE LIMIT
Capital Expenditures are defined as follows:
Amount capitalized as capital expenditures for the period, under GAAP, as property, plant, and equipment (other than those incurred as part of a Permitted Acquisition) $ ------------- Plus: deposits made in the period in connection with property, plant and equipment; less deposits of a prior period included ------------- above Less: Net Proceeds of Asset Dispositions (including but not limited to insurance proceeds and the trade-in value of equipment) included in capital expenditures above, which Borrower is permitted to reinvest under subsection 1.5(C) of the Credit Agreement ------------- Utilization of credits received from Snap-On Tools, Inc., and from others under similar agreements, for student purchases ------------- Gross proceeds received in connection with the Nascar Sale/Leaseback ------------- Capital Expenditures $ Less: Portion of Capital Expenditures financed under capital leases or other Indebtedness (Indebtedness, for this purpose, does not include drawings under the Revolving Loan Commitment)* $ ------------- Unfinanced Capital Expenditures (used in calculation of Fixed Charge Coverage and Excess Cash Flow) $ ------------- Capital Expenditures (from above) $ ------------- Permitted Capital Expenditures $ ------------- In Compliance Yes/No |
*Note: All amounts in Schedule 4.8(C) are without duplication
EXHIBIT 4.8(C)-3
4.3 EBITDA
EBITDA is defined as follows:
Net income (or loss) for the period of Holdings and its Subsidiaries on a consolidated basis determined in accordance with GAAP, but excluding: (a) the income (or loss) of any Person (other than Wholly-Owned Subsidiaries of Holdings) in which Holdings or any of its Subsidiaries has an ownership interest unless received by Holdings or any Subsidiary thereof in a cash distribution; and (b) the income (or loss) of any Person accrued prior to the date it became a Subsidiary of Holdings or is merged into or consolidated with Holdings or any Subsidiary thereof. $ --------------------- Plus: Any provision for (or less any benefit from) income and franchise taxes included in the determination of net income --------------------- Interest expense deducted in the determination of net income --------------------- Amortization and depreciation expenses deducted in determining net income --------------------- Losses (or less gains) from Asset Dispositions or other non-cash items included in the determination of net income (excluding sales, expenses or losses related to current assets) --------------------- Extraordinary losses (or less gains), as defined under GAAP, net of related tax effects --------------------- Expenses of the Related Transactions or Permitted Acquisitions included in the determination of Net Income provided that such expenses were included in the pro forma adjustments to the financial statements delivered at the Closing Date or the Amendment and Restatement Date or in connection with any Permitted Acquisition, or disclosed in the notes thereto --------------------- Start-Up Expenses --------------------- Amounts paid for the period under the Management Agreement in compliance with this Agreement and director's fees paid for the period in compliance with this Agreement, in each instance, to the extent deducted in the determination of net income --------------------- EBITDA $ ===================== |
Note: EBITDA will be calculated on a rolling twelve-month basis.
EXHIBIT 4.8(C)-4
4.4 FIXED CHARGE COVERAGE
Fixed Charge Coverage is defined as follows:
Fixed Charges:
Interest expense, net of interest income, included in the determination of net income $ --------------------- Less: Amortization of capitalized fees and expenses incurred with respect to the Related Transactions and Permitted Acquisitions included in interest expense --------------------- Interest paid in kind or which accrues and is added to principal and included in interest expense --------------------- Interest Expenses $ --------------------- Plus: Any provision for (benefit from) income or franchise taxes included in the determination of net income Any decreases (less increases) in short-term and long-term deferred tax liabilities; and --------------------- Any increases (less decreases) in short-term and long-term deferred tax assets Scheduled payments of principal with respect to all Indebtedness (including the principal portion of scheduled payments of capital lease obligations, but excluding mandatory prepayments required by subsection 1.5) of Holdings and its Subsidiaries on a consolidated basis, but excluding reductions of the Revolving Loan --------------------- Restricted Junior Payments made in cash --------------------- Start-Up Expenses for the period --------------------- Fees paid for the period under the Management Agreement in compliance with this Agreement and director's fees paid for the period in compliance with this Agreement (excluding any such fees payable on the Second Amendment and Restatement Date) --------------------- Fixed Charges $ ===================== Operating Cash Flow: EBITDA (defined in attachment 4.3 of Exhibit 4.8(C)) $ --------------------- |
EXHIBIT 4.8(C)-5
Less: Unfinanced Capital Expenditures (defined in attachment 4.1 of Exhibit 4.8(C))l Other Capitalized Costs, including without limitation prepaid student acquisition costs, defined as the gross amount capitalized, for any fiscal period, as long term assets (net of cash received in respect of long term assets), other than (a) Capital Expenditures and (b) fees and expenses capitalized with respect to the Related Transactions or Permitted Acquisitions Operating Cash Flow $ ===================== Fixed Charge Coverage (Operating Cash Flow / Fixed Charges) --------------------- Required Fixed Charge Coverage --------------------- In Compliance Yes/No |
EXHIBIT 4.8(C)-6
4.5 TOTAL INTEREST COVERAGE
Interest Expenses (defined in attachment 4.4 of Exhibit 4.8(C)) --------------------- EBITDA (defined in attachment 4.3 of Exhibit 4.8(C)) --------------------- Total Interest Coverage (EBITDA / Interest Expenses) --------------------- Required Total Interest Coverage --------------------- In Compliance Yes/No |
EXHIBIT 4.8(C)-7
4.7 TOTAL INDEBTEDNESS TO TTM EBITDA RATIO
Outstanding principal balance of all Indebtedness of Holdings and its Subsidiaries (excluding Total Risk Participation Liability but including all remaining Subordinated Indebtedness (whether or not for borrowed money) --------------------- Total Indebtedness $ ===================== TTM EBITDA for the twelve (12) month period ending on the date set forth above $ ===================== Total Indebtedness to TTM EBITDA Ratio [ ] to [ ] |
EXHIBIT 4.8(C)-8
EXHIBIT 10.1(A)
[FORM OF AMENDED AND RESTATED TERM NOTE A]
TERM NOTE A
[$ __________] _____________, 2002 New York, New York
FOR VALUE RECEIVED, the undersigned, UTI HOLDINGS, INC., an Arizona
corporation ("BORROWER"), hereby unconditionally promises to pay to the order of
[______________________] ("LENDER"), to the Agent's account as specified in the
Credit Agreement (defined below), or at such other place as the holder of this
Term Note A may from time to time designate in writing, in lawful money of the
United States of America and in immediately available funds, the principal sum
of [____________________________________ and __/100 DOLLARS ($__________)].
This Term Note A is payable as set forth in the Second Amendment and Restatement of Credit Agreement with the first installment due and payable on June 30, 2002 and the final installment due and payable on March 31, 2007, if not sooner paid.
This Term Note A is one of the amended and restated Notes referred to in, was executed and delivered pursuant to, and evidences indebtedness of Borrower incurred under, that certain Second Amendment and Restatement of Credit Agreement dated as of March 29, 2002, by and among Borrower, Universal Technical Institute, Inc., the lenders named therein and Heller Financial, Inc., in its capacity as Agent for the Lenders (as the same may be amended, restated, supplemented or otherwise modified and in effect from time to time, the "CREDIT AGREEMENT"), to which reference is hereby made for a statement of the terms and conditions under which Term Loan A, a portion of which is evidenced hereby, was made and is to be repaid and for a statement of Agent's and Lender's remedies upon the occurrence of an Event of Default. Capitalized terms used herein but not otherwise specifically defined shall have the meanings ascribed to such terms in the Credit Agreement.
This Term Note A amends and restates and replaces in whole or in part that certain Term Note A in the original principal amount of $[ ], dated January 23, 1998, by Borrower as maker to [ ] as payee delivered under the Credit Agreement dated as of January 23, 1998 (as the same has been amended, amended and restated, supplemented or otherwise modified from time to time), by and among Borrower, Universal Technical Institute, Inc., the lenders named therein and Heller Financial, Inc., in its capacity as agent for the such lenders, and evidences all or a portion of the indebtedness arising under such replaced Term Note A.
Borrower further promises to pay interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full at the rate from time to time applicable to Term Loan A as determined in accordance with the Credit Agreement; provided, however, that upon the occurrence and during the continuance of an Event of Default, Borrower shall pay interest on demand by Agent or Requisite Lenders on the outstanding principal balance of this Term Note A at the rate of interest applicable following the occurrence of an Event of Default as determined in accordance with the Credit Agreement.
Interest on this Term Note A shall be payable at the times and from the dates specified in the Credit Agreement, on the date of any prepayment hereof, at maturity, whether due by acceleration or
EXHIBIT 10.1(A)
otherwise, and as otherwise provided in the Credit Agreement. From and after the date when the principal balance hereof becomes due and payable, whether by acceleration or otherwise, interest hereon shall be payable on demand. In no contingency or event whatsoever shall interest charged hereunder, however such interest may be characterized or computed, exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, such excess shall be applied in accordance with the terms of the Credit Agreement.
The indebtedness evidenced by this Term Note A is secured pursuant to the terms of the Loan Documents.
This Term Note A may be prepaid in whole or in part at any time subject to the terms of the Credit Agreement.
Borrower hereby waives demand, presentment and protest and notice of demand, presentment, protest and nonpayment.
Borrower agrees that no amendment, termination or waiver of any provision of this Term Note A or consent to any departure by Borrower therefrom, shall in any event be effective except as provided in the Credit Agreement.
Borrower further agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including attorneys' fees and legal expenses, incurred by Lender in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise.
THIS TERM NOTE A HAS BEEN DELIVERED AT NEW YORK, NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (WHICH PRINCIPLES SHALL BE DEEMED NOT TO INCLUDE SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Whenever possible each provision of this Term Note A shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Term Note A shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Term Note A. Whenever in this Term Note A reference is made to Agent, Lender or Borrower, such reference shall be deemed to include, as applicable, a reference to their respective permitted successors and assigns, and, in the case of Lender, any financial institution to which it has sold or assigned all or any part of its interest in Term Loan A or in its commitment to make Term Loan A as permitted by the Credit Agreement. The provisions of this Term Note A shall be binding upon and shall inure to the benefit of such permitted successors and assigns. Borrower's successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for Borrower.
UTI HOLDINGS, INC.
By: __________________________________
Name:
Title:
EXHIBIT 10.1(A)-2
[FORM OF SECOND AMENDED AND RESTATED TERM NOTE B]
TERM NOTE B
[$ __________] _____________, 2002 New York, New York
FOR VALUE RECEIVED, the undersigned, UTI HOLDINGS, INC., an Arizona
corporation ("BORROWER"), hereby unconditionally promises to pay to the order of
[______________________] ("LENDER"), to the Agent's account as specified in the
Credit Agreement (defined below), or at such other place as the holder of this
Term Note B may from time to time designate in writing, in lawful money of the
United States of America and in immediately available funds, the principal sum
of [____________________________________ and __/100 DOLLARS ($__________)].
This Term Note B is payable as set forth in the Second Amendment and Restatement of Credit Agreement with the first installment due and payable on June 30, 2002 and the final installment due and payable on March 31, 2009, if not sooner paid.
This Term Note B is one of the amended and restated Notes referred to in, was executed and delivered pursuant to, and evidences indebtedness of Borrower incurred under, that certain Second Amendment and Restatement of Credit Agreement, dated as of March 29, 2002, by and among Borrower, Universal Technical Institute, Inc., the lenders named therein and Heller Financial, Inc., in its capacity as Agent for the Lenders, (as the same may be amended, restated, supplemented or otherwise modified and in effect from time to time, the "CREDIT AGREEMENT"), to which reference is hereby made for a statement of the terms and conditions under which Term Loan B, a portion of which is evidenced hereby, was made and is to be repaid and for a statement of Agent's and Lender's remedies upon the occurrence of an Event of Default. Capitalized terms used herein but not otherwise specifically defined shall have the meanings ascribed to such terms in the Credit Agreement.
This Term Note B amends and restates and replaces in whole or in part that certain amended and restated Term Note B in the original principal amount of $[ ], dated June 30, 1998, by Borrower, as maker to [ ], as payee delivered under the First Amended and Restated Credit Agreement and evidences all or a portion of the indebtedness arising under such replaced Term Note B.
Borrower further promises to pay interest accrued and unpaid on the promissory note which this Term Note B replaces as well as interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full at the rate from time to time applicable to Term Loan B as determined in accordance with the Credit Agreement; provided, however, that upon the occurrence and during the continuance of an Event of Default, Borrower shall pay interest on demand by Agent or Requisite Lenders on the outstanding principal balance of this Term Note B at the rate of interest applicable following the occurrence of an Event of Default as determined in accordance with the Credit Agreement.
Interest on this Term Note B shall be payable at the times and from the dates specified in the Credit Agreement, on the date of any prepayment hereof, at maturity, whether due by acceleration or otherwise, and as otherwise provided in the Credit Agreement. From and after the date when the principal balance hereof becomes due and payable, whether by acceleration or otherwise, interest hereon shall be payable on demand. In no contingency or event whatsoever shall interest charged hereunder, however such interest may be characterized or computed, exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, such excess shall be applied in accordance with the terms of the Credit Agreement.
EXHIBIT 10.1(A)-3
The indebtedness evidenced by this Term Note B is secured pursuant to the terms of the Loan Documents.
This Term Note B may be prepaid in whole or in part at any time subject to the terms of the Credit Agreement.
Borrower hereby waives demand, presentment and protest and notice of demand, presentment, protest and nonpayment.
Borrower agrees that no amendment, termination or waiver of any provision of this Term Note B or consent to any departure by Borrower therefrom, shall in any event be effective except as provided in the Credit Agreement.
Borrower further agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including attorneys' fees and legal expenses, incurred by Borrower in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise.
THIS TERM NOTE B HAS BEEN DELIVERED AT NEW YORK, NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (WHICH PRINCIPLES SHALL BE DEEMED NOT TO INCLUDE SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Whenever possible each provision of this Term Note B shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Term Note B shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Term Note B. Whenever in this Term Note B reference is made to Agent, Lender or Borrower, such reference shall be deemed to include, as applicable, a reference to their respective permitted successors and assigns, and, in the case of Lender, any financial institution to which it has sold or assigned all or any part of its interest in Term Loan B or in its commitment to make Term Loan B as permitted by the Credit Agreement. The provisions of this Term Note B shall be binding upon and shall inure to the benefit of such permitted successors and assigns. Borrower's successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for Borrower.
UTI HOLDINGS, INC.
By: __________________________________
A. Richard Caputo Jr.
Vice President
EXHIBIT 10.1(A)-4
[FORM OF REVOLVING NOTE]
REVOLVING NOTE
[$ __________] _____________, 2002 New York, New York
FOR VALUE RECEIVED, the undersigned, UTI HOLDINGS, INC., an Arizona
corporation ("BORROWER"), hereby unconditionally promises to pay to the order of
[____________________________] ("LENDER"), to the Agent's account as specified
in the Credit Agreement (defined below), or at such other place as the holder of
this Revolving Note may from time to time designate in writing, in lawful money
of the United States of America and in immediately available funds, the
principal sum of [_____________________ and __/100 DOLLARS ($_________)], or, if
less, the aggregate unpaid principal amount of all Revolving Loans made to
Borrower by Lender pursuant to subsection 1.1(B), subsection 1.1(C)(2) or other
provisions of the Credit Agreement, at such times as are specified therein.
This Revolving Note is one of the Notes referred to in, was executed and delivered pursuant to, and evidences indebtedness of Borrower incurred under, that certain Second Amendment and Restatement of Credit Agreement dated as of March [-], 2002, by and among Borrower, Universal Technical Institute, Inc., the lenders named therein and Heller Financial, Inc., in its capacity as Agent for the Lenders (as the same may be amended, restated, supplemented or otherwise modified and in effect from time to time, the "CREDIT AGREEMENT"), to which reference is hereby made for a statement of the terms and conditions under which the loan evidenced hereby was made and is to be repaid and for a statement of Agent's and Lender's remedies upon the occurrence of an Event of Default. Capitalized terms used herein but not otherwise specifically defined shall have the meanings ascribed to such terms in the Credit Agreement.
Borrower further promises to pay interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full at the rate from time to time applicable to the Revolving Loan as determined in accordance with the Credit Agreement; provided, however, that upon the occurrence and during the continuance of an Event of Default, Borrower shall pay interest on demand by Agent or Requisite Lenders on the outstanding principal balance of this Revolving Note at the rate of interest applicable following the occurrence of an Event of Default as determined in accordance with the Credit Agreement.
Interest on this Revolving Note shall be payable, at the times and from the dates specified in the Credit Agreement, on the date of any prepayment hereof, at maturity, whether due by acceleration or otherwise, and as otherwise provided in the Credit Agreement. From and after the date when the principal balance hereof becomes due and payable, whether by acceleration or otherwise, interest hereon shall be payable on demand. In no contingency or event whatsoever shall interest charged hereunder, however such interest may be characterized or computed, exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, such excess shall be applied in accordance with the terms of the Credit Agreement.
The indebtedness evidenced by this Revolving Note is secured pursuant to the terms of the Loan Documents.
EXHIBIT 10.1(A)-5
Borrower hereby waives demand, presentment and protest and notice of demand, presentment, protest and nonpayment.
Borrower agrees that no amendment, termination or waiver of any provision of this Revolving Note or consent to any departure by Borrower therefrom, shall in any event be effective except as provided in the Credit Agreement.
Borrower further agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including attorneys' fees and legal expenses, incurred by Borrower in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise.
THIS REVOLVING NOTE HAS BEEN DELIVERED AT NEW YORK, NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (WHICH PRINCIPLES SHALL BE DEEMED NOT TO INCLUDE SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Whenever possible each provision of this Revolving Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Revolving Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Revolving Note. Whenever in this Revolving Note reference is made to Agent, Lender or Borrower, such reference shall be deemed to include, as applicable, a reference to their respective permitted successors and assigns and in the case of Lender, any financial institution to which it has sold or assigned all or any part of its interest in the Revolving Loan or in its commitment to make the Revolving Loan as permitted by the Credit Agreement. The provisions of this Revolving Note shall be binding upon and shall inure to the benefit of such permitted successors and assigns. Borrower's successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for Borrower.
UTI HOLDINGS, INC.
By: __________________________________
Name:
Title:
EXHIBIT 10.1(A)-6
EXHIBIT 10.1(B)
[FORM OF]
LENDER ADDITION AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "AGREEMENT") is entered into by and between the parties designated as Assignor ("ASSIGNOR") and Assignee ("ASSIGNEE") above the signatures of such parties on the Schedule of Terms attached hereto and hereby made an integral part hereof (the "SCHEDULE OF TERMS") and relates to the Credit Agreement described in the Schedule of Terms (as the same has been amended, supplemented or otherwise modified to the date hereof and as it may hereafter be further amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"; the terms defined therein and not otherwise defined herein being used herein as therein defined).
IN CONSIDERATION of the agreements, provisions and covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. ASSIGNMENT AND ASSUMPTION
(a) Effective as of the Settlement Date specified in Item 4 of the Schedule of Terms (the "SETTLEMENT DATE"), Assignor hereby sells and assigns to Assignee, without recourse, representation or warranty (except as expressly set forth herein), and Assignee hereby purchases and assumes from Assignor, that percentage interest in all of Assignor's rights and obligations as a Lender arising under the Credit Agreement and the other Loan Documents which represents, as of the Settlement Date, the percentage interest specified in Item 3 of the Schedule of Terms of all rights and obligations of Lenders arising under the Credit Agreement and the other Loan Documents with respect to the Revolving Loan Commitment and any outstanding Loans (the "ASSIGNED SHARE"). Without limiting the generality of the foregoing, the parties hereto hereby expressly acknowledge and agree that any assignment of all or any portion of Assignor's rights and obligations relating to Assignor's Revolving Loan Commitment shall include the sale to Assignee of a ratable portion of any participation previously purchased by Assignor with respect to any Lender Letters of Credit or Risk Participation Agreements.
(b) In consideration of the assignment described above, Assignee hereby agrees to pay to Assignor, on the Settlement Date, the principal amount of any outstanding Loans included within the Assigned Share, such payment to be made by wire transfer of immediately available funds in accordance with the applicable payment instructions set forth in Item 5 of the Schedule of Terms.
(c) Assignor and Assignee hereby agree that, upon giving effect to the assignment and assumption described above, (i) Assignee shall be a party to the Credit Agreement and shall have all of the rights and obligations under the Loan Documents, and shall be deemed to have made all of the covenants and agreements contained in the Loan Documents, arising out of or otherwise related to the Assigned Share, and (ii) Assignor shall be absolutely released from any of such obligations, covenants and agreements assumed or made by Assignee in respect of the Assigned Share. Assignee hereby acknowledges and agrees that the agreement set forth in this Section 1(c) is expressly made for the benefit of Borrower, Agent, Assignor and the other Lenders and their respective successors and permitted assigns.
EXHIBIT 10.1(B)
(d) Assignor and Assignee hereby acknowledge and confirm their understanding and intent that (i) this Agreement shall effect the sale and assignment by Assignor and the purchase and assumption by Assignee of Assignor's rights and obligations with respect to the Assigned Share, (ii) any other assignments by Assignor of a portion of its rights and obligations with respect to the Revolving Loan Commitment and any outstanding Loans shall have no effect on the Pro Rata Share of Assignee in the Revolving Loan Commitment as set forth in Item 3 of the Schedule of Terms or on the interest of Assignee in any outstanding Loans corresponding thereto or otherwise set forth in such Item 3, and (iii) from and after the Settlement Date, Agent shall make all payments under the Credit Agreement in respect of the Assigned Share (including without limitation all payments of principal and accrued but unpaid interest, commitment fees, unused line fees and letter of credit fees with respect thereto) (A) in the case of any such interest and fees that shall have accrued prior to the Settlement Date, to Assignor, and (B) in all other cases, to Assignee; provided that Assignor and Assignee shall make payments directly to each other in accordance with the payment instructions set forth in Item 5 of the Schedule of Terms to the extent necessary to effect any appropriate adjustments in any amounts distributed to Assignor and/or Assignee by Agent under the Loan Documents in respect of the Assigned Share in the event that, for any reason whatsoever, the payment of consideration contemplated by Section 1(b) occurs on a date other than the Settlement Date.
SECTION 2. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS
(a) Assignor represents and warrants that it is the legal and beneficial owner of the Assigned Share, free and clear of any adverse claim.
(b) Assignor hereby represents and warrants that Item 3 of the Schedule of Terms correctly sets forth (1) the aggregate amount of each of (i) the Revolving Loan Commitment, (ii) Term Loan A and (iii) Term Loan B, and (2) the Assigned Share being transferred to Assignee pursuant to this Agreement as described above. Taking into account Assignee's existing Revolving Loan Commitment and Pro Rata Share of each of Term Loan A and Term Loan B, in each case, if any, prior to the effectiveness of this Agreement, the Total Share of Assignee in all of the Lenders' Revolving Loan Commitment and outstanding Loans under the Credit Agreement is as set forth in Item 3 of the Schedule of Terms.
(c) Assignor represents and warrants that it has delivered to Agent the Notes delivered to Assignor by Borrower pursuant to the Credit Agreement and requests that Agent exchange such Notes for new Notes executed by Borrower payable to Assignor and Assignee in the amounts necessary to reflect the transaction contemplated by this Agreement.
(d) Assignor makes no representation and warranty to Assignee with respect to, and shall not be responsible to Assignee for, the execution, effectiveness, genuiness, validity, enforceability, collectibility or sufficiency of any of the Loan Documents or for any representations, warranties, recitals or statements made therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by or on behalf of Borrower or any other Loan Party in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Borrower or any other Loan Party, nor shall Assignor be required to ascertain or inquire as to (i) the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of
EXHIBIT 10.1(B)-2
the Loan Documents, (ii) the use of the proceeds of the Loans,
(iii) the use of the Lender Letters of Credit or Risk
Participation Agreements or (iv) the existence or possible
existence of any Event of Default or Default.
(e) Assignee represents and warrants that it satisfies any eligibility requirements to be a Lender under the Credit Agreement; that it has experience and expertise in the making or the purchasing of loans such as the Loans; that it has acquired the Assigned Share for its own account and without any present intention of selling all or any portion of such interest; and that it has received, reviewed and approved a copy of the Credit Agreement (including all Exhibits and Schedules thereto) and copies of all other Loan Documents which it has requested.
(f) Assignee represents and warrants that it has received from Assignor such financial information regarding Borrower and the other Loan Parties as Assignee has requested, that it has made its own independent investigation of the financial condition and affairs of Borrower and the other Loan Parties in connection with the assignment evidenced by this Agreement, and that it has made and shall continue to make its own appraisal of the creditworthiness of Borrower and the other Loan Parties. Assignor shall have no duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Assignee or to provide Assignee with any other credit or other information with respect thereto, whether coming into its possession before the Settlement Date or at any time or times thereafter, and Assignor shall not have any responsibility with respect to the accuracy of or the completeness of any information provided to Assignee.
(g) Each party to this Agreement represents and warrants to the other party hereto that it has full power and authority to enter into this Agreement and to perform its obligations hereunder in accordance with the provisions hereof, that this Agreement has been duly authorized, executed and delivered by such party and that this Agreement constitutes a legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general principles of equity.
SECTION 3. MISCELLANEOUS
(a) Each of Assignor and Assignee hereby agrees from time to time, upon request of the other such party hereto, to take such additional actions and to execute and deliver such additional documents and instruments as such other party may reasonably request to effect the transactions contemplated by, and to carry out the intent of, this Agreement.
(b) Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except by an instrument in writing signed by the party (including, if applicable, any party required to evidence its consent to or acceptance of this Agreement) against whom enforcement of such change, waiver, discharge or termination is sought.
(c) Unless otherwise specifically provided herein, all notices, approvals, requests, demands and other communications hereunder shall be given in accordance with the notice provision of the Credit Agreement. For the purposes hereof, the notice address of each of Assignor and Assignee shall be as set forth on the Schedule of Terms or, as to either such party, such other address as shall be designated by such party in a written notice delivered
EXHIBIT 10.1(B)-3
to the other such party. In addition, the notice address of Assignee set forth on the Schedule of Terms shall serve as the initial notice address of Assignee for purposes of the Credit Agreement.
(d) In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
(e) THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES (WHICH PRINCIPLES SHALL BE DEEMED NOT TO INCLUDE
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).
(f) This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.
(h) This Agreement shall become effective upon the date (the
"EFFECTIVE DATE") upon which all of the following conditions
are satisfied: (i) the execution of a counterpart hereof by
each of Assignor and Assignee, (ii) the execution of a
counterpart hereof by Agent as evidence of its consent hereto
to the extent required under subsection 8.1 of the Credit
Agreement, (iii) the receipt by Agent of the administrative
fee referred to in subsection 8.1 of the Credit Agreement,
(iv) in the event Assignee is a foreign person (i.e., a person
other than a United States person for United States Federal
income tax purposes), the delivery by Assignee to Agent of
such forms, certificates or other evidence with respect to
United States federal income tax withholding matters as shall
be requested by Agent in order to establish that Assignee
shall be entitled to receive payments of principal, interest
and fees under the Credit Agreement free from withholding of
United States Federal income tax, and (v) the receipt by Agent
of originals or telecopies of the counterparts described
above.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized, such execution being made as of the Effective Date in the applicable spaces provided on the Schedule of Terms.
EXHIBIT 10.1(B)-4
SCHEDULE OF TERMS
1. BORROWER: UTI Holdings, Inc.
2. NAME AND DATE OF CREDIT AGREEMENT: Second Amendment and Restatement of Credit Agreement dated as of March 29, 2002 by and among UTI Holdings, Inc., as Borrower, Universal Technical Institute, Inc., as Parent, Antares Capital Corporation, JP Morgan Chase Bank, as Trustee of the Antares Funding Trust created under a Trust Agreement dated as of November 30, 1999, and The Royal Bank of Scotland, as Lenders, and Heller Financial, Inc., as a Lender and as Agent for the Lenders.
3. AMOUNTS/PRO RATA SHARE:
AMOUNT PRO RATA SHARE Aggregate Revolving Loan Commitment of all Lenders: $____________ N/A Aggregate Term Loan A of all Lenders: $____________ N/A Aggregate Term Loan B of all Lenders: $____________ N/A Assigned Share of Revolving Loan Commitment: $____________ _____% Assigned Share of Term Loan A: $____________ _____% Assigned Share of Term Loan B: $____________ _____% Total Share of Revolving Loan Commitment of Assignee: $____________ _____% Total Share of Term Loan A of Assignee: $____________ _____% Total Share of Term Loan B of Assignee: $____________ _____% |
4. SETTLEMENT DATE: [ ] 5. PAYMENT INSTRUCTIONS: ASSIGNOR: ASSIGNEE: _____________________________ ____________________________ ABA No.: ___________________ ABA No.: __________________ Account No.: _______________ Account No.: ______________ Name: ______________________ Name: _____________________ |
EXHIBIT 10.1(B)-5
Reference: __________________ Reference: ________________ 6. NOTICE ADDRESSES: ASSIGNOR: ASSIGNEE: _____________________________ ____________________________ _____________________________ ____________________________ _____________________________ ____________________________ Attention: __________________ Attention: _________________ 7. SIGNATURES: [NAME OF ASSIGNOR], [NAME OF ASSIGNEE], as Assignor as Assignee By: _________________________ By: ________________________ Title: ______________________ Title: _____________________ Consented to in accordance with subsection 8.1 of the Credit Agreement HELLER FINANCIAL, INC., as Agent By: ________________________ Title: _____________________ UTI HOLDINGS, INC., as Borrower By: ________________________ Title: _____________________ |
EXHIBIT 10.1(B)-6
EXHIBIT 10.1(C)
OMITTED
EXHIBIT 10.1(C)
FORM OF MANAGEMENT NOTE
EXHIBIT 10.1(D)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND ACCORDINGLY MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR LAWS OR PURSUANT TO AN EXEMPTION THEREFROM. THE PRINCIPAL AMOUNT OF THIS NOTE, AND INTEREST IN RESPECT THEREOF, IS SUBORDINATED TO THE PAYMENT IN FULL OF ALL SUPERIOR INDEBTEDNESS, AS DESCRIBED IN THIS NOTE.
UNIVERSAL TECHNICAL INSTITUTE, INC.
Subordinated Junior Note
$____________ [DATE]
UNIVERSAL TECHNICAL INSTITUTE, INC. (hereinafter called the "COMPANY"), a Delaware corporation, for value received, hereby promises to pay to [MANAGER] (the "HOLDER") at the office of the Company in Phoenix, Arizona, subject to the conditions hereinafter stated, the principal sum of $________________ on the date three years after the date set forth above (the "MATURITY DATE") and to pay interest on the unpaid principal amount hereof from the date of this Note until payment in full of all amounts due hereunder at 8.0% per annum. Interest on this Note shall be payable annually on each anniversary of the date hereof. All accrued interest hereon shall in any event be payable not later than the Maturity Date. Payments of principal and interest shall be made in lawful money of the United States of America. This Note may be prepaid, subject to the terms and provisions hereof, in whole or in part at any time without premium or penalty.
ARTICLE I
Subordination
1.1 All indebtedness evidenced hereby ("JUNIOR INDEBTEDNESS") shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of Superior Indebtedness.
For the purposes hereof, the term "SUPERIOR INDEBTEDNESS":
(a) shall mean (i) all indebtedness heretofore or hereafter incurred by the Company for money borrowed unless by its terms it is provided that such indebtedness is not Superior Indebtedness, (ii) all other indebtedness heretofore or hereafter incurred by the Company which by its terms provides that such indebtedness is Superior Indebtedness, (iii) all guarantees, endorsements and other contingent obligations in respect of, or obligations to purchase or otherwise acquire or service, indebtedness or obligations of others of the Company including without limitation, all obligations of the Company under letters of credit issued on behalf of the Company, and (iv) any amendments, modifications, deferrals, renewals or extension of any such Superior Indebtedness, or debentures, notes or evidences of indebtedness heretofore or hereafter issued in evidence of or in exchange for such Superior Indebtedness; and
(b) shall include, without limitation, any interest, and any and all reasonable expenses, payable in respect of any of the foregoing in clause (a) above subsequent to the
EXHIBIT 10.1(D)
commencement of any proceeding against or with respect to the Company under Title 11 of the United States Code (the "BANKRUPTCY ACT") whether or not such interest is an allowed claim in any such proceeding.
For the purposes hereof, "indebtedness" shall include principal, interest, fees, indemnities and any expenses, if any, incurred with respect thereto.
1.2 No payment under Junior Indebtedness shall be made by the Company if and so long as there exists a breach by the Company of any one or more of the covenants contained in any instrument pursuant to which Superior Indebtedness is issued.
1.3 No payment under Junior Indebtedness shall be made by the Company unless full payment of amounts then due for principal of or premium, if any, sinking funds and interest on Superior Indebtedness has been made or duly provided for in money by the Company. No payment under Junior Indebtedness shall be made by the Company if, at the time of such payment or immediately after giving effect thereto, (i) there shall exist a default in the payment of principal or mandatory prepayments of or premium, if any, sinking funds or interest with respect to any Superior Indebtedness or (ii) there shall have occurred an event of default (other than a default in the payment or principal, mandatory prepayments, premium, if any, sinking funds or interest) with respect to any Superior Indebtedness as defined herein or in the instrument under which the same is outstanding permitting the holders thereof (or of the indebtedness secured thereby) to accelerate the maturity thereof (or of the indebtedness secured thereby) and such event of default shall not have been cured or waived or shall not have ceased to exist. The provisions of this Section 1.3 shall not be applicable to any payment governed by Section 1.4 hereof.
1.4 Upon (i) any payment being required to be made by the Company under Junior Indebtedness upon any declaration of acceleration of the principal amount thereof or (ii) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership, or other proceedings; and upon any such declaration of acceleration or dissolution or winding up or liquidation or reorganization, any distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the holders of Junior Indebtedness would be entitled except for the provisions hereof, all principal, premium, if any, and interest due or to become due in full, or payment thereof provided for in money, before any payment is made under Junior Indebtedness shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the holders of Junior Indebtedness if received by them, directly to the holders of Superior Indebtedness of the Company (pro rata to each such holder on the basis of the respective amounts of such Superior Indebtedness held by such holder), or their representatives to the extent necessary to pay all such Superior Indebtedness in full, in cash, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Superior Indebtedness, before any payment or distribution is made to the holders of Junior Indebtedness. In furtherance of the foregoing, but not by way of limitation thereof, if the Company shall file or have filed against it a petition under any chapter of the Bankruptcy Act or be adjudicated a bankrupt thereunder, with the result that the Company is excused from the obligation to pay all or any part of the interest otherwise payable in respect of any Superior Indebtedness during the period subsequent to the commencement of any such proceeding under the Bankruptcy Act, each holder of Junior Indebtedness by his acceptance hereof does hereby agree that all or such part of such interest, as the case may be, shall be payable out of, and to that extent diminish and be at the expense of, reorganization dividends or other distributions in respect of such Junior Indebtedness.
EXHIBIT 10.1(D)-2
1.5 If any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, not permitted by the foregoing shall be received by the holders of Junior Indebtedness before all Superior Indebtedness is paid in full in cash and all commitments under which any Superior Indebtedness can be created have expired or terminated, such payment or distribution shall be held for the benefit of, and shall be paid over or delivered to, the holders of such Superior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Superior Indebtedness may have been issued or under which such instruments are pledged or issued, as their respective interests may appear, for application to the payment of all Superior Indebtedness remaining unpaid to the extent necessary to pay all such Superior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Superior Indebtedness.
1.6 The provisions hereof are solely for the purpose of defining the relative rights of the holders of Superior Indebtedness on the one hand and the holders of Junior Indebtedness on the other hand, and nothing herein shall impair, as between the Company and the holder of any Junior Indebtedness, the obligations of the Company under Junior Indebtedness, which are unconditional and absolute, nor shall anything herein prevent the holders of any Junior Indebtedness from exercising all remedies otherwise permitted by applicable law or hereunder upon default hereunder, all subject to the rights, if any, hereunder of holders of Superior Indebtedness to receive cash, property or securities otherwise payable or deliverable to the holders of Junior Indebtedness.
1.7 Each holder of Junior Indebtedness by his acceptance hereof acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Superior Indebtedness, whether such Superior Indebtedness was created or acquired before or after the issuance of this Junior Indebtedness, to acquire and/or continue to hold such Superior Indebtedness and such holder of Superior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and/or continuing to hold such Superior Indebtedness.
1.8 Subject to the payment in full of all Superior Indebtedness, the holders of Junior Indebtedness shall be subrogated to the rights of the holders of Superior Indebtedness to receive payments or distributions of assets of the Company applicable to the Superior Indebtedness until the Superior Indebtedness shall be paid in full, and no such payments or distributions to the holders of Superior Indebtedness shall, as among the Company, its creditors other than the holders of Superior Indebtedness and the holders of Junior Indebtedness, be deemed to be a payment by the Company to or on account of the Junior Indebtedness.
ARTICLE II
Defaults
2.1 Events of Default. If one or more of the following events ("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Company shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make the a general assignment for the benefit of creditors; or
EXHIBIT 10.1(D)-3
(b) an involuntary case or other proceeding shall be commenced against the Company seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days; or an order for relief shall be entered against the Company under the Federal bankruptcy laws as now or hereafter in effect;
then, and in every such event, subject to the provisions of Article I, the Holder may, by notice to the Company and to the holders of Superior Indebtedness, declare the unpaid principal amount of this Note together with accrued interest thereon, to be, and such portions of this Note (and accrued interest thereon) shall thereupon become, due and payable immediately following delivery of such notice to the Company and to the holders of Superior Indebtedness without presentment, demand, protest or further notice of any kind, all of which are hereby waived by the Company.
ARTICLE III
Miscellaneous
3.1. Prepayment. The Company may prepay any amount of principal due and owing on this Note, together with accrued interest on the amount so prepaid, at any time without premium or penalty.
3.2. Notices. Any notice, request or other communication given hereunder shall be in writing and shall be delivered personally, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid, and shall be deemed given when so delivered personally or sent by facsimile transmission, or if mailed or sent by overnight courier, upon receipt thereof, as follows:
If to the Company, to: Universal Technical Institute, Inc. 3002 North 27th Avenue Phoenix, Arizona 85017 Attention: President Facsimile No. (602) 254-9278 If to the Holder, to: _________________________________ _________________________________ _________________________________ _________________________________ Facsimile No. __________________ 3.3. Governing Law. This Note shall be governed by the internal laws of the State of New York. |
3.4. Assignment. This Note may not be assigned or otherwise transferred by the Holder prior written consent of the Company.
EXHIBIT 10.1(D)-4
IN WITNESS WHEREOF, UNIVERSAL TECHNICAL INSTITUTE, INC. has caused this
Note to be executed and signed the day and year above set forth.
UNIVERSAL TECHNICAL INSTITUTE, INC.
By: ______________________________
Name:
Title:
EXHIBIT 10.1(D)-5
FORM OF INTERCOMPANY INTERCREDITOR LETTER
EXHIBIT 10.1(E)
Heller Financial, Inc.,
as Agent
500 West Monroe Street
Chicago, Illinois 60661
Attention: Portfolio Manager
Corporate Financial Group
Ladies/Gentlemen:
Reference is made to (i) the Second Amendment and Restatement of Credit Agreement, dated as of March [-], 2002, as the same may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time (the "SENIOR CREDIT AGREEMENT") by and among UTI Holdings, Inc., as borrower (the "BORROWER"), Universal Technical Institute, Inc., as parent, Heller Financial, Inc., as Agent and as a Lender, and the other Lenders party thereto from time to time, (ii) the Security Agreement, dated [ ] (as amended, modified or supplemented in accordance with the terms of this Agreement, the "DEBTOR SECURITY AGREEMENT") between [the Borrower][Subsidiary], as debtor [(the "DEBTOR")], and [ ], an Institution Subsidiary, as secured party, (the "SECURED PARTY") and (iii) the promissory note, dated [ ] (the "PROMISSORY NOTE") by the Debtor to the order of the Secured Party. Capitalized terms used herein but not defined herein shall have the meanings given such terms in the Debtor Security Agreement.
As required by the Senior Credit Agreement and in consideration of the Lenders entering into the second amendment and restatement thereof and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Secured Party and the Debtor, the Secured Party and the Debtor agree with the Agent (for the benefit of the Agent and the Lenders) as follows, which agreements shall continue in full force and effect until all Obligations shall have been paid in full in cash and there shall be no outstanding Obligations or Revolving Loan Commitment:
1. Without the prior written consent of the Agent in each instance, the Secured Party shall not take any action or suffer or permit the Debtor to take any action to (a) perfect any security interest granted or arising under the Debtor Security Agreement, (b) exercise any remedies under the Debtor Security Agreement or applicable law against any Collateral or any records thereof, or (c) realize upon or collect any Collateral or otherwise enforce its rights under the Debtor Security Agreement or in respect of the Collateral or any records thereof.
2. Without the prior written consent of the Agent in each instance, neither the Secured Party nor the Debtor shall amend any term of the Debtor Security Agreement or Promissory Note.
3. This agreement shall constitute a Loan Document.
4. THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (WHICH
EXHIBIT 10.1(E)
PRINCIPLES SHALL BE DEEMED NOT TO INCLUDE SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW).
5. The obligations of the Secured Party and the Debtor under this agreement shall not be affected by any (a) waiver, amendment, modification, extension, renewal, refinancing, refunding or other change in or under the Obligations or any Loan Document, (b) sale, exchange, surrender or release by the Agent of any Lender of any Obligations or any Collateral or any failure of the Agent or any Lender to perfect its security interest in any Collateral, (c) delay in any such perfection, (d) any increase in the Obligations or (e) any other circumstance whatsoever, whether similar or dissimilar to all or any of the foregoing.
6. This agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute one and the same instrument.
7. No amendment, modification, termination or waiver of any provision of this agreement shall be effective unless the same shall be in writing and signed by the Agent, the Debtor and the Secured Party.
Please indicate your acceptance of this agreement by signing in the space provided below.
Very truly yours,
[UTI Holdings, Inc.] [Subsidiary]
By: _________________________________ Name:
Title:
[ ]
By: _________________________________
Name:
Title:
ACCEPTED AND AGREED:
Heller Financial, Inc.,
As Agent
By: _________________________________
Name:
Title:
EXHIBIT 10.1(E)-2
FORM OF INTERCOMPANY SECURITY AGREEMENT
EXHIBIT 10.1(F)
SECURITY AGREEMENT
(All Assets)
THIS SECURITY AGREEMENT (the "AGREEMENT") is made this __ day of __________, 200*, by and between ______________________, a (n) ________________ corporation ("SECURED PARTY") and ______________, a (n) _______________ corporation ("DEBTOR").
RECITALS:
A. Debtor is or may be indebted to Secured Party from time to time up to a maximum of ___________ and ___/100 DOLLARS ($___________.___) as evidenced by a promissory note of even date herewith (the "NOTE").
B. As security for the Note, Debtor is willing to give to Secured Party a security interest in the assets hereinafter described.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. SECURITY INTEREST.
1.1 Collateral. In consideration of the loan evidenced by the Note, Debtor hereby grants to Secured Party a security interest in all the assets of Debtor, now existing or created in the future, together with replacements and all proceeds thereof (collectively the "COLLATERAL").
1.2 Indebtedness. This Agreement and the rights hereby granted
shall secure the following (collectively the "OBLIGATIONS"):
the indebtedness evidenced by the Note (and any renewals,
extensions or modifications thereof), together with interest
thereon, late charges and collection costs as provided in the
Note.
2. DEBTOR'S WARRANTIES, COVENANTS AND AGREEMENTS.
Debtor hereby warrants, covenants and agrees that:
2.1 Binding Obligation. This Agreement is the legally valid and binding obligation of Debtor, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditor's generally.
2.2 Debtor's Organization. Debtor is a corporation in good
standing, organized solely under the laws of and duly
certified to do business in the State of ________ ([with the
following organizational identification number: #________]
[without any organizational identification number, which is
not required to be organized and qualified to do business in
such State]) and maintains its principal office at the address
set forth in this
EXHIBIT 10.1(F)
Agreement. Debtor retains its records concerning the Collateral at the same address. Debtor shall promptly notify Secured Party of any change in address.
2.3 Transferability. The Collateral is transferable to Secured Party.
2.4 Inspection of Records. Debtor will, at all reasonable times, allow Secured Party or its representatives free and complete access to all of Debtor's records regarding the Collateral for such inspection and examination as Secured Party deems necessary.
2.5 Condition of Collateral. So long as this Assignment remains in effect, Assignor shall diligently pursue collection of the Collateral. Debtor will promptly notify Secured Party of any levy, distraint or other seizure by legal process or otherwise of any part of the Collateral and of any threatened or filed claim or proceedings that might in any way affect or impair any of the Collateral.
2.6 Title to and Protection of Collateral.
(a) Debtor shall pay promptly when due all taxes, fees, charges and assessments, if any, upon the Collateral.
(b) Secured Party may, at its option, and without any obligation to do so, pay, perform and discharge any and all amounts, costs, expenses and liabilities herein agreed to be paid or performed by Debtor, and all amounts expended by Secured Party in so doing or in respect of or in connection with the Collateral shall become part of the Obligations secured hereby and shall be immediately due and payable by Debtor to Secured Party upon demand therefor and shall bear interest at the rate of interest in effect after default on the indebtedness outstanding under the Note.
2.7 Perfection. Debtor will do all acts and things, will execute and file all instruments (including security agreements, financing statements, continuation statements, etc.) requested by Secured Party to establish, maintain and continue the security interest of Secured Party in the Collateral, and will promptly on demand pay all costs and expenses of (a) filing and recording, including the costs of any searches deemed necessary by Secured Party from time to time to establish and determine the validity and the continuing priority of the security interest of Secured Party and (b) all other claims and charges that in the opinion of Secured Party might prejudice, imperil or otherwise affect the Collateral or security interest therein of Secured Party.
2.8 Loss of Collateral. Debtor will promptly give written notice to Secured Party of any loss of any substantial part of the Collateral. Secured Party is not responsible for any loss of the Collateral unless caused by willfully wrongful acts or omissions of Secured Party.
2.9 No Surrender of Rights. This Agreement shall remain in full
effect, without waiver or surrender of any of Secured Party's
rights hereunder, notwithstanding any one or more of the
following: (a) extension of time or payment of the whole or
any part of the Note; (b) any change in the terms and
conditions of the Note; (c) substitution of any other note or
evidence of indebtedness for the Note; (d) acceptance by
Secured Party of any collateral or security of any kind for
the payment of the Note, any and all extensions, or renewals
thereof; (e) surrender, release, exchange or alteration of any
collateral or other security, either in whole or in part; or
(f) release, settlement, discharge, compromise,
EXHIBIT 10.1(F)-2
change or amendment, in whole or in part, of any claim of Secured Party against Debtor or of any claim against any guarantor or other party secondarily or additionally liable for the payment of the Note.
3. EVENTS OF DEFAULT. Debtor shall be in default hereunder if any of the following shall occur:
3.1 Note Default. An "Event of Default" under the Note;
3.2 Breach of Agreements. Failure or neglect by Debtor to observe or perform any of the obligations, terms, provisions, promises, agreements or covenants of this Agreement or any instrument or security agreement executed and delivered by Debtor in connection with the indebtedness secured by this Agreement; or
3.3 Breach of Representation. Any representation or warranty in the Note, this Agreement or in any other agreement, document or instrument evidencing, securing or relating to any of the obligations, covenants, promises and agreements secured hereby is false or incorrect as of the date made.
4. SECURED PARTY'S REMEDIES. During the continuation of an event of default, Secured Party shall have the following rights and remedies:
4.1 Acceleration. Secured Party may, at its options, declare all or any part of the Obligations immediately due and payable.
4.2 Take Possession of Records. Secured Party may, without notice or demand and without legal process, take possession of Debtor's records evidencing the Collateral where found and, for this purpose, may enter upon any property occupied by or in the control of Debtor.
4.3 Collection from Obligors. Secured Party may demand payment from the obligors of the Collateral, without any further notice to Debtor. By signing this Agreement, Debtor hereby authorizes the obligors of the Collateral to pay to Secured Party all sums of Collateral owed until Secured Party is paid in full, immediately upon receipt or written demand from Secured Party, and without any authorization or consent from Debtor. Debtor agrees that the obligors of the Collateral may rely upon any such demand of Secured Party, without any obligation to verify with or obtain the consent of Debtor.
4.4 Remedies Non-Exclusive. Secured Party may pursue any legal remedy available to collect all sums secured hereby and to enforce its title in and right to possession of the Collateral and to enforce any and all other rights or remedies available to it. No such action shall operate as a waiver of any other right or remedy of Secured Party.
4.5 Uniform Commercial Code. Secured Party shall have all the rights and remedies afforded a secured party under the Arizona Uniform Commercial Code and all other legal or equitable remedies provided by the laws of the United States and the State of Arizona.
5. MISCELLANEOUS PROVISIONS.
5.1 Waiver; Amendments. No default hereunder by Debtor shall be deemed to have been waived by Secured Party except by a writing to that effect signed by Secured Party and
EXHIBIT 10.1(F)-3
no waiver of any default shall operate as a waiver of any other default on a future occasion. No modification, rescission, waiver, release or amendment of any provision of this Agreement shall be made except by a written agreement signed by Debtor and Secured Party.
5.2 Severability. Should any one or more provisions of this Agreement be determined to be illegal or unenforceable, such provision or provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable, and all other provisions nevertheless shall be effective.
5.3 Governing Law. The terms herein shall have the meanings in and be construed under the Arizona Uniform Commercial Code and all issues arising hereunder shall be governed by the laws of the State of Arizona.
5.4 Entire Agreement. This Agreement contains the entire understanding of the parties and supersedes any prior understandings and agreements, written or oral, respecting the subjects discussed herein.
5.5 Successors and Assigns. This Agreement shall be binding on and inure to the benefit of the parties, their respective successors and assigns.
5.6 Counterparts; Duplicate Originals. Agreements may be executed in multiple counterparts and when a counterpart has been executed by each of the parties hereto such counterparts, taken together, shall constitute a single agreement. Duplicate originals may also be utilized, each of which shall be deemed an original document.
EXHIBIT 10.1(F)-4
DEBTOR:
By: ______________________________________
Its:
SECURED PARTY:
By: ______________________________________
Its:
EXHIBIT 10.1(F)-5
FORM OF NTT/PTA RELEASE
EXHIBIT 10.1(G)
RELEASE
Reference is made to (a) the Second Amendment and Restatement of Credit Agreement dated as of September 29, 2002 (as amended or otherwise modified from time to time, the "Credit Agreement") by and among UTI Holdings, Inc., an Arizona corporation (the "Pledgor"), Universal Technical Institute, Inc., a Delaware corporation, the Lenders, NTT Acquisition Inc., a Delaware corporation ("NTT Acquisition") and Heller Financial, Inc., a Delaware corporation ("Agent"), (b) the Pledge Agreement dated as of June 30, 1998 between Pledgor and Agent (the "NTT Acquisition Pledge"), (c) the Pledge Agreement dated as of June 30, 1998 between NTT Acquisition and Agent (the "NTT/PTA Pledge"), (d) the Guaranty dated as of June 30, 1998 by NTT Acquisition in favor of the Agent (the "NTT Acquisition Guaranty"), (e) the Guaranty dated as of June 30, 1998 by National Technology Transfer, Inc., a Delaware corporation ("NTT") in favor of the Agent (the "NTT Guaranty") and (f) the Guaranty dated as of June 30, 1998 by Performance Training Associates, Inc., formerly a Delaware corporation ("PTA") in favor of the Agent (the "PTA Guaranty"). Terms not otherwise defined herein shall have the meanings assigned in the Credit Agreement.
WHEREAS, Pledgor owns all of the outstanding shares of capital stock in NTT Acquisition;
WHEREAS, NTT Acquisition owned all of the outstanding shares of capital stock in NTT and PTA;
WHEREAS, PTA merged with and into NTT as evidenced by a Certificate of Ownership and Merger filed with the Secretary of State of the State of Delaware on July 31 2001, with NTT continuing as the surviving corporation;
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated as of September 29, 2001, by and between NTT Acquisition Corp., a Delaware corporation ("NTT Corp.") and Pledgor, NTT Corp. owns all of the outstanding shares of NTT;
WHEREAS, in accordance with the terms of the Credit Agreement and as
collateral security for the prompt and complete payment, performance and
observance by the Loan Parties of all present and future Obligations, Pledgor
pledged 100% of its shares of NTT Acquisition under the NTT Acquisition Pledge;
(ii) 100% of its shares in NTT and PTA under the NTT/PTA Pledge;
WHEREAS, in accordance with the terms of the Credit Agreement and as collateral security for the prompt and complete payment, performance and observance by the Loan Parties of all present and future Obligations, NTT Acquisition pledged 100% of its shares in NTT and PTA under the NTT/PTA Pledge;
WHEREAS, in accordance with the terms of the Credit Agreement, (i) NTT Acquisition guarantees the Borrower's Obligations under the Credit Agreement pursuant to the NTT Acquisition Guaranty, (ii) NTT guarantees the Borrower's Obligations under the Credit Agreement pursuant to the NTT Guaranty and (iii) PTA guarantees the Borrower's Obligations under the Credit Agreement pursuant to the PTA Guaranty;
EXHIBIT 10.1(G)
NOW, THEREFORE, the undersigned agrees to the following:
1. The undersigned hereby releases, effective as of the date of this Release, the Pledged Collateral, as defined in both the NTT Acquisition Pledge and the NTT/PTA Pledge (such Pledged Collateral collectively being herein referred to as the "Released Collateral") from any Lien granted to or held by the Agent or Loan Parties pursuant to the Credit Agreement, NTT Acquisition Pledge or the NTT/PTA Pledge. The Agent agrees to execute any other documents and take any further action necessary to release any Lien granted to or held by the Agent or the Loan Parties with respect to the Released Collateral, including, without limitation, executing and delivering termination statements with regard to any Uniform Commercial Code or other financing statements executed in favor of the Agent that relate to the Released Collateral.
2. The undersigned hereby releases, effective as of the date of this Release, NTT Acquisition, NTT and PTA from their respective obligations to guarantee to the Agent, for the benefit of the Agent and the Lenders, the full and punctual payment when due (whether as stated maturity, by required pre-payment, by acceleration or otherwise), as well as the performance, of all of the Obligations under the Credit Agreement pursuant to the NTT Acquisition Guaranty, NTT Guaranty and PTA Guaranty.
3. Effective as of the date of this Release, the undersigned acknowledges and agrees that the NTT Acquisition Pledge, NTT/PTA Pledge, NTT Acquisition Guaranty, NTT Guaranty and PTA Guaranty and all of the terms and provisions and rights and obligations set forth in such agreements are hereby terminated.
This Release does not constitute a waiver or release of any of the obligations for which the Released Collateral was given as security or a waiver, release or subordination of the Lien of any other security agreements, pledge agreements, mortgages, deeds of trust or other instruments given as security for the same obligations, and the remaining property described in any such other security agreements, pledge agreements, mortgages, deeds of trust or other instruments given as security for the same obligations shall continue to be held by the secured party, mortgagees or trustees under such other security agreements, mortgages, deeds of trust or other instruments given as security for the same obligations in accordance with the terms thereof. This Release is made without affecting the personal liability of any person for payment of the Obligations secured by the Released Collateral.
[Signature to Follow on Next Page]
EXHIBIT 10.1(G)-2
In Witness whereof, the undersigned has caused this Release to be executed and delivered this __ day of March, 2002.
HELLER FINANCIAL, INC., as Agent
By: ___________________________________
Name:
Title:
Accepted and Agreed:
NTT ACQUISITION, INC.
By: ___________________________________
Name: A. Richard Caputo
Title: Vice President
NATIONAL TECHNOLOGY TRANSFER, INC.
By: __________________________________
Name: A. Richard Caputo
Title: Vice President
UTI HOLDINGS, INC.
By: __________________________________
Name: A. Richard Caputo
Title: Vice President
EXHIBIT 10.1(G)-3
SCHEDULES TO THE
AMENDED AND RESTATED CREDIT AGREEMENT
FOR
UNIVERSAL TECHNICAL INSTITUTE, INC.
INTRODUCTION TO THE DISCLOSURE SCHEDULES
The Disclosure Schedules set forth below are part of the Second Amended and Restated Credit Agreement dated as of March 29, 2002, (the "CREDIT AGREEMENT") by and among Universal Technical Institute, Inc. ("HOLDINGS"); UTI Holdings, Inc., as Borrower; Heller Financial, Inc., as Agent and a Lender; and the other parties thereto listed as Lenders. These Disclosure Schedules contain exceptions made to the representations, warranties, and covenants of Holdings and Borrower in the Credit Agreement.
Any matter specifically described and set forth herein as an exception to a Section of the Credit Agreement or specifically described and set forth in a Schedule to the Credit Agreement shall be deemed to constitute an exception to all other sections of the Credit Agreement to which it applies. No general disclosure in any Schedule herein shall be limited by any more specific disclosure in either that Schedule or any other Schedule herein. Where the terms of a contract or other disclosure item have been summarized or described in the Disclosure Schedules, such summary or description does not purport to be a complete statement of the material terms of such contract or other item. Any cross referencing is purely for the assistance of the reader and is intended to be exclusive as to which Schedule the information pertains.
SCHEDULE A
EXITING LENDERS
PB Capital Corporation (formerly known as BHF-Bank Aktiengesellschaft)
Balanced High Yield Fund I, Ltd. (through its Asset Manager, ING Capital Advisors LLC)
Balanced High Yield Fund II, Ltd. (through its Asset Manager, ING Capital Advisors LLC)
LaSalle Bank National Association
First Source Loan Obligations Trust (through its Servicer and Administrator, First Source Financial, Inc.)
Fleet National Bank
Schedule A
SCHEDULE 1.2(E)
EXCLUDED DEFAULTS
Section 6.1(C) only as it related to Sections: 2.3 3.10 3.12 3.13 3.14 4.1 4.8(C) 4.8(E) 4.8(I) - (N) 4.9 |
Section 6.1 (D)
Section 6.1 (E)
Section 6.1 (H) (as long a such lien, levy or assessment is less than $500,000)
Section 6.1 (O)
Section 6.1 (S)
Schedule 1.2(E)
SCHEDULE 2
PURCHASED SECURITIES
PREFERRED PREFERRED PREFERRED PREFERRED RESTRICTED TOTAL STOCKHOLDER SERIES A SERIES B SERIES C SERIES D COMMON COMMON COMMON OPTIONS UTI SHAREHOLDERS Whites' Family Company LLC 3,673.00000 732.10420 493.67444 1.17919 494.85363 41.29098 John C. White 67.20000 67.20000 -------------------------------------------------------------------------------------------------- TOTAL WHITE (CHC STOCKHOLDERS) 3,673.00000 - 732.10420 493.67444 68.37919 562.05363 41.29098 -------------------------------------------------------------------------------------------------- Robert D. Hartman 2,821.00000 540.33034 205.87712 84.71192 290.58904 41.82441 Robert D. Hartman and Janice W. Hartman, Trustees 50.00000 - 50.00000 Hartman Investments Limited Partnership 197.12000 - 197.12000 -------------------------------------------------------------------------------------------------- TOTAL HARTMAN - 2,821.00000 540.33034 452.99712 84.71192 537.70904 41.82441 -------------------------------------------------------------------------------------------------- Jeffrey Muecke 551.21000 - 70.34980 10.59274 80.94254 6.29592 Kimberly McWaters 51.16500 - 15.04500 8.23436 23.27936 1.81073 Paul C. Riordan 51.16500 - 15.04500 - 15.04500 - Sharon Morrison 10.18000 - 16.00000 - 16.00000 - Roger Speer 22.07000 26.27171 31.38540 5.88597 37.27137 2.89906 Joseph Cutler 57.96000 25.62888 26.36140 4.93662 31.29802 2.43444 Randall Smith 51.46000 - 26.36140 4.93662 31.29802 2.43444 Phillip C. Christner 31.22000 9.93851 25.10540 1.97864 27.08404 - James Gleeson 320.21000 - 25.10540 4.93662 30.04202 - Sherrell Smith 37.44000 10.77974 20.08140 3.76742 23.84882 1.85502 Randal Whitman 31.22000 - 14.29100 2.82806 17.11906 1.33157 Thomas Nelmark 30.70000 4.02941 12.57059 1.87871 14.44930 1.12390 David K. Miller 16.67700 3.57435 16.42500 19.99935 3.55562 Sharon Gleeson 9.25074 6.28730 1.17919 7.46649 0.58076 Dennis L. Hendrix 8.23500 1.76500 5.47500 7.24000 0.56315 UTI Tax-Deferred Trust dd 2/24/99 464.75447 ------------------------------------------------------------------------------------------------- TOTAL MANAGEMENT STOCKHOLDERS 3,673.00000 4,067.00000 1,848.00000 1,256.00000 226.14606 1,482.14606 108.00000 ------------------------------------------------------------------------------------------------- |
Schedule 2
PREFERRED PREFERRED PREFERRED PREFERRED RESTRICTED TOTAL STOCKHOLDER SERIES A SERIES B SERIES C SERIES D COMMON COMMON COMMON OPTIONS THE JORDAN COMPANY & JZEP JZEP Preferred 1,176.00000 Holdings Limited 7,505.00000 JZEP 799.50000 799.50000 UTI/TJC Voting Trust 799.50000 799.50000 Jordan Industries, Inc. 1,176.00000 --------------------------------------------------------------------------------------------- TOTAL TJC & JZEP 7,505.00000 - 2,352.0000 1,599.0000 - 1,599.00000 --------------------------------------------------------------------------------------------- Worldwide Training 1110.73097 Group Charlesbank Voting Trust 1246.46395 TOTAL PENSKE GROUP INVESTORS 2357.19491 |
Schedule 2-2
SCHEDULE 3.1(D)
INDEBTEDNESS
1. 6.55% Subordinated Note, due September 30, 2023, in the principal amount of $4,000,000 from Universal Technical Institute, Inc. to Clinton Education Group, Inc., an Arizona corporation.
2. Letter of Credit in the amount of $6,400,000 issued on behalf of Universal Technical Institute of Texas, Inc. in favor of the DOE.
3. 8% Convertible Note, due June 30, 2006, in the principal amount of $7,010,660, from Universal Technical Institute, Inc. to Nelson R. Sharp.
Schedule 3.1(D)
SCHEDULE 3.2(A)(10)
LIENS AND ENCUMBRANCES
1. Holdings and The Clinton Harley Corporation ("CHC") have received training aids (e.g. cars, motorcycles, etc.) as loans or donations from manufacturers and other companies. There are substantial restrictions on the use and/or transferability of these training aids, and in most cases the property must be either returned or destroyed. CHC possesses certificates of title for many of these training aids, though in most cases such title is defective. A list of the Holdings training aids as of the Closing Date is attached as Annex A. A list of CHC training aids as of the Closing Date is attached as Annex B.
2. UCC-l filings against Holdings and CHC are listed below in Annex C. Many of the filings were terminated prior to the Amendment and Restatement Date. Copies of the liens related to Holdings' current borrowing facility and the liens which will remain outstanding after the Amendment and Restatement Date are attached.
3. We incorporate by reference the results of the UCC lien search and copyright search performed by the Lender's counsel attached hereto as Annex D.
Schedule 3.2(A)(10)
ANNEX A
LIST OF UTI TRAINING AIDS
UTI has several items that have been loaned or donated to UTI's Institutions. These assets are consistently valued at $0 for accounting purposes since they cannot be sold or transferred.
Schedule 3.2(A)(10)-2
ANNEX B
LIST OF CHC TRAINING AIDS AND TITLES OF DEFECTS
CLINTON HARLEY CORPORATION
TRAINING AID TITLES
Certificates or Open Title Statements Title not Other (transferee of Origin, properly Lien not ownership Item # Year Make Model VIN/Serial # left blank) Not Titles Executed released papers ------ ---- -------- -------- ----------------- ----------- ------------ --------- -------- --------- 1 1963 Harley MC Z8ZJ880480075 X 2 1996 Suzuki GSXR7 JS1GR7DA5T2100016 X 3 1986 Harley 1HD1DBL1XGY500007 4 1996 Kawasaki ZL6 H8G1963380054 X 5 1940 Harley Knuckle X 6 2001 Suzuki GS500K1 JS1GM51A112100146 X 7 2001 Suzuki GS500K1 JS1GM51A812100418 X 8 2001 Suzuki GS500K1 JS1GM51A712100460 X 9 2001 Suzuki GS500K1 JS1GM51A912100461 X 10 2001 Suzuki GS500K1 JS1GM51A412100741 X 11 2001 Suzuki GS500K1 JS1GM51A112100762 X 12 1995 Suzuki VS800GLS JS1VS52A8S2102571 X 13 1995 Suzuki LS650PS JS1NP41AXS2102231 X 14 1995 Suzuki DR350SES JS1SK42A2S2100781 X 15 1995 Suzuki LTF4WDXS JSAAK42A6S2114582 X 16 1995 Suzuki DR250SES JS1SJ44A9S2100115 X 17 1994 Suzuki LTF4WDXR JSAAK42AXR2104907 X 18 1996 Suzuki LS650PT JS1NP41AXT2101386 X 19 1994 Suzuki DR125SER JS1SF44A2R2101392 X 20 1990 Suzuki GS500EL JS1GM51A5L2100931 X 21 1937 Harley 74 37UL5720 X 22 1996 Harley FLHT 1HD1DDL1XTY602378 X 23 1957 Harley 57FL2646 X 24 1989 Honda CR250R JH2ME0305KM103299 X 25 1995 Harley 1HD1CAP13SY226522 X 26 1995 Buel 4MZRT11H9S3001198 X 27 1995 Harley 1HD1FDL14SY507873 X 28 1983 Recon Panhead AZ91261 X 29 1986 Harley 1HD1ECL17GY118892 X 30 1986 Harley 1HD1DBL1XGY500007 X 31 1987 Honda JH2KF0104HS000046 X 32 1987 Honda JH2AF120XHK200414 X 33 1993 Honda CR250 JH2ME0301PM500774 X 34 1973 Harley H8GK882180097 X 35 1964 Harley H4L5880210051 X 36 1963 Harley 63FLH3338 X 37 1951 Harley 51WL1136 X 38 1995 Harley 1HD1FCR10SY608734 X 39 1992 Harley 1HD1BLL1XNY019246 X 40 1993 Harley 1HD1DPL15PY503488 X 41 1994 Harley 1HD4CAM33RY223665 X 42 1996 Harley 1HD1FBR3XTY603246 X 43 1995 Harley 1HD1FCR31SY608758 X 44 1995 Harley 1HD1GHL35SY308157 X 45 1995 Harley 1HD1FCR38SY605629 X 46 1995 Harley 1HD1FCR35SY605569 X 47 1996 Harley 1HD1BKL38TY045109 X 48 1996 Harley 1HD1FBR32TY607694 X 49 1996 Harley 1HD1GHL12TY319522 X 50 1996 Harley 1HD1FCR14TY610892 X 51 1998 Suzuki JS1VT51A4W2100451 X |
Schedule 3.2(A)(10)-3
Certificates or Open Title Statements Title not Other (transferee of Origin, properly Lien not ownership Item # Year Make Model VIN/Serial # left blank) Not Titles Executed released papers ------ ---- -------- -------- ----------------- ----------- ------------ --------- -------- --------- 52 1996 Suzuki JS1GR7DA5T2100016 X 53 1986 Harley 1HD1ECL14GY110247 X 54 1993 Honda VFR750FL JH2RC361XPM300056 X 55 1986 Honda CB450SCL JH2PC0558GM402143 X 56 1990 Honda NS50F JH2AC0806LK002030 X 57 1990 Honda VTR250 JH2MC1501LM200946 X 58 1988 Honda NX125 JH2JD0900JK001965 X 59 1986 Honda CMX450C JH2PC1707GM011072 X 60 1986 Honda VF700C JH2RC2109GM207344 X 61 1985 Honda VF700SL JH2RC2216FM100516 X 62 1985 Honda VF700SL JH2RC2219FM100770 X 63 1996 Honda CH80 3H1HF0304TD101228 X 64 1985 Honda VF700SL JH2RC2215FM100247 X 65 1986 Honda CB450SC JH2PC054XGM401308 X 66 1982 Honda CB450T JH2PC050XCM002566 X 67 1984 Honda VF700CL JH2RC2111EM001389 X 68 1990 Honda VTR250L JH2MC151XLM200081 X 69 1990 Honda NX125L 9C2JD0910LR200052 X 70 1998 Honda CBR600F3 JH2PC2501WM700001 X 71 1997 Honda CB750L JH2RC3819VM500050 X 72 1996 Honda CB250L JH2MC241XTK500125 X 73 1998 Honda TRX450S 478TE220XWA000493 X 74 1998 Honda TRX450ES 478TE2242WA000216 X 75 1996 Honda CB250L JH2MC2418TK500074 X 76 1996 Honda CB250L JH2MC2419TK500066 X 77 1997 Honda VF750CL JH2RC4316VM300174 X 78 1997 Honda VF750CL JH2RC4310VM300171 X 79 1997 Honda VF750CL JH2RC4316VM300109 X 80 1997 Honda XR400R JH2NE0307VM100123 X 81 1998 Honda CR25ORL JH2ME033XWM005529 X 82 1997 Honda TRX300 478TE1404VA845018 X 83 1999 Honda CR80R JH2HEO4C8XK600005 X 84 2001 Honda CR25OR JH2ME03361M300006 X 85 2000 Honda VT1100T 1HFSC370XYA200001 X 86 2000 Honda SA50 3H1AF1603YD102137 X 87 2001 Honda CMX250C JH2MC13091K703457 X 88 1999 Honda CR80R JH2HE04C6XK6000004 X 89 2001 Honda CR125R JH2JE01391M300006 X 90 2000 Honda VT1100C JHFSC1809YA400001 X 91 2001 Honda CR250R JH2ME033X1M302843 X 92 2001 Honda CMX250C JH2MC130X1K703841 X 93 2001 Honda CMX250C JH2MC13001K703430 X 94 2001 Honda CMX250C JH2MC13031K703423 X 95 2001 Honda CR250R JH2ME03311M307056 X 96 2001 Honda CMX250C JH2MC13031K700215 X 97 2001 Honda CBR600F41 JH2PC35031M200002 X 98 2000 Honda XR650R JH2RE0100YK100002 X 99 1999 Honda CBR600F4 JH2PC350XXM002042 X 100 2000 Honda CH80 3H1HF0303YD500073 X 101 2000 Honda CH80 3H1HF0302YD500033 X 102 1996 Suzuki GSX-R750T JS1GR7DAXT2100013 X 103 1990 Kawasaki KE100-B9 JKAKETB14LA021685 X 104 1990 Kawasaki KE100-B9 JKAKETB15LA021727 X 105 1990 Kawasaki EN450-A6L JKAENGA17LA040608 X 106 2001 Suzuki GS500K1 JS1GM51A112100146 X 107 2001 Suzuki GS500K1 JS1GM51A412100741 X 108 2001 Suzuki GS500K1 JS1GM51A912100461 X 109 2001 Suzuki GS500K1 JS1GM51A112100762 X 110 2001 Suzuki GS500K1 JS1GM51A812100418 X 111 2001 Suzuki GS500K1 JS1GM51A712100460 X 112 1984 Honda CB700SC JH2RC2009EM004534 X 113 1984 Honda GL1200A 1HFSC1424EA022625 X |
Schedule 3.2(A)(10)-4
Certificates or Open Title Statements Title not Other (transferee of Origin, properly Lien not ownership Item # Year Make Model VIN/Serial # left blank) Not Titles Executed released papers ------ ---- -------- -------- ----------------- ----------- ------------ --------- -------- --------- 114 1983 Honda CT110 JH2JD010XDS302436 X 115 1983 Honda CT110 JH2JD0104DS300469 X 116 1996 Buell S1 DOM 4MZSS11J9T3000044 X |
Schedule 3.2(A)(10)-5
ANNEX C
LIENS
SECURED PARTY / JURISDICTION & DEBTOR / LESSEE LESSOR FILE NO. DATE COMMENTS -------------------------------------------------------------------------------- I. LIEN SEARCH FOR UNIVERSAL TECHNICAL INSTITUTE, INC. -------------------------------------------------------------------------------- Universal Technical Inter-Tel Leasing, Inc. Arizona - 2/1/99 Institute, Inc. 01051465 -------------------------------------------------------------------------------- Universal Technical Inter-Tel Leasing, Inc. Arizona - 5/10/99 Institute, Inc. 0167322 -------------------------------------------------------------------------------- Universal Technical Inter-Tel Leasing, Inc. Arizona - 11/18/99 Institute, Inc. 01093402 -------------------------------------------------------------------------------- Universal Technical Textron Financial Florida 5/15/99 Institute, Inc. Corporation -------------------------------------------------------------------------------- Universal Technical Textron Financial Florida 6/21/99 Institute, Inc. Corporation -------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-6
ANNEX D
AGENT'S COUNSEL'S LIEN SEARCH RESULTS
DEBTOR: U.T.I. OF ILLINOIS, INC.
------------------------------------------------------------------------------------------------------------------------------ FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS ------------------------------------------------------------------------------------------------------------------------------ ILLINOIS SECRETARY OF 1 UCC through 1) UCC-1: Bank One 12/31/1997 003780484 Blanket Collateral Clear through N/A STATE 02/20/2002 Arizona N.A. Statement 02/20/2002 ------------------------------------------------------------------------------------------------------------------------------ DU PAGE COUNTY CLEAR through -- -- -- -- Clear through Clear through 02/26/2002 02/26/2002 02/26/2002 ------------------------------------------------------------------------------------------------------------------------------ |
Schedule 3.2(A)(10)-7
DEBTOR: UNIVERSAL TECHNICAL INSTITUTE INC.
FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS ----------------------------------------------------------------------------------------------------------------------------------- ARIZONA SECRETARY OF 3 UCCs through 1) UCC-1: Inter-Tel 02/01/1998 1051465-0 Equipment Lease Clear through N/A STATE 02/27/2002 Leasing, Inc. 02/27/2002 ----------------------------------------------------------------------------------------------------------------------------------- 2) UCC-1: Inter-Tel 05/10/1999 1067322-0 Equipment Lease Leasing, Inc. ----------------------------------------------------------------------------------------------------------------------------------- 3) UCC-1: Inter-Tel 11/18/1999 1093402-0 Leasing, Inc. ----------------------------------------------------------------------------------------------------------------------------------- MARICOPA COUNTY Clear through -- -- -- -- Clear through Clear through 01/14/2002 01/14/2002 01/14/2002 ----------------------------------------------------------------------------------------------------------------------------------- DELAWARE SECRETARY OF Clear through -- -- -- -- Clear through N/A STATE 02/28/2002 02/28/2002 ----------------------------------------------------------------------------------------------------------------------------------- FLORIDA SECRETARY OF 2 UCCs through 1) UCC-1: Textron 06/15/1999 9900001352 Equipment Clear through Clear through STATE 09/27/2001 Financial Corporation 07 09/27/2001 09/27/2001 ----------------------------------------------------------------------------------------------------------------------------------- 2) UCC-1: Textron 06/21/1999 9900001406 Equipment Financial Corporation 59 ----------------------------------------------------------------------------------------------------------------------------------- MINNESOTA SECRETARY Clear through -- -- -- -- Clear through N/A OF STATE 02/26/2002 02/26/2002 ----------------------------------------------------------------------------------------------------------------------------------- NORTH CAROLINA Clear through -- -- -- -- Clear through N/A SECRETARY OF STATE 02/27/2002 02/27/2002 ----------------------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-8
DEBTOR: UNIVERSAL TECHNICAL INSTITUTE OF ARIZONA, INC.
FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS ----------------------------------------------------------------------------------------------------------------------------------- ARIZONA SECRETARY OF 6 UCCs through 1) UCC-1: Bank One, 11/21/1997 994294 Blanket Collateral Clear through N/A STATE 02/27/2002 Arizona Statement 02/27/2002 ----------------------------------------------------------------------------------------------------------------------------------- 2) UCC-1: IBM 12/11/1997 996624 Equipment Lease Credit Corporation ----------------------------------------------------------------------------------------------------------------------------------- 3) UCC-1: Banc One 08/06/1998 1028245 Equipment Lease Leasing Corporation ----------------------------------------------------------------------------------------------------------------------------------- 4) UCC-1: Banc One 08/06/1998 1028246 Equipment Lease Leasing Corporation ----------------------------------------------------------------------------------------------------------------------------------- 5) UCC-3: Terminated 1028246 Termination ----------------------------------------------------------------------------------------------------------------------------------- 6) UCC-1: BankVest 08/24/1998 1030386 Equipment Lease Capital Corp. ----------------------------------------------------------------------------------------------------------------------------------- MARICOPA COUNTY Clear through -- -- -- -- Clear through Clear through 01/14/2002 01/14/2002 01/14/2002 ----------------------------------------------------------------------------------------------------------------------------------- DELAWARE SECRETARY OF Clear through -- -- -- -- Clear through N/A STATE 02/28/2002 02/28/2002 ----------------------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-9
DEBTOR: UNIVERSAL TECHNICAL INSTITUTE OF CALIFORNIA, INC.
FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS --------------------------------------------------------------------------------------------------------------------- CALIFORNIA SECRETARY 1 UCC through 1) UCC-1: Inter-Tel 10/13/1998 29360237 Equipment Clear through Clear through OF STATE 02/13/2002 Leasing, Inc. 02/13/2002 02/13/2002 --------------------------------------------------------------------------------------------------------------------- SAN BERNARDINO Clear through -- -- -- -- Clear through Clear through COUNTY 02/11/2002 02/11/2002 02/11/2002 --------------------------------------------------------------------------------------------------------------------- NORTH CAROLINA Clear through -- -- -- -- Clear through N/A SECRETARY OF STATE 02/27/2002 02/27/2002 --------------------------------------------------------------------------------------------------------------------- IREDELL COUNTY CLEAR through -- -- -- -- Clear through Clear through 03/01/2002 03/01/2002 03/01/2002 --------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-10
DEBTOR: UNIVERSAL TECHNICAL INSTITUTE OF TEXAS, INC.
FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS -------------------------------------------------------------------------------------------------------------------------------- FLORIDA SECRETARY OF Clear through -- -- -- -- Clear through Clear through STATE 09/27/2002 09/27/2002 09/27/2002 -------------------------------------------------------------------------------------------------------------------------------- TEXAS SECRETARY OF 1 UCC through 1) UCC-1: Bank One, 12/24/1997 9700241382 Blanket Collateral Clear through N/A STATE 02/18/2002 Arizona Statement 02/18/2002 -------------------------------------------------------------------------------------------------------------------------------- HARRIS COUNTY 1 UCC through 1) UCC-1: Bank One, 12/24/1997 000-00-0000 Blanket Collateral Clear through Clear through 02/27/2002 Arizona Statement 02/27/2002 02/27/2002 -------------------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-11
DEBTOR: UTI HOLDINGS, INC.
FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS ------------------------------------------------------------------------------------------------------------------------------------ ARIZONA SECRETARY OF 9 UCCs through 1) UCC-1: Heller 01/27/1998 1002234-0 Blanket Collateral Clear through N/A STATE 02/27/2002 Financial Inc. Statement 02/27/2002 ------------------------------------------------------------------------------------------------------------------------------------ 2) UCC-1: Leasetec 02/17/1999 1054454-0 Equipment Lease Corporation ------------------------------------------------------------------------------------------------------------------------------------ 3) UCC-1: Trinity 05/03/1999 1066607-0 Equipment Lease Capital Corporation ------------------------------------------------------------------------------------------------------------------------------------ 4) UCC-1: Trinity 05/03/1999 1066608-0 Equipment Lease Capital Corporation ------------------------------------------------------------------------------------------------------------------------------------ 5) UCC-1: LeaseVest 07/06/1999 1074934-0 Equipment Lease Capital Corp. ------------------------------------------------------------------------------------------------------------------------------------ 6) UCC-1: LeaseVest 07/06/1999 1074935-0 Equipment Lease Capital Corp. ------------------------------------------------------------------------------------------------------------------------------------ 7) UCC-1: LeaseVest 07/06/1999 1074936-0 Equipment Lease Capital Corp. ------------------------------------------------------------------------------------------------------------------------------------ 8) UCC-1: LeaseVest 07/06/1999 1074939-0 Equipment Lease Capital Corp. ------------------------------------------------------------------------------------------------------------------------------------ 9) UCC-1: LeaseVest 07/06/1999 1074940-0 Equipment Lease Capital Corp. ------------------------------------------------------------------------------------------------------------------------------------ MARICOPA COUNTY 1 UCC through 1) UCC-1: Heller 01/27/1998 980059880 Blanket Collateral Clear through Clear through 01/10/2002 Financial Inc. Statement 01/10/2002 01/10/2002 ------------------------------------------------------------------------------------------------------------------------------------ ILLINOIS SECRETARY OF 2 UCCs through 1) UCC-1: Heller 01/27/1998 003793378 Blanket Collateral Clear through N/A STATE 02/20/2002 Financial Inc. Statement 02/20/2002 ------------------------------------------------------------------------------------------------------------------------------------ 2) UCC-1: LeaseVest 02/02/1999 003982763 Equipment Lease Capital Corp. ------------------------------------------------------------------------------------------------------------------------------------ |
Schedule 3.2(A)(10)-12
DEBTOR: UTI HOLDINGS, INC.
FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS ----------------------------------------------------------------------------------------------------------------------------------- NEW YORK DEPARTMENT 1 UCC through 1) UCC-1: Heller 01/27/1998 018032 Blanket Collateral Clear through N/A OF STATE 02/26/2002 Financial, Inc. Statement 02/26/2002 ----------------------------------------------------------------------------------------------------------------------------------- NEW YORK COUNTY 1 UCC through 1) UCC-1: Heller 01/27/1998 98PN04319 Blanket Collateral Clear through Clear through 02/19/2002 Financial, Inc. Statement 02/11/2002 02/11/2002 ----------------------------------------------------------------------------------------------------------------------------------- TEXAS SECRETARY OF 12 UCCs through 1) UCC-1: Heller 01/27/1998 98016463 Blanket Collateral Clear through N/A STATE 02/06/2002 Financial Inc. Statement 02/06/2002 ----------------------------------------------------------------------------------------------------------------------------------- 2) UCC-1: BankVest 02/01/1999 99021142 Equipment Lease Capital Corp. ----------------------------------------------------------------------------------------------------------------------------------- 3) UCC-1: Trinity 05/03/1999 99088246 Equipment Lease Capital Corporation ----------------------------------------------------------------------------------------------------------------------------------- 4) UCC-1: Trinity 05/03/1999 99088247 Equipment Lease Capital Corporation ----------------------------------------------------------------------------------------------------------------------------------- 5) UCC-1: BankVest 07/05/1999 99136908 Equipment Lease Capital Corp. ----------------------------------------------------------------------------------------------------------------------------------- 6) UCC-1: BankVest 07/05/1999 99136909 Equipment Lease Capital Corp. ----------------------------------------------------------------------------------------------------------------------------------- 7) UCC-1: BankVest 07/05/1999 99136910 Equipment Lease Capital Corp. ----------------------------------------------------------------------------------------------------------------------------------- 8) UCC-1: BankVest 07/05/1999 99136911 Equipment Lease Capital Corp. ----------------------------------------------------------------------------------------------------------------------------------- 9) UCC-1: BankVest 07/05/1999 99136912 Equipment Lease Capital Corp. ----------------------------------------------------------------------------------------------------------------------------------- 10) UCC-1: BankVest 07/09/1999 99139155 Equipment Lease Capital Corp. ----------------------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-13
DEBTOR: UTI HOLDINGS, INC.
FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS ------------------------------------------------------------------------------------------------------------------------------------ TEXAS SECRETARY OF 11) UCC-1: BankVest 07/09/1999 99139814 Equipment Lease STATE Capital Corp. ------------------------------------------------------------------------------------------------------------------------------------ 12) UCC-1: BankVest 07/09/1999 99139815 Equipment Lease Capital Corp. ------------------------------------------------------------------------------------------------------------------------------------ WASHINGTON SECRETARY Clear through -- -- -- -- Clear through N/A OF STATE 09/25/2001 09/25/2001 ------------------------------------------------------------------------------------------------------------------------------------ |
Schedule 3.2(A)(10)-14
DEBTOR: CLINTON EDUCATION GROUP, INC.
FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS ------------------------------------------------------------------------------------------------------------------------------------ ARIZONA SECRETARY OF 1 UCC through 1) UCC-1: Heller 02/27/1998 1002232-0 Blanket Collateral Clear through N/A STATE 02/27/2002 Financial Inc. Statement 02/27/2002 ------------------------------------------------------------------------------------------------------------------------------------ MARICOPA COUNTY 1 UCC through 1) UCC-1: Heller 01/27/1998 98-0059879 Blanket Collateral Clear through Clear through 01/10/2202 Financial Inc. Statement 01/10/2002 01/10/2002 ------------------------------------------------------------------------------------------------------------------------------------ CALIFORNIA SECRETARY 1 UCC through 1) UCC-1: Heller 01/27/1998 02860560 Blanket Collateral Clear through Clear through OF STATE 02/13/2002 Financial Inc. Statement 02/13/2002 02/13/2002 ------------------------------------------------------------------------------------------------------------------------------------ DELAWARE SECRETARY Clear through -- -- -- -- Clear through N/A OF STATE 02/28/2002 02/28/2002 ------------------------------------------------------------------------------------------------------------------------------------ ILLINOIS SECRETARY 1 UCC through 1) UCC-1: Heller 01/27/1998 3793380 Blanket Collateral Clear through N/A OF STATE 02/20/2002 Financial Inc. Statement 02/20/2002 ------------------------------------------------------------------------------------------------------------------------------------ NEW YORK DEPARTMENT 1 UCC through 1) UCC-1: Heller 01/27/1998 018030 Blanket Collateral Clear through N/A OF STATE 02/26/2002 Financial Inc. Statement 02/26/2002 ------------------------------------------------------------------------------------------------------------------------------------ NEW YORK COUNTY 1 UCC through 1) UCC-1: Heller 01/27/1998 98PN04318 Blanket Collateral Clear through Clear through 02/19/2002 Financial Inc. Statement 02/11/2002 02/11/2002 ------------------------------------------------------------------------------------------------------------------------------------ |
Schedule 3.2(A)(10)-15
DEBTOR: CLINTON EDUCATION GROUP, INC.
FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS ------------------------------------------------------------------------------------------------------------------------------------ TEXAS SECRETARY OF 1 UCC through 1) UCC-1: Heller 01/27/1998 9800016464 Blanket Collateral Clear through N/A STATE 02/06/2002 Financial Inc. Statement 02/06/2002 ------------------------------------------------------------------------------------------------------------------------------------ |
Schedule 3.2(A)(10)-16
DEBTOR: CUSTOM TRAINING GROUP, INC.
--------------------------------------------------------------------------------------------------------------------------------- FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS --------------------------------------------------------------------------------------------------------------------------------- ARIZONA SECRETARY OF 2 UCCs through 1)UCC-1: Bank One 11/21/1997 0994293-0 Blanket Collateral Clear through N/A STATE 02/27/2002 Arizona NA Statement 02/27/2002 --------------------------------------------------------------------------------------------------------------------------------- 2)UCC-1: Heller 01/27/1998 1002233-0 Blanket Collateral Financial Inc. Statement --------------------------------------------------------------------------------------------------------------------------------- MARICOPA COUNTY 1 UCC through 1)UCC-1: Heller 01/27/2002 980059881 Blanket Collateral Clear through Clear through 0110/2202 Financial Inc. Statement 01/10/2002 01/10/2002 --------------------------------------------------------------------------------------------------------------------------------- CALIFORNIA SECRETARY 1 UCC through 1)UCC-1: Heller 01/27/1998 02860254 Blanket Collateral Clear through Clear through OF STATE 02/13/2002 Financial Inc. Statement 02/13/2002 02/13/2002 --------------------------------------------------------------------------------------------------------------------------------- BERNARDINO COUNTY Clear through -- -- -- -- Clear through Clear through 02/11/2002 02/11/2002 02/11/2002 --------------------------------------------------------------------------------------------------------------------------------- FLORIDA SECRETARY OF Clear through -- -- -- -- Clear through Clear through STATE 03/06/2002 03/06/2002 03/06/2002 --------------------------------------------------------------------------------------------------------------------------------- BREVARD COUNTY Clear through -- -- -- -- Clear through Clear through 02/27/2002 02/27/2002 02/27/2002 --------------------------------------------------------------------------------------------------------------------------------- ORANGE COUNTY Clear through -- -- -- -- Clear through Clear through 02/19/2002 02/19/2002 02/19/2002 --------------------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-17
DEBTOR: CUSTOM TRAINING GROUP, INC.
--------------------------------------------------------------------------------------------------------------------------------- FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS --------------------------------------------------------------------------------------------------------------------------------- ILLINOIS SECRETARY OF 1 UCC through 1)UCC-1: Heller 01/27/1998 003793379 Blanket Collateral Clear through N/A STATE 02/20/2002 Financial Inc. Statement 02/20/2002 --------------------------------------------------------------------------------------------------------------------------------- DUPAGE COUNTY Clear through -- -- -- -- Clear through Clear through 03/01/2002 03/01/2002 03/01/2002 --------------------------------------------------------------------------------------------------------------------------------- KANE COUNTY 1 UCC through 1)UCC-1: Heller 01/27/1998 179899 Blanket Collateral Clear through Clear through 02/13/2002 Financial, Inc. Statement 02/13/2002 02/13/2002 --------------------------------------------------------------------------------------------------------------------------------- NEW JERSEY SECRETARY Clear through -- -- -- -- N/A Clear through OF STATE 02/24/2002 02/22/2002 --------------------------------------------------------------------------------------------------------------------------------- BERGEN COUNTY Clear through -- -- -- -- Clear through Clear through 01/14/2002 02/20/2002 02/20/2002 --------------------------------------------------------------------------------------------------------------------------------- NEW YORK DEPARTMENT 1 UCC through 1)UCC-1: Heller 01/27/1998 018028 Blanket Collateral Clear through N/A OF STATE 02/26/2002 Financial Inc. Statement 02/26/2002 --------------------------------------------------------------------------------------------------------------------------------- NEW YORK COUNTY 1 UCC through 1)UCC-1: Heller 01/27/1998 98PN04320 Blanket Collateral Clear through Clear through 02/19/2002 Financial, Inc. Statement 02/11/2002 02/11/2002 --------------------------------------------------------------------------------------------------------------------------------- PENNSYLVANIA Clear through -- -- -- -- N/A N/A SECRETARY OF STATE 02/28/2002 -------------------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-18
DEBTOR: CUSTOM TRAINING GROUP, INC.
--------------------------------------------------------------------------------------------------------------------------------- FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS --------------------------------------------------------------------------------------------------------------------------------- LEHIGH COUNTY Clear through -- -- -- -- Clear through Clear through 03/01/2002 03/01/2002 03/01/2002 --------------------------------------------------------------------------------------------------------------------------------- TEXAS SECRETARY OF 1 UCC through 1)UCC-1: Heller 01/27/1998 9800016465 Blanket Collateral Clear through N/A STATE 02/26/2002 Financial Inc. Statement 02/06/2002 --------------------------------------------------------------------------------------------------------------------------------- HARRIS COUNTY Clear through -- -- -- -- Clear through Clear through 02/27/2002 02/27/2002 02/27/2002 --------------------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-19
DEBTOR: PERFORMANCE TRAINING ASSOCIATES, INC.
---------------------------------------------------------------------------------------------------------------------------------- JURISDICTION UCC SECURED PARTY FILE DATE FILE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS ---------------------------------------------------------------------------------------------------------------------------------- COLORADO SECRETARY OF 1 UCCs through 1) UCC-1: Heller 07/10/1998 19982044719 Blanket Collateral Clear through N/A STATE 02/13/2002 Financial, Inc. Statement 02/13/2002 ---------------------------------------------------------------------------------------------------------------------------------- ARAPAHOE COUNTY 1 UCC through 1) UCC-1: Heller 07/07/1998 A8102758 Blanket Collateral Clear through Clear through 02/13/2002 Financial, Inc. Statement 02/25/2002 02/25/2002 ---------------------------------------------------------------------------------------------------------------------------------- DENVER COUNTY 1 UCC through 1) UCC-1: Heller 07/09/1998 9800109443 Blanket Collateral Clear through Clear through 02/13/2001 Financial, Inc. Statement 02/25/2002 02/25/2002 ---------------------------------------------------------------------------------------------------------------------------------- FLORIDA SECRETARY OF 1 UCC through 1) UCC-1: Heller 07/13/1998 155362 Blanket Collateral Clear through Clear through STATE 02/22/2002 Financial Inc. Statement 02/22/2002 02/22/2002 ---------------------------------------------------------------------------------------------------------------------------------- HILLSBOROUGH COUNTY 1 UCC through 1) UCC-1: Heller 07/08/1998 98152887 Blanket Collateral Clear through Clear through 02/20/2002 Financial Inc. Statement 02/20/2002 02/20/2002 ---------------------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-20
DEBTOR: UNIVERSAL TECHNICAL INSTITUTE OF NORTH CAROLINA, INC. (FORMERLY KNOWN AS NASCAR TECHNICAL INSTITUTE, INC.)
--------------------------------------------------------------------------------------------------------------------------------- FILE JURISDICTION UCC SECURED PARTY FILE DATE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS --------------------------------------------------------------------------------------------------------------------------------- ARIZONA SECRETARY OF Clear through -- -- -- -- Clear through N/A STATE 3/11/2002 03/11/2002 --------------------------------------------------------------------------------------------------------------------------------- MARICOPA COUNTY Clear through -- -- -- -- Clear through Clear through 03/14/2002 03/14/2002 03/14/2002 --------------------------------------------------------------------------------------------------------------------------------- DELAWARE SECRETARY OF Clear through -- -- -- -- Clear through N/A STATE 02/28/2002 02/28/2002 --------------------------------------------------------------------------------------------------------------------------------- NORTH CAROLINA Clear through -- -- -- -- Clear through N/A SECRETARY OF STATE 03/08/2002 03/08/2002 --------------------------------------------------------------------------------------------------------------------------------- IREDELL COUNTY Clear through -- -- -- -- Clear through Clear through 03/11/2002 03/11/2002 03/11/2002 --------------------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-21
DEBTOR: THE CLINTON HARLEY CORPORATION
--------------------------------------------------------------------------------------------------------------------------------- JURISDICTION UCC SECURED PARTY FILE DATE FILE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS --------------------------------------------------------------------------------------------------------------------------------- ARIZONA SECRETARY OF Clear through -- -- -- -- Clear through N/A STATE 02/27/2002 02/27/2002 --------------------------------------------------------------------------------------------------------------------------------- CALIFORNIA SECRETARY Clear through -- -- -- -- Clear through Clear through OF STATE 02/13/2002 02/13/2002 02/13/2002 --------------------------------------------------------------------------------------------------------------------------------- DELAWARE SECRETARY OF Clear through -- -- -- -- Clear through N/A STATE 02/28/2002 02/28/2002 --------------------------------------------------------------------------------------------------------------------------------- FLORIDA SECRETARY OF 1 UCC through 1) UCC-1: Inter-Tel 01/10/2000 200000006556 Equipment Lease Clear through Clear through STATE 09/27/2001 Leasing Inc. 02/27/2002 02/27/2002 --------------------------------------------------------------------------------------------------------------------------------- ILLINOIS SECRETARY OF Clear through -- -- -- -- Clear through N/A STATE 02/20/2002 02/20/2002 --------------------------------------------------------------------------------------------------------------------------------- MISSISSIPPI SECRETARY Clear through -- -- -- -- Clear through N/A OF STATE 11/09/2001 11/09/2001 --------------------------------------------------------------------------------------------------------------------------------- NEW JERSEY SECRETARY Clear through -- -- -- -- N/A Clear through OF STATE 02/04/2202 02/27/2002 --------------------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-22
DEBTOR: THE CLINTON HARLEY CORPORATION
--------------------------------------------------------------------------------------------------------------------------------- JURISDICTION UCC SECURED PARTY FILE DATE FILE NUMBER COLLATERAL FEDERAL TAX LIENS JUDGEMENTS --------------------------------------------------------------------------------------------------------------------------------- WASHINGTON SECRETARY Clear through -- -- -- -- Clear through N/A OF STATE 09/25/2001 09/25/2001 --------------------------------------------------------------------------------------------------------------------------------- |
Schedule 3.2(A)(10)-23
SCHEDULE 3.4
CONTINGENT OBLIGATIONS
Letter of Credit in the amount of $6,400,000 issued on behalf of Universal Technical Institute, Inc. in favor of the United States Department of Education.
Schedule 3.4
SCHEDULE 3.8
AFFILIATE TRANSACTIONS
1. Lease Agreement dated January 1, 2002 between the John C. & Cynthia L. White Family Trust, as lessor, and the Clinton Harley Corporation, as lessee, for premises commonly known as 9751 Delegates Drive, Orlando, Florida 32821.
Rent: Base monthly rent $16,479.00/month plus sales taxes. Increases in base rent calculated upon CPI increases or 4% whichever is greater at the end of each year Term: Expires 12/31/2016 Other costs: Pass through of certain costs, including building improvements, casualty, insurance, taxes and utilities. Permitted Uses: Motorcycle classroom and/or lab. |
2. Lease Agreement dated July 2, 2001 between Delegates, LLC, as lessor , and the Clinton Harley Corporation, as lessee, for premises commonly known as 9755 Delegates Drive, Orlando, Florida, 32821.
Rent: $43,719 base rent/month plus sales taxes. Increases in base rent calculated upon CPI increases or 4% whichever is greater at the end of each year Term: Expires 12/31/2016 Other costs: Pass through of certain costs, including building improvements, casualty, insurance, taxes and utilities. Permitted Uses: Motorcycle classroom and/or lab. |
3. Lease Agreement dated April 1, 1994 between City Park, L.L.C., as lessor, and the Clinton Harley Corporation, as lessee, for premises commonly known as 2844 West Deer Valley Road and 2837 West Louise Drive, Phoenix, Arizona 85027.
Rent: $30,345.00 base rent/month; plus 4% increases annually plus sales taxes. Term: Expires 2/28/2015 Other Costs: Pass through of certain costs, including taxes and insurance. |
Schedule 3.8
4. Lease Agreement between Universal Technical Institute of Texas, Inc. ("UTI Texas") and Universal Investment Properties for the premises commonly known as 721 Lockhaven Drive, Houston, Texas, dated August 1, 1999.
Rent: Currently $71,375 per month plus taxes, assessments and property-related expenses. Yearly increases based on CPI with a minimum of 3% but not to exceed 6%. Term: Expires July 31, 2016. |
Universal Investment Properties is a Texas General Partnership formed on October 1, 1983. The partners consist of the following former and current shareholders of UTI:
PARTNER PERCENTAGE ------- ---------- Robert Sweet 32.455% Robert Hartman 2.510 James Gribbin 7.520 Estate of William Bailey 7.520 Robert Muecke 12.530 Robert and Myrna Sweet Family Trust 32.455 Paul Hering 5.010 -------- TOTAL 100.000 ======== |
5. Holdings has entered into a Deferred Compensation Agreement with the following Sales Representatives:
Anthony Tagal
Dennis Seagle
John Redman
James Leech
Theodore Jones
Kent Irwin
James Hill
Ronald Brookman
David Jones
Joe Cutler
Randy Whitman
The Deferred Compensation Agreement provides that Holdings continue to compensate these Sales Representatives during the one year following the Representative's retirement or separation. The amount of the deferred compensation is to be determined at the time of separation.
6. Holdings uses the services of Premier Graphics, a printing company, for a substantial amount of the Company's printing needs. The vendor, Premier Graphics, is owned by the aunt and uncle of Kimberly McWaters, who is a Stockholder and officer of Holdings.
Schedule 3.8-2
7. Holdings provides a Medical Reimbursement Plan to four of its key executives. The Plan reimburses the participant for all out-of-pocket medical expenses up to the following maximum amounts per year.
John White $7,500.00 Robert Hartman 7,500.00 Kim McWaters 7,500.00 Sharon Gleeson 3,500.00 Jennifer Haslip 3,500.00 Randy Smith 3,500.00 Roger Speer 3,500.00 |
8. Contracts with retired shareholders
Holdings has an agreement related to Mr. Robert Sweet's (former owner) retirement in March 1993.
Sweet Insurance:
Mr. Sweet is currently receiving approximately $40,000 per year reimbursement for life insurance.
Schedule 3.8-3
SCHEDULE 3.9
MANAGEMENT FEES AND COMPENSATION
Pursuant to the Management Consulting Agreement, dated as of September
30, 1997, between TJC Management Company ("TJC") and Universal Technical
Institute, Inc. ("COMPANY"), as amended by that certain side letter dated
September 30, 1998, that certain side letter dated September 30, 1999 (the
"SECOND SIDE LETTER") by TJC and the Company and that certain side letter, dated
March 29, 2002 among TJC, Penske ("PENSKE"), Charlesbank Capital Partners, LLC
("CHARLESBANK", and collectively with TJC and Penske, the "CONSULTANTS") and the
Company (as amended, the "MANAGEMENT AGREEMENT"), the Company is required to pay
the Consultants an annual fee, in quarterly installments, equal to the greater
of $250,000 or 2.5% of EBITDA (as defined in the Management Agreement) plus
reimbursement for reasonable out of pocket expenses. In addition, upon the
approval of the Board of Directors for certain transactions, the Company is
required to pay the Consultants an investment banking fee equal to (i) two
percent (2.0%) of the value of any assets or stock of the Company or other
entity acquired or sold by the Company or any of its Subsidiaries or Affiliates;
(ii) one percent (1.0%) of the value of any debt or equity financing consummated
by the Company, or (iii) the greater of the two fees described in (i) and (ii)
for any transaction involving both an acquisition or sale and a financing.
Schedule 3.9
SCHEDULE 3.10
BUSINESS DESCRIPTION
The business of Holdings and its Subsidiaries (including The Clinton Harley Corporation) is to provide proprietary postsecondary vocational training and education. This education and training is focused on programs in six primary fields: (i) automotive; (ii) diesel; (iii) HVAC/R; (iv) collision repair and refinishing; (v) motorcycle; and (vi) marine. In addition, Holdings provides graduate training and custom-designed training programs through its Subsidiary, Custom Training Group Inc. ("CTG").
Schedule 3.10
SCHEDULE 5.3
VIOLATIONS, CONFLICTS, BREACHES AND DEFAULTS
None
Schedule 5.3
SCHEDULES 5.4(A) AND 5.4(B)
JURISDICTIONS OF ORGANIZATION AND CAPITALIZATION
[TO BE UPDATED]
STATE/DATE SHARES SHARES SHARES IN CORPORATION OF INCORP. AUTHORIZED SHARES ISSUED OUTSTANDING TREASURY --------------------------------------------------------------------------------------------------------------------- Universal Technical Delaware 8,500 Comm 3,096 Comm 3,096 Comm 14.6 Institute, Inc. 9/11/97*/ 25,000 Pref 11,178 Pref A 11,178 Pref A 4,067 Pref B 4,067 Pref B 4,200 Pref C 4,200 Pref C 2,358 Pref D 2,358 Pref D --------------------------------------------------------------------------------------------------------------------- UTI Holdings, Inc. Arizona 8/5/91 100 50 50 0 --------------------------------------------------------------------------------------------------------------------- Universal Technical Delaware 100 100 100 0 Institute of Arizona, 9/11/97 Inc. --------------------------------------------------------------------------------------------------------------------- Universal Technical California 1,000 100 100 0 Institute of 10/03/97 California, Inc. --------------------------------------------------------------------------------------------------------------------- Universal Technical Texas 1,000,000 1,000 1,000 0 Institute of Texas, 7/12/83 Inc. --------------------------------------------------------------------------------------------------------------------- U.T.I. of Illinois, Inc. Illinois 1/9/87 1,000 1,000 1,000 0 --------------------------------------------------------------------------------------------------------------------- Custom Training California 1,000 1,000 1,000 0 Group, Inc. 5/8/81 --------------------------------------------------------------------------------------------------------------------- The Clinton Harley Delaware 100 100 100 0 Corporation 9/11/97 --------------------------------------------------------------------------------------------------------------------- Clinton Education Delaware 100 100 100 0 Group, Inc. 9/11/97 --------------------------------------------------------------------------------------------------------------------- Universal Technical Delaware 1000 1000 1000 0 Institute of North 07/17/01 Carolina, Inc. --------------------------------------------------------------------------------------------------------------------- |
*/ Lincoln Technical Institute of Arizona, Inc., d/b/a Universal Technical Institute, an Arizona corporation incorporated on May 3, 1965, was reincorporated in Delaware merging into Universal Technical Institute, Inc. on September 29, 1997.
Schedules 5.4(A) and 5.4(B)
SCHEDULE 5.4(D)
FOREIGN QUALIFICATIONS
Universal Technical Institute Inc. ("HOLDINGS") and its Subsidiaries are qualified to do business in the following states: Arizona, California, Florida, Illinois, Minnesota, Mississippi, New Jersey, New York, North Carolina, Texas, Washington. These qualifications are based upon the residence of its Sales Representatives and registrations within the states.
Holdings apportions its taxable income based upon payroll, property and gross receipts from each state as compared to the total amount of payroll, property and gross receipts for all states. In states where a Representative lives, the apportionment is based on the payroll in that state. Certain states where Holdings is not qualified may take the position that Holdings must be licensed in that state if its Representatives solicit students there.
Holdings has only paid taxes for one entity in some states, and not for the parent and all subsidiaries. This is an acceptable position in some jurisdictions, but may not be in others. Therefore, some minimum annual franchise taxes may be due in some jurisdictions. However, Holdings has apportioned its revenues in all jurisdictions (except Illinois, which does not allow apportionment).
Therefore, Holdings may not have all state, local and foreign licenses, permits or other approvals required for the operation of its business as now being conducted. Nevertheless, Holdings' exposure in these states is limited since such states could only require payment for up to three years of taxes, and Holdings' revenues in states where it is not qualified are low enough that only the minimum franchise tax would be required. The difference in cost between obtaining and maintaining qualification in these states and paying any potential penalties is minimal.
Schedules 5.4(D)
SCHEDULE 5.6
INTELLECTUAL PROPERTY
INTELLECTUAL PROPERTY RIGHTS OF UNIVERSAL TECHNICAL INSTITUTE
Universal Technical Institute only has proprietary rights in teaching manuals that it prepares. Holdings has not taken any steps to attempt to protect these rights. Holdings does not feel that it has any other proprietary rights, invention disclosures, drawings, designs, customer lists, proprietary know how or information or other rights that are material to the business.
The name "Universal Technical Institute, Inc." has not been protected nationwide with any trademark and tradename filings.
In 2000, Holdings trademarked its logo, as set forth in Annex A. In 2001, Holdings trademarked PACT (Partnership for Accelerated Career Training) as set forth in Annex A.
Holdings currently does not have any patents.
INTELLECTUAL PROPERTY RIGHTS OF THE CLINTON HARLEY CORPORATION AND
CLINTON EDUCATION GROUP, INC.
The Clinton Harley Corporation has proprietary rights in the following:
1. Registered service marks listed in Annex A.
2. Registered copyrights listed in Annex A.
3. Proprietary Rights in connection with the following names that are used in connection with CHC's Business:
a. Clinton Technical Institute
b. Motorcycle Mechanics Institute
c. Marine Mechanics Institute
4. Commercially available software used by CHC.
5. Database application used to track information on students that take classes at the Clinton Technical Institute. This custom software was written by an employee of CHC.
Clinton Education Group, Inc. has proprietary rights in the commercially available software it uses.
Neither CHC nor CEG currently have any patents.
Schedule 5.6
ANNEX A
UTI TRADEMARKS(2)
REG./FILING TRADEMARK OWNER STATUS/COUNTRY REG. NUMBER DATE --------------------------------------------------------------------------------------------------------------------- UTI symbol Universal Technical Institute, Registered/ 2,333,820 Mar. 21, 2000 (attached as Inc. United States Exhibit A-1) FACT Educational services, namely, Registered/United 2,429,878 Feb. 20, 2001 conducting training classes to States become an automotive technician and distributing co. Universal Technical Institute, PACT Inc. Registered/United 2,506,017 Nov. 13, 2001 (attached as States Exhibit A-2) Universal Technical Institute, Inc. PACT and Registered/United 2,511,945 Nov. 27, 2001 Design States (attached as Exhibit A-3) --------------------------------------------------------------------------------------------------------------------- |
CHC TRADEMARKS
REG./FILING TRADEMARK OWNER STATUS/COUNTRY REG. NUMBER DATE --------------------------------------------------------------------------------------------------------------------- HONTECH The Clinton Harley Corporation, Registered/ 1,402,546 July 22, 1986 d/b/a Motorcycle Mechanics United States Institute --------------------------------------------------------------------------------------------------------------------- YAMAPRO The Clinton Harley Corporation, Registered/ 1,586,144 March 6, 1990 d/b/a Motorcycle Mechanics United States Institute --------------------------------------------------------------------------------------------------------------------- |
CHC COPYRIGHTS
TITLE AUTHOR OWNER REG. NUMBER REG. DATE ---------------------------------------------------------------------------------------------------------------------- The Complete Guide to Motorcycle Mechanics Motorcycle TX37379659 January 24, 1994 Motorcycle Mechanics Institute Mechanics Institute ---------------------------------------------------------------------------------------------------------------------- |
(2) Universal Technical Institute, Inc. will assign the trademarks to UTI Holdings, Inc. at Closing and such assignment shall be filed with the U.S. Patent and Trademark office by Lender's counsel. At Closing, UTI Holdings, Inc. will enter into an intercompany license agreement and license the trademarks to its direct and indirect subsidiaries and to Universal Technical Institute, Inc. Schedule 5.6-2 |
TITLE AUTHOR OWNER REG. NUMBER REG. DATE ---------------------------------------------------------------------------------------------------------------------- The Complete Guide to Motorcycle Mechanics Motorcycle TX1883586 August 4, 1986 Motorcycle Mechanics Institute Mechanics Institute ---------------------------------------------------------------------------------------------------------------------- How to Tune and Service Motorcycle Mechanics Motorcycle TX1730627 January 8, 1986 a Four-Stroke Japanese Institute Mechanics Motorcycle Institute ---------------------------------------------------------------------------------------------------------------------- |
CEG COPYRIGHTS
TITLE AUTHOR OWNER REG. NUMBER REG. DATE ---------------------------------------------------------------------------------------------------------------------- Harley-Davidson Clinton Education Clinton TX5062068 January 18, 2000 Fundamentals I Group Education Group ---------------------------------------------------------------------------------------------------------------------- |
Schedule 5.6-3
SCHEDULE 5.7
INVESTIGATIONS AND AUDITS
Holdings completed an audit by the Internal Revenue Service (IRS) for the tax year ended September 30, 1999. Deductions for meals & insurance were disallowed which will generate an increase in tax of approximately $35,000. Additional state income taxes for this period are estimated at less than $5,000.
No other audits are pending. No notifications have been received.
Schedule 5.7
SCHEDULE 5.8
EMPLOYEE MATTERS
Universal Technical Institute of Arizona, Inc., a wholly-owned Subsidiary of Borrower, is a party to separate employment agreements, dated as of September 30, 1997, with each of John C. White and Robert D. Hartman. Copies of these agreements have been previously provided to the Lenders.
Universal Technical Institute, Inc. ("Holdings") is party to the severance agreements listed below:
1. Severance Agreement between Holdings and Kim McWaters, dated as of June 22, 2000.
2. Severance Agreement between Holdings and Sharon Gleeson, dated as of June 30, 2000.
3. Severance Agreement between Holdings and Jennifer Haslip, dated as of August 1, 2001.
Historical information with respect to Employee Matters for Holdings, its Subsidiaries and the Institutions follows.
UNIVERSAL TECHNICAL INSTITUTE
At the present time, the person handling the travel arrangements for all employees of Universal Technical Institute, Inc. and its subsidiaries is treated as an independent contractor. It is possible that the Internal Revenue Service may attempt to treat that person as an employee with the result that the Company may owe taxes, penalties and interest.
THE CLINTON HARLEY CORPORATION
There are no pending material claims pending against the Company.
Schedule 5.8
SCHEDULE 5.11
NONCONTRAVENTION
None.
Schedule 5.11
SCHEDULE 5.16
SUBORDINATED INDEBTEDNESS AND SELLER SUBORDINATED NOTES
6.55% Subordinated Note, due September 30, 2023, in the principal amount of $4,000,000 from Universal Technical Institute, Inc. to Clinton Education Group, Inc., an Arizona corporation.
8% Convertible Note, due June 30, 2006, in the principal amount of $5,250,000, from Universal Technical Institute, Inc. to Nelson R. Sharp.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $10,750,000 from Universal Technical Institute, Inc. to J/Z CBO (Delaware), LLC.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $4,650,000 from Universal Technical Institute, Inc. to JZEP.
13.5% Senior Subordinated Note, due October 31, 2006, in the principal amount of $4,000,000 from Universal Technical Institute, Inc. to JZEP.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $2,000,000 from Universal Technical Institute, Inc. to Old Clinton Harley Corporation.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $1,387,260.20 from Universal Technical Institute, Inc. to Robert D. Hartman.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $271,063.10 from Universal Technical Institute, Inc. to Jeffrey Muecke.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $157,471.20 from Universal Technical Institute, Inc. to James Gleeson.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $28,502.70 from Universal Technical Institute, Inc. to Joseph Cutler.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $25,307.90 from Universal Technical Institute, Inc. to Randall Smith.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $18,413.20 from Universal Technical Institute, Inc. to Sherrell Smith.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $15,352.20 from Universal Technical Institute, Inc. to Philip Christner.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $15,352.20 from Universal Technical Institute, Inc. to Randal Whitman.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $15,096.10 from Universal Technical Institute, Inc. to Thomas Nelmark.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $10,853.80 from Universal Technical Institute, Inc. to Roger Speer.
Schedule 5.16
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $5,006.90 from Universal Technical Institute, Inc. to Sharon Morrison.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $25,160.25 from Universal Technical Institute, Inc. to Kimberly McWaters.
13.5% Senior Subordinated Note, due January 31, 2008, in the principal amount of $25,160.25 from Universal Technical Institute, Inc. to Paul C. Riordan.
Schedule 5.16-2
SCHEDULE 7.1
CONDITIONS TO INITIAL LOANS HEREUNDER
(A) DELIVERIES. Any documents listed below shall be duly executed, in form and substance satisfactory to Agent, in quantities designated by Agent (except for the Amended and Restated Notes, of which only the originals shall be signed) and shall be delivered to Agent on or before the Second Amendment and Restatement Date. Capitalized terms used herein shall have the meanings set forth in the Second Amended and Restated Credit Agreement.
(1) CREDIT AGREEMENT. Second Amended and Restated Credit Agreement and all Schedules and Exhibits thereto.
(2) LENDER ADDITION AGREEMENTS AND ASSIGNMENTS. (i) Lender
Addition Agreements (in the form of Exhibit 10.1(B) to the
Original Credit Agreement and otherwise in substance
satisfactory to Agent) evidencing such assignments by Exiting
Lenders and/or Continuing Lenders of the rights and
obligations under the Original Credit Agreement to New Lenders
as may be necessary to consummate the transactions
contemplated by the Second Amended and Restated Credit
Agreement, and (ii) evidence satisfactory to Agent of any
assignments by Exiting Lenders and/or Continuing Lenders to
Continuing Lenders of the rights and obligations under the
Original Credit Agreement to New Lenders as may be necessary
to consummate the transactions contemplated by the Second
Amended and Restated Credit Agreement.
(3) TERM NOTES. Amended and Restated Term Notes for Term Loan A and Second Amended and Restated Term Notes for Term Loan B.
(3) REVOLVING NOTES. Revolving Notes for the Revolving Loans.
(4) SECURITY AGREEMENT. Security Agreement for Holdings; Amended and Restated Security Agreement for Borrower and all Non-Institution Subsidiaries and confirmation of existing Security Agreement; a Security Agreement for each Non-Institution Subsidiary that has not heretofore provided one; and Copyright, Patent and/or Trademark Security Agreements, where appropriate for each entity executing a Security Agreement.
(5) SECURITY INTERESTS, UCC FILINGS AND STOCK CERTIFICATES.
(a) Evidence that Agent has a valid and perfected security interest in the Collateral, subject only to Permitted Encumbrances.
(b) Executed documents (including financing statements under the UCC and other applicable documents under the laws of any jurisdiction with respect to the perfection of Liens) as Agent may deem necessary to perfect or confirm its security interests in the Collateral.
(c) Certificates (which certificates shall be properly endorsed in blank for transfer or accompanied by irrevocable undated stock powers duly endorsed in blank) representing all of the capital stock of Borrower and all Non-Institution Subsidiaries pursuant to the pledge agreement.
(6) REAL PROPERTY. Not Applicable.
Schedule 7.1
(7) ENVIRONMENTAL REPORT. An environmental report delivered to Agent.
(8) NOTICE OF BORROWING AND LETTER OF DIRECTION. A letter of direction from Borrower to Agent describing the disbursement of the proceeds of Incremental Term Loan A and any advance under the Revolving Loan and any Lender Letter of Credit or Risk Participation Agreement to be made or issued on the Second Amendment and Restatement Date.
(9) LETTER OF DIRECTION RE FUTURE LOANS. A letter of direction from Borrower to Agent authorizing and requesting Agent to wire transfer proceeds of all future advances under the Revolving Loan to a bank account designated by Borrower.
(10) INSURANCE POLICIES AND ENDORSEMENTS. Copies of insurance certificates for Borrower and all Non-Institution Subsidiaries together with endorsements naming Agent and Lenders, as applicable, as lender's loss payee (with respect to all property insurance), additional insured (with respect to all liability insurance) or assignee (with respect to all business interruption insurance) pursuant to an assignment agreement acceptable to Agent.
(11) PAYOFF LETTERS. For all Subject Subordinated Indebtedness.
(12) CONSENT AND WAIVER LETTERS. As applicable.
(13) FINANCIAL STATEMENTS. Financial statements referred to in subsection 5.5 of the Credit Agreement, and audited financial statements (reflecting a financial condition and results acceptable to the Agent) for the period ending September 30, 2001 of Holdings and its Subsidiaries.
(14) PRO FORMA AND PROJECTIONS.
(15) FINANCIAL CONDITION/SOLVENCY CERTIFICATE. A representation of each of Borrower, Holdings and each other Loan Party regarding its financial condition and solvency (after giving effect to the Penske/Charlesbank Related Transactions), supported by the Pro Forma and Projections for the period commencing on March 1, 2002 and concluding on March 31, 2009.
(16) CHARTER AND GOOD STANDING. Certified copies of the certificates or articles of incorporation of Holdings, Borrower, each Non-Institution Subsidiary and each other Loan Party together with good standing certificates from the respective states of incorporation and the respective states in which the principal places of business of each is located and from all states in which the activities of such Persons require them to be qualified and/or licensed to do business, each to be dated a recent date prior to the Second Amendment and Restatement Date.
(17) BYLAWS. Copies of the bylaws of Holdings, Borrower, each Non-Institution Subsidiary and each other Loan Party certified as of the Closing Date by its corporate secretary or an assistant secretary.
(18) RESOLUTIONS. Resolutions of the Boards of Directors of Holdings, Borrower, each Non-Institution Subsidiary and each other Loan Party authorizing and approving the execution, delivery and performance of the Loan Documents and all Penske/Charlesbank Related Transactions Documents to which such Person is a party, certified as of the
Schedule 7.1-2
Second Amendment and Restatement Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment.
(19) INCUMBENCY CERTIFICATES. Signature and incumbency certificates of the officers of each Loan Party executing the Loan Documents delivered on the Amendment and Restatement Date.
(20) PLEDGE AGREEMENT. Amendment or Amendment and Restatement of existing Pledge Agreements by Borrower and Holdings (each, a "PLEDGE AGREEMENT") and delivery of stock certificate (with endorsement) for stock of any Subsidiary of Holdings as to which no delivery has been made heretofore.
(21) GUARANTIES. Guaranty by Holdings and confirmation of each existing Guaranty of each Non-Institution Subsidiary.
(22) PURCHASE AGREEMENTS. Certified copy of the final Convertible Preferred Stock Purchase Agreement, and any amendments, modifications or waivers thereto; and all certificates, legal opinions and letters delivered in connection with the Convertible Preferred Stock Purchase Agreement and the Penske/Charlesbank Related Transactions, which certificates, legal opinions and letters shall be addressed to Agent and Lenders or accompanied by a written authorization from the person delivering such certificate, opinion or letter stating that Agent and Lenders may rely on such document as though it were addressed to them.
(23) RELATED TRANSACTIONS. Evidence that the Penske/Charlesbank Related Transactions have been consummated in accordance with the terms of the Convertible Preferred Stock Purchase Agreement and related documents and all other "RELATED AGREEMENTS" (as defined in the Convertible Preferred Stock Purchase Agreement), all as contemplated thereby, without material amendment or waiver except as approved in writing by Agent and Lenders.
(24) GOVERNMENT APPROVALS. Evidence and copies of any required prior approvals of any State or local regulating agencies (including the Necessary Regulatory Authorities) of the transactions contemplated by the Convertible Preferred Stock Purchase Agreement.
(25) OPINIONS OF COUNSEL. Written opinions of (i) Mayer, Brown, Rowe & Maw, special New York counsel, (ii) special Arizona counsel, (iii) special California counsel, (iv) special DOE regulatory counsel and (v) such other counsel as Agent may request, in each case, in form and substance satisfactory to Agent and its counsel, dated as of the Second Amendment and Restatement Date.
(26) SATISFACTION OF SUBJECT SUBORDINATED INDEBTEDNESS. Evidence of satisfaction and cancellation of all evidence of such Indebtedness.
(27) AMENDMENT OF HOLDINGS SUBORDINATED INDEBTEDNESS DOCUMENTS. Evidence that the Holdings Subordinated Indebtedness Documents governing the Remaining Subordinated Indebtedness shall have been amended in a manner satisfactory to Agent and Requisite Lenders.
(29) PRE-CLOSING SEARCHES. UCC, tax and judgment search reports listing all effective financing statements, tax liens and judgment liens that name Holdings or any of its
Schedule 7.1-3
Subsidiaries (or any of their respective predecessors) or any other Loan Party as debtor, together with copies of such financing statements, tax liens and judgment liens, the contents of which shall be satisfactory to Agent.
(29) PREFERRED STOCK. Certified copies of certificate of designation of Series D Preferred Stock.
(30) FEE LETTER. Fee letter among Borrower and Agent in respect of a documentation fee.
(31) OTHER DOCUMENTS. Borrower and Holdings shall have delivered such other documents as Agent may reasonably request.
(B) SUBSCHEDULES
(1) LITIGATION. List of any outstanding judgments, actions, charges, claims, demands, suits, proceedings, petitions, governmental investigations or arbitrations now pending or, to the best knowledge of Borrower after due inquiry, threatened against Holdings, any of its Subsidiaries, any other Loan Party, the Companies or any or affecting any property of Holdings, any of its Subsidiaries, any other Loan Party, the Companies, along with status reports, annexed hereto as Subschedule 1.
(2) EMPLOYEE BENEFIT PLANS. List of any employee benefit plans which Holdings, any of its Subsidiaries, any other Loan Party, the Companies or any Affiliate maintains or contributes to, or has any current or potential obligations under, and copies of IRS Determination Letters for each such employee benefit plan, annexed hereto as Subschedule 2.
(3) CLOSING FEES. List of any broker's, finder's, due diligence, structuring, debt or equity placement fees, commissions or similar compensation payable with respect to the consummation of the Related Transactions, annexed hereto as Subschedule 3.
(4) INVESTMENTS. List of any Investments in any Person by Holdings or any of its Subsidiaries, annexed hereto as Subschedule 4.
(5) DERIVATIVES. List of any contracts or other relationships entered into by Holdings or any of its Subsidiaries which involve the exchange, transfer or modification of risks associated with fluctuations in interest rates, currency exchange rates or commodity prices or any similar risks through caps, swaps, collars, futures contracts, forward exchange contracts or any other type of derivative arrangement, annexed hereto as Subschedule 5.
(6) BANK ACCOUNT. List of bank accounts setting forth for each such bank account, the bank at which the account is maintained, the account number, the purpose of the account and the maximum balance of the account.
(7) SUBSIDIARIES. List of Holdings' and Borrowers' percentage ownership of each of their respective Subsidiaries.
Schedule 7.1-4
The foregoing deliveries and subschedules are true, correct and complete and are made and delivered this 29th day of March, 2002.
BORROWER:
UTI HOLDINGS, INC.
By: ____________________________
Name:
Title:
Schedule 7.1-5
SCHEDULE 7.1(B)(1)
LITIGATION
Occasionally litigation against Holdings and its Subsidiaries is threatened by various parties as a result of incidents occurring in the ordinary course of business. There are no material lawsuits pending with the Company.
Schedule 7.1(B)(1)
SCHEDULE 7.1(B)(2)
EMPLOYEE BENEFIT PLANS
Dental. Dental insurance is provided through MetLife. Two plans are offered including a basic and a buy-up program. This is a pre-tax benefit.
Short term and long term disability. Jefferson Pilot Financial is the carrier for company paid short and long term disability. Short term pays 66 and 2/3% of base up to $500 per week. Long term disability provides 50% of base salary up to $5,000 per month maximum. Jefferson Pilot also offers voluntary term life insurance for the employee, spouse and dependents in varying amounts.
Vision. A voluntary discount vision program is offered through EyeMed Vision Care.
Life and AD&D. These programs are also offered through Jefferson Pilot Financial. Employees are eligible for one times their base salary up to $40,000 maximum.
Vacation. After completing 90 days of employment, all full-time and part-time regular employees accrue a bi-weekly vacation benefit equal to 10 days for 90 days to four years of service, 15 days for five years to nine years of service, and 20 days for 10 plus years of service.
Holidays. All full-time and part-time regular employees are eligible for holiday pay. The Company observes nine paid holidays per calendar year.
Sick/Personal Time. All full-time and part-time regular employees are eligible for a maximum of six paid days off per year to be used for hours and/or days missed due to illness or personal reasons.
Tuition Reimbursement. The Company will provide reimbursement for the cost of
tuition, books, lab and registration fees as follows: Non-Degree Course Work:
Must directly relate to the employee's professional development within the
company. Payment is remitted at 100% if a grade of "C" or better is attained.
Degree Programs: The Company will provide assistance for course work required as
part of an approved degree program. The Company will provide 50% of
reimbursement upon the successful completion of each course graded "C" or
better. One year after graduation, the remaining 50% of the cost will be
reimbursed to the active employee.
401(k). This program is available to full-time employees on the first of the month after 90 days of employment. The Company match is $.50 on the dollar up to 5% of base pay beginning January 1, 2002. The vesting schedule is 5 years and is zero for the first year.
Profit Sharing Plan. The Company provides a profit sharing plan with a discretionary match.
Bonus. Bonus plans are maintained for all employees as follows:
Manager bonuses are paid each December based on a percentage of base pay and business unit achievement of targets.
Grad Block bonuses are paid monthly to Education Representatives based on a percentage of tuition for graduates once they have exceeded what they have been paid in up front compensation
Schedule 7.1(B)(2)
BBOP bonuses are paid quarterly to Graduate Employment Directors and Advisors based on the number of students employed after graduation.
MPC bonuses are paid quarterly to Manufacturer Program Coordinators based on the number of starts in the manufacturer programs at each campus
Industry Relations Managers Bonus is paid quarterly based on the number of starts and graduates in the assigned industry accounts
Breakthrough Bonus is paid every year in December to all employees who do not participate in another bonus program based on business unit achievement of targets.
Executive Medical Reimbursement. A taxable medical reimbursement program is offered to senior executives. The program allows for reimbursement of unpaid medical expenses up to a specified dollar amount.
Executive Premiums. The Company pays medical, dental and buy-up disability insurance premiums for the senior executive team.
Deferred Compensation. This plan is available to senior executives and is a non-qualified plan. The executives may elect to defer compensation and elect investment options.
Schedule 7.1(B)(2)-2
SCHEDULE 7.1(B)(3)
CLOSING FEES
Closing fees payable in the approximate amounts as set forth below:
TJC Management Corp. $ 1,325,000.00 The Jordan Company, LLC 562,781.25 Jordan Investment Company of Illinois 112,218.75 Worldwide Training Group, LLC ("WTG") 350,000.00 Charlesbank Capital Partners, LLC ("CCP") 150,000.00 Credit Suisse First Boston (Investment Banking) 1,609,000.00 Mayer, Brown, Rowe & Maw (Legal) 550,000.00 Dow, Lohnes & Albertson, pllc (Legal) 107,764.07 Sacks Tierney P.A. (Legal) 1,500.00 Covington & Burling 430,000.00 George Aucott (Management Consultant) 125,000.00 Lunkes & Associates (Management Consultant) 150,000.00 Crowe Chizek and Company, LLP 109,227.00 Aon Risk Services, Inc. 25,000.00 Worldwide Training Group, LLC (Out of Pocket Expenses) 90,662.00 Charlesbank Capital Partners, LLC (Out of Pocket Expenses) 30,808.00 The Jordan Company, LLC (Out of Pocket Expenses) 20,000.00 Senior Financing (Amendment Fee) 1,575,000.00 Senior Financing (Documentation Fee) 50,000.00 Bank Legal 156,500.00 Bank Expenses (Environmental, Insurance, Other) 28,261.75 Amendment Fee 153,300.00 FEES ALREADY PAID BY THE COMPANY: PriceWaterhouseCoopers (Accounting) 100,200.00 Dow, Lohnes & Albertson, pllc 23,760.00 -------------- APPROXIMATE TRANSACTION RELATED FEES AND EXPENSES: $ 7,835,982.82 |
Schedule 7.1(B)(3)
SCHEDULE 7.1(B)(4)
INVESTMENTS
None.
Schedule 7.1(B)(4)
SCHEDULE 7.1(B)(5)
DERIVATIVES
Neither Universal Technical Institute, Inc. nor any of its Subsidiaries are parties to any contracts or have entered into any relationships which involve the exchange, transfer or modification of risks associated with fluctuations in interest rates, currency exchange rates or commodity prices or any similar risks through caps, swaps, collars, futures contracts, forward exchange contracts or any other type of derivative arrangement.
Schedule 7.1(B)(5)
SCHEDULE 7.1(B)(6)
BANK ACCOUNTS
BANK ONE. ARIZONA ----------------- UTI Holdings Concentration Sweep Account #2964-6016 Universal Technical Institute Inc. General Operating Account #0628-9095 Universal Technical Institute Inc. Payroll Account #0956-6844 Universal Technical Institute Inc. Student Payables Account #0956-6887 Clinton Harley Corporation (AZ Campus) Deposit Account #0631-7383 Universal Technical Institute Inc. Medical Reimbursement #2233-1177 BANK ONE, TEXAS Universal Technical Institute of Texas, Inc. General Operating Account #1588115004 BANK ONE (CHICAGO) U.T.I. of Illinois, Inc. Student Payables Account #4425055723406 WELLS FARGO (CALIFORNIA) Universal Technical Institute of California, Inc. Student Payables Account #0465-045904 BANK OF AMERICA (FLORIDA) Clinton Harley Corporation (Florida Campus) Deposit Account #002830126729 M&I THUNDERBIRD BANK #09 2839 W. BELL RD PHOENIX, AZ 85023-3093 Chris Binder Memorial Fund Account #09-12460-8 |
**********
The following are the Bank One fiduciary bank accounts (Title IV Accounts) at the DOE. When the students make "satisfactory progress", the monies may be withdrawn into the Company's general bank accounts. Depending upon the time of the year, these accounts may hold as much as $1,000,000.
UTI FFELP Trust #1 (EFT Transfers) #0956-6879 Fed ID#86-0226984 MMI FFELP Trust #2 (EFT Transfers) #0956-6916 Fed ID#86-0226984 Universal Technical Institute Federal EDPMS - Phoenix #0030-3036 Universal Technical Institute Federal EDPMS - Houston #0030-3132 MMI Federal EDPMS #2824-8147 Universal Technical Institute Federal Trust Fund - Phoenix #0956-6924 Universal Technical Institute Federal Trust Fund - Houston #0956-6676 Clinton Harley Federal Trust Fund #2238-3831 SLM Financial Account #2828-8739 Universal Technical Institute CAL Grant #0630-0397 |
Schedule 7.1(B)(6)
SCHEDULE 7.1(B)(7)
SUBSIDIARIES
Universal Technical Institute, Inc.
owns 100% of
UTI Holdings, Inc.
which, in turn, owns 100% of the following:
Universal Technical Institute of Arizona, Inc.*
Universal Technical Institute of California, Inc.
Universal Technical Institute of Texas, Inc.
U. T. I. of Illinois, Inc.
Universal Technical Institute of North Carolina, Inc.
Custom Training Group, Inc.
The Clinton Harley Corporation (Delaware)
Clinton Education Group, Inc. (Delaware)**
** A shell corporation for future acquisitions.
Schedule 7.1(B)(7)
SCHEDULE 10.1(A)
PRO FORMA / PROJECTIONS
Attached hereto are the projections prepared by the Company. These projections represent a reasonable estimate by the Company of the future performance of Universal Technical Institute and its subsidiaries after giving effect to the discontinuance of NTT and PTA.
See attached.
Schedule 10.1(A)
THE JORDAN COMPANY
RECAPITALIZATION -- PENSKE -- MANAGEMENT BANK CASE
Assumes Transaction Closed 9/30/01
Dollars in Thousands)
1. TRANSACTION ASSUMPTIONS
SOURCES:
Bank Revolver $ 4,500 (1) Bank Term A 20,000 Bank Term B 30,000 Sub. Debt. (Hold. Co.) 0 Sr. Red. Pref. (Hold Co.) 0 Other Sr. Pref. (Hold Co.) 0 Jr. Conv. Pref. (Hold Co.) 45,500 (2) Common Stk. (Hold Co.) 0 Cash on B/S 0 --------- Total $ 100,000 ========= |
USES:
Pay Down Bank Debt $ 69,152 Pay Down Sub Debt 23,400 PIK Interest 1,850 Accrued Fees 2,000 Fees & Expenses 3,500 (3) Working Capital 99 --------- Total $ 100,000 ========= |
--------------- (1) Revolver Commitment = $ 20,000 Avg. Seasonal Balance = $ 0 (2) Purchased by New Investor. Convertible at: 42.5% (3) Annual fee amortization (7 years): $ 500 |
FINANCING ASSUMPTIONS:
CLOSE RATE PAYMENT LIBOR + ---------- ------- ------- Bank Revolver 6.250% Cash 3.25% Float (5) Bank Term A 6.250% Cash 3.25% Float (5) Bank Term B 6.750% Cash 3.75% Float (5) Sub. Debt (Hold. Co.) (4) 8.000% Cash 5.00% Fixed Sr. Red. Pref. (Hold Co.) 7.500% Cum. 4.50% Fixed Other Sr. Pref. (Hold Co.) 6.000% Cum. 3.00% Fixed Jr. Conv. Pref. (Hold Co.) 7.500% Cum. 4.50% Fixed |
(5) Based on pricing grid, subject to change based on leverage.
PRO FORMA CAPITAL STRUCTURE:
x EBITDA ---------------------------------- $ AMOUNT PERCENT 2001 LTM (6) 2002 2003 -------- ------- ---- --- ---- ---- OPCO. Bank Revolver $ 4,500 3.57% 0.21 x 0.19 x 0.19 x 0.18 x Bank Term A 20,000 15.87% 1.16 x 1.05 x 1.03 x 0.98 x Bank Term B 30,000 23.80% 2.57 x 2.34 x 2.29 x 2.18 x -------- ------ ----- ---- ---- ---- Total Debt OpCo. $ 54,500 43.24% 2.57 x 2.34 x 2.29 x 2.18 x HOLDCO. Sub Debt (Hold Co.) $ 6,616 5.25% 2.88 x 2.62 x 2.56 x 2.45 x Sr. Red. Pref. (Hold Co.) 0 0.00% Other Sr. Pref. (Hold Co.) 19,414 15.40% Jr. Conv. Pref. (Hold Co.) 45,500 36.10% Common Stk. (Hold Co.) 0 0.00% -------- ------ Total Equity OpCo. $ 71,530 56.76% -------- ------ Total Capitalization $126,030 100.00% ======== ====== |
DEBT MULTIPLES:
OPCO TOTAL ---- ----- Total Debt $ 54,500 $ 61,116 Less Cash (7) (3,452) (3,452) ---------- ---------- Net Debt $ 51,049 $ 57,665 ========== ========== Net Debt/2001 EBITDA 2.41 x 2.72 x Net Debt/ LTM EBITDA (6) 2.19 x 2.47 x Net Debt/2002 EBITDA 2.14 x 2.42 x Net Debt/2003 EBITDA 2.04 x 2.31 x |
MARKET ASSUMPTIONS:
LIBOR at Close 3.00% Federal Income Tax Rate 35.00% State Income Tax Rate 6.00% Cash on Balance Sheet - LIBOR less 1.00% |
(7) Cash is a pro forma value after the transaction.
Schedule 10.1(A)-2
2. INCOME STATEMENT
Years Ended September 30,
ACTUAL ----------------------------------- 1998 1999 2000 2001 ------- ------- ------- -------- Net Sales $66,226 $78,540 $92,701 $110,386 Cost of Goods Sold 15,288 19,827 25,517 34,384 ------- ------- ------- -------- Gross Profit 50,938 58,713 67,184 76,002 SG&A 43,127 50,412 54,592 59,275 ------- ------- ------- -------- Adjusted EBITA $ 7,811 $ 8,301 $12,592 $ 16,727 Step-Up Depreciation (Book-40 Years) Amort of Trans. Fees Amort of Goodwill Nascar Start-Up TJC/Penske/Charlesbank Management/Director Fees EBIT Interest Expense Interest (Income) Bank Fees Pre-Tax Income Income Taxes Net Income Cash Pref. Dividend Cum. Pref. Dividend Net Income after Dividends EBITDA CALCULATION: Adjusted EBITA $ 7,811 $ 8,301 $12,592 $ 16,727 Add: Depreciation 2,015 2,546 3,288 4,477 ------- ------- ------- -------- Adjusted EBITDA $ 9,826 $10,847 $15,880 $ 21,204 Less: CapEx 3,069 5,737 3,935 5,732 ------- ------- ------- -------- FCF $ 6,757 $ 5,110 $11,945 $ 15,472 ======= ======= ======= ======== PROJECTED ------------------------------------------------------------------------------ 2002 2003 2004 2005 2006 2007 2008 2009 -------- -------- -------- -------- -------- -------- -------- -------- Net Sales $123,316 $142,018 $161,896 $185,240 $211,473 $232,620 $251,230 $266,304 Cost of Goods Sold 37,105 43,134 49,724 56,198 64,211 70,949 76,625 81,223 -------- -------- -------- -------- -------- -------- -------- -------- Gross Profit 86,211 98,884 112,172 129,042 147,262 161,671 174,605 185,081 SG&A 66,812 79,263 89,354 102,214 113,511 126,386 136,627 144,815 -------- -------- -------- -------- -------- -------- -------- -------- Adjusted EBITA $ 19,399 $ 19,621 $ 22,818 $ 26,828 $ 33,751 $ 35,285 $ 37,978 $ 40,266 Step-Up Depreciation (Book-40 Years) 0 0 0 0 0 0 0 0 Amort of Trans. Fees 500 500 500 500 500 500 500 0 Amort of Goodwill 0 0 0 0 0 0 0 0 Nascar Start-Up 1,814 0 0 0 0 0 0 0 TJC/Penske/Charlesbank Management/Director Fees 696 724 807 911 1,089 1,173 1,255 1,325 -------- -------- -------- -------- -------- -------- -------- -------- EBIT $ 16,389 $ 18,397 $ 21,511 $ 25,417 $ 32,162 $ 33,612 $ 36,222 $ 38,941 Interest Expense 4,414 4,707 4,933 4,843 4,649 4,262 3,349 1,852 Interest (Income) (80) (197) (483) (885) (1,509) (2,306) (3,017) (3,635) Bank Fees 129 148 142 137 130 123 117 111 -------- -------- -------- -------- -------- -------- -------- -------- Pre-Tax Income $ 11,926 $ 13,739 $ 16,919 $ 21,322 $ 28,893 $ 31,534 $ 35,773 $ 40,614 Income Taxes 4,639 5,345 6,582 8,294 11,239 12,267 13,916 15,799 -------- -------- -------- -------- -------- -------- -------- -------- Net Income $ 7,287 $ 8,395 $ 10,338 $ 13,028 $ 17,654 $ 19,267 $ 21,857 $ 24,815 Cash Pref. Dividend 0 0 0 0 0 0 0 0 Cum. Pref. Dividend 4,577 4,577 4,577 4,577 4,577 4,577 4,577 4,577 -------- -------- -------- -------- -------- -------- -------- -------- Net Income after Dividends $ 2,709 $ 3,817 $ 5,760 $ 8,450 $ 13,076 $ 14,690 $ 17,280 $ 20,238 ======== ======== ======== ======== ======== ======== ======== ======== EBITDA CALCULATION: Adjusted EBITA $ 19,399 $ 19,621 $ 22,818 $ 26,828 $ 33,751 $ 35,285 $ 37,978 $ 40,266 Add: Depreciation 4,450 5,355 5,449 5,614 5,802 7,624 8,233 8,727 -------- -------- -------- -------- -------- -------- -------- -------- Adjusted EBITDA $ 23,849 $ 24,976 $ 28,267 $ 32,442 $ 39,553 $ 42,908 $ 46,211 $ 48,994 Less: CapEx 6,065 5,729 6,254 5,498 5,873 6,373 6,873 7,373 -------- -------- -------- -------- -------- -------- -------- -------- FCF $ 17,784 $ 19,247 $ 22,013 $ 26,944 $ 33,680 $ 36,535 $ 39,338 $ 41,621 ======== ======== ======== ======== ======== ======== ======== ======== |
Schedule 10.1(A)-3
3. RATIO ANALYSIS
ACTUAL --------------------------------- 1998 1999 2000 2001 ---- ---- ---- ---- Net Sales Growth -- 18.59% 18.03% 19.08% Gross Margin 76.92% 74.76% 72.47% 68.85% EBITDA Margin 14.84% 13.81% 17.13% 19.21% EBITA Margin 11.79% 10.57% 13.58% 15.15% FCF Margin 10.20% 6.51% 12.89% 14.02% |
PROJECTED --------------------------------------------------------------------- 2002 2003 2004 2005 2006 2007 2008 2009 ---- ---- ---- ---- ---- ---- ---- ---- Net Sales Growth 11.71% 15.17% 14.00% 14.42% 14.16% 10.00% 8.00% 6.00% Gross Margin 69.91% 69.63% 69.29% 69.66% 69.64% 69.50% 69.50% 69.50% EBITDA Margin 19.34% 17.59% 17.46% 17.51% 18.70% 18.45% 18.39% 18.40% EBITA Margin 15.73% 13.82% 14.09% 14.48% 15.96% 15.17% 15.12% 15.12% FCF Margin 14.42% 13.55% 13.60% 14.55% 15.93% 15.71% 15.66% 15.63% |
INTEREST COVERAGE: ------------------ PRO FORMA ---------------------------------- EBITDA/Bank Int. Exp. 2.58 x 2.84 x 4.16 x 5.56 x EBITDA/Opco Cash Int. Exp. 2.23 x 2.46 x 3.60 x 4.80 x EBITDA/Total Cash Interest Exp. 2.23 x 2.46 x 3.60 x 4.80 x Bank Debt/EBITDA 5.55 x 5.02 x 3.43 x 2.57 x Opco Debt / EBITDA 5.55 x 5.02 x 3.43 x 2.57 x Total Debt / EBITDA 6.22 x 5.63 x 3.85 x 2.88 x |
INTEREST COVERAGE: ------------------ EBITDA/Bank Int. Exp. 6.25 x 6.07 x 6.48 x 7.52 x 9.60 x 11.50 x 16.39 x 37.05 x EBITDA/Opco Cash Int. Exp. 5.40 x 5.31 x 5.73 x 6.70 x 8.51 x 10.07 x 13.80 x 26.46 x EBITDA/Total Cash Interest Exp. 5.40 x 5.31 x 5.73 x 6.70 x 8.51 x 10.07 x 13.80 x 26.46 x Bank Debt/EBITDA 2.05 x 1.86 x 1.52 x 1.18 x 0.81 x 0.52 x 0.17 x 0.00 x Opco Debt / EBITDA 2.33 x 2.13 x 1.76 x 1.38 x 0.98 x 0.67 x 0.32 x 0.00 x Total Debt / EBITDA 2.33 x 2.13 x 1.76 x 1.38 x 0.98 x 0.67 x 0.32 x 0.00 x |
Schedule 10.1(A)-4
4. CASH FLOW STATEMENT
PROJECTED ---------------------------------------------------------------------- 2002 2003 2004 2005 2006 2007 2008 2009 ---- ---- ---- ---- ---- ---- ---- ---- OPERATING SOURCES: Net Income after Dividends $ 2,709 $ 3,817 $ 5,760 $ 8,450 $13,076 $14,690 $17,280 $20,238 Cum. Dividends 4,577 4,577 4,577 4,577 4,577 4,577 4,577 4,577 Depreciation 4,450 5,355 5,449 5,614 5,802 7,624 8,233 8,727 Amort of Trans. Fees 500 500 500 500 500 500 500 0 Amort of Goodwill 0 0 0 0 0 0 0 0 PIK Interest 0 0 0 0 0 0 0 0 ------- ------- ------- ------- ------- ------- ------- ------- Total Sources $12,237 $14,250 $16,287 $19,142 $23,956 $27,391 $30,591 $33,542 OPERATING USES: Increase in Working Capital $ 320 $ 331 $ 324 $ 243 $ 221 $ 177 $ 201 $ 201 Capital Expenditures 6,065 5,729 6,254 5,498 5,873 6,373 6,873 7,373 ------- ------- ------- ------- ------- ------- ------- ------- Total Uses $ 6,385 $ 6,060 $ 6,578 $ 5,741 $ 6,094 $ 6,550 $ 7,074 $ 7,574 ------- ------- ------- ------- ------- ------- ------- ------- CUMULATIVE Cash Flow From Operations $ 5,852 $ 8,189 $ 9,709 $13,401 $17,862 $20,841 $23,517 $25,969 ---------- $125,339 DEBT/PREF. AMORTIZATION (BORROWINGS): Bank Term A 850 2,200 3,200 4,450 5,950 3,350 0 0 Bank Term B 150 300 300 300 300 6,400 14,250 8,000 Sub. Debt (Hold. Co.) 0 0 0 0 0 0 0 6,616 Sr. Red. Pref. (Hold Co.) 0 0 0 0 0 0 0 0 Other Sr. Pref. (Hold Co.) 0 0 0 0 0 0 0 0 Jr. Conv. Pref. (Hold Co.) 0 0 0 0 0 0 0 0 Capital Leases 554 508 332 10 5 0 0 0 ------- ------- ------- ------- ------- ------- ------- ------- Total Mandatory Amortization/Interest Hldg. Co. $ 1,554 $ 3,008 $ 3,832 $ 4,760 $ 6,255 $ 9,750 $14,250 $14,616 Cash Bal. After Debt Amortization $ 4,298 $ 5,181 $ 5,877 $ 8,641 $11,607 $11,091 $ 9,267 $11,353 Add: Beginning Cash Bal. 3,452 3,249 8,431 14,308 22,949 34,555 45,646 54,913 ------- ------- ------- ------- ------- ------- ------- ------- Cash Avail. Before Revolver $ 7,749 $ 8,431 $14,308 $22,949 $34,555 $45,646 $54,913 $66,265 Revolver Borrowings $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Revolver (Amortization) (4,500) 0 0 0 0 0 0 0 Additional Bank Term A Amortization 0 0 0 0 0 0 0 0 Additional Bank Term B Amortization 0 0 0 0 0 0 0 0 Additional Sr Sub Debt Amortization 0 0 0 0 0 0 0 0 ------- ------- ------- ------- ------- ------- ------- ------- Ending Cash Balance $ 3,249 $ 8,431 $14,308 $22,949 $34,555 $45,646 $54,913 $66,265 ======= ======= ======= ======= ======= ======= ======= ======= |
Schedule 10.1(A)-5
5. BALANCE SHEET
September 30,
ACTUAL (1) PROJECTED ------------------------ RECAP PROFORMA --------------------- 2000 2001 ADJ.'S 2001 2002 2003 ---- ---- ------ ---- ---- ---- Assets: Cash & Equivalents $ 2,792 $ 3,353 $ 99 $ 3,452 $ 3,249 $ 8,431 Accounts Receivable 65,381 73,251 0 73,251 84,463 97,273 Prepaid Student Acquisition Costs 6,885 8,780 0 8,780 10,174 11,716 Prepaid Expenses and other Current Assets 2,317 2,242 0 2,242 2,466 2,840 --------- --------- --------- --------- --------- --------- Total Current Assets 77,375 87,626 99 87,725 100,352 120,260 Net Prop., Plant & Equip. 14,806 17,077 0 17,077 18,692 19,066 Existing Goodwill 21,150 20,578 0 20,578 20,578 20,578 Trans. Costs 0 0 3,500 3,500 3,000 2,500 Investments 0 0 0 0 0 0 Other Assets 5,176 5,969 0 5,969 5,969 5,969 --------- --------- --------- --------- --------- --------- Total Assets 118,507 131,250 3,599 134,849 148,591 168,373 ========= ========= ========= ========= ========= ========= Liabilities & Equity Accounts Payable 8,826 14,135 0 14,135 15,249 16,249 Deferred Revenues 73,782 76,623 0 76,623 88,171 101,543 Other Current Liabilities 1,329 3,111 0 3,111 2,960 2,982 --------- --------- --------- --------- --------- --------- Total Current Liabilities 83,937 93,869 0 93,869 106,379 120,774 Revolver/Existing Debt 73,916 69,152 (64,652) 4,500 0 0 Bank Term A 0 0 20,000 20,000 19,150 16,950 Bank Term B 0 0 30,000 30,000 29,850 29,550 Sub. Debt (Hold. Co.) 29,526 30,016 (23,400) 6,616 6,616 6,616 Capital Leases 1,852 1,409 0 1,409 855 347 Other L.T. Liabilities (2) 10,844 11,516 (3,850) 7,667 7,667 7,667 --------- --------- --------- --------- --------- --------- Total Liabilities 200,075 205,962 (41,902) 164,061 170,517 181,904 Sr. Red. Pref. (Hold Co.) 0 0 0 0 0 0 Other Sr. Pref. (Hold Co.) 18,296 19,414 0 19,414 20,579 21,744 Jr. Conv. Pref. (Hold Co.) 0 0 45,500 45,500 48,913 52,325 Common Stock 0 0 0 0 0 0 Retained Earnings (99,864) (94,126) 0 (94,126) (91,417) (87,599) --------- --------- --------- --------- --------- --------- Total Equity (81,568) (74,712) 45,500 (29,212) (21,925) (13,531) --------- --------- --------- --------- --------- --------- Total Liabilities & Equity $ 118,507 $ 131,250 $ 3,599 $ 134,849 $ 148,591 $ 168,373 ========= ========= ========= ========= ========= ========= PROJECTED --------------------------------------------------------------------- 2004 2005 2006 2007 2008 2009 ---- ---- ---- ---- ---- ---- Assets: Cash & Equivalents $ 14,308 $ 22,949 $ 34,555 $ 45,646 $ 54,913 $ 66,265 Accounts Receivable 110,888 126,877 144,845 159,329 172,075 182,400 Prepaid Student Acquisition Costs 13,356 15,282 17,447 19,191 20,726 21,970 Prepaid Expenses and other Current Assets 3,238 3,705 4,229 4,652 5,025 5,326 --------- --------- --------- --------- --------- --------- Total Current Assets 141,790 168,813 201,076 228,819 252,739 275,961 Net Prop., Plant & Equip 19,871 19,755 19,826 18,575 17,215 15,861 Existing Goodwill 20,578 20,578 20,578 20,578 20,578 20,578 Trans. Costs 2,000 1,500 1,000 500 0 0 Investments 0 0 0 0 0 0 Other Assets 5,969 5,969 5,969 5,969 5,969 5,969 --------- --------- --------- --------- --------- --------- Total Assets 190,208 216,615 248,449 274,441 296,501 318,369 ========= ========= ========= ========= ========= ========= Liabilities & Equity Accounts Payable 17,029 18,091 19,351 20,410 21,203 21,808 Deferred Revenues 115,756 132,447 151,203 166,324 179,629 190,407 Other Current Liabilities 3,319 3,705 4,124 4,420 4,773 5,060 --------- --------- --------- --------- --------- --------- Total Current Liabilities 136,103 154,243 174,678 191,153 205,606 217,275 Revolver/Existing Debt 0 0 0 0 0 0 Bank Term A 13,750 9,300 3,350 0 0 0 Bank Term B 29,250 28,950 28,650 22,250 8,000 0 Sub. Debt (Hold. Co.) 6,616 6,616 6,616 6,616 6,616 0 Capital Leases 15 5 0 0 0 0 Other L.T. Liabilities (2) 7,667 7,667 7,667 7,667 7,667 7,667 --------- --------- --------- --------- --------- --------- Total Liabilities 193,401 206,780 220,961 227,686 227,888 224,941 Sr. Red. Pref. (Hold Co.) 0 0 0 0 0 0 Other Sr. Pref. (Hold Co.) 22,909 24,073 25,238 26,403 27,568 28,733 Jr. Conv. Pref. (Hold Co.) 55,738 59,150 62,563 65,975 69,388 72,800 Common Stock 0 0 0 0 0 0 Retained Earnings (81,839) (73,389) (60,312) (45,623) (28,343) (8,105) --------- --------- --------- --------- --------- --------- Total Equity (3,193) 9,835 27,488 46,755 68,613 93,428 --------- --------- --------- --------- --------- --------- Total Liabilities & Equity $ 190,208 $ 216,615 $ 248,449 $ 274,441 $ 296,501 $ 318,369 ========= ========= ========= ========= ========= ========= |
(2) Includes a $4 million "shadow note" which is offset by a $4 million subscription receivable from John White.
Schedule 10.1(A)-6
6. REVENUE, CGS, S,G & A, AND W.C. ASSUMPTIONS
Years Ended December 31,
ACTUAL PROJECTED ---------------------------------------------------------------------------- 1998 1999 2000 2001 2002 2003 ---- ---- ---- ---- ---- ---- Net Sales 66,226 78,540 92,701 110,386 123,316 142,018 Growth Rate NA 18.59% 18.03% 19.08% 11.71% 15.17% Cost of Goods 15,288 19,827 25,517 34,384 Less: Primary Adjustment 0 0 0 0 Other Adjustments 0 0 0 0 --------- --------- ---------- ---------- ---------- ---------- Adj. Cost of Goods 15,288 19,827 25,517 34,384 37,105 43,134 As % of Net Sales 23.08% 25.24% 27.53% 31.15% 30.09% 30.37% SG&A 43,127 50,412 54,592 59,934 68,626 77,763 Less: Nascar Start-Up Adjustment (257) (1,814) 0 Other "EBITDA" Adjustments (1) (402) 0 0 Plus: Expense Reserve (2) 0 1,500 ---------- ---------- ---------- Adj. SG&A $ 43,127 $ 50,412 $ 54,592 $ 59,275 $ 66,812 $ 79,263 As % of Net Sales 65.12% 64.19% 58.89% 53.70% 54.18% 55.81% TJC/Penske/Charlesbank Mgt./Director Fees 696 724 Cost of Unused Line (1/2% of unused balance) 46 65 Agent's Administration Fee 50 50 Non-DOE L/C Fee (assumes $1.0 million @ 3.25%) 33 33 ---------- ---------- Bank Fees 129 148 Total Cap. Ex. 3,069 5,737 3,935 5,732 6,065 5,729 Total Depreciation 2,015 2,546 3,288 4,477 4,450 5,355 Step-Up P,P & E (Book - 40 Years) 0 0 --------- --------- ---------- ---------- ---------- ---------- Total Depreciation $ 2,015 $ 2,546 $ 3,288 $ 4,477 $ 4,450 $ 5,355 Base Dep./Cap Exp. 0.7 0.4 0.8 0.8 0.7 0.9 Working Capital Assumptions Days in A/R (Rev.) 257.4 242.2 250.0 250.0 Prepaid Student Acquisitions (% of Sales) 7.43% 7.95% 8.25% 8.25% Prepaid Expenses (% of Sales) 2.50% 2.03% 2.00% 2.00% Days in A/P (CGS) 126.2 150.0 150.0 137.5 Def. Rev. (% of Sales) 79.59% 69.41% 71.50% 71.50% Other Current Liabilities (% of Sales) 1.43% 2.82% 2.40% 2.10% Net Work. Cap. (3) ($ 9,354) ($ 9,596) ($ 9,276) ($ 8,945) W.C./Revenue -10.09% -8.69% -7.52% -6.30% Inc. in Net W.C. ---------- (242) 320 331 PROJECTED ----------------------------------------------------- 2004 2005 2006 2007 ---- ---- ---- ---- Net Sales 161,896 185,240 211,473 232,620 Growth Rate 14.00% 14,42% 14.16% 10.00% Cost of Goods Less: Primary Adjustment Other Adjustments ---------- ------------ ---------- ---------- Adj. Cost of Goods 49,724 56,198 64,211 70,949 As % of Net Sales 30.71% 30.34% 30.36% 30.50% SG&A 86,854 98,214 107,011 118,636 Less: Nascar Start-Up Adjustment 0 0 0 0 Other "EBITDA" Adjustments (1) 0 0 0 0 Plus: Expense Reserve (2) 2,500 4,000 6,500 7,750 ---------- ------------ ---------- ---------- Adj. SG&A $ 89,354 $ 102,214 $ 113,511 $ 126,386 As % of Net Sales 55.19% 55.18% 53.68% 54.33% TJC/Penske/Charlesbank Mgt./Director Fees 807 911 1,089 1,173 Cost of Unused Line (1/2% of unused balance) 60 54 48 40 Agent's Administration Fee 50 50 50 50 Non-DOE L/C Fee (assumes $1.0 million @ 3.25%) 33 33 33 33 ---------- ------------ ---------- ---------- Bank Fees 142 137 130 123 Total Cap. Ex 6,254 5,498 5,873 6,373 Total Depreciation 5,449 5,614 5,802 7,624 Step-Up P,P & E (Book - 40 Years) 0 0 0 0 ---------- ------------ ---------- ---------- Total Depreciation $ 5,449 $ 5,614 $ 5,802 $ 7,624 Base Dep./Cap Exp. 0.9 1.0 1.0 1.2 Working Capital Assumptions Days in A/R (Rev.) 250.0 250.0 250.0 250.0 Prepaid Student Acquisitions (% of Sales) 8.25% 8.25% 8.25% 8.25% Prepaid Expenses (% of Sales) 2.00% 2.00% 2.00% 2.00% Days in A/P (CGS) 125.0 117.5 110.0 105.0 Def. Rev. (% of Sales) 71.50% 71.50% 71.50% 71.50% Other Current Liabilities (% of Sales) 2.05% 2.00% 1.95% 1.90% Net Work. Cap. (3) ($ 8,621) ($ 8,379) ($ 8,158) ($ 7,981) W.C./Revenue -5.33% -4.52% -3.86% -3.43% Inc. in Net W.C. 324 243 221 177 |
(2) Represents an extra expense reserve taken versus the projections in the CSFB information. Such reserve is taken to discount the Company's "sale projections".
(3) Net Working Capital = (A/R + Prepaid Student Acquisition Costs + Prepaid Expenses) - (A/P + Deferred Revenues + Other Current Liabilities)
Schedule 10.1(A)-7
7. DEBT & PREFERRED AMORTIZATION
Libor - End of Year 3.00% 3.75% 5.00% 5.50% 6.00% Cash Balances 2.00% 2.75% 4.00% 4.50% 5.00% Bank Revolver At Close 2002 2003 2004 2005 -------- -------- -------- -------- -------- Total Capacity $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 Less: Borrowings O/S 4,500 4,500 0 0 0 Less: Title IV L/C 6,250 6,982 8,041 9,166 -------- -------- -------- -------- -------- Total Excess 15,500 9,250 13,018 11,959 10,834 L/C Fees @ 3.25% (based on current pricing) $ 203 $ 227 $ 261 $ 298 Rate 6.25% 7.00% 8.25% 8.75% 9.25% Beginning Principal $ 4,500 $ 4,500 $ 0 $ 0 $ 0 Borrowings 0 0 0 0 Amortization (4,500) 0 0 0 -------- -------- -------- -------- -------- Ending Principal $ 4,500 $ 0 $ 0 $ 0 $ 0 ======== ======== ======== ======== ======== Interest (Includes L/C Fees) $ 352 $ 227 $ 261 $ 298 Seasonal Revolver Component Average Balance $ 0 $ 0 $ 0 $ 0 $ 0 ======== ======== ======== ======== ======== Seasonal Interest $ 0 $ 0 $ 0 $ 0 Bank Term A At Close 2002 2003 2004 2005 -------- -------- -------- -------- -------- Rate 6.25% 7.00% 8.25% 8.75% 9.25% Beginning Principal $ 20,000 $ 20,000 $ 19,150 $ 16,950 $ 13,750 Amortization (850) (2,200) (3,200) (4,450) Optional Amortization 0 0 0 0 -------- -------- -------- -------- -------- Ending Principal $ 20,000 $ 19,150 $ 16,950 $ 13,750 $ 9,300 ======== ======== ======== ======== ======== Interest $ 1,325 $ 1,460 $ 1,441 $ 1,238 Bank Term B At Close 2002 2003 2004 2005 -------- -------- -------- -------- -------- Rate 6.75% 7.50% 8.75% 9.25% 9.75% Beginning Principal $ 30,000 $ 30,000 $ 29,850 $ 29,550 $ 29,250 Amortization (150) (300) (300) (300) Optional Amortization 0 0 0 0 -------- -------- -------- -------- -------- Ending Principal $ 30,000 $ 29,850 $ 29,550 $ 29,250 $ 28,950 ======== ======== ======== ======== ======== Interest $ 2,138 $ 2,425 $ 2,660 $ 2,779 Capital Leases At Close 2002 2003 2004 2005 -------- -------- -------- -------- -------- Rate NA NA NA NA NA Beginning Principal $ 1,409 $ 1,409 $ 855 $ 347 $ 15 Amortization (554) (508) (332) (10) Optional Amortization 0 0 0 0 -------- -------- -------- -------- -------- Ending Principal $ 1,409 $ 855 $ 347 $ 15 $ 5 ======== ======== ======== ======== ======== Interest $ 70 $ 65 $ 42 $ 0 |
Libor - End of Year 6.50% 7.00% 7.00% 7.00% Cash Balances 5.50% 6.00% 6.00% 6.00% Bank Revolver 2006 2007 2008 2009 -------- -------- -------- ------- Total Capacity $ 20,000 $ 20,000 $ 20,000 $20,000 Less: Borrowings O/S 0 0 0 0 Less: Title IV L/C 10,488 11,973 13,171 14,225 -------- -------- -------- ------- Total Excess 9,512 8,027 6,829 5,775 L/C Fees @ 3.25% (based on current pricing) $ 341 $ 389 $ 428 $ 462 Rate 9.75% 10.25% 10.25% 10.25% Beginning Principal $ 0 $ 0 $ 0 $ 0 Borrowings 0 0 0 0 Amortization 0 0 0 0 -------- -------- -------- ------- Ending Principal $ 0 $ 0 $ 0 $ 0 ======== ======== ======== ======= Interest (Includes L/C Fees) $ 341 $ 389 $ 428 $ 462 Seasonal Revolver Component Average Balance $ 0 $ 0 $ 0 $ 0 ======== ======== ======== ======= Seasonal Interest $ 0 $ 0 $ 0 $ 0 Bank Term A 2006 2007 2008 2009 -------- -------- -------- ------- Rate 9.75% 10.25% 10.25% 10.25% Beginning Principal $ 9,300 $ 3,350 $ 0 $ 0 Amortization (5,950) (3,350) 0 0 Optional Amortization 0 0 0 0 -------- -------- -------- ------- Ending Principal $ 3,350 $ 0 $ 0 $ 0 ======== ======== ======== ======= Interest $ 884 $ 335 $ 0 $ 0 Bank Term B 2006 2007 2008 2009 -------- -------- -------- ------- Rate 10.25% 10.75% 10.75% 10.75% Beginning Principal $ 28,950 $ 28,650 $ 22,250 $ 8,000 Amortization (300) (6,400) (14,250) (8,000) Optional Amortization 0 0 0 0 -------- -------- -------- ------- Ending Principal $ 28,650 $ 22,250 $ 8,000 $ 0 ======== ======== ======== ======= Interest $ 2,895 $ 3,008 $ 2,392 $ 860 Capital Leases 2006 2007 2008 2009 -------- -------- -------- ------- Rate NA NA NA NA Beginning Principal $ 5 $ 0 $ 0 $ 0 Amortization (5) 0 0 0 Optional Amortization 0 0 0 0 -------- -------- -------- ------- Ending Principal $ 0 $ 0 $ 0 $ 0 ======== ======== ======== ======= Interest $ 0 $ 0 $ 0 $ 0 |
Schedule 10.1(A)-8
8. DEBT & PREFERRED AMORTIZATION (CONTINUED)
Sub Debt (Hold Co.) At Close 2002 2003 2004 2005 2006 2007 2008 2009 -------------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Rate 8.00% 8.00% Cash Beginning Principal 0.00% PIK $ 6,616 $ 6,616 $ 6,616 $ 6,616 $ 6,616 $ 6,616 $ 6,616 $ 6,616 $ 6,616 Amortization 0 0 0 0 0 0 0 (6,616) Optional Amortization 0 0 0 0 0 0 0 0 PIK Interest 0 0 0 0 0 0 0 0 -------- -------- -------- -------- -------- -------- -------- -------- -------- Ending Principal $ 6,616 $ 6,616 $ 6,616 $ 6,616 $ 6,616 $ 6,616 $ 6,616 $ 6,616 $ 0 ======== ======== ======== ======== ======== ======== ======== ======== ======== Cash Interest 529 529 529 529 529 529 529 529 Total Interest $ 529 $ 529 $ 529 $ 529 $ 529 $ 529 $ 529 $ 529 |
Sr. Red. Pref. (Hold Co.) At Close 2002 2003 2004 2005 2006 2007 2008 2009 -------------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Rate 7.50% Cum. Beginning Principal $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Amortization 0 0 0 0 0 0 0 0 PIK Dividend 0 0 0 0 0 0 0 0 -------- -------- -------- -------- -------- -------- -------- -------- -------- Ending Principal $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ======== ======== ======== ======== ======== ======== ======== ======== ======== Cash Dividend $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 |
Other Sr. Pref. (Hold Co.) At Close 2002 2003 2004 2005 2006 2007 2008 2009 -------------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Rate 6.00% Cum. Beginning Principal $ 19,414 $ 19,414 $ 20,579 $ 21,744 $ 22,909 $ 24,073 $ 25,238 $ 26,403 $ 27,568 Amortization 0 0 0 0 0 0 0 0 Cumulative Dividend 1,165 1,165 1,165 1,165 1,165 1,165 1,165 1,165 -------- -------- -------- -------- -------- -------- -------- -------- -------- Ending Principal $ 19,414 $ 20,579 $ 21,744 $ 22,909 $ 24,073 $ 25,238 $ 26,403 $ 27,568 $ 28,733 ======== ======== ======== ======== ======== ======== ======== ======== ======== Cash Dividend $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 |
Jr. Conv. Pref. (Hold Co.) At Close 2002 2003 2004 2005 2006 2007 2008 2009 --------------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Rate 7.50% Cum. Beginning Principal $ 45,500 $ 45,500 $ 48,913 $ 52,325 $ 55,738 $ 59,150 $ 62,563 $ 65,975 $ 69,388 Amortization 0 0 0 0 0 0 0 0 Cumulative Dividend 3,413 3,413 3,413 3,413 3,413 3,413 3,413 3,413 -------- -------- -------- -------- -------- -------- -------- -------- -------- Ending Principal $ 45,500 $ 48,913 $ 52,325 $ 55,738 $ 59,150 $ 62,563 $ 65,975 $ 69,388 $ 72,800 ======== ======== ======== ======== ======== ======== ======== ======== ======== Cumulative Dividend $ 3,413 $ 3,413 $ 3,413 $ 3,413 $ 3,413 $ 3,413 $ 3,413 $ 3,413 Total Accumulated Dividends $ 3,413 $ 6,825 $ 10,238 $ 13,650 $ 17,063 $ 20,475 $ 23,888 $ 27,300 |
Schedule 10.1(A)-9
9. COVERAGE RATIO ANALYSIS
Projected Proforma ---- ---- ---- ---- ---- ---- ---- ---- 2001 2002 2003 2004 2005 2006 2007 2008 2009 ---- ---- ---- ---- ---- ---- ---- ---- ---- Bank Debt Interest $3,815 $3,815 $4,112 $4,362 $4,314 $4,119 $3,732 $2,820 $1,322 Other Opco Cash Interest 599 599 594 571 529 529 529 529 529 ------ ------ ------ ------ ------ ------ ------ ------ ------ Total Cash Interest $4,414 $4,414 $4,707 $4,933 $4,843 $4,649 $4,262 $3,349 $1,852 ====== ====== ====== ====== ====== ====== ====== ====== ====== Cash Dividends $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Tax-Effected Cash Dividends (1) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Total Cash Interest and Cash Dividend (1) $4,414 $4,414 $4,707 $4,933 $4,843 $4,649 $4,262 $3,349 $1,852 Operating Company Cash Interest $4,414 $4,414 $4,707 $4,933 $4,843 $4,649 $4,262 $3,349 $1,852 PIK Interest Expense $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 |
Projected Proforma ---- ---- ---- ---- ---- ---- ---- ---- 2001 2002 2003 2004 2005 2006 2007 2008 2009 ---- ---- ---- ---- ---- ---- ---- ---- ---- EBITDA/Total Cash Interest 4.80 x 5.40 x 5.31 x 5.73 x 6.70 x 8.51 x 10.07 x 13.80 x 26.46 x EBITDA-CapEx/Total Cash Interest 3.51 x 4.03 x 4.09 x 4.46 x 5.56 x 7.25 x 8.57 x 11.75 x 22.48 x EBITDA/Bank Interest 5.56 x 6.25 x 6.07 x 6.48 x 7.52 x 9.60 x 11.50 x 16.39 x 37.05 x EBITDA-CapEx/Bank Interest 4.06 x 4.66 x 4.68 x 5.05 x 6.25 x 8.18 x 9.79 x 13.95 x 31.48 x EBITDA/OpCo. Cash Interest 4.80 x 5.40 x 5.31 x 5.73 x 6.70 x 8.51 x 10.07 x 13.80 x 26.46 x EBITDA-CapEx/OpCo. Cash Int. 3.51 x 4.03 x 4.09 x 4.46 x 5.56 x 7.25 x 8.57 x 11.75 x 22.48 x EBITDA/Total Int. + Cash Div. (1) 4.80 x 5.40 x 5.31 x 5.73 x 6.70 x 8.51 x 10.07 x 13.80 x 26.46 x EBITDA-CapEx/Total Int. + Cash Div. (1) 3.51 x 4.03 x 4.09 x 4.46 x 5.56 x 7.25 x 8.57 x 11.75 x 22.48 x |
Schedule 10.1(A)-10
10. CAPITALIZATION
Dollar Amount:
At Close 2002 2003 2004 2005 2006 2007 2008 2009 -------- ---- ---- ---- ---- ---- ---- ---- ---- Bank Revolver $ 4,500 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Bank Term A 20,000 19,150 16,950 13,750 9,300 3,350 0 0 0 Bank Term B 30,000 29,850 29,550 29,250 28,950 28,650 22,250 8,000 0 Sub Debt (Hold Co.) 6,616 6,616 6,616 6,616 6,616 6,616 6,616 6,616 0 --------- --------- --------- --------- -------- -------- -------- -------- -------- Total Debt $ 61,116 $ 55,616 $ 53,116 $ 49,616 $ 44,866 $ 38,616 $ 28,866 $ 14,616 $ 0 Sr. Red. Pref. (Hold Co.) 0 0 0 0 0 0 0 0 0 Other Sr. Pref. (Hold Co.) 19,414 20,579 21,744 22,909 24,073 25,238 26,403 27,568 28,733 Jr. Conv. Pref. (Hold Co.) $ 45,500 $ 48,913 $ 52,325 $ 55,738 $ 59,150 $ 62,563 $ 65,975 $ 69,388 $ 72,800 Common Stk. (Hold Co.) (94,126) (91,417) (87,599) (81,839) (73,389) (60,312) (45,623) (28,343) (8,105) --------- --------- --------- --------- -------- -------- -------- -------- -------- Total Equity ($ 29,212) ($ 21,925) ($ 13,531) ($ 3,193) $ 9,835 $ 27,488 $ 46,755 $ 68,613 $ 93,428 --------- --------- --------- --------- -------- -------- -------- -------- -------- Total Capitalization $ 31,904 $ 33,691 $ 39,585 $ 46,423 $ 54,701 $ 66,104 $ 75,621 $ 83,229 $ 93,428 ========= ========= ========= ========= ======== ======== ======== ======== ======== |
Percentage of Total Capital:
At Close 2002 2003 2004 2005 2006 2007 2008 2009 -------- ---- ---- ---- ---- ---- ---- ---- ---- Bank Revolver 14.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Bank Term A 62.7% 56.8% 42.8% 29.6% 17.0% 5.1% 0.0% 0.0% 0.0% Bank Term B 94.0% 88.6% 74.6% 63.0% 52.9% 43.3% 29.4% 9.6% 0.0% Sub Debt (Hold Co.) 20.7% 19.6% 16.7% 14.3% 12.1% 10.0% 8.7% 7.9% 0.0% ------ ------ ------ ------ ------ ----- ----- ----- ----- Total Debt 191.6% 165.1% 134.2% 106.9% 82.0% 58.4% 38.2% 17.6% 0.0% Sr. Red. Pref. (Hold Co.) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other Sr. Pref. (Hold Co.) 60.9% 61.1% 54.9% 49.3% 44.0% 38.2% 34.9% 33.1% 30.8% Jr. Conv. Pref. (Hold Co.) 142.6% 145.2% 132.2% 120.1% 108.1% 94.6% 87.2% 83.4% 77.9% Common Stk. (Hold Co.) -295.0% -271.3% -221.3% -176.3% -134.2% -91.2% -60.3% -34.1% -8.7% ------ ------ ------ ------ ------ ----- ----- ----- ----- Total Equity -91.6% -65.1% -34.2% -6.9% 18.0% 41.6% 61.8% 82.4% 100.0% ------ ------ ------ ------ ------ ----- ----- ----- ----- Total Capitalization 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% ====== ====== ====== ====== ====== ===== ===== ===== ===== |
Schedule 10.1(A)-11
11. TERMINAL VALUES
8.0 x EBITDA Multiple 2002 2003 2004 2005 ---------------------------------- --------- ---------- ---------- ---------- EBITDA $ 23,849 $ 24,976 $ 28,267 $ 32,442 Multiple 8.0 x 8.0 x 8.0 x 8.0 x --------- --------- --------- --------- Enterprise Value $190,792 $199,808 $226,136 $259,536 Less: Debt ($ 55,616) ($ 53,116) ($ 49,616) ($ 44,866) Convertible Pref. (45,500) (45,500) (45,500) (45,500) Acc. Dividends (3,413) (6,825) (10,238) (13,650) Less: Sr. Red. Pref. (Hold Co.) 0 0 0 0 Less: Other Sr. Pref. (Hold Co. (20,579) (21,744) (22,909) (24,073) Plus: Conversion 45,500 45,500 45,500 45,500 Add: Cash 3,249 8,431 14,308 22,949 --------- --------- --------- --------- Common Equity Value $114,434 $126,554 $157,682 $199,895 ========= ========= ========= ========= |
8.0 x EBITDA Multiple 2006 2007 2008 2009 ---------------------------------- --------- ---------- ---------- ---------- EBITDA $ 39,553 $ 42,908 $ 46,211 $ 48,994 Multiple 8.0 x 8.0 x 8.0 x 8.0 x --------- --------- --------- -------- Enterprise Value $316,424 $343,266 $369,688 $391,949 Less: Debt ($ 38,616) ($ 28,866) ($ 14,616) $ 0 Convertible Pref. (45,500) (45,500) (45,500) (45,500) Acc. Dividends (17,063) (20,475) (23,888) (27,300) Less: Sr. Red. Pref. (Hold Co.) 0 0 0 0 Less: Other Sr. Pref. (Hold Co. (25,238) (26,403) (27,568) (28,733) Plus: Conversion 45,500 45,500 45,500 45,500 Add: Cash 34,555 45,646 54,913 66,265 --------- --------- --------- -------- Common Equity Value $270,063 $313,168 $358,529 $402,181 ========= ========= ========= ======== |
9.0 x EBITDA Multiple 2002 2003 2004 2005 ---------------------------------- --------- ---------- ---------- ---------- EBITDA $ 23,849 $ 24,976 $ 28,267 $ 32,442 Multiple 9.0 x 9.0 x 9.0 x 9.0 x --------- --------- --------- --------- Enterprise Value $214,641 $224,784 $254,403 $291,978 Less: Debt ($ 55,616) ($ 53,116) ($ 49,616) ($ 44,866) Convertible Pref. (45,500) (45,500) (45,500) (45,500) Acc. Dividends (3,413) (6,825) (10,238) (13,650) Less: Sr. Red. Pref. (Hold Co.) 0 0 0 0 Less: Other Sr. Pref. (Hold Co. (20,579) (21,744) (22,909) (24,073) Plus: Conversion 45,500 45,500 45,500 45,500 Add: Cash 3,249 8,431 14,308 22,949 --------- --------- --------- --------- Common Equity Value $138,283 $151,530 $185,949 $232,337 ========= ========= ========= ========= |
9.0 x EBITDA Multiple 2006 2007 2008 2009 ---------------------------------- --------- ---------- ---------- ---------- EBITDA $ 39,553 $ 42,908 $ 46,211 $ 48,994 Multiple 9.0 x 9.0 x 9.0 x 9.0 x --------- --------- --------- -------- Enterprise Value $355,977 $386,175 $415,899 $440,943 Less: Debt ($38,616) ($ 28,866) ($ 14,616) $ 0 Convertible Pref. (45,500) (45,500) (45,500) (45,500) Acc. Dividends (17,063) (20,475) (23,888) (27,300) Less: Sr. Red. Pref. (Hold Co.) 0 0 0 0 Less: Other Sr. Pref. (Hold Co. (25,238) (26,403) (27,568) (28,733) Plus: Conversion 45,500 45,500 45,500 45,500 Add: Cash 34,555 45,646 54,913 66,265 --------- --------- --------- -------- Common Equity Value $309,616 $356,077 $404,740 $451,175 ========= ========= ========= ======== |
10.0 x EBITDA Multiple 2002 2003 2004 2005 ---------------------------------- --------- ---------- ---------- ---------- EBITDA $ 23,849 $ 24,976 $ 28,267 $ 32,442 Multiple 10.0 x 10.0 x 10.0 x 10.0 x --------- --------- --------- --------- Enterprise Value $238,490 $249,760 $282,670 $324,420 Less: Debt ($ 55,616) ($ 53,116) ($ 49,616) ($ 44,866) Convertible Pref. (45,500) (45,500) (45,500) (45,500) Acc. Dividends (3,413) (6,825) (10,238) (13,650) Less: Sr. Red. Pref. (Hold Co.) 0 0 0 0 Less: Other Sr. Pref. (Hold Co. (20,579) (21,744) (22,909) (24,073) Plus: Conversion 45,500 45,500 45,500 45,500 Add: Cash 3,249 8,431 14,308 22,949 --------- --------- --------- --------- Common Equity Value $162,132 $176,506 $214,216 $264,779 ========= ========= ========= ========= |
10.0 x EBITDA Multiple 2006 2007 2008 2009 ---------------------------------- --------- ---------- ---------- ---------- EBITDA $ 39,553 $ 42,908 $ 46,211 $ 48,994 Multiple 10.0 x 10.0 x 10.0 x 10.0 x --------- --------- --------- -------- Enterprise Value $395,530 $429,083 $462,110 $489,936 Less: Debt ($ 38,616) ($ 28,866) ($ 14,616) $ 0 Convertible Pref. (45,500) (45,500) (45,500) (45,500) Acc. Dividends (17,063) (20,475) (23,888) (27,300) Less: Sr. Red. Pref. (Hold Co.) 0 0 0 0 Less: Other Sr. Pref. (Hold Co. (25,238) (26,403) (27,568) (28,733) Plus: Conversion 45,500 45,500 45,500 45,500 Add: Cash 34,555 45,646 54,913 66,265 --------- --------- --------- -------- Common Equity Value $349,169 $398,985 $450,951 $500,169 ========= ========= ========= ======== |
Schedule 10.1(A)-12
12. TAX CALCULATION
2002 2003 2004 2005 -------- -------- -------- ------- Pre-Tax Income $ 11,926 $ 13,739 $ 16,919 $ 21,322 Add: Intangible Amortization 0 0 0 0 Add: Existing Intangible Amortization 0 0 0 0 Add: Step-Up Depreciation 0 0 0 0 -------- -------- -------- -------- Taxable Earnings $ 11,926 $ 13,739 $ 16,919 $ 21,322 Less: Deductible Intangible Amortization 0 0 0 0 -------- -------- -------- -------- $ 11,926 $ 13,739 $ 16,919 $ 21,322 Beginning NOL (1) $ 0 $ 0 $ 0 $ 0 Use of NOL 0 0 0 0 Contribution to NOL 0 0 0 0 Ending NOL 0 0 0 0 -------- -------- -------- -------- After NOL Taxable Earnings $ 11,926 $ 13,739 $ 16,919 $ 21,322 States Taxes @ 6.00% $ 716 $ 824 $ 1,015 $ 1,279 Federal Taxes @ 35.00% 3,924 4,520 5,566 7,015 -------- -------- -------- -------- Total Taxes $ 4,639 $ 5,345 $ 6,582 $ 8,294 ======== ======== ======== ======== |
2006 2007 2008 2009 -------- ------- ------- ------- Pre-Tax Income $ 28,893 $31,534 $35,773 $40,614 Add: Intangible Amortization 0 0 0 0 Add: Existing Intangible Amortization 0 0 0 0 Add: Step-Up Depreciation 0 0 0 0 -------- ------- ------- ------- Taxable Earnings $ 28,893 $31,534 $35,773 $40,614 Less: Deductible Intangible Amortization 0 0 0 0 -------- ------- ------- ------- $ 28,893 $31,534 $35,773 $40,614 Beginning NOL (1) $ 0 $ 0 $ 0 $ 0 Use of NOL 0 0 0 0 Contribution to NOL 0 0 0 0 Ending NOL 0 0 0 0 -------- ------- ------- ------- After NOL Taxable Earnings $ 28,893 $31,534 $35,773 $40,614 States Taxes @ 6.00% $ 1,734 $ 1,892 $ 2,146 $ 2,437 Federal Taxes @ 35.00% 9,506 10,375 11,769 13,362 -------- ------- ------- ------- Total Taxes $ 11,239 $12,267 $13,916 $15,799 ======== ======= ======= ======= |
Schedule 10.1(A)-13
SCHEDULE 10.1(B)
SEPTEMBER 1999 CAPITAL CONTRIBUTION
STOCKHOLDER CONTRIBUTION ------------ Whites' Family Company LLC 156.87944 John C. White Robert D. Hartman 143.51712 Robert D. Hartman and Janice W. Hartman, Trustees Hartman Investments Limited Partnership Jeffrey Muecke 31.65980 Kimberly Riordan Paul C. Riordan Sharon Morrison Roger Speer 9.89540 Joseph Cutler 8.31140 Randall Smith 8.31140 Phillip C. Christner 7.91540 James Gleeson 7.91540 Sherrell Smith 6.33140 Randal Whitman 3.97100 Thomas Nelmark 3.97059 David K. Miller 3.57435 Wendell Crabb Sharon Gleeson 1.98230 Dennis L. Hendrix 1.76500 Howard A. Kosick UTI Tax-Deferred Trust dd 2/24/97 JZEP 252.00000 UTI/TJC VOTING TRUST (b) Leucadia Investors, Inc. 63.00000 John W. Jordan, II Revocable Trust 39.46950 David W. Zalaznick 39.46950 Jonathan F. Boucher 33.83100 A. Richard Caputo 25.20000 Adam E. Max 25.20000 The Lowden Family Trust John R. Lowden 18.90000 Douglas J. Zych 3.78000 Paul Rodzevik Profit Sharing Plan & Trust 2.52000 James E. Jordan Jr. Profit Sharing Plan & Trust 0.63000 --------- TOTALS 900.00000 ========= |
Schedule 10.1(B)
PREFERRED STOCKHOLDER SERIES C --------------- ---------- UTI SHAREHOLDERS Whites' Family Company LLC 732.10420 John C. White ------------- TOTAL WHITE 732.10420 ------------- Robert D. Hartman 540.33034 ------------- TOTAL HARTMAN 540.33034 ------------- Jeffrey Muecke - Kimberly Riordan - Paul C. Riordan - Sharon Morrison - Roger Speer 26.27171 Joseph Cutler 25.62888 Randall Smith - Phillip C. Christner 9.93851 James Gleeson - Sherrell Smith 10.77974 Randal Whitman - Thomas Nelmark 4.02941 David K. Miller 16.67700 Wendell Crabb - Sharon Gleeson 9.25074 Dennis L. Hendrix 8.23500 Howard A. Kosick - UTI Tax-Deferred Trust dd 2/24/99 464.75447 ------------- TOTAL UTI SHARES INCL. WHITE & HARTMAN 1,848.00000 ------------- THE JORDAN COMPANY & JZEP JZEP Preferred Holdings Limited 1,176.00000 JZEP UTI/TJC Voting Trust Jordan Industries, Inc. 1,176.00000 ------------- TOTAL TJC & JZEP 2,352.00000 ------------- ------------- TOTAL 4,200.00000 ============= |
Schedule 10.1(B)-2
EXECUTION VERSION
AMENDMENT NO. 1 TO SECOND AMENDMENT AND
RESTATEMENT OF CREDIT AGREEMENT
AMENDMENT NO. 1, dated as of September __, 2002 (this "AMENDMENT"), to the
SECOND AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT, dated as of March 29, 2002
(the "ORIGINAL CREDIT AGREEMENT"), among UTI HOLDINGS, INC., an Arizona
corporation, as Borrower ("BORROWER") and UNIVERSAL TECHNICAL INSTITUTE, INC., a
Delaware corporation, as Parent ("HOLDINGS"), the lenders signatory thereto from
time to time (the "LENDERS"), HELLER FINANCIAL, INC., a Delaware corporation (in
its individual capacity, "HELLER"), for itself as a Lender and as Agent for the
Lenders (the "AGENT"). Terms defined in the Original Credit Agreement and not
otherwise defined herein shall have the meanings assigned thereto in the
Original Credit Agreement.
PRELIMINARY STATEMENT
(1) Borrower and Holdings have requested that the Lenders agree to amend the Original Credit Agreement to allow Borrower and Holdings to guarantee the obligations of Institution Subsidiaries under certain operating leases entered into in the ordinary course of business by such Institution Subsidiaries; and
(2) The Lenders are willing to agree to so amend the Original Credit Agreement but only on and subject to the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), Borrower, Holdings and the Lenders hereby agree as follows:
(1) Subject to the satisfaction of the conditions set forth in Section 2 hereof, Section 3.4 of the Original Credit Agreement shall be and hereby is amended as follows:
(a) the word "and" is hereby deleted from the end of clause (M);
(b) the period at the end of clause (N) is hereby replaced with "; and"; and
(c) the following shall be added as clause (O):
"(O) arising from any guarantee by Borrower or Holdings of the obligations of an Institution Subsidiary under any operating lease of premises constituting a campus operated by such Institution Subsidiary entered into in the ordinary course of business by such Institution Subsidiary."
(2) The foregoing amendments contained in this Amendment shall become effective (the "EFFECTIVE DATE") upon the satisfaction in full of the following conditions:
(a) this Amendment shall have been executed and delivered by each of the Requisite Lenders, Borrower and Holdings;
(b) each Person who has guaranteed the Obligations shall have executed a consent to this Amendment in the form provided below;
(c) there shall be continuing no Default or Event of Default (after giving effect to the amendments contemplated by this Amendment); and
(d) all representations and warranties of the Borrower contained in this Amendment and in the Original Credit Agreement shall be true and correct in all material respects as of the date hereof and as of the Effective Date, except to the extent such representations and warranties relate to a specific date.
(3) Each of Borrower and Holdings hereby represents and warrants as follows:
(a) this Amendment has been duly authorized and executed by each such Person, and the Original Credit Agreement, as amended by this Amendment, is the legal, valid and binding obligation of each such Person, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, moratorium and similar laws affecting the rights of creditors in general; and
(b) each of Borrower and Holdings repeats and restates the representations and warranties made by it and contained in the Original Credit Agreement as of the date of this Amendment and as of the Effective Date, except to the extent such representations and warranties relate to a specific date.
(4) This Amendment is being delivered in the State of New York and shall be a contract made under and governed by the laws of the State of New York applicable to contracts made and to be wholly performed within the State of New York.
(5) Each of Borrower and Holdings hereby ratify and confirm the Original Credit Agreement as amended hereby, and agree that, as amended hereby, the Original Credit Agreement remains in full force and effect.
(6) Each of Borrower and Holdings agree that all Loan Documents to which each such Person is a party remain in full force and effect notwithstanding the execution and delivery of this Amendment.
(7) This Amendment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of such counterparts together shall constitute but one and the same instrument. Delivery of an executed counterpart hereof by facsimile shall be as effective as delivery of a manually executed counterpart hereof.
(8) All references in the Loan Documents to the "Credit Agreement" and in the Original Credit Agreement as amended hereby to "this Agreement," "hereof," "herein" or the like shall mean and refer to the Original Credit Agreement as amended by this Amendment (as well as by all subsequent amendments, restatements, modifications and supplements thereto).
IN WITNESS WHEREOF, this Amendment No. 1 to the Second Amendment and Restatement of Credit Agreement has been duly executed as of the date first written above.
UTI HOLDINGS, INC.,
as Borrower
By:_________________________
Name
Title:
UNIVERSAL TECHNICAL INSTITUTE, INC.,
as Parent
By:_________________________
Name
Title:
HELLER FINANCIAL, INC.,
as Agent and Lender
By:_________________________
Name
Title:
ANTARES CAPITAL CORPORATION,
as Lender
By:_________________________
Name
Title:
THE ROYAL BANK OF SCOTLAND PLC,
as Lender
By:_________________________
Name
Title:
JPMORGAN CHASE BANK,
AS TRUSTEE OF THE ANTARES FUNDING TRUST
CREATED UNDER A TRUST AGREEMENT DATED AS OF
NOVEMBER 30, 1999,
as Lender
By:_________________________
Name
Title:
MARINER CDO 2002, LTD.,
as Lender
By:_________________________
Name
Title:
Each of the undersigned hereby consents to the execution and delivery by Borrower and Holdings of the foregoing Amendment No. 1 and agrees that each Loan Document to which it is a party remains in full force and effect and that such execution and delivery is not a defense to the obligations of the undersigned under any such Loan Document.
CUSTOM TRAINING GROUP, INC. CLINTON EDUCATION GROUP, INC. By:_________________________ By:__________________________ Name Name Title: Title: -4- |
EXECUTION COPY |
AMENDMENT NO. 2 TO SECOND AMENDMENT AND
RESTATEMENT OF CREDIT AGREEMENT
AMENDMENT NO. 2, dated as of March 3, 2003 (this "AMENDMENT"), to the SECOND
AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT, dated as of March 29, 2002 (as
previously amended by Amendment No. 1, dated as of September 25, 2002, the
"ORIGINAL CREDIT AGREEMENT"), among UTI HOLDINGS, INC., an Arizona corporation,
as Borrower ("BORROWER") and UNIVERSAL TECHNICAL INSTITUTE, INC., a Delaware
corporation, as Parent ("HOLDINGS"), (the lenders signatory thereto from time to
time (the "LENDERS"), HELLER FINANCIAL, INC., a Delaware corporation (in its
individual capacity, "HELLER"), for itself as a Lender and as Agent for the
Lenders (the "AGENT"). Terms defined in the Original Credit Agreement and not
otherwise defined herein shall have the meanings assigned thereto in the
Original Credit Agreement.
PRELIMINARY STATEMENT
(1) Borrower and Holdings have requested that the Lenders agree to amend the Original Credit Agreement (a) to allow Universal Technical Institute of Arizona, Inc., a Delaware corporation that is an Institution Subsidiary, to act as lessee under an operating lease for the Borrower's corporate headquarters and (b) to allow Holdings to guarantee such obligation; and
(2) The Lenders are willing to agree to so amend the Original Credit Agreement but only on and subject to the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), Borrower, Holdings and the Lenders hereby agree as follows;
(1) Subject to the satisfaction of the conditions set forth in Section 2 hereof, the Original Credit Agreement shall be and hereby is amended as follows:
(a) Clause (O) of Section 3.4 is hereby amended and restated in its entirety to read as follows:
"(O) arising from any guarantee (i) by Borrower or Holdings of the obligations of an Institution Subsidiary under any operating lease of premises constituting a campus operated by such Institution Subsidiary entered into in the ordinary course of business by such Institution Subsidiary and (ii) by Holdings of the obligations of Arizona as lessee under the operating lease for Borrower's corporate headquarters located at 20410 North 19th Avenue, Phoenix, Arizona 85027,";
(b) Section 3.10 is hereby amended by adding the following phrase between the phrases "and its Subsidiaries" and "and its performance from time to time" in the second sentence thereof;
", any assumption of a Contingent Obligation permitted under
Section 3.4"; and
(c) Section 10.1 shall be amended as follows:
(i) the following defined term shall be added in its correct alphabetical position:
"'ARIZONA' means Universal Technical Institute of Arizona, Inc., a Delaware corporation that is an Institution Subsidiary."; and
(ii) the definition of "Institution Subsidiary" in Section 10.1 is hereby amended by adding the following before the period at the end thereof;
", except that Arizona shall constitute an Institution Subsidiary notwithstanding its being the lessee under the operating lease for Borrower's corporate headquarters located at 20410 North 19th Avenue, Phoenix, Arizona 85027".
(2) The foregoing amendments contained in this Amendment shall become effective (the "EFFECTIVE DATE") upon the satisfaction in full of the following conditions:
(a) this Amendment shall have been executed and delivered by each of the Requisite Lenders, Borrower and Holdings;
(b) each Person who has guaranteed the Obligations shall have executed a consent to this Amendment in the form provided below;
(c) there shall be continuing no Default or Event of Default (after giving effect to the amendments contemplated by this Amendment); and
(d) all representations and warranties of the Borrower contained in this Amendment and in the Original Credit Agreement shall be true and correct in all material respects as of the date hereof and as of the Effective Date, except to the extent such representations and warranties relate to a specific date.
(3) Each of Borrower and Holdings hereby represents and warrants as follows:
(a) this Amendment has been duly authorized and executed by each such Person, and the Original Credit Agreement, as amended by this Amendment, is the legal, valid and binding obligation of each such Person, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, moratorium and similar laws affecting the rights of creditors in general; and
(b) each of Borrower and Holdings repeats and restates the representations and warranties made by it and contained in the Original Credit Agreement as of the date of this Amendment and as of the Effective Date, except to the extent such representations and warranties relate to a specific date.
(4) This Amendment is being delivered in the State of New York and shall be a contract made under and governed by the laws of the State of New York applicable to contracts made and to be wholly performed within the State of New York.
(5) Each of Borrower and Holdings hereby ratify and confirm the Original Credit Agreement as amended hereby, and agree that, as amended hereby, the Original Credit Agreement remains in full force and effect.
(6) Each of Borrower and Holdings agree that all Loan Documents to which each such Person is a party remain in full force and effect notwithstanding the execution and delivery of this Amendment.
(7) This Amendment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of such counterparts together shall constitute but one and the same instrument. Delivery of an executed counterpart hereof by facsimile shall be as effective as delivery of a manually executed counterpart hereof.
(8) All references in the Loan Documents to the "Credit Agreement" and in the Original Credit Agreement as amended hereby to "this Agreement," "hereof," "herein" or the like shall mean and refer to the Original Credit Agreement as amended by this Amendment (as well as by all subsequent amendments, restatements, modifications and supplements thereto).
[Remainder of page left blank intentionally; signatures on following pages.]
IN WITNESS WHEREOF, this Amendment No. 2 to the Second Amendment and Restatement of Credit Agreement has been duly executed as of the date first written above.
UTI HOLDINGS, INC., UNIVERSAL TECHNICAL INSTITUTE, INC., as Borrower as Parent /s/ Jennifer Haslip /s/ Jennifer Haslip --------------------------- --------------------------- Name JENNIFER HASLIP Name JENNIFER HASLIP Title: CHIEF FINANCIAL OFFICER Title: CHIEF FINANCIAL OFFICER HELLER FINANCIAL, INC., ANTARES CAPITAL CORPORATION, as Agent and Lender as Lender /s/ Matthew Colucci /s/ Tyler Lindblad --------------------------- --------------------------- Name MATTHEW COLUCCI Name TYLER LINDBLAD Title: VICE PRESIDENT Title: DIRECTOR THE ROYAL BANK OF SCOTLAND PLC, JPMORGAN CHASE BANK, as Lender AS TRUSTEE OF THE ANTARES FUNDING TRUST CREATED UNDER A TRUST AGREEMENT /s/ Una M. Corr DATED AS OF NOVEMBER 30, 1999, --------------------------- as Lender Name UNA M. CORR Title: VICE PRESIDENT /s/ Leslie Hundley --------------------------- MARINER CDO 2002, LTD., Name LESLIE HUNDLEY as Lender Title: OFFICER /s/ Tyler Lindblad --------------------------- Name TYLER LINDBLAD Title: DIRECTOR |
SIGNATURE PAGE TO AMENDMENT NO. 2 TO
SECOND AMENDMENT AND RESTATEMENT
OF UTI CREDIT AGREEMENT
Each of the undersigned hereby consents to the execution and delivery by Borrower and Holdings of the foregoing Amendment No. 2 and agrees that each Loan Document to which it is a party remains in full force and effect and that such execution and delivery is not a defense to the obligations of the undersigned under any such Loan Document.
CUSTOM TRAINING GROUP, INC. CLINTON EDUCATION GROUP, INC. By: /s/ Jennifer Haslip By: /s/ Jennifer Haslip --------------------------- --------------------------- Name JENNIFER HASLIP Name JENNIFER HASLIP Title: CHIEF FINANCIAL OFFICER Title: CHIEF FINANCIAL OFFICER |
SIGNATURE PAGE TO AMENDMENT NO. 2 TO
SECOND AMENDMENT AND RESTATEMENT
OF UTI CREDIT AGREEMENT
EXECUTION VERSION
AMENDMENT NO. 3 TO SECOND AMENDMENT AND
RESTATEMENT OF CREDIT AGREEMENT
AMENDMENT NO. 3, dated as of July 16, 2003 (this "AMENDMENT"), to the SECOND
AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT, dated as of March 29, 2002 (as
previously amended by Amendment No. 1, dated as of September 25, 2002 and
Amendment No. 2, dated as of March 3, 2003, the "CREDIT AGREEMENT"), among UTI
HOLDINGS, INC., an Arizona corporation, as Borrower ("BORROWER") and UNIVERSAL
TECHNICAL INSTITUTE, INC., a Delaware corporation, as Parent ("HOLDINGS"), the
lenders signatory thereto from time to time (the "LENDERS"), HELLER FINANCIAL,
INC., a Delaware corporation (in its individual capacity, "HELLER"), for itself
as a Lender and as Agent for the Lenders (the "AGENT"). Terms defined in the
Credit Agreement and not otherwise defined herein shall have the meanings
assigned thereto in the Credit Agreement.
PRELIMINARY STATEMENT
(1) Borrower and Holdings have requested that the Lenders agree to amend the Credit Agreement as provided herein; and
(2) The Lenders are willing to agree to so amend the Credit Agreement but only on and subject to the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), Borrower, Holdings, Agent and the Lenders hereby agree as follows:
(1) Subject to the satisfaction of the conditions set forth in Section 3 hereof, the Credit Agreement shall be and hereby is amended as follows:
(a) Section 1.1(B)(1) is hereby amended as follows:
(i) by replacing the amount "$20,000,000" in the first sentence with "$30,000,000";
(ii) by replacing the amount "$10,000,000" in the second sentence with "$15,000,000"; and
(iii) by replacing the amount "$15,000,000" in the second sentence with "$22,500,000" in lieu thereof.
(b) Section 1.2(A) is hereby amended by revising the Pricing Table appearing therein in its entirety to read as follows:
"PRICING TABLE
BASE RATE MARGIN LIBOR MARGIN ------------------------------ ------------------------------- OBLIGATIONS LOANS OTHER THAN OTHER THAN TOTAL DEBT TO TTM EBITDA TERM LOAN B TERM LOAN B TERM LOAN B TERM LOAN B ------------------------- ----------- -------------- ------------- ------------- > 3.00x 2.25% 2.75% 3.50% 4.00% > 2.50 and < or = 3.00x 2.00% 2.50% 3.25% 3.75% > 2.00 and < or = 2.50x 1.75% 2.25% 3.00% 3.50% > 1.50 and < or = 2.00x 1.50% 2.00% 2.75% 3.25% < or = l.50x 1.25% 1.75% 2.50% 3.00%" |
(c) Clause (2) of Section 1.2(B) is hereby amended in its entirety to read as follows:
"(2) (a)until the Second Amendment and Restatement Date, three-eighths of one percent (0.375%) per annum and (b) from and after the Second Amendment and Restatement Date, (i) one-half of one percent (0.500%) per annum when the sum indicated in part (b) of clause (1) of this Section 1.2(B) is 50% or more of the Revolving Loan Commitment and (ii) three-quarters of one percent (0.750%) per annum when such sum is less than 50% of the Revolving Loan Commitment".
(d) Section 3.5 is hereby amended by inserting the following text after the semicolon at the end of subsection (D):
"provided that, notwithstanding the foregoing, Holdings may, on or before August 31, 2003, prepay the outstanding principal amount on the Sharp Note in a single payment not to exceed $7,010,660;".
(e) Section 4.1 is hereby amended as follows:
(i) by replacing the amount "$9,000,000" in the first sentence of such section with "$30,000,000"; and
(ii) by replacing the amount "$3,000,000" in the second sentence of such section with "$10,000,000".
(f) Section 4.8(H) is hereby amended by replacing the percentage "70%" appearing twice therein with the percentage "60%".
(g) The signature pages for the following Lenders are hereby amended to change the amount of each such Lenders' "Commitment to make Revolving Loans" as follows:
(i) for Heller Financial, Inc., by replacing the amount $8,571,428.57 with $12,857,142.86;
(ii) for Antares Capital Corporation, by replacing the amount $5,714,285.71 with $8,571,428.57; and
(iii) for The Royal Bank of Scotland, by replacing the amount $5,714,285.71 with $8,571,428.57.
(2) On or before the Effective Date, Borrower will prepay the Loans in an amount equal to $15,000,000. Borrower and Agent hereby agree, pursuant to Section 1.5(A) of the Credit Agreement, that all of such prepayment shall be applied to prepay Term Loan B against all remaining installments in the inverse order thereof. Borrower and Agent further agree that such prepayment shall be deducted from EBITDA for the purpose of calculating Excess Cash Flow (as calculated on Exhibit 1.5(B)) for the fiscal year ended September 31, 2003.
(3) The foregoing amendments contained in this Amendment shall become effective (the "EFFECTIVE DATE") upon the satisfaction in full of the following conditions:
(a) this Amendment shall have been executed and delivered by each of the Lenders, Borrower and Holdings;
(b) each Person who has guaranteed the Obligations shall have executed a consent to this Amendment in the form provided below;
(c) there shall be continuing no Default or Event of Default (after giving effect to the amendments contemplated by this Amendment); and
(d) all representations and warranties of the Borrower contained in this Amendment and in the Credit Agreement shall be true and correct in all material respects as of the date hereof and as of the Effective Date, except to the extent such representations and warranties relate to a specific date.
(4) Each of Borrower and Holdings hereby represents and warrants as follows:
(a) this Amendment has been duly authorized and executed by each such Person, and the Credit Agreement, as amended by this Amendment, is the legal, valid and binding obligation of each such Person, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, moratorium and similar laws affecting the rights of creditors in general;
(b) each of Borrower and Holdings repeats and restates the representations and warranties made by it and contained in the Credit Agreement as of the date of this Amendment and as of the Effective Date, except to the extent such representations and warranties relate to a specific date; and
(c) as of July 10, 2003, (i) the aggregate outstanding principal
balance of Term Loan A is $17,625,000, (ii) the aggregate
outstanding principal balance of Term Loan B is $29,625,000,
(iii) the aggregate outstanding principal balance of the
Revolving Loans is $13,600,000, which consists wholly of
outstanding Lender Letters of Credit (including $7,600,000 of
DOE Letters of Credit and $6,000,000 of Non-DOE Letters of
Credit).
Each of such amounts are owed by the Borrower to the Lenders without defense of any kind.
(5) This Amendment is being delivered in the State of New York and shall be a contract made under and governed by the laws of the State of New York applicable to contracts made and to be wholly performed within the State of New York.
(6) Each of Borrower and Holdings hereby ratify and confirm the Credit Agreement as amended hereby, and agree that, as amended hereby, the Credit Agreement remains in full force and effect.
(7) Each of Borrower and Holdings agree that all Loan Documents to which each such Person is a party remain in full force and effect notwithstanding the execution and delivery of this Amendment.
(8) This Amendment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of such counterparts together shall constitute but one and the same instrument. Delivery of an executed counterpart hereof by facsimile shall be as effective as delivery of a manually executed counterpart hereof.
(9) All references in the Loan Documents to the "Credit Agreement" and in the Credit Agreement as amended hereby to "this Agreement," "hereof," "herein" or the like shall mean and refer to the Credit Agreement as amended by this Amendment (as well as by all subsequent amendments, restatements, modifications and supplements thereto).
[Remainder of page left blank intentionally; signatures on following pages.]
IN WITNESS WHEREOF, this Amendment No. 3 to the Second Amendment and Restatement of Credit Agreement has been duly executed as of the date first written above.
UTI HOLDINGS, INC., UNIVERSAL TECHNICAL INSTITUTE, INC., as Borrower as Parent /s/ Jennifer Haslip /s/ Jennifer Haslip --------------------------- --------------------------- Name JENNIFER HASLIP Name JENNIFER HASLIP Title: CFO, SECRETARY Title: CFO, SECRETARY HELLER FINANCIAL, INC., ANTARES CAPITAL CORPORATION, as Agent and Lender as Lender /s/ Luis Acosta /s/ Tyler W. Lindblad --------------------------- --------------------------- Name LUIS ACOSTA Name TYLER W. LINDBLAD Title: MD Title: DIRECTOR THE ROYAL BANK OF SCOTLAND PLC, JPMORGAN CHASE BANK, as Lender AS TRUSTEE OF THE ANTARES FUNDING TRUST CREATED UNDER A TRUST AGREEMENT DATED /s/ Una M. Corr AS OF NOVEMBER 30, 1999, --------------------------- as Lender Name UNA M. CORR Title: VICE PRESIDENT /s/ Leslie Hundley --------------------------- MARINER CDO 2002, LTD., Name LESLIE HUNDLEY as Lender Title: OFFICER /s/ Tyler W. Lindblad --------------------------- Name TYLER W. LINDBLAD Title: DIRECTOR |
SIGNATURE PAGE TO AMENDMENT NO. 3 TO
SECOND AMENDMENT AND RESTATEMENT
OF UTI CREDIT AGREEMENT
Each of the undersigned hereby consents to the execution and delivery by Borrower and Holdings of the foregoing Amendment No. 3 and agrees that each Loan Document to which it is a party remains in full force and effect and that such execution and delivery is not a defense to the obligations of the undersigned under any such Loan Document.
CUSTOM TRAINING GROUP, INC. CLINTON EDUCATION GROUP, INC. By: /s/ Jennifer Haslip By: /s/ Jennifer Haslip --------------------------- --------------------------- Name JENNIFER HASLIP Name JENNIFER HASLIP Title: CFO, SECRETARY Title: CFO, SECRETARY |
SIGNATURE PAGE TO AMENDMENT NO. 3 TO
SECOND AMENDMENT AND RESTATEMENT
OF UTI CREDIT AGREEMENT
Exhibit 10.2
UNIVERSAL TECHNICAL
INSTITUTE
EXECUTIVE
BENEFIT PLAN
UNIVERSAL TECHNICAL INSTITUTE
3002 NORTH 27TH AVENUE
PHOENIX, ARIZONA 85017
UNIVERSAL TECHNICAL INSTITUTE
EXECUTIVE BENEFIT PLAN
PLAN OUTLINE
ELIGIBILITY:
- Eligibility will be at the discretion of the president of the Company
- Eligible executives will be notified, in writing, of their eligibility to participate
PARTICIPATION:
- Participants may take their annual bonus in any of the following ways:
+ In cash, net of the usual withholdings for taxes, etc.; or
+ Participants may contribute all or any part of their annual bonus on a tax-deferred basis into the Plan
- Category I Participants may request that the Employer invest their deferred bonus into either the Phantom Stock Account* or the Fixed Account* or a combination thereof
- Category II Participants may request that the Employer invest their deferred bonus into the Phantom Stock Account*, the Variable Account or the Fixed Account* or a combination thereof
- For deferrals into the Phantom Stock Account during the first Plan year, the Employer will provide a special matching contribution of $.50 for each $1.00 deferred.
* These terms are explained in the Questions & Answers section of this book.
- After the first Plan year, Participant's deferrals into the Phantom Stock Account will be matched by the Employer $.30 for each $1.00 deferred.
- The value of the Participant's Phantom Stock Account will be determined by the amount of the Participant's deferred bonuses, the Employer's matches, and the value of the common stock of the Employer determined as of the most recently completed stock valuation report prior to the date of payment or In- Service Distribution
- Participant's deferrals into the Variable Account will be matched by the Employer $.30 for each $1.00 deferred.
- Participant's deferrals into the Fixed Account will be matched by the Employer $.15 for each $1.00 deferred.
- The value of the Participant's Fixed Account will be determined by the amount of the Participant's deferred bonuses, the Employer's matches, and the interest rate credited to that account.
- The amount of the Employer's match for the Phantom Stock Account and Fixed Account will be announced at the beginning of each Plan Year and may vary substantially from year to year.
- The interest rate to be credited on the Fixed Account will be announced yearly, prior to the commencement of each new Plan Year
- Participant deferral elections must be made prior to February 28th for the first Plan Year. Thereafter, Participant deferral elections must be made by December 31st prior to the beginning of each Plan Year and are irrevocable once made for that Plan Year.
- Once per year, Participants will be permitted to transfer all or part of the balance of their Fixed Account to the Phantom Stock Account as of the beginning of the next Plan Year
- Once a Participant has attained the age of 60, a transfer of all or part of their Phantom Stock Account to the Fixed Account will be permitted once per year as of the beginning of the next Plan Year
- Once a Participant has attained the age of 60, a transfer of all or part of their Variable Account to the Fixed Account will be permitted once per year as of the beginning of the next Plan Year
- Retirement, disability and termination of service benefits will be determined based on the value of the Participant's Phantom Stock Account and/or Fixed Account at the time benefits are due to be paid
- All Participant deferrals and Employer matches are always 100% vested
BENEFIT PAYMENTS:
- Retirement - benefit will be paid annually for a period of ten (10) years and will commence as soon as administratively feasible following retirement
- Death Pre-Retirement - benefit will be paid in a lump sum as soon as administratively feasible following the death of the participant
- Death Post-Retirement - the remaining retirement benefit payments will be paid directly to the participant's beneficiary(ies)
- Disability - benefit will be paid annually for a period of ten (10) years and will commence as soon as administratively feasible after a six (6) month period following the date of total and permanent disability
- Termination of Employment (for any reason other than death, retirement or disability) - benefit will be paid annually for a period of ten (10) years and will commence as soon as administratively feasible following the two year anniversary of the participant's date of termination
- The Employer may, in its sole discretion, accelerate the payment of any benefits
- In-Service Distributions of amounts elected by the Participant (not exceeding ten percent (10%) of the Participant's account balance at the time of distribution) will be made on the date elected by the Participant
MISCELLANEOUS:
- The Plan effective date is March 1, 1997
- The Plan Year is March 1st through February 28th
- Normal Retirement Age is attainment of age 65
- Benefits will be held in a specialized Trust
LIFE INSURANCE BENEFIT
In addition to your participation in the Executive Benefit Plan, Universal Technical Institute is pleased to provide you with $300,000 of life insurance coverage, if you are insurable. This benefit shall be in addition to your account balance under the Executive Benefit Plan. You will be notified by Universal Technical Institute if you are approved for the coverage and when it becomes effective. Please be aware that until you are notified, you do not have this insurance coverage.
An amount equal to the PS-58 cost (a nominal dollar amount which represents the economic benefit you receive annually from being insured) will be included in your taxable income each year. UTI will, however, increase your compensation in an amount sufficient to pay the income tax on this additional income each year. A 40% combined federal and state income tax bracket will be assumed for this purpose. Including the current cost of this insurance coverage in your current income allows your beneficiaries to receive this survivor benefit (the insurance proceeds) income tax-free. Your tax advisor can provide you with more information on this topic.
You will have no current ownership interest in this life insurance policy nor will you have the ability to take it with you if you should terminate employment.
UNIVERSAL TECHNICAL INSTITUTE
EXECUTIVE BENEFIT PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 Establishment. Effective as of March 1, 1997, LINCOLN TECHNICAL
INSTITUTE OF ARIZONA, INC. d.b.a. UNIVERSAL TECHNICAL INSTITUTE (hereinafter
known as the "Company") hereby establishes a Executive Benefit Plan (the
"Plan") for the benefit of eligible key executives, managers and highly
compensated employees (hereinafter collectively known as "Employee,"
"Participant," or "Executive" as the context may require).
1.2 Purpose. The objective and purpose of the Plan is to attract and retain competent executives, managers and highly compensated employees, by offering flexible compensation opportunities to such individuals and to provide them an opportunity to build an estate or supplement income for use after retirement.
1.3 Application of Plan. The Plan shall be applicable only with respect to eligible executives, managers and highly compensated employees. This Plan is intended to be an unfunded plan maintained by the Company primarily to provide deferred compensation for select management or highly compensated employees. As such, and to such extent, the Plan shall be exempt from the participation and funding requirements of Parts 2 and 3 of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and shall be subject to the limited reporting and disclosure requirements (under Part 1 of Title I of ERISA) applicable to such plans.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Whenever used in the Plan, the following terms shall have the meaning set forth below unless otherwise expressly provided:
(a) "Accounts" means the record keeping accounts which are maintained under the name of the Participant to account for any Deferred Compensation Amounts, Company Matches and Earnings thereupon, which may be credited from time to time.
The Participants' Accounts shall include the following sub-accounts:
i) Phantom Stock Account - a separate sub-account maintained to account for the Participant's Deferred Compensation Amounts allocated to the Phantom Stock Account, plus Company Matches, and any increases or decreases due to the Valuation of Company Stock.
ii) Fixed Account - a separate sub-account maintained to account for the Participant's Deferred Compensation Amounts allocated to the Fixed Account, plus Company Matches, plus Earnings credited thereon.
iii) Variable Account - a separate sub-account maintained to account for the Participant's Deferred Compensation Amounts allocated to the Variable Account, plus any Company Matches, and any increases or decreases resulting from Earnings thereon.
(b) "Beneficiary" means the person, persons or trust designated by the Participant as a beneficiary under the terms of Section 10.1. Whenever the rights of the Participant are stated or limited herein, the rights of his or her beneficiaries shall also be as stated or limited by this Plan.
(c) "Bonus" means any management incentive or other bonus award which the Employee may become eligible to receive from the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time to time.
(e) "Company" means LINCOLN TECHNICAL INSTITUTE OF ARIZONA, INC. d.b.a. UNIVERSAL TECHNICAL INSTITUTE and any successors thereto.
(f) "Company Matches" means the matches made by the Company on behalf of the Participant and credited to his Accounts by the Company pursuant to Section 4.1.
(g) "Deferred Compensation Amounts" means the portion of the Participant's Bonuses which the Participant elects to defer pursuant to Article IV hereof.
(h) "Deferral Amounts" means deferred Bonus amounts.
(i) "Deferral Election" means an election by the Employee to defer part or all of his Bonuses pursuant to Article IV.
(j) "Earnings" means the stated rate of interest credited to the Participant's Fixed Account, as provided in Section 6.4, and the variable return credited to the Participant's Variable Account, as provided in Section 6.5 hereof.
(k) "Eligible Employees" means the "Employee" of the Company who is designated for participation in the Plan by the President of the Company. Once so designated, an individual shall remain an Eligible Employee until such status is terminated by the President of the Company, or until such individual is no longer an "Employee" as defined herein. All determinations as to the status of an Employee as an Eligible Employee shall be made by the President of the Company in his sole and absolute discretion, and shall be final and binding upon all parties.
(l) "Employee" means a key employee of the Company, who is a member of a select group of management or highly compensated employees.
(m) "Participant" means the Employee who (i) is covered by a current, effective Participation Agreement & Deferral Election, or (ii) has a balance credited to his Account hereunder. If the Participant is not, at any relevant time, an Eligible Employee or covered by a current Participation Agreement & Deferral Election, he shall be referred to as an "Inactive Participant".
(n) "Plan" means the UNIVERSAL TECHNICAL INSTITUTE EXECUTIVE BENEFIT PLAN as set forth herein, and as it may be amended from time to time.
(o) "Plan Year" means the 12 month period beginning each March 1 and ending on the following last day of February.
(p) "Retirement Age" means the attainment of age 65.
(q) "Termination of Service" means severance of all categories of Executive's employment with the Company for any cause which occurs prior to retirement other than by death or disability.
(r) "Total and Permanent Disability" means the mental or physical inability of Executive to perform his normal job with the Company, as evidenced by the decision of the insurance company chosen by the Company to provide disability insurance coverage for the Executive's benefit. The insurance company's decision shall be binding and conclusive on both the Company and the Executive. If there is no insurance company providing current
disability insurance for the Executive's benefit at the time of his disability, the determination of whether the Executive is totally disabled shall be evidenced by the certificate of a physician satisfactory to both the Company and the Executive, certifying such inability and certifying that such condition is likely to be permanent. If a physician satisfactory to both the Company and the Executive cannot be found, then Total and Permanent Disability shall mean qualifying for disability benefits under Social Security (FICA), provided Executive is still so disabled at the end of six (6) months after qualifying.
(s) "Trust" means the U.T.I. TAX DEFERRED TRUST (referred to herein as the "Tax Deferred Trust") established pursuant to Article VIII hereof for the purpose of holding the Company Matches and amounts deferred by the Participants until the dates specified for the payment of such deferred amounts to the Participants, and as otherwise specified in the Trust.
(t) "Valuation Date" means the last day of February.
(u) "Valuation of Company Stock" means the value of the common stock of the Company, determined by the most recently completed stock valuation report prior to the date of compensation deferral or distribution.
2.2 Gender and Number; Severability. Except when otherwise indicated by the context, any masculine terminology when used in the Plan shall also include the feminine gender, and the definition of any term in the singular shall also include the plural. In the event any provision of the Plan shall be held invalid or illegal for any reason, any illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had never been inserted, and the Company shall have the privilege and opportunity to correct and remedy such questions of illegality or invalidity by amendment as provided in the Plan.
ARTICLE III
PARTICIPATION
3.1 Eligibility. The President of the Company shall designate and communicate in writing to the Plan Administrator before December 1 of each year, Employees who shall become eligible Employees. The Plan Administrator shall provide each such newly designated Eligible Employee with notice of his or her status as an Eligible Employee, so as to permit the Eligible Employee the opportunity to make the elections provided for under Article IV. Such notice shall be given in such manner as the Plan Administrator
may determine from time to time, and shall advise the Eligible Employee of the time and manner for filing his or her elections. Each Eligible Employee shall be eligible to participate in all features of the Plan. For the initial Plan Year such notices shall be given as soon as possible to the initial Eligible Employees.
3.2 Participation.
(a) In General. The Eligible Employee shall become a Participant in this Plan as of the first day of the Plan Year immediately following the Plan Year during which the Plan Administrator receives his or her Participation Agreement & Deferral Election. If the Employee is eligible to participate in the Plan for the initial Plan Year, he or she shall make their Participation Agreement & Deferral Elections no later than February 28, 1997 for the initial Plan Year.
(b) Cessation of Status as Eligible Employee. If the Employee with a Participation Agreement & Deferral Election in effect for a particular Plan Year ceases to be an Eligible Employee, his or her Deferral Election with respect to a Deferred Bonus Amount shall terminate effective as of the first day on which he or she no longer qualifies to make a Deferral Election with respect to a subsequent Plan Year; provided that any amounts credited to such individual's Accounts under any such Deferral Election prior to its discontinuance shall continue to be governed by such Deferral Election and the terms of this Plan.
ARTICLE IV
DEFERRAL
4.1 Company Matches. The Company shall make Company Matches to be credited to each Participant's Accounts for the initial Plan Year as set forth on the attached Schedule "A", which is incorporated herein by this reference. The Company may elect, to make Company Matches for subsequent Plan Years to be credited to Participant's Deferred Compensation Amounts. Whether such Company Matches are made and the amount of such matches for the Participant shall be determined in the sole discretion of the Company's President and will be announced prior to the commencement of each Plan Year. Company Matches shall vest pursuant to Section 6.7 hereof.
4.2 Deferred Bonuses. The Eligible Employee may elect to defer all or any portion of his or her Bonus which he or she may be entitled to receive from the Company. The amount to be so deferred shall be specified as a dollar amount or a
percentage, or a combination thereof, not in excess of the total amount of the Participant's Bonus, to be withheld from his or her paycheck in the payroll period during which the Bonus would otherwise have been payable.
4.3 Deferral Elections: Manner and Form.
(a) In General. To make a Deferral Election for any Plan Year, the Eligible Employee must file a Participation Agreement & Deferral Election form with the Plan Administrator on or prior to December 31 of the Plan Year preceding the Plan Year for which the election is made, subject to Section 4.3(b). Each such election shall be made with respect to a specific Plan Year and all payroll periods or payment dates applicable to such individual which begin within such Plan Year. An election filed for a Plan Year shall be applicable for such Plan Year and remain in effect until a new Participation Agreement & Deferral Election form is filed with the Plan Administrator, unless the individual ceases to be an Eligible Employee, in which case the Deferral Election shall terminate in accordance with Section 3.2(b)
(b) Treatment of New Eligible Employees. If the Eligible Employee first becomes eligible to make a Participation Agreement & Deferral Election after the first day of a Plan Year, such individual may make a Participation Agreement & Deferred Compensation Election with respect to Bonuses payable during the remaining Plan Year. To make such election, the individual must file the appropriate Participation Agreement & Deferral Election form with the Plan Administrator no later than 30 days after the date on which he or she became eligible to make a Deferral Election, and such election shall be effective for Bonuses occurring after the date he files such form and beginning within the subject Plan Year. A Participation Agreement & Deferral Election as described in this Section 4.3(b) shall become irrevocable when the appropriate form is filed with the Plan Administrator.
(c) Deferral Elections: Amounts. Deferral Elections shall be made on such
forms as are prescribed by the Plan Administrator. Each such election
form shall specify the nature of the Deferral Amount (by a dollar
amount, percentage, or combination thereof), the designated date of
in-service distribution, if any (at least two (2) years following the
deferral date), and the Beneficiary or Beneficiaries to receive any
death benefit applicable to the subject amount, as provided in Section
10.1. Except as otherwise provided in this Article IV, all Deferral
Elections shall become irrevocable
December 31 prior to commencement of the subject Plan Year. The Eligible Employee may change or revoke his or her Participation Agreement & Deferral Election at any time prior to December 31 of the Plan Year preceding the Plan Year of deferral. Only an Eligible Employee may file a Participation Agreement & Deferral Election form and an Inactive Participant is not eligible to file such forms.
(d) Deferral Elections: Rate of Return. Rate of return elections shall be made by Participants on such forms as are prescribed by the Plan Administrator. Those Participants listed as Category I Employees on Schedule "B" to this Plan shall be eligible to specify either the Phantom Stock Account or the Fixed Account, or a combination thereof, as a requested rate of return. Those Participants listed as Category II Employees on Schedule "B" to this Plan shall be eligible to specify the Phantom Stock Account, the Fixed Account, or the Variable Account, or a combination thereof, as a requested rate of return. The Participant may request a transfer of all or part of the balance of his Fixed Account into the Phantom Stock Account once per year, effective at the beginning of the next following Plan Year. Transfers from the Phantom Stock Account into the Fixed Account will not be permitted until the Participant has attained the age of sixty (60), at which time the Participant may request transfer of all or part of the balance of his Phantom Stock Account into the Fixed Account once per year, effective at the beginning of the next following Plan Year. Transfers from the Variable Account into the Fixed Account will not be permitted until the Participant has attained the age of sixty (60), at which time the Participant may request transfer of all or part of the balance of his Variable Account into the Fixed Account once per year, effective at the beginning of the next following Plan Year.
ARTICLE V
PAYMENT OF BENEFITS
5.1 Time and Manner of Distribution. The Participant's Accounts shall be
payable to the Participant in equal annual installments over a period of ten
(10) years. The first annual installment shall be made no later than January 1
of the calendar year following the Participant's Termination of Service and each
successive annual installment shall be paid on the anniversaries of the first
payment date. The Company, however, has the right at any time to accelerate the
payments or to make a single lump-sum payment to the Participant. From the date
of Termination of Service the outstanding principal amount not received by the
Participant shall continue to be credited with the fixed interest
rate for the Fixed Account, as determined from time to time by the Company pursuant to Section 6.4.
5.2 Pre-Retirement Death Benefits. In the event of a Participant's death prior to Retirement, the Participant's Beneficiary(ies) will be paid a lump sum equal to the Participant's Accounts as of the date of death. From the date of death, the outstanding principal amount of the Participant's Accounts will be credited with the fixed interest rate for the Fixed Account, as determined from time to time by the Company pursuant to Section 6.4, through the date of payment to the Participant's Beneficiary(ies). This payment will be made as soon as administratively feasible following the Company's receipt of written notification of the Participant's death and shall constitute the entire entitlement of Participant's Beneficiary(ies) under this Plan. In the absence of a valid beneficiary designation by the Participant, or if the designated Beneficiary(ies) predecease the Participant, the unpaid amounts shall be paid to the Participant's estate.
5.3 Post-Retirement Death Benefit. In the event of the Participant's death after Retirement, the Participant's Beneficiary(ies) shall receive the remaining annual installments due the Participant, on the dates said payments would have been paid to the Participant pursuant to Section 5.1.
5.4 Total and Permanent Disability. In the event the Participant suffers Total and Permanent Disability, after a waiting period of six (6) months from the date of certification of Total and Permanent Disability, he or she shall receive the amount of his Participant Accounts (balance computed as of the end of the waiting period) payable over a period of ten (10) years, in accordance with Section 5.1 above, except that payments shall commence as soon as administratively feasible following the expiration of the six month waiting period.
5.5 Termination of Employment. In the event the Participant terminates his or her employment with the Company prior to retirement or disability, the Participant shall receive the balance of their Participant's Accounts, computed as of the date of termination, payable in equal annual installments over a period of ten (10) years, commencing as soon as administratively feasible following the second anniversary of the date of the Participant's termination of employment.
5.6 Legal Disability. If a person entitled to any payment shall be under a legal disability, or in the sole judgment of the Plan Administrator shall otherwise be unable to apply such payment to his or her own interest and advantage, the Plan Administrator, in the exercise of its discretion, may direct the Company to make such payment in any one or more of the following ways:
(a) Directly to such person;
(b) to his or her legal guardian or conservator; or
(c) to his or her spouse or to any person charged with his or her support;
to be expended for his or her benefit. The decision of the Plan Administrator shall in each case be final and binding upon all persons in interest. Any such payment shall completely discharge the obligations of the Plan Administrator and the Company with regard to such payment.
5.7 In-Service Withdrawal from Participant Account. The Participant may elect to make an in-service withdrawal of a portion of the amounts credited to his or her Participant Accounts by including the proper election of in-service withdrawals on his or her initial Participation Agreement & Deferral Election form. The amount of an in-service withdrawal in any one year cannot exceed ten percent (10%) of the balance of the Participant's Accounts at the time of distribution without the prior consent of the Company. The Participant may elect to postpone payment of any scheduled in-service withdrawal by giving written notice of such election to the Plan Administrator no later than the December 31 which is at least eighteen (18) months prior to the date when such withdrawal is to be made. The postponed withdrawal shall then be payable on such later date as may be designated by the Participant on his or her written notice of election to postpone payment. Such in-service withdrawal shall be paid in the form of a lump sum; provided, however, that if the Participant is married on the date of the withdrawal, his or her spouse must consent to such withdrawal on forms provided by the Plan Administrator.
5.8 Withholding of Taxes. The Company shall have the right to deduct from all payments made under the Plan any Federal, state or local taxes required by law to be withheld with respect to such payments, unless the Company and the Participant shall make other mutually acceptable arrangements for the payment of applicable taxes.
ARTICLE VI
ACCOUNTING FOR DEFERRAL AMOUNTS
6.1 Participant Accounts. The Plan Administrator shall maintain, or cause to be maintained, bookkeeping Accounts for the Participant for the purpose of accounting for the Participant's beneficial interest under the Plan. The establishment and maintenance of separate Accounts for the Participant shall not be construed as giving any person an interest in the assets of the Company or a right to payment other than as provided hereunder. Benefits hereunder shall constitute an unsecured general obligation of the
Company, but the Company may create reserves or funds and/or provide for amounts to be held in trust on the Company's behalf in order to facilitate payment. The Plan Administrator shall maintain, or cause to be maintained, such other accounts, sub-accounts, records or books as it deems necessary to properly provide for the maintenance of Accounts under the Plan, and to carry out the intent and purposes of the Plan.
6.2 Adjustment of Accounts; Account Balances. The Participant's Accounts shall be adjusted to reflect all amounts credited to his Accounts, all Company Matches credited to his Accounts, Earnings, interest (if applicable), changes in the value of the Company common stock (if applicable), and all benefit payments charged to his Accounts.
6.3 Rate of Return; Phantom Stock Account. The Category I or II Participant may request that a portion or all of his Deferral Amounts in this Plan receive a rate of return as though the Deferral Amounts had been invested in the common stock of the Company. The Participant's Deferral Amounts will be credited to his Phantom Stock Account as an equivalent number of shares of phantom stock of the Company as of the date on which the amount which is being deferred would have become payable to the Participant in the absence of the subject Deferral Election. For purposes of computing the number of phantom stock units to be credited to the Participant's Phantom Stock Account, the most recently completed Stock Valuation Report as of the Valuation Date immediately preceding the date of deferral will be utilized. Although the rate of return for the Phantom Stock Account is measured with reference to the value of the common stock of the Company, such measurement is solely for purposes of computing benefits payable under this Plan and the Participant will not receive any actual stock, nor will he be entitled to any voting rights or to receive any dividends. Increases or decreases in the value of the Company common stock will be reflected in the balance of the Participant's Phantom Stock Account as soon as administratively feasible following the completion of the annual Stock Valuation Report. Charges to the Participant's Phantom Stock Account to reflect benefit payments under the Plan will be made as of the date of any such payment, measured with reference to the value of the common stock of the Company as of the Valuation Date immediately preceding the date of benefit payment.
6.4 Rate of Return; Fixed Account. A Category I or II Participant may request that a portion or all of his Deferral Accounts in this Plan receive a fixed rate of return as established by the Company. Prior to the start of each Plan Year, the Company will announce the fixed rate of return that will be credited on this account for the following Plan Year. Earnings on balances credited to the Participant's Fixed Account will be credited to that Account as soon as administratively feasible following the completion of the Plan Year. Charges to the Participant's Fixed Account to reflect benefit payments under the Plan will be made as of the date of any such payment.
6.5 Rate of Return; Variable account. A Category II Participant may request a portion or all of his Deferral Accounts in this Plan receive a variable rate of return as established by the Company. In the event and to the extent that the Company elects to acquire, directly or through a trust or other funding vehicle, stocks, bonds, mutual funds, or any other investments to assist the Company in its funding obligations under this Plan, the Variable Account shall be credited hereunder with the actual rate of return of those funding vehicles.
6.6 Nature of Account Entries. The establishment and maintenance of Participants' Accounts shall be merely bookkeeping entries and shall not be construed as giving any person an interest in the assets or stock of the Company. Benefits hereunder shall constitute an unsecured general obligation of the Company, but the Company may create reserves, funds and/or provide for amounts to be held in trust on the Company's behalf under the Tax Deferred Trust.
6.7 Vesting of Participant Accounts. The Participant shall have a fully vested and nonforfeitable beneficial interest in the outstanding balance of his Accounts as of any relevant date, subject to changes in the value of the common stock of the Company if the Participant has a Phantom Stock Account and changes in the cash value of investments if the Participant has a Variable Account, and the conditions and limitations on the payment of amounts credited to such Accounts as provided in the Plan.
6.7 Account Statements. The Plan Administrator shall provide the Participant with a statement of the status of his Accounts under the Plan. The Plan Administrator shall provide such a statement annually, approximately 60 days after completion of the annual Stock Valuation Report, or as soon as administratively feasible Such statement shall be in the format as prescribed by the Plan Administrator.
ARTICLE VII
ADMINISTRATION OF THE PLAN
7.1 Administration. The Plan shall be administered by the Plan Administrator, consisting of an Executive Committee appointed by the President of the Company. The Plan Administrator shall have that authority which is expressly stated in the Plan as vested in the Plan Administrator, and authority to make rules to administer and interpret the Plan, to decide questions arising under the Plan, and to take such other action as may be appropriate to carry out the purposes of the Plan.
7.2 Rules: Claims for Benefits. The Plan Administrator shall adopt and establish such rules and regulations with respect to the administration of the Plan as it
deems necessary and appropriate. In the event that the Participant or a
Beneficiary claims any right hereunder, he or she must complete and submit such
claim forms and supporting documentation as shall be required in the sole
discretion of the Plan Administrator. Any employee or other person claiming
benefits, eligibility, participation or any other right or interest under this
Plan may file a written claim setting forth the basis of the claim with the Plan
Administrator. In connection with the determination of a claim, or in connection
with review of a denied claim, the claimant may examine this Plan and any other
pertinent documents generally available to Participants relating to the claim. A
written notice of the disposition of any such claim shall be furnished to the
claimant within ninety (90) days after the claim is filed with the Plan
Administrator. Such notice shall refer, if appropriate, to pertinent provisions
of the Plan, shall set forth in writing the reasons for denial of the claim if a
claim is denied (including references to any pertinent provisions of the Plan),
and where appropriate, shall explain how the claimant can perfect the claim. If
the claim is denied, in whole or in part, the claimant shall also be notified in
writing that a review procedure is available. Thereafter, within ninety (90)
days after receiving the written notice of the Plan Administrator's disposition
of the claim, the claimant may request in writing, and shall be entitled to, one
(1) review meeting with the Plan Administrator to present reasons why the claim
should be allowed; provided, however, that if a benefit claimed is explicitly
excluded by the terms of the Plan, a review will not be provided. The claimant
shall be entitled to be represented by counsel at this review meeting. The
claimant may also submit a written statement of his claim and the reasons for
requesting a review of the claim. Such statement may be submitted in addition
to, or in lieu of, the review meeting with the Plan Administrator. If the
claimant does not request a review meeting within ninety (90) days after
receiving written notice of the Plan Administrator's disposition of the claim,
the claimant shall be deemed to have accepted the Plan Administrator's written
disposition, unless the claimant shall be deemed to have accepted the Plan
Administrator's written disposition, unless the claimant shall have been
physically or mentally incapacitated so as to be unable to request review within
such period. A decision on review of the claim by the Plan Administrator shall
be made within sixty (60) days after review, and a written copy of such decision
shall be delivered to the claimant. If special circumstances require an
extension of the ordinary period, the Plan Administrator shall so notify the
claimant. In any event, if a claim is not determined within one hundred twenty
(120) days after submission for review, it shall be deemed to be denied. The
Plan Administrator shall have the right to request and receive from a claimant
such additional information, documents or other evidence as the Plan
Administrator may reasonably require. To the extent permitted by law, a decision
on review by the Plan Administrator shall be binding and conclusive upon all
persons whomsoever. To the extent permitted by law, completion of the claims
procedures described in this Article VII shall be a mandatory precondition that
must be complied with prior to the commencement of a legal or equitable action
by a person claiming rights under the Plan. The Plan Administrator may, in its
sole and absolute discretion, waive these procedures as a mandatory condition to
such action. In no event shall the claims
procedure set forth in this Article VII be applied to circumvent or have the effect of modifying either the manner of payment or the time of commencement of payment under the terms of the Plan.
7.3 Finality of Determinations. All determinations of the Plan Administrator as to any matter arising under the Plan, including questions of construction and interpretation shall be final, binding and conclusive upon all interested parties.
7.4 Indemnification. To the extent permitted by law and the Company's bylaws, the Plan Administrator, its agents, and the officers, directors and employees of the Company shall be indemnified and held harmless by the Company against and from any and all loss, cost, liability or expense that may be imposed upon or may be reasonably incurred by them in connection with or resulting from any claim, action, suit or proceeding to which they may be a party or in which they may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by them in satisfaction of a judgment in any such action, suit or proceeding.
ARTICLE VIII
FUNDING
8.1 Funding. It is intended that the Company is under a contractual obligation to make the payments from the Participant's Accounts when due, to the extent of the amounts accumulated in the Trust. All amounts paid under the Plan shall be paid in cash from the general assets of the Company and shall at all times be subject to the claims of its creditors. Benefits hereunder and Earnings (where applicable) shall be reflected on the accounting records of the Company, as provided for under the Plan, but such records shall not be construed to create, in the Participant, any right, title or interest whatsoever in or to any Company common stock, investment reserves, trust accounts, or funds that the Company may purchase establish or accumulate to aid in providing the benefit payments described in the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust or a fiduciary relationship of any kind between the Company and the Participant or any other person. With respect to assets held by the Tax Deferred Trust, the Participant and Beneficiaries shall not acquire any interest under the Plan greater than that of unsecured general creditor of the Company.
ARTICLE IX
AMENDMENT; TERMINATION; MERGER
9.1 Amendment and Termination. The President of the Company, or the Plan Administrator acting on behalf of the President, may amend, modify or terminate the Plan at any time and in any manner, but may not reduce the amounts credited to the Participant's Accounts (except as those amounts in a Participant's Phantom Stock Account are valued by reference to the value of the Company common stock or those amounts in the Variable Account vary in cash value) nor postpone the time of payment thereunder as of the time of such amendment, modification or termination. In the event of a termination of this Plan, no further Deferral Elections may be made under the Plan, and amounts which are then payable, or which become payable under the terms of the Plan, shall be paid as scheduled in accordance with the provisions of the Plan.
ARTICLE X
GENERAL PROVISIONS
10.1 Beneficiary Designation. The Participant shall designate a Beneficiary or Beneficiaries who, upon his or her death, are to receive payments that otherwise would have been paid to him under the Plan. All Beneficiary designations shall be in writing and on a form prescribed by the Plan Administrator for such purpose, and any such designation shall only be effective if and when delivered to the Plan Administrator during the lifetime of the Participant. A Participant may from time to time during his lifetime change a designated Beneficiary or Beneficiaries by filing a new Beneficiary designation form with the Plan Administrator. In the event a designated Beneficiary of the Participant predeceases the Participant, the designation of such Beneficiary shall be void. If a designated Beneficiary dies after the Participant, but before all death benefit payments relating to such Beneficiary have been paid, the remainder of such death benefit payments shall be paid to such Beneficiary's estate, unless the Participant had designated on the applicable Beneficiary designation form payment to a contingent Beneficiary. In the event a Participant shall fail to designate a Beneficiary or Beneficiaries with respect to any death benefit payment, or if for any reason such designation shall be ineffective, in whole or in part, any payment that otherwise would have been paid to the Participant shall be paid to his estate, and in such event, his estate shall be his Beneficiary with respect to such payment.
10.2 Effect on Other Plans. Deferral Amounts shall not be considered as part of the Participant's compensation for the purpose of any savings or pension plan maintained by the Company, but such amounts shall be taken into account under all other employee benefit plans maintained by the Company in the year in which such amounts would have been payable in the absence of a Deferral Election; provided, however, that such amounts
shall not be taken into account to the extent the inclusion thereof would jeopardize the tax-qualified status of the plan to which they relate.
10.3 Nontransferability. No right or interest of the Participant in the Plan shall be assignable or transferable in whole or in part, either voluntarily or by operation of law or otherwise, or be subject to payment of debts of the Participant by execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner. Notwithstanding the foregoing, upon receipt of a copy of a decree from a court of competent jurisdiction which finally declares the Participant's spouse as having property rights to a portion of the amounts credited to the Participant's Account, the Plan Administrator shall segregate such portion from the Participant's Account and hold that portion for the benefit of the spouse. For purposes of crediting Earnings on and determining the timing of the distribution of such segregated amounts, such segregated amounts shall be treated as if they had remained part of the Participant's Account. In receiving payment of such amount, and in designating Beneficiaries, the spouse shall be treated as if they had remained part of the Participant's Account. In receiving payment of such amount, and in designating Beneficiaries, the spouse shall be treated as if she was a Participant; provided, however, that the spouse shall not be treated as if she was a Participant; provided however, that the spouse shall not be entitled to begin receiving payments hereunder before the earliest date that the Participant could have recovered payments under this Plan.
10.4 Plan Not an Employment Contract. The Plan is not an employment contract. It does not give to the right to be continued in employment, and the Executive remains subject to change of salary, transfer, change of job, discipline, layoff, discharge or any other change of employment status.
10.5 Applicable Law. The Plan shall be governed and construed in accordance with the laws of the State of Arizona, except to the extent such laws are preempted by any applicable Federal law.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed this 1st day of March, 1997, by its authorized representative.
LINCOLN TECHNICAL INSTITUTE OF ARIZONA,
INC., d.b.a. UNIVERSAL TECHNICAL INSTITUTE
By: /s/ Robert Hartman --------------------------------------- Robert Hartman, President |
SCHEDULE "A"
COMPANY MATCHES
UNIVERSAL TECHNICAL INSTITUTE
Phantom Stock Account Fixed Account Variable Account ------------- ------------- --------------- Initial Plan Year: 3/1/97-2/29/98 $.50 for each $.15 for each $.30 for each $1.00 deferred $1.00 deferred $1.00 deferred Subsequent Plan Years: As determined As determined As determined by President by President by President |
SCHEDULE "B"
PARTICIPANTS
UNIVERSAL TECHNICAL INSTITUTE
CATEGORY I PARTICIPANTS:
Joseph Cutler
Phillip Christner
Jeanine Linsenmeyer
Jim Gleeson
Sharon Morrison
Jeffrey Muecke
Thomas Nelmark
Kimberly Riordan
Randall Smith
Sherrell Smith
Roger Speer
Randall Whitman
CATEGORY II PARTICIPANTS:
Robert Hartman
U. T. I. TAX-DEFERRED TRUST
TRUST AGREEMENT (the "Trust"), dated as of February 24, 1997, by and
between LINCOLN TECHNICAL INSTITUTE OF ARIZONA, INC. d.b.a. UNIVERSAL TECHNICAL
INSTITUTE (hereinafter referred to as the "Company"), and ROBERT HARTMAN, KIM
RIORDAN and SHARON MORRISON (hereinafter collectively referred to as "Trustee").
WHEREAS, the Company has established the Universal Technical Institute Executive Benefit Plan (herein the "Plan") to provide benefits for certain officers and executives of the Company (the "Executives");
WHEREAS, the aforesaid obligations of the Company are not funded or otherwise secured and the Company has agreed to assure that the future payment of such amounts will not be improperly withheld under certain circumstances;
WHEREAS, for purposes of assuring that such payments will not be improperly withheld, the Company desires to deposit with the Trustee for the benefit of the Executives, subject only to the claims of the Company's creditors as provided herein, amounts of cash sufficient to make such payments as they may become due and payable; and
WHEREAS, this Trust in intended to be a grantor trust within the meaning of
Section 671 of the Internal Revenue Code of 1986, as amended, and all income,
deductions and credits of the Trust shall belong to the Company for income tax
purposes as the owner of the Trust Corpus and will be included on the Company's
income tax return;
NOW THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the parties hereto agree as follows:
ARTICLE I
THE PLAN
SECTION 1.01 Acceptance of Trust. The Trustee hereby accepts this Trust as evidenced by the Trustee's execution of this Trust Agreement. This Trust shall be known as the "U. T. I. Tax-Deferred Trust". The Company hereby represents and warrants that it has full power, authority and capacity to execute and deliver this Trust Agreement and perform its obligations hereunder and that this Trust Agreement constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other laws affecting the enforcement of creditors' rights generally.
SECTION 1.02 The Plan. The Universal Technical Institute Executive Benefit Plan, a copy of which is attached as Exhibit "A", and related Participation Agreement & Deferral Elections are subject to the Trust.
Attached as Schedule 1 is a list of names and mailing addresses of Executives who have vested benefits in the Executive Benefit Plan. The Company will revise the Executive Lists from time to time to reflect changes in the identity of Executives participating in the Plans.
The Company shall only be liable to the Executives to make all payments required under the terms of the Plan to the extent such payments may be made pursuant to this Trust. Distributions made from the Trust to or for Executives in respect of the Plan pursuant to Section 3.01 hereof, shall, completely and conclusively satisfy the Company's obligation to pay benefits to such Executive under the Plan.
ARTICLE II
TRUST AND THE TRUST CORPUS
SECTION 2.01 Definitions and Construction. Unless the context of this Trust clearly indicates otherwise, the terms defined in the Plan shall, when used herein, have the same meaning as in the Plan. Where appearing in this Trust, the masculine gender shall include the feminine and neuter genders, the singular shall include the plural, and vice versa. The headings in this Trust are used for the convenience of reference only and are to be ignored in any constructions of the provisions hereof.
SECTION 2.02 Contributions to the Trust. The Company hereby establishes with the Trustee a trust, pursuant to the Plan, in which may be deposited such sums of money as shall from time to time be paid or delivered to or deposited with the Trustee by or with the approval of the Company in accordance with the terms of the Plan. Neither the Trustee nor any Plan participant or beneficiary shall have the right to compel such deposits. All such sums of money, all investments and reinvestments thereof, and all earnings, appreciation and additions allocable thereto, less losses, depreciation and expenses allocable thereto and any payments made therefrom as authorized under the Plan or this Agreement shall constitute the "Trust Corpus". The Trust Corpus shall be held, managed and administered by the Trustee, in trust, and dealt in accordance with the provisions of this Trust and in accordance with any funding policy or guidelines established under the Plan that are communicated in writing to the Trustee. The Trustee shall not be responsible for the calculation or collection of any contribution under or required by the Plan, but shall be responsible only for funds and property received by the
2.
Trustee pursuant to this Trust Agreement. All remittances of funds by the Company to the Trustee shall be made either by check or by wire transfer pursuant to instructions received from the Trustee. The Trustee shall hold, administer and invest the Trust Corpus and all sums paid to the Trustee in accordance with the provisions of this Trust Agreement, provided, however, that the Trustee shall not invest the Trust Corpus in the stock of the Company. All income, deductions, and credits of the Trust Corpus shall belong to the Company for income tax purposes as the owner of the Trust Corpus and will be included in the Company's income tax returns.
SECTION 2.03 Accounts. The Company intends to have an individual account established for each Executive designed to assist in funding the Company's legal liability under the Plan with respect to the Executive for whom such account has been established, and to have the balance of funds, if any, credited to all such accounts revert to the Company after the legal liabilities of the Company to the Participant for benefits under the Plan have been met.
SECTION 2.04 Insurance Contracts. As directed by the Company or its delegate, the Trustee shall execute the application for any insurance contract to be applied for in such form as the Company shall deem appropriate. The Trustee shall be the absolute owner and beneficiary of all contracts which shall be held as part of the Trust Corpus. The Trustee shall pay from the Trust Corpus premiums, assessments, dues, charges and interest to acquire or maintain any contracts held in the Trust. For such purposes the Trustee may use any money held by the Trustee as part of the Trust Corpus. If the cash available in the Trust is not sufficient to pay all of the sums with respect to such contracts, the Trustee shall immediately notify the Company of the amount of the deficiency; and the Trustee shall be under no duty or obligation to make any such payments unless and until the Trustee shall be in receipt of a Company contribution. As directed by the Company, the Trustee shall, without the consent of any other person, collect and receive all dividends or other payments of any kind payable with respect to, under, or arising out of, any insurance contracts held in the Trust or shall leave the same with the issuing insurance company. As directed by the Company the Trustee shall have the power to convert from one form of contract to any other form of contract; to designate any mode of settlement of the proceeds of any contract held in the Trust; to borrow sums of money from the issuing insurance company upon any contract or contracts issued by it and held in the Trust; to agree with the insurance company issuing any contract to any release, reduction, modification or amendment thereof; and, without limitation of any of the foregoing, to exercise any and all of the rights, options or privileges that belong to the absolute owner of any contracts held in the Trust or that are granted by the terms of any such contracts or of this Trust Agreement. Any such direction from the Company shall be binding upon the Trustee and the Trustee shall be under no duty to question any such direction of the Company or to review any contracts or other property acquired or held
pursuant to the Company's directions or to make any suggestions to the Company in connection therewith; and the Trustee shall as promptly as possible comply with any directions given by the Company hereunder. The Trustee shall not be liable, to the extent permitted by law, for compliance with any such directions. All directions of the Company to the Trustee shall be in writing signed by an individual it shall authorize in writing so to act.
ARTICLE III
RELEASE OF THE TRUST CORPUS
SECTION 3.01 Payments from the Trust Corpus.
(a) Subject to the provisions of Section 3.02 hereof, the Trustee shall from time to time at the direction of the Company or its delegate make payments out of the Trust Corpus to the Company or Executives. The Trustee shall be under no liability for any payment made pursuant to the direction of the Company. The Trustee shall not guarantee the sufficiency of any payment and has no duty to determine whether any such payment is properly made pursuant to the provisions of the Plan. Any direction of the Company shall constitute a certification that that distribution or payment so directed is one which the Company is authorized to direct for the purpose of providing benefits under the Plan to Executives. The Trustee shall hold the Trust Corpus in its possession under the provisions of this Trust Agreement until authorized to distribute the Trust Corpus or any specified portion thereof.
(b) As directed by the Company or its delegate, but otherwise in its discretion, the Trustee shall be permitted to withhold from any payment due to an Executive hereunder the amount required by law to be so withheld under federal, state and local wage withholding requirements or otherwise, and shall pay over to the appropriate governmental authority the amounts so withheld.
(c) Except as otherwise provided herein, in the event of any final determination by the Internal Revenue Service or a court of competent jurisdiction, which determination is not appealable, or with respect to which the time for appeal has expired, or the receipt by the Trustee of a substantially unqualified opinion of tax counsel selected by the Trustee, which determination determines, or which opinion opines, that the Executives or any particular Executive, is subject to federal income taxation on amounts held in Trust hereunder prior to the distribution to the Executive or Executives of such amounts, the Trustee shall, on receipt by the Trustee of such opinion or notice of such determination, pay to each Executive the portion of the Trust Corpus includable in such Executive's federal gross income.
SECTION 3.02 Deliveries to Creditors of the Company. The parties hereto
intend that the Trust Corpus be and shall remain at all times subject to the
claims of the general creditors of the Company in the event of the Company's
insolvency or bankruptcy as defined in Section 3.03. Accordingly, the Company
shall not create, and this Trust Agreement shall not be construed to create, a
security interest in the Trust Corpus in favor of the Executives or any
creditor. If the Trustee receives the notice provided for in Section 3.03
hereof or otherwise determines the Company is bankrupt or insolvent, as
described in Section 3.03 hereof, the Trustee shall discontinue payments to all
of the Executives. Unless the Trustee has received the notice provided for in
Section 3.03 hereof, the Trustee shall have no duty to inquire whether the
Company is bankrupt or insolvent. Following receipt of such notice, the Trustee
shall deliver the Trust Corpus only to satisfy such claims, including those of
the Executives, as a court of competent jurisdiction may direct. The Trustee
shall, as soon as practicable after receipt of such notice, attempt to
determine whether the Company is bankrupt or insolvent, based upon such
evidence as may be available to the Trustee which would provide a reasonable
basis for making such a determination. The Trustee shall resume distributions
of Trust Corpus to the Executives under the terms hereof, including any
arrearages, after so notifying the Company, if it determines that the Company
was not, or is no longer, bankrupt or insolvent.
SECTION 3.03 Notification of Bankruptcy or Insolvency. The Company, through its Board of Directors and Chief Executive Officer, shall advise the Trustee promptly in writing of the Company's bankruptcy or insolvency. The Company shall be deemed to be bankrupt or insolvent upon the occurrence of either of the following:
(i) The Company is unable to pay its debts as such debts become due; or
(ii) The Company is subject to a bona fide pending proceeding as a debtor under the Bankruptcy Code.
ARTICLE IV
TRUSTEE
SECTION 4.01 Trustee.
(a) The duties and obligations of the Trustee acting as Trustee hereunder shall be strictly limited to those expressly imposed upon the Trustee by this Trust Agreement and by applicable law. The Trustee shall not be under any duty hereunder to review the Plan, and shall have no duty under the Plan. The Trustee shall have no responsibility for providing for the proper administration of the Plan, or for ensuring that the provisions of the Plan are consistent with the provision of this Trust Agreement. The Trustee shall have
no responsibility to monitor compliance by the Company or any other person with respect to the Plan or with any law applicable thereto. The Trustee is not the administrator of the Plan. The Trustee shall assume that the written directions of the Company are consistent with the terms of the Plan. The Trustee may request direction from the Company with respect to carrying out its duties hereunder and may await such direction without incurring liability for doing so. All persons dealing with the Trustee are released from inquiry into the decision or authority of the Trustee and from seeing to the application of any monies, securities or other property paid or delivered to the Trustee. The exercise by the Trustee of any express or implied discretion pursuant to this Trust Agreement shall be conclusive and binding upon all persons whomsoever, but the Trustee shall have the right to reconsider and redetermine such actions. The Trustee shall not be responsible for the adequacy of the Trust Corpus to meet and discharge any and all distributions and liabilities under the Plan. The Trustee does not guarantee the Trust Corpus from loss or depreciation, and the liability of the Trustee to make any payment hereunder at any and all times will be limited to the then available assets of the Trust Corpus. The Company shall indemnify and hold the Trustee harmless from any liability incurred by or claim asserted against the Trustee by reason of any action of the Trustee taken at the direction of the Company.
(b) The interests of the Executives hereunder are not subject to assignment, alienation, attachment or garnishment except in accordance with the terms of the Plan.
(c) The Trustee shall maintain such books, records and accounts as may be necessary for the proper administration of the Trust Corpus, including without limitation, as provided in Article II hereof, and shall render to the Company and to each Executive, on or prior to each March 15 following the date of this Trust until the termination of this Trust (and on the date of such termination), an accounting with respect to the Trust Corpus as of the end of the then most recent calendar year (and as of the date of such termination). The Trustee will at all times maintain a separate bookkeeping account for each Executive to which it will credit each amount delivered by the Company to the Trustee with respect to such Executive. Upon the written request of an Executive or the Company, the Trustee shall deliver to such Executive or the Company, as the case may be, a written report setting forth the amount held in the Trust for each Executive and a record of the contributions made with respect thereto by the Company, provided that the Trustee need not provide more than two statements per year to each individual Executive. Unless the Company or any Executive shall have filed with the Trustee written exceptions or objections to any such statement and account within 180 days after receipt thereof, the Company or the Executive, as the case may be, shall be deemed to have approved such statement and account, and in such case the Trustee shall be forever released and discharged with respect to all matters and items reported in such statement and account as though it had been settled by a decree of a court of competent jurisdiction in an action
or proceeding to which the Company and the Executive were parties. Notwithstanding the foregoing, the Trustee shall have no duty to determine the adequacy of any disclosure to an Executive required under the terms of the Plan, nor shall the Trustee be liable for ensuring the accuracy of information provided to an Executive by a party other than the Trustee or provided to the Trustee with a direction to distribute to an Executive.
(d) The Trustee shall not be liable for any act taken or omitted to be taken hereunder if taken or omitted to be taken by it in good faith. Subject to the express provisions of Section 3.02, the Trustee shall also be fully protected in relying upon any notice given hereunder which it in good faith believes to be genuine and executed and delivered in accordance with this Trust.
(e) The Trustee may consult with legal counsel to be selected by it, and the Trustee shall not be liable for any action taken or suffered by it in good faith in accordance with the advice of such counsel.
(f) The Company shall reimburse the Trustee for all reasonable expenses incurred in connection with the performance of duties hereunder, including, but not limited to, any fees or expenses incurred by the Trustee, or any Executives pursuant to the provisions of this Trust, and the Trustee shall be paid reasonable fees for the performance of its duties in the manner provided by paragraph (g) of this Section 4.01. Notwithstanding the foregoing, the Company shall not be required to reimburse any expenses incurred by the Trustee, any Executives or any other party in connection with any interpleader action instituted by the Trustee hereunder.
(g) The Company agrees to indemnify and hold harmless the Trustee and any
officer, director or employee of the Trustee from and against any and all
damages, losses, claims or expenses as incurred (including expenses of
investigation and fees and disbursements of counsel to the Trustee and any
taxes imposed on the Trust Corpus or income of the Trust) arising out of or in
connection with the performance or omission by the Trustee of its duties
hereunder. Any amount payable under paragraph (f) of this Section 4.01 or this
paragraph (g) and not previously paid by the Company shall be paid by the
Company promptly upon demand therefor or, if the Trustee so chooses in its sole
discretion, from the Trust Corpus. In the event that payment is made hereunder
from the Trust Corpus, the Trustee shall promptly notify the Company in writing
of the amount of such payment. The Company agrees that, upon receipt of such
notice, it will deliver to the Trustee to be held in the Trust an amount in
cash equal to any payments made from the Trust Corpus pursuant to paragraph (f)
of this Section 4.01 or this paragraph (g). The failure of the Company to
transfer any such amount shall not in any way impair the Trustee's right to
indemnification, reimbursement and payment pursuant to paragraph (f) of this
Section 4.01 or this paragraph (g).
7.
SECTION 4.02 Successor Trustee. The Trustee may resign and be discharged from its duties hereunder at any time by giving notice in writing of such resignation to the Company specifying a date (not less than thirty days after the giving of such notice) when such resignation shall take effect. Promptly after such notice, the Company shall appoint a successor trustee, such trustee to become Trustee hereunder upon the resignation date specified in such notice. If the Company is unable to designate a successor within thirty days after such notice, the successor Trustee shall be selected by the vote of not less than 65% of the then Executives. If the Executives cannot so agree on a successor trustee, the Trustee shall be entitled to petition a United States District Court or any court of competent jurisdiction in the state in which the Trustee maintains its principal place of business to relieve the Trustee of its duties hereunder, with expenses of any such action to be paid by the Company or from the Trust Corpus. The Trustee shall continue to serve until its successor accepts the trust and receives delivery of the Trust Corpus. The Company may at any time substitute a new trustee by giving 30 days' notice thereof to the Trustee then acting. In the event of such removal or resignation, the Trustee shall duly file with the Company a written statement or statements of accounts and proceedings as provided in Section 3.01(c) hereof for the period since the last previous annual accounting of the Trust, and if written objection to such account is not filed as provided in Section 3.01(c) hereof, the Trustee shall, to the maximum extent permitted by applicable law, be forever released and discharged from all liability and accountability with respect to the propriety of its acts and transactions shown in such account.
SECTION 4.03 General Administration and Investment Powers of the Trustee. Subject to the restrictions of applicable law and to its duty to apply the proceeds and avails of all assets of the Trust Corpus as directed by the Company, the Trustee may perform every act in the management of the Trust Corpus that individuals may perform in the management of like property owned by them free of any trust, and may exercise every power with respect to each item of property in the Trust Corpus, real and personal, which individual owners of like property can exercise, including by way of illustration, but not by way of limitation, the following powers:
(a) To invest and reinvest in bonds, notes, debentures, stocks (common and preferred), interest in investment companies (whether "open-end mutual funds" or "closed-end mutual funds"), life insurance policies, life insurance company group or individual annuity contracts, life insurance company guaranteed investment contracts and deposit administration contracts, equipment trust certificates, personal, corporate and governmental obligations, mortgages, leaseholds, fee interests, trust and participation certificates, interests in any amount in common trust funds established by a bank or trust company (and for such time as such assets are invested in such common trust funds, such assets shall be subject to the declarations of trust establishing such common trust funds, and for that purpose, said declarations of trust are hereby made a part of this Trust Agreement),
pooled investment funds and such other property, real, personal, or mixed, irrespective of whether such securities or such property shall be of the character authorized by any state law for trust investment; notwithstanding the above, the Trustee shall not invest in securities of the Company;
(b) To invest, deal in, trade, buy and sell securities options and securities option contracts, whether "put" or "call" options, in accordance with applicable law;
(c) To invest in interest-bearing deposits with a federally-insured institution at a reasonable rate of interest, including but not limited to investment in time deposits, savings deposits, certificates of deposit or time accounts;
(d) To pledge or mortgage, assign, lease, contract to lease, grant, exercise or purchase options to purchase or sell, sell for cash or on credit at a private or public sale, convert, redeem, exchange for other securities or other property in which the Trust Corpus may be invested under this Trust Agreement, or otherwise dispose of any securities or other property at any time held by it; no person dealing with the Trustee shall be bound to see to the application or to inquire into the validity, expediency or propriety of such sale or other disposition;
(e) To retain in cash so much of the Trust Corpus as the Company deems advisable;
(f) To settle, compromise, contest or submit to arbitration any claims, debts or damages due or owing to or from the Trust Corpus, to commence or defend suits or legal proceedings, and to represent this trust in all suits or legal proceedings;
(g) To exercise any option right, conversion privilege or subscription right available in connection with any securities or property at any time held by it; to consent to the reorganization, consolidation, merger or readjustment of the finances of any corporation, company or association, or to the sale, mortgage, pledge or lease of the property of any corporation, company or association, any of the securities of which may at any time be held by it and to do any acts with reference thereto, including the exercise of options, making of agreements or subscriptions, and the payment of expenses, deemed to be necessary or advisable in connection therewith, and to hold and retain any securities or other property which it may so acquire;
(h) To vote any corporate stock belonging to the Trust Corpus and to give proxies or general or limited powers of attorney for the purpose of such voting to other persons, with or without power of substitution;
(i) To borrow money from itself or others, assume indebtedness, extend mortgages and encumber by mortgage or pledge upon such terms and conditions as may be deemed advisable;
(j) To lease property on any terms or conditions for any term of years although extending beyond the period of the trust hereunder; to manage, insure, administer, operate, repair, improve and mortgage or lease, regardless of any restrictions on leases; to renew or extend or to participate in the renewal or extension of any mortgage or lease, and to agree to the reduction in the rate of interest on any mortgage or other modification or change in terms of any mortgage, guarantee thereof or lease in any manner and upon such terms as may be deemed advisable; to alter and partition real estate, erect or raze improvements, grant easements, subdivide, dedicate to public use; provided, however, that the authority granted to the Trustee pursuant to this Section does not give the Trustee the authority to operate a business.
(k) To collect the income, rents, issues, profits and increases of the Trust Corpus through such means as are deemed advisable;
(l) To employ and consult with agents, attorneys and advisors and to pay their reasonable compensation and expenses from Trust assets to the extent not paid by the Company; the Trustee shall incur no liability for the acts or defaults of such agents, attorneys and advisors selected by it with due care, and the Trustee shall be fully protected in acting upon the advice of counsel on questions of law arising in connection with the administration of the Trust Corpus;
(m) To cause any of the investments of the Trust Corpus to be registered in its name or in the name of its nominee; any corporation or its transfer agent may presume conclusively that such nominee is the actual owner of any investments submitted for transfer; to make, execute and deliver as Trustee any and all instruments, deeds, leases, mortgages, advances, contracts, waivers, releases or other instruments in writing necessary or proper in the employment of any of the foregoing powers; to form corporations and to create trusts to hold title to any securities or other property, upon such terms and conditions as are deemed advisable;
(n) To retain any funds or property subject to dispute without liability for the payment of interest, and to decline to make payment or delivery thereof until final adjudication is made by a court of competent jurisdiction; and
(o) To pay personal and real property taxes, income taxes, transfer taxes and other taxes levied or assessed against the Trust Corpus under the law of any jurisdiction, but the Trustee shall have the right to contest, protest and settle the liability of the Trust
Corpus for any such taxes.
No enumeration of specific powers herein shall be construed as a limitation on the foregoing general powers of the Trustee, nor shall any of the powers herein conferred upon the Trustee be exhausted by the use thereof but each shall be continuing.
ARTICLE V
TERMINATION AND AMENDMENT
SECTION 5.01. Termination. Except as provided herein, this Trust shall be revocable. Promptly upon termination of this Trust, any remaining portion of the Trust Corpus shall be paid to the Company.
SECTION 5.02 Amendment.
(a) This Trust may be amended by the Company at any time, provided, however, that no such amendment may be made that would contravene the terms of the Plan and provided further that the Trustee must consent to any amendment that would increase its duties or limit its right of indemnification or reimbursement hereunder.
(b) This Trust may not be amended except by an instrument in writing signed on behalf of the Trustee and the Company. No such amendment relating to this Trust may be made that would decrease the amounts payable hereunder to a particular Executive unless such Executive has agreed in writing to such amendment. No amendment relating to this Trust may be made that would contravene the terms of the Plan.
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.01 Further Assurances. The Company shall, at any time and from time to time, upon the reasonable request of the Trustee, execute and deliver such further instruments and do such further acts as may be necessary or proper to effectuate the purposes of this Trust including, without limitation, providing the Trustee with (i) copies of the Plan, (ii) notice of the termination of the Plan, (iii) annual reports filed by the Plan, and (iv) any request to the Internal Revenue Service for a private letter ruling in connection with the Trust and any ruling so obtained.
SECTION 6.02 Certain Provisions Relating to This Trust.
(a) This Trust sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes any and all prior agreements, arrangements and
understandings relating thereto, with the exception of any separate fee agreement between the Company and the Trustee. This Trust shall be binding upon and inure to the benefit of the parties and their respective successors and legal representatives.
(b) This Trust shall be governed by and construed in accordance with the laws of the State of Arizona, other than and without reference to any provisions of such law regarding choice of laws or conflict of law.
(c) In the event that any provision of this Trust or the application thereof to any person or circumstances shall be determined by a court of proper jurisdiction to be invalid or unenforceable to any extent, the remainder of this Trust, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each provision of this Trust shall be valid and enforced to the fullest extent permitted by law.
(d) No term or condition under this Trust Agreement shall be deemed to have been waived, nor shall there be an estoppel against the enforcement of any provision of this Trust Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waive shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.
SECTION 6.03 Notices. Any notice or direction to the Trustee from the Company shall be in writing signed by or on behalf of the Company and delivered to the Trustee. The Trustee shall be responsible only for such notices or directions as are actually received by the Trustee. The Trustee shall incur no liability in acting upon any such notice or direction reasonably believed by the Trustee to be genuine and to have been signed by the proper person or persons. The Company shall furnish the Trustee with the names of those persons authorized by the Board of Directors to act for the Company in connection with the Plan. The Trustee shall be entitled to rely upon the most recent such notification in the Trustee's possession. Any notice, accounting or other communication to be given to the Company may be given by mailing or delivering such notice, accounting or other communication to the appropriate party at the last address provided to the Trustee. Any notice, report or payment to be provided to an Executive may be dispatched by personal delivery or mail to the Executive or at the last address supplied to the Trustee by the Company or Executive. As of the date of this Trust Agreement, notices shall be addressed as follows:
If to the Company: Lincoln Technical Institute of Arizona, Inc. d.b.a. Universal Technical Institute 3002 North 27th Avenue Phoenix, AZ 85017 If to the Trustee: Robert Hartman, Kim Riordan & Sharon Morrison c/o Universal Technical Institute 3002 North 27th Avenue Phoenix, AZ 85017 |
If to an Executive, to the address of such Executive as listed on the Executive List.
A notice shall be deemed received upon the date of delivery if given personally or, if given by mail, upon the receipt thereof.
SECTION 6.04 Trust Beneficiaries - Each Executive is an intended beneficiary under this Trust, and shall be entitled to enforce all terms and provisions hereof with the same force and effect as if such person had been a party hereto.
IN WITNESS WHEREOF, the parties have executed this Trust as of the date first written above.
LINCOLN TECHNICAL INSTITUTE OF ARIZONA,
INC. d.b.a. UNIVERSAL TECHNICAL INSTITUTE
By: /s/ Robert Hartman -------------------------------------- Its: President ------------------------------------- |
TRUSTEE:
/s/ Robert Hartman ----------------------------------------- Robert Hartman, Trustee /s/ Kim Riordan ----------------------------------------- Kim Riordan, Trustee /s/ Sharon Morrison ----------------------------------------- Sharon Morrison, Trustee |
SCHEDULE 1
EXECUTIVE BENEFIT PLAN
EXECUTIVE LIST
Date Social Security Executive Mailing Address of Birth Number --------- --------------- -------- --------------- Phillip C. Christner 4423 E. Friess Dr. 10/10/44 Intentionally omitted Phoenix, AZ 85032 Randall Don Whitman 3506 Highland Lakes Dr. 08/03/49 Intentionally omitted Kingwood, TX 77339 Sherrell Edward Smith 9246 S. Juniper 06/03/63 Intentionally omitted Tempe, AZ 85284 Kimberly Jean Riordan 4214 W. Whispering Wind 04/18/64 Intentionally omitted Glendale, AZ 85310 Randall Ragan Smith 22976 N. Dobson Road 11/22/50 Intentionally omitted Scottsdale, AZ 85255 Sharon M. Morrison 7 W. Conrad Drive 04/07/60 Intentionally omitted Phoenix, AZ 85023 Jeanine I. Linsenmeyer 5335 E. Charleston Ave. 08/01/47 Intentionally omitted Scottsdale, AZ 85254 Roger Lawrence Speer 250 N. Cambridge Dr. 06/07/58 Intentionally omitted Geneva, IL 60134 Jeffrey L. Muecke 6310 E. Doubletree 06/16/54 Intentionally omitted Paradise Valley, AZ 85253 Joseph Robert Cutler 980 N. Oxford 05/15/59 Intentionally omitted Chandler, AZ 85225 |
Thomas John Nelmark 521 Viking Drive 09/13/56 Intentionally omitted Batavia, IL 60510 James M. Gleeson 645 Rosewood Drive 04/04/41 Intentionally omitted West Chicago, IL 60185 Robert Hartman 179 E. Palomino 05/23/48 Intentionally omitted Tempe, AZ 85284 |
ERISA NOTIFICATION MEMORANDUM STATEMENT
DATE: March 1, 1997 TO: Office of Pension and Welfare Programs Labor Management - Service Administration U.S. Department of Labor Washington, D.C. 20216 FROM: Lincoln Technical Institute of Arizona, Inc. d.b.a. Universal Technical Institute 3002 North 27th Avenue Phoenix, AZ 85047 Employer I.D. #86-0226984 |
This document constitutes the statement required by 29 C.F.R. Section 2520.104-23(a)(1) to be filed with the Secretary of Labor in respect to a sponsored Non-Qualified Executive Benefit Plan maintained by the above Employer.
The Employer currently maintains one (1) non-qualified executive benefit plan. The total number of participants is twelve (12).
/s/ Robert D. Hartman, President -------------------------------- Robert D. Hartman, President Universal Technical Institute |
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UNIVERSAL TECHNICAL INSTITUTE
EXECUTIVE BENEFIT PLAN
SUMMARY DESCRIPTION/
QUESTIONS AND ANSWERS
This Summary Description/Questions And Answers is a brief description of your Plan and your rights, obligations, and benefits under that Plan. It is qualified in its entirety by the more detailed information set forth in the UNIVERSAL TECHNICAL INSTITUTE EXECUTIVE BENEFIT PLAN and the TRUST AGREEMENT OF THE UNIVERSAL TECHNICAL INSTITUTE EXECUTIVE BENEFIT PLAN documents themselves. A copy of your Plan is on file at the Company's office and you are encouraged to read the Plan and Trust documents in their entirety and to ask any questions you may have. If any discrepancy arises between these questions and answers and the Plan and Trust documents, you should rely on the Plan and Trust documents. (Unless otherwise indicated in these questions and answers, capitalized terms have the meanings set forth in the Plan.)
TABLE OF CONTENTS:
PAGE PLAN OBJECTIVE 16 ELIGIBILITY 16 EMPLOYEE DEFERRALS 16 COMPANY CONTRIBUTIONS 17 SOCIAL SECURITY TAXES 19 CREDITING RATE 19 BENEFIT PAYMENTS 20 SECURITY 23 PLAN ADMINISTRATION 24 |
PLAN OBJECTIVES
Q What is the purpose of the Plan?
A The Plan is designed to allow Participants to save for retirement by deferring all or a portion of their current bonus income on a pre-tax basis and receiving a tax-deferred return on these deferrals.
ELIGIBILITY
Q Who is eligible for the Plan?
A Participation in the Plan is limited to a select group of management and/or highly compensated Employees. The Company President will select the Employees who may participate.
EMPLOYEE DEFERRALS
Q What is the income tax effect of electing to defer bonus income?
A Amounts you defer under the Plan will not be taxed for federal or state income tax purposes in the year they would have otherwise been paid to you. In additions, earnings allocated to your account in accordance with the Plan will not be taxed for federal or state income tax purposes in the year they are credited to your Account. Rather, these amounts will be taxed when they are paid to you. (See however, the following discussion regarding Social Security taxes).
Q How much can I defer under the Plan?
A You can elect to defer up to 100% of your annual bonus per Plan year.
The percentage or dollar amount of bonus you elect to defer will be deducted from your paycheck when the amount would otherwise have been paid. Once elected, this deferral schedule cannot be changed until the following Plan Year.
Q When do I make my Plan Deferral Election?
A To participate in the Plan during the Plan Year beginning March 1, 1997 and ending February 28, 1998, you must enroll in the Plan and make your election by February 28, 1997. Enrollment forms received after the deadline cannot be accepted. For subsequent Plan Years, you must elect, by December 31st of the prior Plan Year, how much of your annual bonus you want to defer. Your Deferral Election is irrevocable for the current Plan Year and cannot be changed until a new Deferral Election is filed for the following Plan Year.
If the Company notifies you of your eligibility to participate in the Plan after the Plan Year has begun, you must make your deferral election within 30 days of the date you were notified of your eligibility to participate.
Q Can I change the amount I am deferring or stop my deferrals during a Plan Year?
A No. IRS rules and regulations require that an irrevocable election be made prior to each Plan Year. Therefore, changing or stopping an elected Deferral Amount while remaining a Participant is not permitted.
COMPANY CONTRIBUTIONS
Q Are there any Company Matching Contributions?
A The Company may make discretionary matching contributions each year. The amount of company matching contributions may be different for deferrals into the Phantom Stock Account and for deferrals into the Fixed Account.
Q What is the Phantom Stock Account?
A The Phantom Stock Account is a bookkeeping entry made in your name, which records an account value tied directly to the value of the Company common stock. For example, assume that the Company common stock was valued at $50.00 per share by the most recently completed Stock Valuation Report prior to your deferral election. If you make a deferral of $100 and request that it be invested by the Company in the Phantom Stock Account, your deferral will be recorded as the equivalent of 2 phantom stock units (2 x $50/share = $100). If you make no further deferrals and are later eligible to receive a distribution of the amount of your accounts, you will receive a distribution in accordance with the Plan which is based on the value of the Company's common stock as determined by the Stock Valuation Report prior to your date of distribution. If the Stock Valuation Report prior to your date of distribution set the common stock value at $250.00 per share, your account would now be worth $500.00 (2 units x $250.00 per share). The value of Company Matching Contributions will further enhance the number of shares recorded to your account.
Q What is the Company Matching Contribution into the Phantom Stock Account?
A For the 1997-1998 Plan Year, the Company is making a special match on deferrals to the Phantom Stock Account of $.50 for each $1.00 deferred.
After the first plan year Participant's deferrals into the Phantom Stock Account will be matched by the Company $.30 for each $1.00 deferred. The Company reserves the right to announce the match for the Phantom Stock Account at the beginning of each Plan Year.
Q What is the Fixed Account?
A The Fixed Account is a bookkeeping entry made in your name which records the amount of your deferrals and credits a fixed rate of interest earnings. The fixed rate of interest is set annually by the Company.
Q What is the Company Matching Contribution for the Fixed Account?
A For the 1997-1998 Plan Year, the Company is making a matching contribution on deferrals into the Fixed Account of $.15 for each $1.00 deferred. The Company reserves the right to announce the match for the Fixed Account at the beginning of each Plan Year.
SOCIAL SECURITY TAXES
Q If my deferrals are considered pre-tax deferrals, why is FICA currently withheld?
A Your Deferral Amounts are considered earnings at the time that they are earned, regardless of when paid, for the purpose of calculating Social Security taxes. Thus, FICA must be withheld at the time your deferrals are earned and credited to your Account. However, no FICA will be withheld on payout of benefits (i.e., earnings on the account are not subject to FICA).
CREDITING RATE
Q How will the returns on amounts deferred into the Phantom Stock Account be calculated?
A Your Account will be credited with actual gains and losses of the value of the Company common stock. The value of the Company's common stock will be established as of February 28th of each Plan Year. A fixed rate of interest in lieu of stock value gain or loss will be credited to your Account commencing with the beginning of the Plan Year in which you terminate your employment.
Q How will the returns on amounts deferred into the Fixed Account be calculated?
A Your account will be credited with a fixed rate of interest, set annually by the Company. The fixed rate of interest for the Plan Year 1997-1998 is six percent (6%). The fixed rate of interest may vary substantially from year to year.
BENEFIT PAYMENTS
Q Under what circumstances can I receive a distribution of all or part of my Account?
A There are several ways you can elect to receive a distribution of all or a portion of your Account Balance:
1. In-Service Withdrawals provide you with access to a portion of your Account as soon as 2 years from the date of your initial entry into the Plan. The annual amount of In-Service Withdrawals is limited to a maximum of ten percent (10%) of your Account balance at the time of withdrawal.
2. After you have attained the Plan's Retirement Age, you may receive your Account in the form of a retirement benefit to be paid to you in annual payments over a period of ten (10) years.
3. If you die prior to attaining Retirement Age while still employed with the Company, the Beneficiary you name will receive an amount equal to your Account balance as a Pre-Retirement Death Benefit payable in a lump sum as soon as administratively feasible following your death. If you die after terminating service due to attainment of Retirement Age, your Beneficiary will continue to receive the retirement benefit payments that would have been paid to you.
4. If you become Totally and Permanently Disabled and remain so for a period of 6 months, you may receive your Account as a disability benefit payable in annual payments over a period of ten (10) years.
5. If you leave the Company for reasons other than Retirement, Total and Permanent Disability, or death, you will receive a termination benefit equal to your Account balance, payable in annual payments over a period of ten (10) years which will commence as soon as administratively feasible following the two year anniversary of your date of termination.
At the discretion of the Company, benefits may be paid out in a lump sum or over a shorter period of time than 10 years.
Q What is normal Retirement Age for purposes of the Plan?
A The retirement benefit for Plan Participants, which equals your Account balance, is available for Employees starting at Retirement Age 65.
Q Can you tell me more about the In-Service Withdrawals?
A In-Service Withdrawals are available to help you meet shorter term financial needs, such as helping to fund a child's college education, financing a future home purchase or for whatever foreseeable use you may have.
This option allows you to receive a distribution of a portion of your Account, up to a maximum of 10% of your Account Balance, in any year as long as it is at least 2 years from the date of your initial participation in the Plan. For example, an In-Service Withdrawal elected on the 1997-1998 Plan Year election form can be paid no earlier than March 1, 1999. An election for an In-Service Withdrawal must be made on the election form you complete when you are initially enrolled in the Plan. This election is not available in subsequent years.
If for some reason you do not need the In-Service Withdrawal on the date initially elected, you may postpone the date provided you elect to do so at least 18 months prior to the date it would otherwise be paid.
For example, your child may be planning to start college in five years. To help pay the tuition costs, you elect in March of 1997 to receive a portion of your Account in August of 2002, a portion in August of 2003 and so on. If your child receives a scholarship and you no longer need the distribution, you can postpone the payments provided you make such election in December of 2000 or before. The payments may be postponed to another future stated date or to retirement.
Q If I receive a distribution from the Plan, can I roll the money over into another plan to avoid taxes?
A No. The Plan is a nonqualified plan and distributions may not be rolled over into a tax-qualified retirement plan or IRA.
Q Can I take a loan from my Account?
A No, loans from your Account are not available.
Q Who can I name as Beneficiary?
A You can name any individual or entity you wish subject to, under certain circumstances, your spouse's consent.
Q Is the Pre-Retirement Death Benefit payable under the Plan taxable income to my Beneficiary?
A The Pre-Retirement Death Benefit payable to your Beneficiary is taxable as income and, under certain circumstances, may be subject to estate taxes.
Q How are my Deferral Amounts taxed when they are distributed to me?
A You Deferral Amounts, Company Matching Contributions and earnings accrued on such amounts, are taxed as current income when they are distributed to you.
Q Will my receipt of benefits from the Plan affect my Social Security benefits after I retire?
A Yes and No. Distributions made from the Plan will not affect your Social Security benefits themselves. For purposes of Social Security, these distributions are considered "earned" when they are credited to your account; therefore, they do not constitute earned income under the earnings test when they are distributed to you. However, because the distributions will be considered gross income for federal income tax purposes, they may have the effect of subjecting your social security benefits to federal income taxation. These issues need to be discussed with your tax advisor.
Q Will the Company guarantee the payment of my Account under all circumstances?
A The Company's obligation under the plan is that of an unsecured promise to pay money in the future. Amounts payable to you or your Beneficiaries will be paid from the general assets of the Company exclusively. However, the Company has established a specialized Trust to increase the security of your Plan benefits.
Q Can I assign or dispose of my interest in the Plan?
A No. You cannot in any way sell, assign, hypothecate, alienate, encumber or in any way transfer or convey in advance of receipt, any of your rights under the Plan.
SECURITY
Q What happens to my Account if the Company is taken over or sold?
A A specialized Trust has been adopted so that assets are available to pay Plan benefits to you in the event the Company is unable to pay your Plan benefits for any reason other than insolvency or bankruptcy.
Q What happens to my Account if the Company becomes insolvent or bankrupt?
A In the unlikely event that the Company becomes insolvent, you will be an unsecured general creditor of the Company. Your claim against the assets of the Company will be considered in sequence with the claims of other general creditors of the Company.
PLAN ADMINISTRATION
Q How frequently will I receive a statement of my Account?
A Once a year you will receive a statement of your Account. The statement will be sent to you approximately 60 days after completion of the annual Stock Valuation Report, or sooner if administratively feasible. It is necessary to obtain the valuation of the Company's common stock in order to determine the proper crediting of earnings on the Phantom Stock Accounts. The annual statement will be sent to you by the Company.
Q Who will oversee the operation of the Plan?
A The Executive Committee appointed by the Company's President interprets and administers the Plan. The Committee has the authority and responsibility to interpret and enforce the Plan and all applicable regulations.
Q Where can I get more information about the Plan and its administrators?
A The Plan and Trust documents are available from the Company and you are encouraged to read them. If you still have questions after reading the information in this packet, you may contact a member of the Executive Committee.
THESE QUESTIONS AND ANSWERS PROVIDE A SUMMARY DESCRIPTION OF THE PLAN. FOR A COMPLETE DESCRIPTION OF PLAN PROVISIONS AND BENEFITS, PLEASE REFER TO THE PLAN AND THE TRUST. IF ANY CONFLICTS ARISE BETWEEN THIS SUMMARY DESCRIPTION AND THE PLAN OR TRUST DOCUMENT ITSELF, THE DOCUMENTS WILL PREVAIL.
EXHIBIT 10.3
UNIVERSAL TECHNICAL INSTITUTE, INC.
1997 RESTRICTED STOCK PLAN
SECTION 1
GENERAL
1.1 Purpose. The Universal Technical Institute, Inc. 1997 Restricted Stock Plan (the "Plan") has been established by Universal Technical Institute, Inc. (the "Company") to attract and retain employees and other persons providing services to the Company and the Related Companies (as defined below) through compensation that is based on the Company's shares of common stock (the "Stock"), thereby further identifying Participants' interests with those of the Company's stockholders and promoting the long-term financial interest of the Company and the Related Companies. The term "Related Company" means any company during any period in which it is a "subsidiary corporation" (as that term is defined in section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code")) with respect to the Company.
1.2 Administration. The authority to manage and control the operation
and administration of the Plan shall be vested in the "Administrator". The
Administrator shall be the full Board of Directors of the Company (the "Board"),
or a duly authorized committee thereof. The Administrator shall have the
authority and discretion to (a) manage and control the operation of the Plan,
(b) interpret and construe the provisions of the Plan, and prescribe, amend and
rescind rules and regulations relating to the Plan, (c) grant Restricted Stock
Awards (as defined in Section 2.1) under Section 2 of the Plan, in such amounts
and subject to such restrictions, limitations and conditions as it deems
appropriate, (d) subject to the provisions of Section 4, modify the terms of,
cancel or suspend Restricted Stock Awards, (e) prescribe the form of agreement,
certificate or other instrument evidencing any Restricted Stock Award under the
Plan, (f) correct any defect or omission and reconcile any inconsistency in the
Plan or in any award of Stock hereunder, and (g) make all other determinations
and take all other actions as it deems necessary or desirable for the
implementation and administration of the Plan. The determination of the
Administrator on matters within its authority shall be conclusive and binding on
the Company and all other persons.
1.3 Participation. Subject to the terms and conditions of the Plan, the Administrator shall determine and designate from among the Eligible Individuals, those persons who will be granted Restricted Stock Awards under the Plan and thereby become "Participants" in the Plan. For purposes of the Plan, the term "Eligible Individual" shall mean any employee of the Company or such employee's designee.
SECTION 2
2.1 Definition. Subject to the terms of this Section 2, a "Restricted Stock Award" under the Plan is a grant of shares of Stock to a Participant, the vesting of which is subject to one or more conditions established by the Administrator. Such conditions may relate to events (such as performance or continued employment) occurring before or after the date the Restricted Stock
Award is granted, or the date the Stock is vested in the Participant. If the vesting of Restricted Stock Awards is subject to conditions occurring after the date of grant, the period beginning on the date of grant of a Restricted Stock Award and ending on the vesting or forfeiture of such Stock (as applicable) is referred to as the "Restricted Period". Restricted Stock Awards may provide for delivery of the shares of Stock at the time of grant, or may provide for a deferred delivery date.
2.2 Eligibility. The Administrator shall designate the Participants to whom Restricted Stock Awards are to be granted, and the number of shares of Stock that are subject to each such Award.
2.3 Terms and Conditions of Awards. Except as otherwise provided in the applicable Award Agreement (as defined herein), Restricted Stock Awards granted to Participants under the Plan shall be subject to the following terms and conditions:
(a) Beginning on the date of grant (or, if later, the date of distribution) of shares of Stock comprising a Restricted Stock Award, and including any applicable Restricted Period, the Participant as owner of such shares shall have the right to vote such shares; provided, however, that, if requested by the Administrator, the Participant agrees to place such shares in a Voting Trust until the Stock has vested.
(b) Any Participant who is not a signatory to the Stockholders Agreement dated September 30, 1997 by and among all of the Stockholders of the Company shall, on or prior to the date of grant, shall become a signatory to the Stockholders Agreement.
(c) Payment of dividends with respect to Restricted Stock Awards shall be subject to the following:
(i) On and after the date that a Participant has a fully vested right to the shares comprising a Restricted Stock Award, and the shares have been distributed to the Participant, the Participant shall have all Dividend Rights (and other rights) of a stockholder with, respect to such shares.
(ii) Prior to the date that a Participant has a fully vested right to the shares comprising a Restricted Stock Award, the Administrator, in its sole discretion, may award Dividend Rights (and any other rights) with respect to such shares.
(iii) A "Dividend Right" with respect to shares comprising a Restricted Stock Award shall entitle the Participant, as of each dividend payment date, to an amount equal to the dividends payable with respect to a share of Stock multiplied by the number of such shares. Dividend Rights shall be settled in cash or in shares of Stock, as determined by the Administrator, shall be payable at the time and in the form determined by the Administrator, and shall be subject to such other terms and conditions as the Administrator may determine.
2.4 Vesting. Unless provided otherwise by the Administrator or in the applicable Award Agreement, Restricted Stock Awards granted to any Participant before January 1, 1998 shall initially be non vested and shall not become vested until the last day of each calendar year commencing with 1998 and ending with 2002, if and to the extent, if any, that the performance criteria relating to the achievement of certain cumulative EBITA goals set forth below are met. Restricted Stock Awards granted to Participants on or after January 1, 1998 shall become vested in accordance with the terms established by the Administrator at the time the Restricted Stock Award is granted. The cumulative EBITA goals which must be met with respect to Restricted Stock Awards granted before January 1, 1998, and the portion of each such Restricted Stock Award which shall become vested each year upon the achievement of that year's cumulative EBITA goals, is as follows:
If cumulative Percentage of total shares EBITA for awarded which become year ended Equals at least: vested on such date: ----------------- ---------------------- -------------------------- 1998 $10,400,000 20% 1999 $21,900,000 40% 2000 $35,900,000 60% 2001 $51,900,000 80% 2002 $69,100,000 100% |
If the cumulative EBITA set forth above is not achieved for any calendar year, no additional shares shall become vested under any Restricted Stock Award as of the last day of such year; provided, however, that if the cumulative EBITA target is achieved for a subsequent calendar year, any non-vested shares which could have become vested in a prior year (had the cumulative EBITA target been achieved for such prior year) shall become vested at the end of such subsequent year. Any shares which have not become vested on or before December 31, 2002 under the above schedule shall be forfeited. For purposes of the Plan, the term "EBITA" means the Company's earnings before interest, taxes, amortization and transaction expenses related to or arising out of the transaction pursuant to which the Company acquired certain assets of The Clinton Harley Corporation and Clinton Educational Group, Inc. (the "Asset Acquisition"), amortization and transaction expenses related to or arising out of the transactions contemplated by the Securities Purchase Agreement, dated September 30, 1997, between the Company and the Purchasers identified therein, depreciation related to asset step-ups contemplated by the Asset Acquisition, non-compete payments to certain former shareholders of the Company listed in Annex A hereto and management and investment banking fees paid to The Jordan Company. EBITA will be determined by the Administrator, in its sole discretion, and its determination shall be final. The Administrator shall determine EBITA in accordance with United States generally accepted accounting principles applied consistently with the audited financial statements of the Company's predecessor by merger, Lincoln Technical Institute of Arizona, Inc., as of and for the period ending February 28, 1997. Such determination with respect to any calendar year shall be made by the Administrator no later than thirty (30) days after the Company's receipt of audited financial statements for such year, and the vesting or forfeiture (as the case may be) resulting therefrom shall be deemed for all purposes to have occurred at the end of such year. Notwithstanding the foregoing provisions of this Section 2.4, except as otherwise provided in the
applicable Award Agreement (i) a Participant must remain in the employ of the Company and the Related Companies as of the last day of any year in order to become vested in the portion of the shares that first become vested as of the last day of that year, and (ii) if a Participant terminates employment with the Company and the Related Companies for any reason prior to December 31, 2002, any shares under his Restricted Stock Award which have not become vested on or before his termination date shall be forfeited.
In the event any Participant forfeits his shares pursuant to this Section 2.4, the Company shall repurchase such Participant's shares for an amount per share equal to that which the Participant paid at the time such shares were awarded (the "Forfeiture Amount"), provided, however, that the Company may apply the Forfeiture Amount against any amounts owed to the Company by the Participant, including, without limitation, amounts outstanding under any promissory note for the purchase price of the Restricted Stock or any portion thereof.
SECTION 3
OPERATION AND ADMINISTRATION
3.1 Effective Date. The Plan became effective as of September 30, 1997, the date it was adopted by the Board.
3.2 Shares Subject to Plan. The shares of Stock with respect to which Restricted Stock Awards may be made under the Plan shall be shares currently authorized but unissued or currently held or subsequently acquired by the Company as treasury shares, including shares purchased in the open market or in private transactions. The number of shares of Stock which may be issued with respect to Restricted Stock Awards under the Plan shall not exceed 235 shares of Stock as of the date the Plan is adopted by the Board, subject to adjustment in accordance with Section 3.3. Any shares of Stock granted under a Restricted Stock Award which are forfeited for any reason shall again become available for Restricted Stock Awards under the Plan.
3.3 Adjustments to Shares Reserved. In the event of any merger, consolidation, reorganization; recapitalization, spinoff, stock dividend, stock split, reverse stock split, exchange or other distribution with respect to shares of Stock or other change in the corporate structure or capitalization affecting the Stock (each an "Extraordinary Event"), the type and number of shares of stock which are or may be subject to Restricted Stock Awards under the Plan and the terms of any outstanding Restricted Stock Awards shall be equitably adjusted by the Administrator, in its reasonable discretion, to preserve the value of benefits awarded or to be awarded to Participants under the Plan. Notwithstanding the foregoing: (i) unvested shares of stock under a Restricted Stock Award that have been issued prior to the Extraordinary Event and not forfeited pursuant to Section 2.4 prior to the Extraordinary Event shall be entitled, in connection with the Extraordinary Event, to receive the same distributions or consideration per share, and otherwise to be treated in all respects the same, as other then issued and outstanding shares of Stock not covered by the Plan, and (ii) the aggregate purchase price and forfeiture price for shares of Stock covered by a Restricted Stock Award (including any securities received in connection with the Extraordinary Event in respect of such shares) shall not be changed.
3.4 Limitations on Distributions. Distribution of shares of Stock or other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Stock under the Plan unless such delivery or distribution would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity.
(b) In the case of a Participant who is or becomes subject to Section 16(a) and 16(b) of the Securities Exchange Act of 1934, as amended, the Administrator may, at any time, add such conditions and limitations to any Restricted Stock Award granted to such Participant, or any feature of any such Restricted Stock Award, as the Administrator, in its reasonable discretion, deems necessary to comply with Section 16(a) or 16(b) and the rules and regulations thereunder or to obtain any exemption therefrom.
(c) To the extent that the Plan provides for issuance of certificates to reflect the transfer of shares of Stock, the transfer of such shares may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.
3.5 Withholding. All Restricted Stock Awards and other payments under the Plan are subject to withholding of all applicable taxes, if any, which withholding obligations may be satisfied, with the consent of the Administrator, through the surrender of shares of Stock which the Participant already owns, or to which the Participant is otherwise entitled under the Plan.
3.6 Transferability. Other than as set forth in any other agreement to which the Company is a party, non-vested shares of Stock may not be sold, assigned, transferred, pledged or otherwise encumbered during the Restricted Period applicable to such shares. Each certificate issued with respect to shares of Stock granted under the Plan which are distributed prior to the lapse of the Restricted Period may, at the discretion of the Administrator, be deposited in a bank designated by the Administrator. Each such certificate shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) contained in the Universal Technical Institute, Inc. 1997 Restricted Stock Plan and the Stockholders Agreement entered into between the registered owner and Universal Technical Institute, Inc. A copy of such plan and agreement is on file in the office of the Secretary of Universal Technical Institute, Inc.; c/o The Jordan Company; 9 West 57th Street, Suite 4000; New York, New York 10019; Attention: A. Richard Caputo, Jr."
3.7 Notices. Any notice or document required to be filed with the Administrator under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Administrator, in care of the Company, at its principal executive offices. The Administrator may, by advance written notice to affected persons, revise such notice procedure from time to
time. Any notice required under the Plan (other than a notice of exercise) may be waived by the person entitled to notice.
3.8 Agreement with Company. At the time a Restricted Stock Award is granted to a Participant under the Plan, the Administrator may require the Participant to enter into an agreement with the Company (the "Award Agreement") in a form specified by the Administrator, agreeing to the terms and conditions of the Plan and to such additional terms and conditions, not inconsistent with the Plan, as the Administrator may, in its reasonable discretion, prescribe.
3.9 No Contract of Employment. The Plan does not constitute a contract of employment, and selection as a Participant will not give any employee the right to be retained in the employ of the Company or any Related Company, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan or in any award, no award under the Plan shall confer upon the holder thereof any right as a stockholder of the Company prior to the date on which he fulfills all requirements and other conditions for receipt of such rights.
3.10 Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it reasonably considers pertinent and reliable, and signed, made or presented by the proper party or parties.
3.11 Gender and Number. Where the context admits, words in one gender shall include the other gender, words in the singular shall include the plural and the plural shall include the singular.
3.12 Effect of Vesting. Shares of Stock that become vested shall, upon such vesting, cease to be subject to the terms of this Plan but shall remain subject to the terms of the Stockholders Agreement.
SECTION 4
AMENDMENT AND TERMINATION
4.1 The Board may, at any time, amend or terminate the Plan; provided that subject to Section 3.3 (relating to certain adjustments to shares), no amendment or termination may adversely affect the rights of any Participant under any Restricted Stock Award granted under the Plan prior to the date such amendment is adopted by the Board.
EXHIBIT 10.4
MANAGEMENT 1999 OPTION PROGRAM
TABLE OF CONTENTS
Page ---- SECTION 1 GENERAL................................................................................... 2 1.1. Purpose....................................................................................... 2 1.2. Participation................................................................................. 2 SECTION 2 OPTIONS................................................................................... 3 2.1. Definitions................................................................................... 3 2.2. Eligibility................................................................................... 3 2.3. Price......................................................................................... 3 2.4. Exercise...................................................................................... 4 2.5. Post-Exercise Limitations..................................................................... 5 2.6. Expiration Date............................................................................... 5 2.7. Stock Certificates............................................................................ 5 SECTION 3 OPERATION AND ADMINISTRATION.............................................................. 5 3.1. Effective Date................................................................................ 5 3.2. Shares Subject to Plan........................................................................ 5 3.3. Adjustments to Shares......................................................................... 6 3.4. Limit on Distribution......................................................................... 8 3.5. Withholding................................................................................... 8 3.6. Transferability............................................................................... 8 3.7. Notices....................................................................................... 9 3.8. Form and Time of Elections.................................................................... 9 3.9. Agreement With Company........................................................................ 9 3.10. Limitation of Implied Rights.................................................................. 9 3.11. Evidence...................................................................................... 10 3.12. Action by Company or Related Company.......................................................... 10 3.13. Gender and Number............................................................................. 10 3.14. Applicable Law................................................................................ 10 SECTION 4 COMMITTEE................................................................................. 10 4.1. Administration................................................................................ 10 4.2. Selection of Committee........................................................................ 10 4.3. Powers of Committee........................................................................... 10 4.4. Delegation by Committee....................................................................... 11 4.5. Information to be Furnished to Committee...................................................... 11 4.6. Liability and Indemnification of Committee.................................................... 11 SECTION 5 AMENDMENT AND TERMINATION................................................................. 12 |
UTI MANAGEMENT OPTION PROGRAM
SECTION 1
GENERAL
1.1. Purpose. The UTI Management Option Program (the "Plan") has been established by Universal Technical Institute, Inc. (the "Company") to:
(a) attract and retain employees and other persons providing services to the Company and the Related Companies (as defined below);
(b) motivate Participants (as defined in subsection 1.2), by means of appropriate incentives, to achieve long-range goals;
(c) provide incentive compensation opportunities that are competitive with those of other corporations; and
(d) further identify Participants' interests with those of the Company's other stockholders through compensation that is based on the value of the Company's common shares;
and thereby promote the long-term financial interest of the Company and the Related Companies, including the growth in value of the Company's equity and enhancement of long-term stockholder return. The term "Related Company" means any company during any period in which it is a "subsidiary corporation" (as that term is defined in section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code")), with respect to the Company or any affiliate of the Company which is designated as a Related Company by the Committee.
1.2. Participation. Subject to the terms and conditions of the Plan, the Committee (as described in Section 4) shall determine and designate, from time to time, from among the Eligible Individuals (as defined below), those persons who will be granted one or more awards under Section 2 of the Plan (an "Award"), and thereby become "Participants" in the Plan. In the discretion of the Committee, and subject to the terms of the Plan, a Participant may be granted any Award permitted under the provisions of the Plan, and more than one Award may be granted to a Participant. Except as otherwise agreed by the Company and the Participant, or except as otherwise provided in the Plan, an Award under the Plan shall not affect any previous Award under the Plan or an award under any other plan maintained by the Company or the Related Companies. For purposes of the Plan, the term "Eligible Individual" shall mean any employee of the Company or a Related Company or other person providing services thereto; provided, however, that a member of the Board of Directors of the Company (the "Board") who is not an employee of the Company or a Related Company shall not be an "Eligible Individual".
SECTION 2
OPTIONS
2.1. Definitions. The grant of an "Option" under this Section 2 entitles the Participant to purchase shares of common stock of the Company ("Shares") at a price fixed at the time the Option is granted, subject to the terms of this Section. Options granted under this Section may be either Incentive Stock Options or Non-Qualified Stock Options, as determined in the discretion of the Committee. An "Incentive Stock Option" is an Option that is intended to satisfy the requirements applicable to an "incentive stock option" described in section 422 of the Code. A "Non-Qualified Stock Option" is an Option that is not intended to be an Incentive Stock Option. The Participant may also be entitled to receive a grant of Shares of common stock of the Company.
2.2. Eligibility. The Committee shall designate the Participants to whom Options or Shares are to be granted under this Section and shall determine the number of Shares subject to each such Option. If the Committee grants Incentive Stock Options, to the extent that the aggregate fair market value of Shares with respect to which Incentive Stock Options are exercisable for the first time by any individual during any calendar year (under all plans of the Company and all related companies within the meaning of section 424(f) of the Code) exceeds $100,000, such options shall be treated as Non-Qualified Stock Options, to the extent required by section 422 of the Code.
2.3. Price. The determination and payment of the purchase price of a Share under each Option granted under this Section shall be subject to the following:
(a) The purchase price shall be established by the Committee at the time the Option is granted; provided, however, that in no event shall such price be less than the par value of a Share.
(b) Subject to the following provisions of this subsection, the full purchase price of each Share purchased upon the exercise of any Option shall be paid at the time of such exercise (or such later date as may be permitted by the Committee in the case of a cashless exercise) and, as soon as practicable thereafter (subject to an election under subsection 2.4), a certificate representing the Shares so purchased shall be delivered to the person entitled thereto.
(c) The purchase price shall be payable in cash or by tendering Shares by actual delivery or attestation (valued at Fair Market Value as of the day of exercise) that have been held by the Participant at least six months, or in any combination thereof, as determined by the Committee.
(d) The "Fair Market Value" of a Share as of any date shall be determined in accordance with the following rules:
(i) If the Shares are at the time listed or admitted to trading on any stock exchange, then the Fair Market Value shall be the closing price per Share on such date on the principal exchange on which the Shares are then listed
or admitted to trading or, if no such sale is reported on that date, on the last preceding date on which a sale was so reported.
(ii) If the Shares are not at the time listed or admitted to trading on a stock exchange, the Fair Market Value shall be the average of the closing reported bid and asked prices regular way of the Shares on the date in question in the over-the-counter market, as such prices are reported in a publication of general circulation selected by the Committee and regularly reporting the market price of Shares in such market.
(iii) If the Shares are not listed or admitted to trading on any stock exchange or traded in the over-the-counter market, the Fair Market Value shall be as determined by the Committee in good faith.
(iv) For purposes of determining the Fair Market Value of Shares that are sold pursuant to a cashless exercise program, Fair Market Value shall be the price at which such Shares are sold.
2.4. Exercise. Except as otherwise expressly provided in the Plan, an Option granted under this Section shall be exercisable in accordance with the following terms of this subsection:
(a) The terms and conditions relating to exercise of an Option shall be established by the Committee, and may include, without limitation, conditions relating to completion of a specified period of service (subject to paragraph (b) below), achievement of performance standards prior to exercise of the Option or the achievement of Share ownership objectives by the Participant. The Committee, in its sole discretion, may accelerate the vesting of any Option under circumstances designated by it at the time the Option is granted or thereafter.
(b) No Option may be exercised by a Participant after the Expiration Date (as defined in subsection 2.6) applicable to that Option.
(c) Prior to the date the Shares would otherwise be transferred pursuant to the exercise of an Option, to the extent permitted by the Committee, a Participant may irrevocably elect to defer receipt of such Shares until the last date of a later calendar year, but in no event later than the Participant's Date of Termination (as defined in subsection 2.6); provided, that if the Date of Termination of a Participant who is a member of a select group of management or a highly compensated employee within the meaning of section 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, occurs by reason of Retirement (as defined in subsection 2.6), the Participant may elect to defer receipt for a period up to the last day of the calendar year in which occurs the fifteenth anniversary of the Participant's Retirement. Any such deferral election shall be made in such form and at such times as the Committee may determine and shall be subject to such other terms, conditions and limitations as the Committee may establish, provided, however, any election to defer payment
beyond a Participant's Retirement which has not been on file at least 12 months prior to the Participant's Retirement shall be disregarded.
2.5. Post-Exercise Limitations. The Committee, in its discretion, may impose such restrictions on Shares acquired pursuant to the exercise of an Option or Shares granted under this Section as it determines to be desirable, including, without limitation, restrictions relating to disposition of the Shares and forfeiture restrictions based on service, performance, share ownership by the Participant and such other factors as the Committee determines to be appropriate.
2.6. Expiration Date. The "Expiration Date" with respect to an Option means the date established as the Expiration Date by the Committee at the time of the grant; provided, however, that unless determined otherwise by the Committee, the Expiration Date with respect to any Option shall not be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the Option is granted; or
(b) the Participant's Date of Termination.
For purposes of the Plan, a Participant's "Date of Termination" shall be the date on which he both ceases to be an employee of the Company and the Related Companies and ceases to perform material services for the Company and the Related Companies, regardless of the reason for the cessation; provided, that a "Date of Termination" shall not be considered to have occurred during the period in which the reason for the cessation of services is a leave of absence approved by the Company or the Related Company which was the recipient of the Participant's services.
2.7. Stock Certificates. Shares to be granted under this Section shall be evidenced by stock certificates, provided that the Committee may provide by resolution that some or all of the Shares be uncertificated shares.
SECTION 3
OPERATION AND ADMINISTRATION
3.1. Effective Date. The Plan shall be effective as of the date it is approved by the Company's stockholders. The Plan shall be unlimited in duration and, in the event of Plan termination, shall remain in effect as long as any Awards awarded under it are outstanding and not fully vested; provided, however, that no new Awards shall be made under the Plan on or after the tenth anniversary of the date on which the Plan is adopted by the Board.
3.2. Shares Subject to Plan. The Shares with respect to which Awards may be made under the Plan shall be shares currently authorized but unissued or currently held or subsequently acquired by the Company as treasury shares, including shares purchased in the open market or in private transactions. Subject to the provisions of subsection 3.3, the number of Shares which may be issued with respect to Awards under the Plan shall not exceed 108 Shares in the aggregate. Except as otherwise provided herein, any Shares subject to an Award which for any reason expires or is terminated without issuance of Shares (including Shares that are not issued
because Shares are tendered pursuant to subsection 2.3(c) or 3.5) shall again be available under the Plan.
3.3. Adjustments to Shares.
(a) If the Company shall effect any subdivision or consolidation of Shares or other capital readjustment, payment of stock dividend, stock split, combination of shares or recapitalization or other increase or reduction of the number of Shares outstanding without receiving compensation therefor in money, services or property, then the Committee shall equitably adjust (i) the number of Shares available under the Plan; (ii) the number of shares available under any individual or other limits; (iii) the number of Shares subject to outstanding Awards; and (iv) the per-share price under any outstanding Award to the extent that the Participant is required to pay a purchase price per Share with respect to the Award.
(b) If the Company is reorganized, merged or consolidated or is party to a plan of exchange with another corporation, pursuant to which reorganization, merger, consolidation or plan of exchange, the stockholders of the Company receive any shares of stock or other securities or property, or the Company shall distribute securities of another corporation to its stockholders, there shall be substituted for the Shares subject to outstanding Awards an appropriate number of shares of each class of stock or amount of other securities or property which were distributed to the stockholders of the Company in respect of such Shares, subject to the following:
(i) If the Committee determines that the substitution described in accordance with the foregoing provisions of this paragraph would not be fully consistent with the purposes of the Plan or the purposes of the outstanding Awards under the Plan, the Committee may make such other adjustments to the Awards to the extent that the Committee determines such adjustments are consistent with the purposes of the Plan and of the affected Awards.
(ii) All or any of the Awards may be cancelled by the Committee on or immediately prior to the effective date of the applicable transaction, but only if the Committee gives reasonable advance notice of the cancellation to each affected Participant, and only if either: (A) the Participant is permitted to exercise all Awards that will be cancelled (without regard to whether such Awards would otherwise be exercisable) for a reasonable period prior to the effective date of the cancellation; or (B) the Participant receives payment or other benefits that the Committee determines to be reasonable compensation for the value of all cancelled Awards (without regard to whether such Awards would otherwise be vested).
(iii) Upon the occurrence of a reorganization of the Company or any other event described in this paragraph (b), any successor to the Company shall
be substituted for the Company to the extent that the Company and the successor agree to such substitution.
(c) Upon (or, in the discretion of the Committee, immediately prior to) the sale to (or exchange with) a third party unrelated to the Company of all or substantially all of the assets of the Company, all Awards shall be cancelled. If Awards are cancelled under this paragraph, then, with respect to any affected Participant, either:
(i) the Participant shall be provided with reasonable advance notice of the cancellation, and the Participant shall be permitted to exercise all Awards that will be cancelled (without regard to whether such Awards would otherwise be exercisable) for a reasonable period prior to the effective date of the cancellation; or
(ii) the Participant shall receive payment or other benefits that the Committee determines to be reasonable compensation for the value of all cancelled Awards (without regard to whether such cancelled Awards would otherwise be vested).
The foregoing provisions of this paragraph shall also apply to the sale of all or substantially all of the assets of the Company to a related party, if the Committee determines such application is appropriate. Notwithstanding the foregoing provisions of this paragraph (c), in lieu of cancellation of outstanding Awards, the Committee and the purchaser of all or substantially all of the Company's assets may provide that an appropriate number of shares or securities of the purchaser or its affiliates shall be substituted for Shares with respect to outstanding Awards under the Plan, provided that such substituted awards shall be comparable in value and contain terms and conditions similar to the Awards.
(d) In determining what action, if any, is necessary or appropriate under the foregoing provisions of this subsection, the Committee shall act in a manner that it determines to be consistent with the purposes of the Plan and of the affected Awards and, where applicable or otherwise appropriate, in a manner that it determines to be necessary to preserve the benefits and potential benefits of the affected Awards for the Participants and the Company.
(e) The existence of this Plan and the Awards granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Company's Shares or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
(f) Except as expressly provided by the terms of this Plan, the issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property or for labor or services, either upon direct sale, upon the exercise of rights or warrants to subscribe therefor or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof, shall be made with respect to Awards then outstanding hereunder.
(g) Awards under the Plan are subject to adjustment under this subsection only during the period in which they are considered to be outstanding under the Plan. For purposes of this subsection, an Award is considered "outstanding" on any date if the Participant's ability to obtain all benefits with respect to the Award is subject to limits imposed by the Plan (including any limits imposed by the Agreement reflecting the Award). The determination of whether an Award is outstanding shall be made by the Committee.
3.4. Limit on Distribution. Distribution of Shares or other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any Shares under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws.
(b) To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a non-certificated basis.
3.5. Withholding. All Awards and other payments under the Plan are subject to withholding of all applicable taxes, which withholding obligations may be satisfied, with the consent of the Committee, through the surrender of Shares which the Participant already owns or to which a Participant is otherwise entitled under the Plan; provided, however, except to the extent permitted by the Committee, previously-owned Shares that have been held by the Participant less than six months or Shares to which the Participant is entitled under the Plan may only be used to satisfy the minimum tax withholding required by applicable law.
3.6. Transferability. Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution or, to the extent provided by the Committee, pursuant to a qualified domestic relations order (within the meaning of the Code and applicable rules thereunder). To the extent that the Participant who receives an Award under the Plan has the right to exercise such Award, the Award may be exercised during the lifetime of the Participant only by the Participant. Notwithstanding the foregoing provisions of this subsection, Awards under the Plan may be transferred to or for the benefit of the Participant's family (including, without limitation, to a trust or partnership for the benefit of a Participant's family), subject to such procedures as the Committee may establish. In no event shall an Incentive Stock Option be transferable to the extent that such transferability would violate the requirements applicable to such option under Code section 422.
3.7. Notices. Any notice or document required to be filed with the Committee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Committee, in care of the Company, at its principal executive offices. The Committee may, by advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan (other than a notice of election) may be waived by the person entitled to notice.
3.8. Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed with the Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require.
3.9. Agreement With Company. At the time of an Award to a Participant under the Plan, the Committee may require a Participant to enter into an agreement with the Company (the "Agreement") in a form specified by the Committee, agreeing to the terms and conditions of the Plan and to such additional terms and conditions, not inconsistent with the Plan, as the Committee may, in its sole discretion, prescribe.
3.10. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Company or any Related Company whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Related Company, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the amounts, if any, payable under the Plan, unsecured by any assets of the Company and any Related Company. Nothing contained in the Plan shall constitute a guarantee by the Company or any Related Company that the assets of such companies shall be sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and selection as a Participant will not give any employee the right to be retained in the employ of the Company or any Related Company, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder thereof any right as a stockholder of the Company prior to the date on which he fulfills all service requirements and other conditions for receipt of such rights and Shares are registered in his name.
3.11. Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.
3.12. Action by Company or Related Company. Any action required or permitted to be taken by the Company or any Related Company shall be by resolution of its board of directors or
trustees, as applicable, or by action of one or more members of the board (including a committee of the board) who are duly authorized to act for the board or (except to the extent prohibited by applicable law or the rules of any stock exchange) by a duly authorized officer of the Company.
3.13. Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.
3.14. Applicable Law. The provisions of the Plan shall be construed in accordance with the laws of the State of Delaware, without giving effect to choice of law principles.
SECTION 4
COMMITTEE
4.1. Administration. The authority to control and manage the operation and administration of the Plan shall be vested in a committee (the "Committee") in accordance with this Section 4.
4.2. Selection of Committee. The Committee shall be selected by the Board and shall consist of not fewer than two members of the Board, none of whom shall be eligible to receive Awards under the Plan.
4.3. Powers of Committee. The authority to manage and control the operation and administration of the Plan shall be vested in the Committee, subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select individuals to receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of Shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and to cancel or suspend Awards. In making such Award determinations, the Committee may take into account the nature of services rendered by the respective employee, the individual's present and potential contribution to the Company's success and such other factors as the Committee deems relevant.
(b) The Committee will have the authority and discretion to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements made pursuant to the Plan and to make all other determinations that may be necessary or advisable for the administration of the Plan.
(c) Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.
(d) Except as otherwise expressly provided in the Plan, where the Committee is authorized to make a determination with respect to any Award, such determination shall be made at the time the Award is made, except that the
Committee may reserve the authority to have such determination made by the Committee in the future (but only if such reservation is made at the time the Award is granted and is expressly stated in the Agreement reflecting the Award).
4.4. Delegation by Committee. The Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time.
4.5. Information to be Furnished to Committee. The Company and Related Companies shall furnish the Committee such data and information as may be required for it to discharge its duties. The records of the Company and Related Companies as to an employee's or Participant's employment (or other provision of services), termination of employment (or cessation of the provision of services), leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
4.6. Liability and Indemnification of Committee. No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own fraud or willful misconduct; nor shall the Company or any Related Company be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a Director or employee of the Company or Related Company. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the Company against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance.
SECTION 5
AMENDMENT AND TERMINATION
Subject to obtaining such approvals as may be required under the Code or Delaware corporate law, the Board may, at any time, amend or terminate the Plan; provided, that subject to subsection 3.3 (relating to certain adjustments to shares), no amendment or termination may materially adversely affect the rights of any Participant or beneficiary under any Award made under the Plan prior to the date such amendment is adopted by the Board.
EXHIBIT 10.5
MANAGEMENT 2002 OPTION PROGRAM
TABLE OF CONTENTS
Page ---- SECTION 1 GENERAL................................................................................... 2 1.1. Purpose....................................................................................... 2 1.2. Participation................................................................................. 2 SECTION 2 OPTIONS................................................................................... 3 2.1. Definitions................................................................................... 3 2.2. Eligibility................................................................................... 3 2.3. Price......................................................................................... 3 2.4. Exercise...................................................................................... 4 2.5. Post-Exercise Limitations..................................................................... 5 2.6. Expiration Date............................................................................... 5 2.7. Stock Certificates............................................................................ 5 SECTION 3 OPERATION AND ADMINISTRATION.............................................................. 5 3.1. Effective Date................................................................................ 5 3.2. Shares Subject to Plan........................................................................ 5 3.3. Adjustments to Shares......................................................................... 6 3.4. Limit on Distribution......................................................................... 8 3.5. Withholding................................................................................... 8 3.6. Transferability............................................................................... 8 3.7. Notices....................................................................................... 9 3.8. Form and Time of Elections.................................................................... 9 3.9. Agreement With Company........................................................................ 9 3.10. Limitation of Implied Rights.................................................................. 9 3.11. Evidence...................................................................................... 10 3.12. Action by Company or Related Company.......................................................... 10 3.13. Gender and Number............................................................................. 10 3.14. Applicable Law................................................................................ 10 SECTION 4 COMMITTEE................................................................................. 10 4.1. Administration................................................................................ 10 4.2. Selection of Committee........................................................................ 10 4.3. Powers of Committee........................................................................... 10 4.4. Delegation by Committee....................................................................... 11 4.5. Information to be Furnished to Committee...................................................... 11 4.6. Liability and Indemnification of Committee.................................................... 11 SECTION 5 AMENDMENT AND TERMINATION................................................................. 12 |
UTI MANAGEMENT OPTION PROGRAM
SECTION 1
GENERAL
1.1. Purpose. The UTI Management Option Program (the "Plan") has been established by Universal Technical Institute, Inc. (the "Company") to:
(a) attract and retain employees and other persons providing services to the Company and the Related Companies (as defined below);
(b) motivate Participants (as defined in subsection 1.2), by means of appropriate incentives, to achieve long-range goals;
(c) provide incentive compensation opportunities that are competitive with those of other corporations; and
(d) further identify Participants' interests with those of the Company's other stockholders through compensation that is based on the value of the Company's common shares;
and thereby promote the long-term financial interest of the Company and the Related Companies, including the growth in value of the Company's equity and enhancement of long-term stockholder return. The term "Related Company" means any company during any period in which it is a "subsidiary corporation" (as that term is defined in section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code")), with respect to the Company or any affiliate of the Company which is designated as a Related Company by the Committee.
1.2. Participation. Subject to the terms and conditions of the Plan, the Committee (as described in Section 4) shall determine and designate, from time to time, from among the Eligible Individuals (as defined below), those persons who will be granted one or more awards under Section 2 of the Plan (an "Award"), and thereby become "Participants" in the Plan. In the discretion of the Committee, and subject to the terms of the Plan, a Participant may be granted any Award permitted under the provisions of the Plan, and more than one Award may be granted to a Participant. Except as otherwise agreed by the Company and the Participant, or except as otherwise provided in the Plan, an Award under the Plan shall not affect any previous Award under the Plan or an award under any other plan maintained by the Company or the Related Companies. For purposes of the Plan, the term "Eligible Individual" shall mean any employee of the Company or a Related Company or other person providing services thereto; provided, however, that a member of the Board of Directors of the Company (the "Board") who is not an employee of the Company or a Related Company shall not be an "Eligible Individual".
SECTION 2
OPTIONS
2.1. Definitions. The grant of an "Option" under this Section 2 entitles the Participant to purchase shares of common stock of the Company ("Shares") at a price fixed at the time the Option is granted, subject to the terms of this Section. Options granted under this Section may be either Incentive Stock Options or Non-Qualified Stock Options, as determined in the discretion of the Committee. An "Incentive Stock Option" is an Option that is intended to satisfy the requirements applicable to an "incentive stock option" described in section 422 of the Code. A "Non-Qualified Stock Option" is an Option that is not intended to be an Incentive Stock Option.
2.2. Eligibility. The Committee shall designate the Participants to whom Options or Shares are to be granted under this Section and shall determine the number of Shares subject to each such Option. If the Committee grants Incentive Stock Options, to the extent that the aggregate fair market value of Shares with respect to which Incentive Stock Options are exercisable for the first time by any individual during any calendar year (under all plans of the Company and all related companies within the meaning of section 424(f) of the Code) exceeds $100,000, such options shall be treated as Non-Qualified Stock Options, to the extent required by section 422 of the Code.
2.3. Price. The determination and payment of the purchase price of a Share under each Option granted under this Section shall be subject to the following:
(a) The purchase price shall be established by the Committee at the time the Option is granted; provided, however, that in no event shall such price be less than the par value of a Share.
(b) Subject to the following provisions of this subsection, the full purchase price of each Share purchased upon the exercise of any Option shall be paid at the time of such exercise (or such later date as may be permitted by the Committee in the case of a cashless exercise) and, as soon as practicable thereafter (subject to an election under subsection 2.4), a certificate representing the Shares so purchased shall be delivered to the person entitled thereto.
(c) The purchase price shall be payable in cash or by tendering Shares by actual delivery or attestation (valued at Fair Market Value as of the day of exercise) that have been held by the Participant at least six months, or in any combination thereof, as determined by the Committee.
(d) The "Fair Market Value" of a Share as of any date shall be determined in accordance with the following rules:
(i) If the Shares are at the time listed or admitted to trading on any stock exchange, then the Fair Market Value shall be the closing price per Share on such date on the principal exchange on which the Shares are then listed
or admitted to trading or, if no such sale is reported on that date, on the last preceding date on which a sale was so reported.
(ii) If the Shares are not at the time listed or admitted to trading on a stock exchange, the Fair Market Value shall be the average of the closing reported bid and asked prices regular way of the Shares on the date in question in the over-the-counter market, as such prices are reported in a publication of general circulation selected by the Committee and regularly reporting the market price of Shares in such market.
(iii) If the Shares are not listed or admitted to trading on any stock exchange or traded in the over-the-counter market, the Fair Market Value shall be as determined by the Committee in good faith.
(iv) For purposes of determining the Fair Market Value of Shares that are sold pursuant to a cashless exercise program, if applicable, Fair Market Value shall be the price at which such Shares are sold.
2.4. Exercise. Except as otherwise expressly provided in the Plan, an Option granted under this Section shall be exercisable in accordance with the following terms of this subsection:
(a) The terms and conditions relating to exercise of an Option shall be established by the Committee, and may include, without limitation, conditions relating to completion of a specified period of service (subject to paragraph (b) below), achievement of performance standards prior to exercise of the Option or the achievement of Share ownership objectives by the Participant. The Committee, in its sole discretion, may accelerate the vesting of any Option under circumstances designated by it at the time the Option is granted or thereafter.
(b) No Option may be exercised by a Participant after the Expiration Date (as defined in subsection 2.6) applicable to that Option.
(c) Prior to the date the Shares would otherwise be transferred pursuant to the exercise of an Option, to the extent permitted by the Committee, a Participant may irrevocably elect to defer receipt of such Shares until the last date of a later calendar year, but in no event later than the Participant's Date of Termination (as defined in subsection 2.6).
2.5. Post-Exercise Limitations. The Committee, in its discretion, may impose such restrictions on Shares acquired pursuant to the exercise of an Option or Shares granted under this Section as it determines to be desirable, including, without limitation, a requirement that the Participant and any transferee thereof execute and become party to the Company's Stockholders Agreement (as defined in Section 7.1 hereof) and restrictions relating to disposition of the Shares and forfeiture restrictions based on service, performance, share ownership by the Participant and such other factors as the Committee determines to be appropriate.
2.6. Expiration Date. The "Expiration Date" with respect to an Option means the date established as the Expiration Date by the Committee at the time of the grant; provided, however,
that unless determined otherwise by the Committee, the Expiration Date with respect to any Option shall not be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the Option is granted; or
(b) the Participant's Date of Termination.
For purposes of the Plan, a Participant's "Date of Termination" shall be the date on which he both ceases to be an employee of the Company and the Related Companies and ceases to perform material services for the Company and the Related Companies, regardless of the reason for the cessation; provided, that a "Date of Termination" shall not be considered to have occurred during the period in which the reason for the cessation of services is a leave of absence approved by the Company or the Related Company which was the recipient of the Participant's services.
2.7. Stock Certificates. Shares to be granted under this Section shall be evidenced by stock certificates, provided that the Committee may provide by resolution that some or all of the Shares be uncertificated shares.
SECTION 3
OPERATION AND ADMINISTRATION
3.1. Effective Date. The Plan shall be effective as of the date it is approved by the Board, subject to the approval of the Company's stockholders. The Plan shall be unlimited in duration and, in the event of Plan termination, shall remain in effect as long as any Awards awarded under it are outstanding and not fully vested; provided, however, that no new Awards shall be made under the Plan on or after the tenth anniversary of the date on which the Plan is adopted by the Board.
3.2. Shares Subject to Plan. The Shares with respect to which Awards may be made under the Plan shall be shares currently authorized but unissued or currently held or subsequently acquired by the Company as treasury shares, including shares purchased in the open market or in private transactions. Subject to the provisions of subsection 3.3, the number of Shares which may be issued with respect to Awards under the Company's Management 1999 Option Program and Awards under the Plan shall not exceed [279.49936] Shares in the aggregate. Except as otherwise provided herein, any Shares subject to an Award which for any reason expires or is terminated without issuance of Shares (including Shares that are not issued because Shares are tendered pursuant to subsection 2.3(c) or 3.5) shall again be available under the Plan.
3.3. Adjustments to Shares.
(a) If the Company shall effect any subdivision or consolidation of Shares or other capital readjustment, payment of stock dividend, stock split, combination of shares or recapitalization or other increase or reduction of the number of Shares outstanding without receiving compensation therefor in money, services or property, then the Committee shall equitably adjust (i) the number of Shares available under the Plan; (ii) the number of shares available under any individual or other limits; (iii) the number of Shares subject to outstanding Awards; and (iv)
the per-share price under any outstanding Award to the extent that the Participant is required to pay a purchase price per Share with respect to the Award.
(b) If the Company is reorganized, merged or consolidated or is party to a plan of exchange with another corporation, pursuant to which reorganization, merger, consolidation or plan of exchange, the stockholders of the Company receive any shares of stock or other securities or property, or the Company shall distribute securities of another corporation to its stockholders, there shall be substituted for the Shares subject to outstanding Awards an appropriate number of shares of each class of stock or amount of other securities or property which were distributed to the stockholders of the Company in respect of such Shares, subject to the following:
(i) If the Committee determines that the substitution described in accordance with the foregoing provisions of this paragraph would not be fully consistent with the purposes of the Plan or the purposes of the outstanding Awards under the Plan, the Committee may make such other adjustments to the Awards to the extent that the Committee determines such adjustments are consistent with the purposes of the Plan and of the affected Awards.
(ii) All or any of the Awards may be cancelled by the Committee on or immediately prior to the effective date of the applicable transaction, but only if the Committee gives reasonable advance notice of the cancellation to each affected Participant, and only if either: (A) the Participant is permitted to exercise all Awards that will be cancelled (without regard to whether such Awards would otherwise be exercisable) for a reasonable period prior to the effective date of the cancellation; or (B) the Participant receives payment or other benefits that the Committee determines to be reasonable compensation for the value of all cancelled Awards (without regard to whether such Awards would otherwise be vested).
(iii) Upon the occurrence of a reorganization of the Company or any other event described in this paragraph (b), any successor to the Company shall be substituted for the Company to the extent that the Company and the successor agree to such substitution.
(c) Upon (or, in the discretion of the Committee, immediately prior to) the sale to (or exchange with) a third party unrelated to the Company of all or substantially all of the assets of the Company, all Awards shall be cancelled. If Awards are cancelled under this paragraph, then, with respect to any affected Participant, either:
(i) the Participant shall be provided with reasonable advance notice of the cancellation, and the Participant shall be permitted to exercise all Awards that will be cancelled (without regard to whether such Awards would otherwise be exercisable) for a reasonable period prior to the effective date of the cancellation; or
(ii) the Participant shall receive payment or other benefits that the Committee determines to be reasonable compensation for the value of all cancelled Awards (without regard to whether such cancelled Awards would otherwise be vested).
The foregoing provisions of this paragraph shall also apply to the sale of all or substantially all of the assets of the Company to a related party, if the Committee determines such application is appropriate. Notwithstanding the foregoing provisions of this paragraph (c), in lieu of cancellation of outstanding Awards, the Committee and the purchaser of all or substantially all of the Company's assets may provide that an appropriate number of shares or securities of the purchaser or its affiliates shall be substituted for Shares with respect to outstanding Awards under the Plan, provided that such substituted awards shall be comparable in value and contain terms and conditions similar to the Awards.
(d) In determining what action, if any, is necessary or appropriate under the foregoing provisions of this subsection, the Committee shall act in a manner that it determines to be consistent with the purposes of the Plan and of the affected Awards and, where applicable or otherwise appropriate, in a manner that it determines to be necessary to preserve the benefits and potential benefits of the affected Awards for the Participants and the Company.
(e) The existence of this Plan and the Awards granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Company's Shares or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
(f) Except as expressly provided by the terms of this Plan, the issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property or for labor or services, either upon direct sale, upon the exercise of rights or warrants to subscribe therefor or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof, shall be made with respect to Awards then outstanding hereunder.
(g) Awards under the Plan are subject to adjustment under this subsection only during the period in which they are considered to be outstanding under the Plan. For purposes of this subsection, an Award is considered "outstanding" on any date if the Participant's ability to obtain all benefits with respect to the Award is subject to limits imposed by the Plan (including any limits imposed by the Agreement reflecting the Award). The determination of whether an Award is outstanding shall be made by the Committee.
3.4. Limit on Distribution. Distribution of Shares or other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any Shares under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws.
(b) To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a non-certificated basis.
3.5. Withholding. All Awards and other payments under the Plan are subject to withholding of all applicable taxes, which withholding obligations may be satisfied, with the consent of the Committee, through the surrender of Shares which the Participant already owns or to which a Participant is otherwise entitled under the Plan; provided, however, except to the extent permitted by the Committee, previously-owned Shares that have been held by the Participant less than six months or Shares to which the Participant is entitled under the Plan may only be used to satisfy the minimum tax withholding required by applicable law.
3.6. Transferability. Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution. To the extent that the Participant who receives an Award under the Plan has the right to exercise such Award, the Award may be exercised during the lifetime of the Participant only by the Participant. Notwithstanding the foregoing provisions of this subsection, Awards under the Plan may be transferred to or for the benefit of the Participant's family, subject to such procedures as the Committee may establish. In no event shall an Incentive Stock Option be transferable to the extent that such transferability would violate the requirements applicable to such option under Code section 422.
3.7. Notices. Any notice or document required to be filed with the Committee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Committee, in care of the Company, at its principal executive offices. The Committee may, by advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan (other than a notice of election) may be waived by the person entitled to notice.
3.8. Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed with the Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require.
3.9. Agreement With Company. At the time of an Award to a Participant under the Plan, the Committee may require a Participant to enter into an agreement with the Company (the "Agreement") in a form specified by the Committee, agreeing to the terms and conditions of the
Plan and to such additional terms and conditions, not inconsistent with the Plan, as the Committee may, in its sole discretion, prescribe.
3.10. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Company or any Related Company whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Related Company, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the amounts, if any, payable under the Plan, unsecured by any assets of the Company and any Related Company. Nothing contained in the Plan shall constitute a guarantee by the Company or any Related Company that the assets of such companies shall be sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and selection as a Participant will not give any employee the right to be retained in the employ of the Company or any Related Company, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder thereof any right as a stockholder of the Company prior to the date on which he fulfills all service requirements and other conditions for receipt of such rights and Shares are registered in his name.
3.11. Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.
3.12. Action by Company or Related Company. Any action required or permitted to be taken by the Company or any Related Company shall be by resolution of its board of directors or trustees, as applicable, or by action of one or more members of the board (including a committee of the board) who are duly authorized to act for the board or (except to the extent prohibited by applicable law or the rules of any stock exchange) by a duly authorized officer of the Company.
3.13. Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.
SECTION 4
COMMITTEE
4.1. Administration. The authority to control and manage the operation and administration of the Plan shall be vested in the Compensation Committee of the Board (the "Committee") in accordance with this Section 4.
4.2. Selection of Committee. The Committee shall be selected by the Board and shall consist of not fewer than two members of the Board, none of whom shall be eligible to receive Awards under the Plan.
4.3. Powers of Committee. The authority to manage and control the operation and administration of the Plan shall be vested in the Committee, subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select individuals to receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of Shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and to cancel or suspend Awards. In making such Award determinations, the Committee may take into account the nature of services rendered by the respective employee, the individual's present and potential contribution to the Company's success and such other factors as the Committee deems relevant.
(b) The Committee will have the authority and discretion to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements made pursuant to the Plan and to make all other determinations that may be necessary or advisable for the administration of the Plan.
(c) Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.
(d) Except as otherwise expressly provided in the Plan, where the Committee is authorized to make a determination with respect to any Award, such determination shall be made at the time the Award is made, except that the Committee may reserve the authority to have such determination made by the Committee in the future (but only if such reservation is made at the time the Award is granted and is expressly stated in the Agreement reflecting the Award).
4.4. Delegation by Committee. The Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time.
4.5. Information to be Furnished to Committee. The Company and Related Companies shall furnish the Committee such data and information as may be required for it to discharge its duties. The records of the Company and Related Companies as to an employee's or Participant's employment (or other provision of services), termination of employment (or cessation of the provision of services), leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
4.6. Liability and Indemnification of Committee. No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own fraud or willful misconduct; nor shall the Company or any Related Company be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a Director or employee of the Company or Related Company. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the Company against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance.
SECTION 5
AMENDMENT AND TERMINATION
Subject to obtaining such approvals as may be required under the Code or Delaware corporate law, the Board may, at any time, amend or terminate the Plan; provided, that subject to subsection 3.3 (relating to certain adjustments to shares), no amendment or termination may materially adversely affect the rights of any Participant or beneficiary under any Award made under the Plan prior to the date such amendment is adopted by the Board.
SECTION 6
DEFINED TERMS
6.1. In addition to the other definitions contained herein, the following definitions shall apply:
(a) "Cause" means any of the following:
(i) Participant's conviction of, or plea of guilty or nolo contendere to, a serious felony or a crime involving embezzlement, conversion of property or moral turpitude;
(ii) a finding by a majority of the Board of Directors of Participant's fraud, embezzlement or conversion of property;
(iii) Participant's conviction of, or plea of guilty or nolo contendere to, a crime involving the acquisition, use or expenditure of federal, state or local government funds;
(iv) an administrative or judicial determination that Participant committed fraud or any other violation of law involving federal, state or local government funds;
(v) a finding by a majority of the Board of Participant's knowing breach of any of his fiduciary duties to the Company or any Related Company or the Company's stockholders or making of a misrepresentation or omission which breach, misrepresentation or omission would reasonably be expected to materially adversely affect the business, properties, assets, condition (financial or other) or prospects of the Company or any Related Company; provided, that the Participant has been given notice and 30 days from such notice fails to cure the breach, misrepresentation or omission;
(vi) Participant's willful and continual neglect or failure to discharge his material duties, responsibilities or obligations prescribed by this Agreement or any other agreement between the Participant and the Company or any Related Company; provided, that the Participant has been given notice and 30 days from such notice fails to cure the neglect or failure;
(vii) Participant's alcohol or substance abuse, which materially interferes with Participant's ability to discharge his duties, responsibilities and obligations of employment (as prescribed by Participant's employment agreement with the Company or otherwise); provided, that Participant has been given notice and 30 days from such notice fails to cure such abuse;
(viii) Any material violation, with the actual knowledge of Participant, of any obligations imposed upon Participant, personally, as opposed to upon the Company, whether as a stockholder or otherwise, under any material agreement or instrument relating to the Company or any Related Company, or the Certificate of Incorporation or By-Laws of the Company; provided, that the Participant has been given notice and 30 days from such notice fails to cure the violation; or
(ix) Participant's personal (as opposed to the Company's) material and knowing failure, to observe or comply with Regulations whether as an officer, stockholder or otherwise, in any material respect or in any manner which would reasonably be expected to have a material adverse effect in respect of the Company's or any Related Company's ongoing business, operations, conditions, other business relationships or properties; provided, that the Participant has been given notice and 30 days from such notice fails to cure the failure. For purposes of this paragraph, "Regulations" means any laws, statutes, regulations, rulings, rules, orders or permits of, administered or enforced by or on behalf of any Authority, and the Certificate of Incorporation and By-laws of the Company, as applicable and "Authority" means any governmental, regulatory or administrative body, agency or authority, any court or judicial authority, any public, private or industry regulatory authority, whether national, Federal, state or local or otherwise, or any Person lawfully empowered by any of the foregoing to enforce or seek compliance with any applicable law, statute, regulation, order or decree.
6.2. "Disability" means due to physical or mental disability the Executive is unable to perform, and does not perform, as certified by a mutually agreeable competent medical physician, his material duties hereunder for 180 days in any continuous 210 day period. The final determination of Disability shall be made in the reasonable judgment of the Board of Directors. In the event of any inconsistency between the definition of disability herein and the definition of such term in any employment agreement between the Participant and the Company then in effect, the definition of such term in such employment agreement shall control for purposes of the Plan.
6.3. "Material Breach" means:
(a) Participant's breach of any of such Participant's fiduciary duties to the Company, its subsidiaries or its stockholders or making of a willful misrepresentation or omission which breach, misrepresentation or omission would reasonably be expected to materially adversely affect the business, properties, assets, condition (financial or other) or prospects of the Company or its subsidiaries;
(b) Participant's willful, continual and material neglect or failure to discharge such Participant's duties, responsibilities or obligations prescribed by the Award or of any other agreement between the Company or its subsidiaries or by the Company (other than arising solely due to physical or mental disability);
(c) Participant's habitual drunkenness or substance abuse which materially interferes with such Participant's ability to discharge such Participant's duties, responsibilities or obligations prescribed by the Company or its subsidiaries;
(d) Participant's violation of any non-competition, non-disparagement or confidentiality agreement with the Company or its subsidiaries, or any other agreements with the Company or its subsidiaries; and
(e) Participant's gross neglect of such Participant's duties and responsibilities, as determined by the Company's Board of Directors;
in each case, for purposes of clauses (a) through (d), after the Company or the Board of Directors has provided such Participant with 60 days' written notice of such circumstances and the possibility of a Material Breach in reasonable detail, and such Participant fails to cure such circumstances and Material Breach within those 60 days. No act or omission shall be deemed gross neglect if done, or omitted to be done, in good faith by such Participant based upon a resolution duly adopted by the Company's Board of Directors.
6.4. "Retirement" shall mean any voluntary termination of employment by a Participant for any reason other than Death, Disability, Cause, Material Breach or Unsatisfactory Performance after such Participant reaches age 65.
6.5. "Unsatisfactory Performance" means a Participant's failure to perform Participant's duties to the standards set by the Board of Directors (such determination to be made in good faith by the Board of Directors); provided, that Participant has been given notice and 30 days from such notice fails to cure such unsatisfactory performance.
SECTION 7
STOCKHOLDERS AGREEMENT
7.1. Upon Participant's exercise of an Option in accordance with the terms of this Plan, Participant agrees that he will execute and become a party to the Company's Amended and Restated Stockholders Agreement, dated April 1, 2002, as amended, restated, supplemented or modified (the "Stockholders Agreement") which will bind Participant beyond the period of time that he owns any Shares or Options.
EXHIBIT 10.6
UNIVERSAL TECHNICAL INSTITUTE, INC.
2003 STOCK INCENTIVE PLAN
ARTICLE 1
PURPOSE
1.1 GENERAL. The purpose of the Universal Technical Institute, Inc. 2003 Stock Incentive Plan (the "Plan") is to promote the success and enhance the value of Universal Technical Institute, Inc. (the "Company") by linking the personal interests of its Board members, employees, officers, and executives of, and consultants and advisors to, the Company to those of Company shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to shareholders of the Company. The Plan is also intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Board members, employees, officers, and executives of, and consultants and advisors to, the Company upon whose judgment, interest, and special effort the successful conduct of the Company's operation is largely dependent.
ARTICLE 2
EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan is effective as of the date the Plan is approved by the Board (the "Effective Date"). The Plan must be approved by the Company's shareholders within 12 months after the Effective Date. The Plan will be considered approved by the Company's shareholders if it receives the affirmative vote of the holders of a majority of the shares of Company's stock present or represented and entitled to vote at a meeting duly held in accordance with the Company's Bylaws or by written consent of a majority of the Company's shareholders in lieu of a meeting. Any Awards granted under the Plan prior to shareholder approval are effective when made (unless the Committee specifies otherwise at the time of grant), but no Award may be exercised or settled and no restrictions relating to any Award may lapse before the Plan is approved by the Company's shareholders. If the Company's shareholders do not approve the Plan within 12 months after the Effective Date, any Award previously made is automatically canceled without any further act.
ARTICLE 3
DEFINITIONS
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the initial letter capitalized, and the word or phrase does not begin a sentence, the word or phrase will be given the meaning in this Section or in Sections 1.1 or 2.1 unless otherwise indicated. The following words and phrases will have the following meanings:
(a) "AWARD" means any Option, Stock Appreciation Right, Restricted Stock Award, Performance Share Award, Performance-Based Award, or IPO Award granted to a Participant under the Plan.
(b) "AWARD AGREEMENT" means any written agreement, contract, or other instrument or document evidencing an Award.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CAUSE" means (except as otherwise provided in an Award Agreement) if the Committee, in its reasonable and good faith discretion, determines that the Participant (i) fails to substantially perform his duties (other than as a result of Disability), after the Board or the individual to whom the Participant reports delivers to the Participant a written demand for substantial performance that specifically identifies the manner in which the Participant has not substantially performed his or her duties; (ii) engages in willful misconduct or gross negligence that is materially injurious to the Company or a Subsidiary; (iii) breaches his or her duty of loyalty to the Company or a Subsidiary; or (iv) commits a felony or a serious crime involving moral turpitude.
Any rights the Company or any of its Subsidiaries has to determine the existence of events giving rise to Cause are in addition to the rights the Company or any of its Subsidiaries may have under any other agreement with the Participant or at law or in equity. If, after a Participant's termination of employment or services, the Company discovers that the Participant's employment or services could have been terminated for Cause, the Participant's employment or services will, in the Board's sole discretion, be deemed to have been terminated for Cause retroactively to the date the events giving rise to Cause occurred.
(e) "CHANGE OF CONTROL" means: (i) any sale, lease, exchange, or other transfer (in one transaction or series of related transactions) of all or substantially all the Company's assets to any person or group of related persons under Section 13(d) of the Exchange Act ("Group"); (ii) the Company's shareholders approve and complete any plan or proposal for the liquidation or dissolution of the Company; (iii) any person or Group becomes the beneficial owner, directly or indirectly, of shares representing more than 25% of the aggregate voting power of the issued and outstanding stock entitled to vote in the election of directors of the Company ("Voting Stock") and such person or Group has the power and authority to vote such shares; (iv) if a majority of the individual Board members are replaced over a two-year period and such replacement is not approved by a vote of majority of the Board then still in office who either were members of such Board at the beginning of such two-year period or were appointed by such Board members; (v) any person or Group acquires sufficient shares of Voting Stock to elect a majority of the members of the Board; or (vi) the completion of a merger or consolidation of the Company with another entity in which holders of the Stock immediately before the completion of the transaction hold, directly or indirectly, immediately after the transaction, 50% or less of the common equity interest in the surviving corporation in the transaction. Notwithstanding the foregoing, in no event will a Change of Control be deemed to have occurred as a result of an initial public offering of the Stock.
(f) "CODE" means the Internal Revenue Code of 1986, as amended.
(g) "COMMITTEE" means the committee of the Board described in Article 4.
(h) "COVERED EMPLOYEE" means an Employee who is a "covered employee" within the meaning of Section 162(m) of the Code.
(i) "DISABILITY" means (unless otherwise defined in an employment agreement between the Company or any of its Subsidiaries and the Participant or in the Participant's Award Agreement) any illness or other physical or mental condition of a Participant that renders the Participant incapable of performing his customary and usual duties for the Company or Subsidiary, or any medically determinable illness or other physical or mental condition resulting from a bodily injury, disease or mental disorder, which in the Committee's sole judgment is permanent and continuous in nature. The Committee may require such medical or other evidence as it deems necessary to judge the nature and permanency of the Participant's condition.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(k) "FAIR MARKET VALUE" means, as of any given date, the fair market value of Stock on a particular date determined by such methods or procedures established by the Committee. Unless otherwise determined by the Committee the Fair Market Value of Stock as of any date is the closing price for the Stock as reported on the New York Stock Exchange (or on any national securities exchange on which the Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the next preceding date for which a closing price was reported. For purposes of IPO Awards and Awards effective as of the effective date of the Company's initial public offering, fair market value of Stock shall be the price at which the Company's Stock is offered to the public in its initial public offering.
(l) "INCENTIVE STOCK OPTION" means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision.
(m) "IPO AWARD" means the Option granted to each eligible Participant pursuant to Article 12.
(n) "NON-EMPLOYEE DIRECTOR" means a member of the Board who qualifies as a "Non-Employee Director" as defined in Rule 16b-3(b)(3) of the Exchange Act, or any successor provision.
(o) "NON-QUALIFIED STOCK OPTION" means an Option that is not intended to be an Incentive Stock Option.
(p) "OPTION" means a right granted to a Participant under Article 7 or Article 12 of the Plan to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.
(q) "PARTICIPANT" means a person who, as a Board member, employee, officer, or executive of, or consultant or advisor providing services to, the Company or any Subsidiary, has been granted an Award under the Plan.
(r) "PERFORMANCE-BASED AWARDS" means the Performance Share Awards and Restricted Stock Awards granted to select Covered Employees pursuant to Articles 9 and 10, and are subject to the terms and conditions in Article 11. All Performance-Based Awards are intended to qualify as "performance-based compensation" under Section 162(m) of the Code.
(s) "PERFORMANCE CRITERIA" means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria used to establish Performance Goals are limited to: pre- or after-tax net earnings, sales growth, operating earnings, operating cash flow, return on net assets, return on stockholders' equity, return on assets, return on capital, Stock price growth, stockholder returns, gross or net profit margin, earnings per share, price per share of Stock, and market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Committee will, within the time prescribed by Section 162(m) of the Code, objectively define the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Participant.
(t) "PERFORMANCE GOALS" means, for a Performance Period, the written goals established by the Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, Subsidiary, or an individual. The Committee, in its discretion, may, within the time prescribed by Section 162(m) of the Code, adjust or modify the calculation of Performance Goals for such Performance Period to prevent the dilution or enlargement of the rights of Participants (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event, or development, or (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions.
(u) "PERFORMANCE PERIOD" means the one or more periods of time, which may be of varying and overlapping durations, selected by the Committee, over which the attainment of one or more Performance Goals will be measured for purposes of determining a Participant's right to, and the payment of, a Performance-Based Award.
(v) "PERFORMANCE SHARE" means a right granted to a Participant under Article 9, to receive cash, Stock, or other Awards, the payment of which is contingent on achieving certain Performance Goals established by the Committee.
(w) "PLAN" means the Universal Technical Institute, Inc. 2003 Stock Incentive Plan, as amended.
(x) "RESTRICTED STOCK AWARD" means Stock granted to a Participant under Article 10 that is subject to certain restrictions and to risk of forfeiture.
(y) "STOCK" means the common stock of the Company and such other securities of the Company that may be substituted for Stock pursuant to Article 14.
(z) "STOCK APPRECIATION RIGHT" or "SAR" means a right granted to a Participant under Article 8 to receive a cash, Stock, or other Awards, , all as determined pursuant to Article 8.
(aa) "SUBSIDIARY" means any corporation or other entity of which the Company owns, directly or indirectly, a majority of the outstanding voting stock or voting power.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan will be administered by the Board or a Committee appointed by, and which serves at the discretion of, the Board. If the Board appoints a Committee, the Committee will consist of at least two individuals, each of whom qualifies as (i) a Non-Employee Director, and (ii) an "outside director" under Code Section 162(m) and the regulations issued thereunder. Reference to the Committee in this Plan will refer to the Board if the Board does not appoint a Committee.
4.2 ACTION BY THE COMMITTEE. A majority of the Committee will constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, will be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company's independent certified public accountants, any executive compensation consultant or other professional retained by the Company to assist in the Plan's administration.
4.3 AUTHORITY OF COMMITTEE. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:
(a) Designate Participants to receive Awards;
(b) Determine the type of Awards granted to each Participant;
(c) Determine the number of Awards granted and the number of shares of Stock to which an Award will relate;
(d) Except as otherwise provided in the Plan, determine the terms and conditions of any Award granted under the Plan including but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, based in each case on such considerations as the Committee in its sole discretion determines; provided, however, that the Committee will not have the authority to accelerate the vesting or waive the forfeiture of any Performance-Based Awards;
(e) Amend, modify, or terminate any outstanding Award, with the Participant's consent unless the Committee has the authority to amend, modify, or terminate an Award without the Participant's consent under any other provision of the Plan;
(f) Determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not be identical for each Participant;
(h) Decide all other matters that must be determined in connection with an Award;
(i) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(j) Interpret the terms of, and any matter arising under, the Plan or any Award Agreement; and
(k) Make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan.
4.4 DECISIONS BINDING. The Committee's interpretation of the Plan, any Awards granted under the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment provided in Section 14.1, the aggregate number of shares of Stock reserved and available for grant under the Plan will be 5,250,000.
5.2 LAPSED AWARDS. To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award will again be available to the Committee to grant Awards under the Plan.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.
5.4 LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS. Notwithstanding any provision in the Plan to the contrary, and subject to the adjustment in Section 14.1, the maximum number of shares of Stock with respect to one or more Awards that may be granted to any one Participant during any fiscal year of the Company is 1,000,000
ARTICLE 6
ELIGIBILITY AND PARTICIPATION
6.1 ELIGIBILITY.
(a) GENERAL. Persons eligible to participate in this Plan include all Board members, employees, officers, and executives of, and consultants and advisors to, the Company or a Subsidiary, as determined by the Committee.
(b) FOREIGN PARTICIPANTS. To assure the viability of Awards granted to Participants employed in foreign countries, the Committee is authorized to provide for any special terms it considers necessary or appropriate to accommodate differences in local law, tax policy, or custom. Moreover, the Committee may approve any supplements to, or amendments, restatements, or alternative versions of the Plan as it considers necessary or appropriate for such purposes without affecting the terms of the Plan as in effect for any other purpose; provided, however, that no such supplements, amendments, restatements, or alternative versions may increase the share limitations contained in Section 5.1 of the Plan.
6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all eligible individuals, those to whom Awards will be granted and will determine the nature and amount of each Award. No individual will have any right to be granted an Award under this Plan.
ARTICLE 7
STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant Options to Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock
under an Option will be determined by the Committee and set forth in the Award
Agreement. The Committee may, in its discretion, grant Options (other than
Options that are intended to be Incentive Stock Options or Options that are
intended to qualify as "performance-based compensation" under Code Section
162(m)) with an exercise price of less than Fair Market Value on the date of
grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee will determine the time or times at which an Option may be exercised in whole or in part. The Committee will also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised. Unless otherwise provided in an Award Agreement, an Option will lapse immediately if a Participant's employment or services are terminated for Cause.
(c) PAYMENT. The Committee will determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, cash, promissory note, shares of Stock (through actual tender or by attestation), or other property (including broker-assisted "cashless exercise" arrangements), and the methods by which shares of Stock will be delivered or deemed to be delivered to Participants.
(d) EVIDENCE OF GRANT. All Options will be evidenced by a written Award Agreement, which Agreement will include such provisions as determined by the Committee.
7.2 INCENTIVE STOCK OPTIONS. Incentive Stock Options will be granted only to employees and the terms of any Incentive Stock Options granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The per share exercise price for any Incentive Stock Option may not be less than the Fair Market Value as of the date of the grant.
(b) EXERCISE. No Incentive Stock Option may be exercisable for more than ten years after the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option will lapse under the following circumstances.
(1) The Incentive Stock Option will lapse ten years from the date it is granted, unless it lapses earlier under the Award Agreement.
(2) Unless otherwise provided in the Award Agreement, an Incentive Stock Option will lapse upon a Participant's termination of employment for Cause or for any other reason (other than the death or Disability).
(3) If the Participant terminates employment
because of Disability or death before the Option lapses pursuant to paragraph
(1) or (2) above, the Incentive Stock Option will lapse, unless it is sooner
exercised, on the earlier of (i) the date on which the Option would have lapsed
had the Participant not become Disabled or lived and had remain employed; or
(ii) 12 months after the date of the Participant's termination of employment
because of Disability or death. Upon the Participant's Disability or death, any
Incentive Stock Option exercisable at the Participant's Disability or death may
be exercised by the Participant's legal representative, by the person or persons
entitled to do so under the Participant's last will and testament, or, if the
Participant fails to make testamentary disposition of such Incentive Stock
Option or dies intestate, by the person or persons entitled to receive the
Incentive Stock Option under the applicable laws of descent and distribution.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value (determined as of the grant date) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000.00 or such other limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess will be considered Non-Qualified Stock Options.
(e) TEN PERCENT OWNERS. An Incentive Stock Option will be granted to any individual who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of Stock only if such Option is granted at a price that is not less than 110% of Fair Market Value on the grant date and the Option is exercisable for no more than five years from the grant date.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive Stock Option may be made pursuant to this Plan after the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. An Incentive Stock Option may be exercised only by the Participant during his or her lifetime,.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 GRANT OF SARs. The Committee is authorized to grant SARs to Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a SAR, the Participant to whom it is granted has the right to receive the excess, if any, of:
(1) The Fair Market Value of a share of Stock on the date of exercise; over
(2) The grant price of the SAR as determined by the Committee, which will not be less than the Fair Market Value of a share of Stock on the date of grant in the case of any SAR related to any Incentive Stock Option.
(b) OTHER TERMS. All SARs grants will be evidenced by an Award Agreement. The terms, methods of exercise, methods of settlement, form of consideration payable in settlement, and any other terms and conditions of any SAR will be determined by the Committee at the time of the grant of the Award and as set forth in the Award Agreement.
ARTICLE 9
PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant Performance Shares to Participants on such terms and conditions as determined by the Committee. The Committee has the discretion to determine the number of Performance Shares granted to each Participant and such other terms and conditions of such grant, all as set forth in the Award Agreement.
9.2 RIGHT TO PAYMENT. A grant of Performance Shares gives the Participant rights, valued as determined by the Committee, and payable to, or exercisable by, the Participant to whom the Performance Shares are granted, in whole or in part, as the Committee will establishes at grant or thereafter. Subject to the terms of the Plan, the Committee will set performance goals and other terms or conditions to payment of the Performance Shares in its discretion which, depending on the extent to which they are met, will determine the number and value of Performance Shares that will be paid to the Participant.
9.3 OTHER TERMS. Performance Shares may be payable in cash, Stock, or other property, and have such other terms and conditions as determined by the Committee and as set forth in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1 GRANT OF RESTRICTED STOCK. The Committee is authorized to make Awards of Restricted Stock to Participants in such amounts and subject to such terms and conditions as determined by the Committee, all as set forth in the Award Agreement.
10.2 ISSUANCE AND RESTRICTIONS. Restricted Stock will be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.
10.3 FORFEITURE. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions will be forfeited, provided, however, that the Committee may provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.
10.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under the Plan may be evidenced as determined by the Committee. If certificates representing shares of Restricted Stock are registered in the name of the Participant, the certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.
ARTICLE 11
PERFORMANCE-BASED AWARDS
11.1 PURPOSE. The purpose of this Article 11 is to provide the Committee the ability to qualify the Performance Share Awards under Article 9 and the Restricted Stock Awards under Article 10 as "performance-based compensation" under Section 162(m) of the Code. If the Committee, in its discretion, decides to grant a Performance-Based Award to a Covered Employee, the provisions of this Article 11 will control over any contrary provision contained in Articles 9 or 10.
11.2 APPLICABILITY. This Article 11 will apply only to those Covered Employees selected by the Committee to receive Performance-Based Awards. The Committee may, in its discretion, grant Restricted Stock Awards or Performance Share Awards to Covered Employees that do not satisfy the requirements of this Article 11. The designation of a Covered Employee as a Participant for a Performance Period does not entitle the Participant to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant for a particular Performance Period will not require designation of such Covered Employee as a Participant in
any subsequent Performance Period and designation of one Covered Employee as a Participant will not require designation of any other Covered Employees as a Participant in such period or in any other Performance Period.
11.3 DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE AWARDS. With regard to a particular Performance Period, the Committee will have full discretion to select the length of such Performance Period, the type of Performance-Based Awards to be issued, the kind and/or level of the Performance Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary or any division or business unit or to the individual.
11.4 PAYMENT OF PERFORMANCE AWARDS. Unless otherwise provided in the Award Agreement, a Participant must be employed by the Company or a Subsidiary on the last day of the Performance Period to be eligible for a Performance Award for such Performance Period. Furthermore, a Participant will be eligible to receive payment under a Performance-Based Award for a Performance Period only if the Performance Goals for such period are achieved. In determining the actual size of an individual Performance-Based Award, the Committee may reduce or eliminate the amount of the Performance-Based Award earned for the Performance Period, if in its sole and absolute discretion, such reduction or elimination is appropriate.
11.5 MAXIMUM AWARD PAYABLE. The maximum Performance-Based Award payable to any one Participant under the Plan for a Performance Period is 1,000,000 shares of Stock, or if the Performance-Based Award is paid in cash, the maximum Performance-Based Award is determined by multiplying 1,000,000 by the Fair Market Value of the Stock as of the date the Performance-Based Award is granted.
ARTICLE 12
IPO AWARDS
12.1 IPO AWARDS. IPO Awards will be awarded to Participants selected by the Committee and will be subject to the following terms and conditions:
(a) EFFECTIVE DATE OF AWARDS. The effective date of the IPO Awards will be the date of the Company's initial public offering of Stock.
(b) EXERCISE PRICE FOR AWARDS. Notwithstanding anything in the Plan to the contrary, the exercise price per share of Stock under the IPO Awards will be the price at which the Company's Stock is offered to the public in its initial public offering of Stock ("IPO Price").
(c) AMOUNT OF THE IPO AWARDS. Each Participant selected to receive an IPO Award and who became an employee by the Company on or after _______, 1999, will be entitled to receive an Option to purchase 50 shares of Stock. Each Participant selected to receive an IPO Award and who became an employee by the Company before _______, 1999, will be entitled to receive an Option to purchase 100 shares of Stock. Such Option will be designated as a Non-Qualified Stock Option.
(d) TIME AND CONDITIONS OF EXERCISE. The IPO Awards will become fully exercisable on the first anniversary of the date of grant. Unless otherwise provided in the Award Agreement, the IPO Award will lapse upon a Participant's termination of employment or service with the Company or a Subsidiary for any reason, and will include such other provisions as may be specified by the Committee.
(e) PAYMENT. The Committee will determine the methods by which the exercise price of the IPO Awards may be paid, the form of payment, including, without limitation, cash, promissory note, shares of Stock (through actual tender or by attestation), or other property (including broker-assisted "cashless exercise" arrangements), and the methods by which shares of Stock will be delivered or deemed to be delivered to Participants.
(f) EVIDENCE OF GRANT. All IPO Awards will be evidenced by an Award Agreement.
ARTICLE 13
PROVISIONS APPLICABLE TO AWARDS
13.1 STAND-ALONE AND TANDEM AWARDS. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted under the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
13.2 EXCHANGE PROVISIONS. The Committee may at any time offer to exchange or buy out any previously granted Award for a payment in cash, Stock, or another Award, based on the terms and conditions the Committee determines and communicates to the Participant at the time the offer is made.
13.3 TERM OF AWARD. The term of each Award will be for the period as determined by the Committee, provided that in no event will the term of any Incentive Stock Option or a Stock Appreciation Right granted in tandem with the Incentive Stock Option exceed a period of ten years from the date of its grant.
13.4 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and any applicable law or Award Agreement, payments or transfers to be made by the Company or a Subsidiary on the grant or exercise of an Award may be made in such forms as the Committee determines at or after the time of grant, including without limitation, cash, promissory note, Stock, other Awards, or other property, or any combination, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case determined in accordance with rules adopted by, and at the discretion of, the Committee.
13.5 LIMITS ON TRANSFER. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or will be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. Except as otherwise provided by the Committee, no Award will be assignable or transferable by a Participant other than by will or the laws of descent and distribution.
13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant's death. A beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married, a designation of a person other than the Participant's spouse as his beneficiary with respect to more than 50% of the Participant's interest in the Award will not be effective without the written consent of the Participant's spouse. If no beneficiary has been designated or survives the Participant, payment will be made to the person entitled thereto under the Participant's will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.
13.7 STOCK CERTIFICATES. Notwithstanding anything herein to the contrary, the Company will not be required to issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Awards, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed or traded. All Stock certificates delivered under the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with Federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements.
13.8 ACCELERATION UPON A CHANGE OF CONTROL. If a Change of Control occurs, all outstanding Options, Stock Appreciation Rights, and other Awards will become fully exercisable and all restrictions on outstanding Awards will lapse. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the excess Options will be deemed to be Non-Qualified Stock Options. Upon, or in anticipation of, such an event, the Committee may cause every Award outstanding hereunder to terminate at a specific time in the future and will give each Participant the right to exercise Awards during a period of time as the Committee, in its sole and absolute discretion, will determine.
ARTICLE 14
CHANGES IN CAPITAL STRUCTURE
14.1 GENERAL.
(a) SHARES AVAILABLE FOR GRANT. If there is any change in the number of shares of Stock outstanding by reason of any stock dividend or split, recapitalization,
merger, consolidation, combination or exchange of shares or similar corporate change, the maximum aggregate number of shares of Stock with respect to which the Committee may grant Awards will be appropriately adjusted by the Committee. If there is any change in the number of shares of Stock outstanding by reason of any other event or transaction, the Committee may, but need not, make such adjustments in the number and class of shares of Stock with respect to which Awards may be granted as the Committee may deem appropriate.
(b) OUTSTANDING AWARDS - INCREASE OR DECREASE IN ISSUED SHARES WITHOUT CONSIDERATION. Subject to any required action by the shareholders of the Company, if there is any increase or decrease in the number of issued shares of Stock resulting from a subdivision or consolidation of shares of Stock or the payment of a stock dividend (but only on the shares of Stock), or any other increase or decrease in the number of such shares effected without receipt or payment of consideration by the Company, the Committee will proportionally adjust the number of shares of Stock subject to each outstanding Award and the exercise price per share of Stock of each such Award.
(c) OUTSTANDING AWARDS - CERTAIN MERGERS. Subject to any required action by the shareholders of the Company, if the Company is the surviving corporation in any merger or consolidation (except a merger or consolidation as a result of which the holders of shares of Stock receive securities of another corporation), each Award outstanding on the date of such merger or consolidation will pertain to and apply to the securities which a holder of the number of shares of Stock subject to such Award would have received in such merger or consolidation.
(d) OUTSTANDING AWARDS - OTHER CHANGES. If any other change in the capitalization of the Company or corporate change other than those specifically referred to in Article 14, the Committee may, in its absolute discretion, make such adjustments in the number and class of shares subject to Awards outstanding on the date on which such change occurs and in the per share exercise price of each Award as the Committee may consider appropriate to prevent dilution or enlargement of rights.
(e) NO OTHER RIGHTS. Except as expressly provided in the Plan, no Participant will have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, will affect, and no adjustment by reason thereof will be made with respect to, the number of shares of Stock subject to an Award or the exercise price of any Award.
ARTICLE 15
AMENDMENT, MODIFICATION, AND TERMINATION
15.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however, that to the extent necessary and desirable to comply with
any applicable law, regulation, or stock exchange rule, the Company will obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required.
15.2 AWARDS PREVIOUSLY GRANTED. Except as otherwise provided in the Plan, including without limitation, the provisions of Article 14, no termination, amendment, or modification of the Plan will adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant.
ARTICLE 16
GENERAL PROVISIONS
16.1 NO RIGHTS TO AWARDS. No Participant, employee, or other person will have any claim to be granted any Award under the Plan, and neither the Company nor the Committee is obligated to treat Participants, employees, and other persons uniformly.
16.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the rights of a stockholder of the Company unless and until shares of Stock are in fact issued to such person in connection with such Award.
16.3 WITHHOLDING. The Company or any Subsidiary has the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of this Plan. With the Committee's consent, a Participant may elect to have the Company withhold from those shares of Stock that would otherwise be received upon the exercise of any Option, a number of shares having a Fair Market Value equal to the minimum statutory amount necessary to satisfy the Company's applicable federal, state, local and foreign income and employment tax withholding obligations.
16.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any Award Agreement will interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant's employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company or any Subsidiary.
16.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an "unfunded" plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement will give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.
16.6 INDEMNIFICATION. To the extent allowable under applicable law, each member of the Committee or the Board will be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act under the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification is in addition to any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
16.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan will be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary.
16.8 EXPENSES. The Company and its Subsidiaries will pay the expenses of administering the Plan.
16.9 TITLES AND HEADINGS. The titles and headings of the Sections in the Plan are for convenience of reference only, and if there is any conflict, the text of the Plan, rather than such titles or headings, will control.
16.10 FRACTIONAL SHARES. No fractional shares of stock will be issued and the Committee will determine, in its discretion, whether cash will be given in lieu of fractional shares or whether such fractional shares will be eliminated by rounding up or down as appropriate.
16.11 SECURITIES LAW COMPLIANCE. With respect to any person who is, on the relevant date, obligated to file reports under Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it will be void to the extent permitted by law and voidable as deemed advisable by the Committee.
16.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make payment of awards in Stock or otherwise will be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company will be under no obligation to register under the Securities Act of 1933, as amended, any of the shares of Stock paid under the Plan. If the shares paid under the Plan may in certain circumstances be exempt from registration under the Securities Act of 1933, as amended, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.
16.13 GOVERNING LAW. The Plan and all Award Agreements will be construed in accordance with and governed by the laws of the State of Arizona.
EXHIBIT 10.7
UNIVERSAL TECHNICAL INSTITUTE, INC.
2003 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of this Universal Technical Institute, Inc. 2003 Employee Stock Purchase Plan (the "Plan") is to encourage stock ownership by eligible employees of Universal Technical Institute, Inc. (the "Company") and its Subsidiaries and to provide them with an incentive to contribute to the profitability and success of the Company. The Plan is intended to qualify as an "employee stock purchase plan" under Section 423 of the Code and will be maintained for the exclusive benefit of eligible employees of the Company and its Subsidiaries.
2. DEFINITIONS. For purposes of the Plan, in addition to the terms defined in Section 1, the following terms are defined:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CASH ACCOUNT" means the account maintained on behalf of a Participant by the Company for the purpose of holding cash contributions withheld from payroll pending investment in Stock.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "CUSTODIAN" means ____________________ or any successor or replacement appointed by the Board or its delagatee under Section 3(a).
(e) "EARNINGS" means a Participant's salary or wages, including bonuses and overtime, for services performed for the Company and its Subsidiaries and received by a Participant for services rendered during an Offering Period.
(f) "FAIR MARKET VALUE" means the closing price of the Stock on the relevant date as reported on New York Stock Exchange (or any national securities exchange or quotation system on which the Stock is then listed), or if there were no sales on that date the closing price on the next preceding date for which a closing price was reported; provided, however, that for the Offering Period beginning on the IPO Date, the Fair Market Value of the Stock on the first day of such Offering Period shall be deemed to be the price at which the Company's Stock is first offered in its initial public offering of Stock.
(g) "IPO DATE" means the date on which the Company's initial public offering of Stock is consummated.
(h) "OFFERING PERIOD" means the six-month period beginning on each January 1 and ending each June 30 and the six-month period beginning on each July 1 and ending on each December 31. Notwithstanding the above, the first Offering Period shall begin on the IPO Date and end on June 30, 2004.
(i) "PARTICIPANT" means an employee of the Company or a Subsidiary who is participating in the Plan.
(j) "PURCHASE RIGHT" means a Participant's option to purchase Stock that is deemed to be outstanding during a Offering Period. A Purchase Right represents an "option" under Section 423 of the Code.
(k) "STOCK" means the common stock of the Company.
(l) "STOCK ACCOUNT" means the account maintained on behalf of the Participant by the Custodian for the purpose of holding Stock acquired under the Plan.
(m) "SUBSIDIARY" means any subsidiary corporation defined in Code Section 424(f).
3. ADMINISTRATION.
(a) BOARD ADMINISTRATION. The Plan will be administered by the Board. The Board may delegate its administrative duties and authority (other than its authority to amend or terminate the Plan) to any Board committee or to any officers or employees or committee thereof as the Board may designate (in which case references to the Board will be deemed to refer to the administrator to which such duties and authority have been delegated). The Board will have full authority to adopt, amend, suspend, waive, and rescind rules and regulations and appoint agents as it deems necessary or advisable to administer the Plan, to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and rules and regulations thereunder, to furnish to the Custodian such information as the Custodian may require, and to make all other decisions and determinations under the Plan (including determinations relating to eligibility). No person acting in connection with the administration of the Plan will, in that capacity, participate in deciding any matter relating to his or her participation in the Plan.
(b) THE CUSTODIAN. The Custodian will act as custodian under the Plan, and perform those duties specified in the Plan and in any agreement between the Company and the Custodian. The Custodian will establish and maintain Participants Stock Accounts and any subaccounts as may be necessary or desirable to administer the Plan.
(c) WAIVERS. The Board may waive or modify any requirement that a notice or election be made or filed under the Plan a specified period in advance on an individual case or by adopting a rule or regulation under the Plan, without amending the Plan.
(d) OTHER ADMINISTRATIVE PROVISIONS. The Company will furnish information from its records as directed by the Board, and such records, including a Participant's Earnings, will be conclusive on all persons unless determined by the Board to be incorrect. Each Participant and other person claiming benefits under the Plan must furnish to the Company in writing a current mailing address and any other information as the Board or Custodian may reasonably request. Any communication, statement, or notice mailed with postage prepaid to any such Participant or other person at the last mailing address filed with the Company will be deemed sufficiently given when mailed and will be binding upon the named recipient. The Plan will be administered on a reasonable and nondiscriminatory basis and uniform rules will apply to all persons similarly situated. All Participants will have equal rights
and privileges (subject to the terms of the Plan) with respect to Purchase Right outstanding during any given Offering Period in accordance with Code Section 423(b)(5) .
4. STOCK SUBJECT TO PLAN. Subject to adjustment as provided below, the total number of shares of Stock reserved and available for issuance or which may be otherwise acquired upon exercise of Purchase Rights under the Plan will be __________. Any shares of Stock delivered by the Company under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares or shares of Stock purchased on the open market. The number and kind of such shares of Stock subject to the Plan will be proportionately adjusted, as determined by the Board, in the event of any extraordinary dividend or other distribution, recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event affecting the Stock. If, at the end of any Offering Period, the number of shares of Stock with respect to which Purchase Rights are to be exercised exceeds the number of shares of Stock then available under the Plan, the Board shall make a pro rata allocation of the shares of Stock remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable.
5. ENROLLMENT AND CONTRIBUTIONS.
(a) ELIGIBILITY. An employee of the Company or any Subsidiary designated by the Board may be enrolled in the Plan for any Offering Period if such employee is employed by the Company or a Subsidiary authorized to participate in the Plan on the first day of the Offering Period, unless one of the following applies to the employee:
(i) such person has been employed by the Company or a Subsidiary less than 90 days;
(ii) such person is customarily employed by the Company or a Subsidiary for 20 hours or less a week;
(iii) such person is customarily employed by the Company or a Subsidiary for not more than five months in any calendar year; or
(iv) such person would, immediately upon enrollment, be deemed to own, for purposes of Section 423(b)(3) of the Code, an aggregate of five percent or more of the total combined voting power or value of all outstanding shares of all classes of the Stock of the Company or any Subsidiary.
The Company will notify an employee of the date as of which he or she is eligible to enroll in the Plan, and will make available to each eligible employee the necessary enrollment forms.
(b) INITIAL ENROLLMENT. An employee who is eligible under
Section 5(a) (or who will become eligible on or before a given Offering Period)
may, after receiving current information about the Plan, initially enroll in the
Plan by executing and filing with the Company a properly completed enrollment
form, including the employee's election as to the rate
of payroll contributions for the Offering Period. To be effective for any Offering Period, such properly executed enrollment form must be filed with the Company at least two weeks (or such other period determined by the Board) preceding such Offering Period.
(c) AUTOMATIC RE-ENROLLMENT FOR SUBSEQUENT OFFERING
PERIODS. A Participant whose enrollment in, and payroll contributions under, the
Plan continues throughout a Offering Period will automatically be re-enrolled in
the Plan for the next Offering Period unless (i) the Participant terminates
enrollment before the next Offering Period in accordance with Section 7(a), or
(ii) the Participant is ineligible to participate under Section 5(a). The
initial rate of payroll contributions for a Participant who is automatically
re-enrolled for a Offering Period will be the same as the rate of payroll
contribution in effect at the end of the preceding Offering Period, unless the
Participant files a new properly executed enrollment form designating a
different rate of payroll contributions and such new enrollment form is filed
with the Company no later than two weeks (or such other period determined by the
Board) prior to the beginning of the next Offering Period.
(d) PAYROLL CONTRIBUTIONS. A Participant will make contributions under the Plan only by means of payroll deductions from each payroll period which ends during the Offering Period, at the rate elected by the Participant in his or her enrollment form in effect for that Offering Period (except that such rate may be changed during the Offering Period to the extent permitted below). The rate of payroll contributions elected by a Participant may not be less than one percent (1%) nor more than ten percent (10%) of the Participant's Earnings for each payroll period, and only whole percentages may be elected; provided, however, that the Board may specify a lower minimum rate and higher maximum rate, subject to Section 8(c). Notwithstanding the above, a Participant's payroll contributions will be adjusted downward by the Company as necessary to ensure that the limit on the amount of Stock purchased for an Offering Period set forth in Section 6(a)(iii) is not exceeded. A Participant may elect to increase, decrease, or discontinue payroll contributions for a future Offering Period by filing a new enrollment form designating a different rate of payroll contributions, which properly executed form must be filed with the Company at least two weeks (or such other period determined by the Board) prior to the beginning of an Offering Period to be effective for that Offering Period. In addition, a Participant may elect to discontinue payroll contributions during an Offering Period by filing a new properly executed enrollment form, such change to be effective for the next payroll after the Participant's new enrollment form is filed with the Company.
(e) CREDITING PAYROLL CONTRIBUTIONS TO CASH ACCOUNTS. All payroll contributions by a Participant under the Plan will be credited to a Cash Account maintained by the Company on behalf of the Participant. The Company will credit payroll contributions to each Participant's Cash Account as soon as practicable after the contributions are withheld from the Participant's Earnings.
(f) NO INTEREST ON CASH ACCOUNTS. No interest will be credited or paid on cash balances in Participant's Cash Accounts pending investment in Stock.
6. PURCHASES OF STOCK.
(a) PURCHASE RIGHTS. Enrollment in the Plan for any Offering Period by a Participant will constitute a grant by the Company of a Purchase Right to such Participant for such Offering Period. Each Purchase Right will be subject to the following terms:
(i) The purchase price of each share of Stock purchased for each Offering Period will equal 85% of the lesser of the Fair Market Value of a share of Stock on the first day of an Offering Period, or the Fair Market Value of a share of Stock on the last day of an Offering Period;.
(ii) Except as limited in (iii) below, the number of shares of Stock that may be purchased upon exercise of the Purchase Right for a Offering Period will equal the number of shares (including fractional shares) that can be purchased at the purchase price specified in Section 6(a)(i) with the aggregate amount credited to the Participant's Cash Account as of the last day of an Offering Period.
(iii) The number of shares of Stock subject to a Participant's Purchase Right for any Offering Period will not exceed the number derived by dividing $12,500 by 100% of the Fair Market Value of one share of Stock on the first day of the Offering Period; provided, however, that the above limitation for the first Offering Period will adjusted by the Board on a pro rata basis, if such Offering Period is less or more than a six-month period.
(iv) The Purchase Right will be automatically exercised on the last day of the Offering Period.
(v) Payments by a Participant for Stock purchased under a Purchase Right will be made only through payroll deduction in accordance with Section 5(d) and (e).
(vi) The Purchase Right will expire on the earlier of the last day of the Offering Period or the date on which the Participant's enrollment in the Plan terminates.
(b) PURCHASE OF STOCK. At or as promptly as practicable after the last day of an Offering Period, amounts credited to each Participant's Cash Account will be applied by the Company to purchase Stock, in accordance with the terms of the Plan. Shares of Stock will be purchased from the Company or in the open market, as the Board determines. The Company will aggregate the amounts in all Cash Accounts when purchasing Stock, and shares purchased will be allocated to each Participant's Stock Account in proportion to the cash amounts withdrawn from such Participant's Cash Account. After completing purchases for each Offering Period (which will be completed in not more than 15 calendar days after the last day of
an Offering Period), all shares of Stock so purchased for a Participant will be credited to the Participant's Stock Account.
(c) DIVIDEND REINVESTMENT; OTHER DISTRIBUTIONS. Cash dividends on any Stock credited to a Participant's Stock Account will be automatically reinvested in additional shares of Stock and such amounts will not be available in the form of cash to Participants. The Company will aggregate all purchases of Stock in connection with dividend reinvestment for a given dividend payment date. Purchases of Stock for purposes of dividend reinvestment will be made as promptly as practicable (but not more than 15 calendar days) after a dividend payment date. The purchases will be made directly from the Company at 100% of the Fair Market Value of a share of Stock on the dividend payment date or on the open market. Any shares of Stock distributed as a dividend or distribution in respect of shares of Stock or in connection with a split of the Stock credited to a Participant's Stock Account will be credited to such Account.
(d) WITHDRAWALS AND TRANSFERS. Shares of Stock may be withdrawn from a Participant's Stock Account, in which case one or more certificates for whole shares may be issued in the name of, and delivered to, the Participant, with such Participant receiving cash in lieu of fractional shares based on the Fair Market Value of a share of Stock on the day preceding the date of withdrawal. Alternatively, whole shares of Stock may be withdrawn from a Participant's Stock Account by means of a transfer to a broker-dealer or financial institution that maintains an account for the Participant, together with the transfer of cash in lieu of fractional shares based on the Fair Market Value of a share of Stock on the day preceding the date of withdrawal. Participants may not designate any other person to receive shares of Stock withdrawn or transferred under the Plan. A Participant seeking to withdraw or transfer shares of Stock must give instructions to the Custodian in such manner and form as may be prescribed by the Custodian, which instructions will be acted upon as promptly as practicable. Withdrawals and transfers will be subject to any fees imposed in accordance with Section 8(a).
(e) EXCESS ACCOUNT BALANCES. If any amounts remain in a Cash Account following the date on which the Company purchases Stock for an Offering Period as a result of the limitation set forth in Section 6(a)(iii) or for any other reason, such amounts will be returned to the Participant as promptly as practicable.
7. TERMINATION AND DISTRIBUTIONS.
(a) TERMINATION OF ENROLLMENT. A Participant's enrollment
in the Plan will terminate upon (i) the beginning of any payroll period or
Offering Period that begins after he or she files a written notice of
termination of enrollment with the Company, provided that such Participant will
continue to be deemed to be enrolled with respect to any completed Offering
Period for which purchases have not been completed, (ii) such time as the
Participant becomes ineligible to participate under Section 5(a) of the Plan, or
(iii) the termination of the Participant's employment by the Company and its
Subsidiaries. An employee whose enrollment in the Plan terminates may again
enroll in the Plan as of any subsequent Offering Period that is at least 90 days
after such termination of enrollment if he or she satisfies the eligibility
requirements of Section 5(a) as of such Offering Period. A Participant's
election to discontinue payroll contributions will not constitute a termination
of enrollment.
(b) DISTRIBUTION. As soon as practicable after a Participant's enrollment in the Plan terminates, amounts in the Participant's Cash Account which resulted from payroll contributions will be repaid to the Participant. The Custodian will continue to maintain the Participant's Stock Account for the Participant until the earlier of such time as the Participant directs the sale of all Stock in the Account, withdraws, or transfers all Stock in the Account, or one year after the Participant ceases to be employed by the Company and its Subsidiaries. If a Participant's termination of enrollment results from his or her death, all amounts payable will be paid to his or her designated beneficiary or beneficiaries and if no such designation is made, to his or her estate.
8. GENERAL.
(a) COSTS. Costs and expenses incurred in the administration of the Plan and maintenance of Accounts will be paid by the Company, to the extent provided in this Section 8(a). Any brokerage fees and commissions for the purchase of Stock under the Plan (including Stock purchased upon reinvestment of dividends and distributions) will be paid by the Company, but any brokerage fees and commissions for the sale of Stock under the Plan by a Participant will be borne by such Participant. The rate at which such fees and commissions will be charged to Participants will be determined by the Custodian or any broker-dealer used by the Custodian (including an affiliate of the Custodian), and communicated from time to time to Participants. In addition, the Custodian may impose or pass through a reasonable fee for the withdrawal of Stock in the form of stock certificates (as permitted under Section 6(d)), and reasonable fees for other services unrelated to the purchase of Stock under the Plan, to the extent approved in writing by the Company and communicated to Participants.
(b) STATEMENTS TO PARTICIPANTS. The Participant's statement will reflect payroll contributions, purchases, sales, and withdrawals and transfers of shares of Stock and other Plan transactions by appropriate adjustments to the Participant's Accounts. The Custodian will, not less frequently than quarterly, provide or cause to be provided a written statement to the Participant showing the transactions in his or her Stock Account and the date thereof, the number of shares of Stock credited or sold, the aggregate purchase price paid or sales price received, the purchase or sales price per share, the brokerage fees and commissions paid (if
any), the total shares held for the Participant's Stock Account (computed to at least three decimal places), and such other information as agreed to by the Custodian and the Company.
(c) COMPLIANCE WITH SECTION 423. It is the intent of the
Company that this Plan comply in all respects with applicable requirements of
Section 423 of the Code and regulations thereunder. Accordingly, if any
provision of this Plan does not comply with such requirements, such provision
will be construed or deemed amended to the extent necessary to conform to such
requirements.
9. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Plan, the granting and exercising of Purchase Rights hereunder, and the other obligations of the Company and the Custodian under the Plan will be subject to all applicable federal and state laws, rules, and regulations, and to such approvals by any regulatory or governmental agency as may be required. The Company may, in its discretion, postpone the issuance or delivery of Stock upon exercise of Purchase Rights until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule, or regulation, or the laws of any country in which employees of the Company and a Subsidiary who are nonresident aliens and who are eligible to participate reside, or other required action with respect to any automated quotation system or stock exchange upon which the Stock or other Company securities are designated or listed, or compliance with any other contractual obligation of the Company, as the Company may consider appropriate. In addition, the Company may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Stock in compliance with applicable laws, rules, and regulations, designation or listing requirements, or other contractual obligations.
(b) LIMITS ON ENCUMBERING RIGHTS. No right or interest of a Participant under the Plan, including any Purchase Right, may be pledged, encumbered, or hypothecated to or in favor of any party, subject to any lien, obligation, or liability of such Participant, or otherwise assigned, transferred, or disposed of except pursuant to the laws of descent or distribution, and any right of a Participant under the Plan will be exercisable during the Participant's lifetime only by the Participant.
(c) NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any action taken hereunder, including the grant of a Purchase Right, will be construed as giving any employee the right to be retained in the employ of the Company or any of its Subsidiaries, nor will it interfere in any way with the right of the Company or any of its Subsidiaries to terminate any employee's employment at any time.
(d) TAXES. The Company or any Subsidiary is authorized to withhold from any payment to be made to a Participant, including any payroll and other payments not related to the Plan, amounts of withholding and other taxes due in connection with any transaction under the Plan, and a Participant's enrollment in the Plan will be deemed to constitute his or her consent to such withholding. In addition, Participants may be required to advise the Company of sales and other dispositions of Stock acquired under the plan in order to permit the Company to comply with tax laws and to claim any tax deductions to which the Company may be entitled
with respect to the Plan. This provision and other Plan provisions do not set forth an explanation of the tax consequences to Participants under the Plan. A brief summary of the tax consequences will be included in disclosure documents to be separately furnished to Participants.
(e) CHANGES TO THE PLAN. The Board may amend, alter, suspend, discontinue, or terminate the Plan without the consent of shareholders or Participants, except that any such action will be subject to the approval of the Company's shareholders within one year after such Board action if such shareholder approval is required by any federal or state law or regulation or the rules of any automated quotation system or stock exchange on which the Stock may then be quoted or listed, or if such shareholder approval is necessary in order for the Plan to continue to meet the requirements of Section 423 of the Code, and the Board may otherwise, in its discretion, determine to submit other such actions to shareholders for approval. However, without the consent of an affected Participant, no amendment, alteration, suspension, discontinuation, or termination of the Plan may materially and adversely affect the rights of such Participant with respect to outstanding Purchase Rights relating to any Offering Period that has been completed prior to such Board action. The foregoing notwithstanding, upon termination of the Plan the Board may (i) elect to terminate all outstanding Purchase Rights at such time as the Board may designate, and all amounts contributed to the Plan which remain in a Participant's Cash Account will be returned to the Participant (without interest) as promptly as practicable, or (ii) shorten the Offering Period to such period determined by the Board and use amounts credited to a Participant Cash Account to purchase Stock.
(f) NO RIGHTS TO PARTICIPATE; NO SHAREHOLDER RIGHTS. No Participant or employee will have any claim to participate in the Plan with respect to Offering Periods that have not commenced, and the Company will have no obligation to continue the Plan. No Purchase Right will confer on any Participant any of the rights of a shareholder of the Company unless and until Stock is duly issued or transferred and delivered to the Participant (or credited to the Participant's Stock Account).
(g) FRACTIONAL SHARES. Unless otherwise determined by the Board, purchases of Stock under the Plan executed by the Custodian may result in the crediting of fractional shares of Stock to the Participant's Stock Account. Such fractional shares will be computed to at least three decimal places. Fractional shares will not, however, be issued by the Company, and certificates representing fractional shares will not be delivered to Participants under any circumstances.
(h) PLAN YEAR. The Plan will operate on a plan year that begins on January 1 and ends December 31 in each year, except for the first Plan Year which shall begin on the IPO Date and end on December 31, 2003.
(i) GOVERNING LAW. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan will be determined in accordance with the laws of the State of Arizona, without giving effect to principles of conflicts of laws, and applicable federal law.
(j) EFFECTIVE DATE. The Plan will become effective on the IPO Date, subject to the Plan being approved by shareholders of the Company, at a meeting by a vote
sufficient to meet the requirements of Section 423(b)(2) of the Code. If the Plan is not approved in accordance with Section 423(b)(2) of the Code, each Participant's Purchase Right shall be void and amounts credited to the Participant's Cash Account shall be promptly returned to the Participant.
EXHIBIT 10.8
AMENDED AND RESTATED EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
This Agreement, dated as of April 1, 2002, by and between Robert D. Hartman (the "Executive") and Universal Technical Institute of Arizona, Inc., a Delaware corporation (the "Company");
W I T N E S S E T H:
WHEREAS, the Company wishes to obtain the future services of the Executive for the Company; and
WHEREAS, the Executive is willing, upon the terms and conditions herein set forth, to provide services hereunder; and
WHEREAS, the Company wishes to secure the Executive's non-interference, upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive, and Executive agrees to accept such employment, during the Term of Employment (as defined in Section 3(a)),(a) as Chief Executive Officer of the Company and (b) as Co-Chairman of the Board of Directors of the Company. The Company shall also cause the Executive to be employed, and Executive hereby agrees to be employed, during the Term of Employment by each of the companies listed in Schedule I (which companies, together with the Company, shall be referred to collectively as the "Company Group"), in each case as Chief Executive Officer of such company and as Co-Chairman of its Board of Directors.
2. Extent of Employment
(a) During the Term of Employment, the Executive shall perform his obligations hereunder faithfully and to the best of his ability at the principal executive offices of the Company, under the direction of the Board of Directors of the Company to which the Executive shall directly report, and shall abide by the rules, customs and usages from time to time established by the Company.
(b) During the Term of Employment, the Executive shall devote all of his business time, energy and skill as may be reasonably necessary for the performance of his duties, responsibilities and obligations hereunder (except for vacation periods and reasonable periods of illness or other incapacity), consistent with past practices and norms in similar positions.
(c) Nothing contained herein shall require Executive to follow any directive or to perform any act which would violate any laws, ordinances, regulations or rules of any governmental, regulatory or administrative body, agent or authority, any court or judicial authority, or any public, private or industry regulatory authority (collectively "Regulations").
Executive will not knowingly (i) breach or violate any provision of any Regulations in any material respect or (ii) otherwise act in any manner which might reasonably be expected to have a material adverse effect on the ongoing business, operations, conditions, prospects or other business relationships or properties of any company in the Company Group.
(d) During the term of his employment, the Executive shall live in the Phoenix, Arizona area and generally perform his duties under this Agreement from the Company's offices in the Phoenix area.
3. Term of Employment; Termination
(a) The "Term of Employment" shall commence on the date hereof and shall continue through September 30, 2006 (such term ending on September 30, 2006 being the "Original Term"). Should the Executive's employment be earlier terminated by the Company pursuant to Section 3(b) or by the Executive pursuant to Section 3(c), the Term of Employment shall end on the date of such earlier termination.
(b) Subject to the payments contemplated by Section 3(c), Term of Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental disability the Executive is unable to perform, and does not perform, as certified by a mutually agreeable competent medical physician, his material duties hereunder for 180 days in any continuous 210 day period;
(iii) for Cause (as defined in Section 3(d));
(iv) for any other reason not referred to in clauses (i) through (iii) or no reason, such that this Agreement, subject to the provisions of Section 3(e), shall be construed as terminable at will by the Company.
Executive acknowledges that no representations or promises have been made concerning the grounds for termination or the future operation of the Company's business, and that, except as set forth in the following sentence, nothing contained herein or otherwise stated by or on behalf of the Company modifies or amends the right of the Company to terminate Executive at any time, with or without Cause. Termination shall become effective 30 days after, or, if for Cause, upon the delivery by the Company to the Executive of notice specifying such termination and, if for Cause, the reasons therefor.
(c) Subject to the Company's obligations to make the payments contemplated by Section 3(c), the Term of Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental disability the Executive is unable to perform, and does not perform, as certified by a mutually agreeable competent medical physician, his duties hereunder for 180 days in any continuous 210 day period;
(iii) as a result of a material reduction in Executive's authority, perquisites, position or responsibilities (other than such a reduction which affects all of the Company's senior executives on a substantially equal or proportionate basis), a requirement that the Executive relocate outside the Phoenix, Arizona metropolitan area or the Company's willful, material violation of its obligations under this Agreement, in each case, after 30 days' prior written notice to the Company and its Board of Directors and the Company's failure thereafter to cure such reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred to in clauses (i) through (iii) in each case, after 120 days' prior written notice to the Company and its Board of Directors.
(d) For the purposes of this Section 3, "Cause" shall mean any of the following;
(i) Executive's conviction of, or plea of guilty or nolo contendere to, a serious felony or a crime involving embezzlement, conversion of property or moral turpitude;
(ii) a finding by a majority of the Board of Directors of Executive's fraud, embezzlement or conversion of property;
(iii) Executive's conviction of, or plea of guilty or nolo contendere to, a crime involving the acquisition, use or expenditure of federal, state or local government funds;
(iv) an administrative or judicial determination that Executive committed fraud or any other violation of law involving federal, state or local government funds;
(v) a finding by a majority of the Board of Directors of Executive's knowing breach of any of his fiduciary duties to any company in the Company Group or the Company's stockholders or making of a misrepresentation or omission which breach, misrepresentation or omission would reasonably be expected to materially adversely affect the business, properties, assets, condition (financial or other) or prospects of any company in the Company Group; provided, that the Executive has been given notice and 30 days from such notice fails to cure the breach, misrepresentation or omission;
(vi) Executive's willful and continual neglect or failure to discharge his material duties, responsibilities or obligations prescribed by this Agreement or any other agreement between the Executive and any company in the Company Group; provided, that the Executive has been given notice and 30 days from such notice fails to cure the neglect or failure;
(vii) Executive's alcohol or substance abuse, which materially interferes with Executive's ability to discharge his duties, responsibilities and obligations prescribed by this Agreement; provided, that Executive has been given notice and 30 days from such notice fails to cure such abuse;
(vii) Any material violation, with the actual knowledge of Executive, of any obligations imposed upon Executive, personally, as opposed to upon the Company, whether as a stockholder or otherwise, under this Agreement, the Securities Purchase Agreement, the Asset Purchase Agreement, the Stockholders Agreement, the Exchange Agreement, the Penske/Charlesbank Stock Purchase Agreement, the Credit Agreement, the Certificate of Incorporation or By-Laws of the Company; provided, that the Executive has been given notice and 30 days from such notice fails to cure the violation; or
(ix) Executive's personal (as opposed to the Company's) material and knowing failure, to observe or comply with Regulations whether as an officer, stockholder or otherwise, in any material respect or in any manner which would reasonably be expected to have a material adverse effect in respect of the Company Group's ongoing business, operations, conditions, other business relationships or properties; provided, that the Executive has been given notice and 30 days from such notice fails to cure the failure.
(e) If Executive's employment is terminated for any reason whatsoever, then Executive shall be entitled to (i) accrued and unpaid base salary and benefits (including sick pay, vacation pay and benefits under Section 6) with respect to the period prior to termination, (ii) reimbursement for expenses under Section 5 with respect to such period, and (iii) any other benefits (including COBRA) required by law to be provided after termination of employment under the circumstances. In the event Executive's employment is terminated pursuant to:
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), the Company will also pay to Executive (or his estate or representative) the full amounts to which he would be entitled under Section 4(a) for the period from effectiveness of termination through the first anniversary of such termination;
(ii) Section 3(b)(iii) or 3(c)(iv) there will be no additional amounts owing by the Company to Executive under this Agreement from and after such termination; and
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will also pay
the Executive the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination to the
earlier to occur of (i) September 30, 2006 (or the end of any
applicable renewal term) or (ii) the date 4 years following such
effectiveness of termination, on the regular payment dates established
pursuant to Section 4(a) in accordance with Company practices.
(f) (i) Termination of the Term of Employment will not terminate Sections 7, 8, 10 through 21, or any other provisions not associated specifically with the Term of Employment.
(ii) In the event of termination, the Executive shall not have a duty to mitigate the Company's payment obligations under Section 3(e) by seeking alternative employment.
(g) Upon the conclusion of the Original Term of this Agreement and upon each succeeding anniversary of this Agreement, the Executive's Term of Employment will be automatically renewed for an additional one year term; provided, that neither the Company nor the Executive terminates this Agreement pursuant to Section 3 during the Original Term or any
subsequent renewal term; and provided further, that during such Original Term, or any renewal term, if either the Company or the Executive provides notice to the other party of its intent not to renew the Term of Employment at least 90 days before the end of such term, this Agreement will expire upon the succeeding anniversary of this Agreement unless earlier terminated pursuant to Section 3. If this Agreement is terminated pursuant to Section 3 during any renewal term, the Company shall pay to the Executive the amount (if any) to which such Executive is entitled pursuant to and in accordance with Section 3(e) hereunder.
4. Compensation. During the Term of Employment, the Company shall pay compensation to Executive as follows:
(a) As base compensation for his services hereunder, in twenty-six
(26) equal installments, a base salary at a rate of $312,500 per annum, subject
to annual cost of living adjustments based on the Consumer Price Index. The
Board of Directors shall annually, and in its sole discretion, determine whether
the base salary should be increased and, if so, the amount of such increase.
(b) An annual bonus compensation based on Executive's performance as determined and approved by the Board of Directors, in its sole discretion, based on performance parameters set by the Board at the beginning of each fiscal year. Such bonus will be at the full discretion of the Board of Directors, and may not be paid at all. Executive acknowledges that no such bonuses will be paid if the established performance parameters are not met. If the Board of Directors pays a bonus, it is to be paid within 30 days after the issuance of audited financial statements for the Company and shall not exceed 60% of Executive's annual base salary. The Board of Directors in its sole discretion may establish a higher bonus level based on the performance of Executive.
5. Reimbursement of Expenses
During the Term of Employment, the Company shall reimburse Executive for reasonably documented travel, entertainment and other expenses reasonably incurred by Executive in connection with the performance of his duties hereunder and, in each case, in accordance with the reasonable rules, customs and usages promulgated by the Company from time to time in effect.
6. Benefits
(a) During the Term of Employment, the Executive shall be entitled to the following benefits to the Company:
(i) a car allowance of $1,000 per month, which shall include reimbursement for cellular car phone fees and gasoline;
(ii) automobile insurance coverage paid by the Company consistent with the Company's past practice; and
(iii) coverage by an executive medical reimbursement plan for up to an aggregate total of $15,000 per calendar year (subject to annual cost of living adjustments
based on the Consumer Price Index) in noninsurable medical matters for Executive and his family, including but not limited to Executive's purchase of supplemental or additional insurance policies that provide coverage not offered by the Company. Any unused portion of such $15,000 annual maximum amount, including cumulative unused amounts from prior years, will be carried forward and added to the following calendar year's maximum dollar amount.
In addition to the foregoing, during the Term of Employment the Executive shall be entitled to such other perquisites and benefits (including, without limitation, health, short and long term disability, pension and life insurance benefits consistent with past practice, or as increased from time to time) established from time to time, at the sole discretion of the Board of Directors for executives of the Company and their families.
(b) Following the Term of Employment, the Company shall maintain at Company expense health care insurance benefits for the Executive and his spouse comparable to that provided to the executives of the Company and the Executive Medical Reimbursement Plan as described in 6 (a) (iii) above. These benefits will be provided until and including age 65. If, at this time, there remains any unused amounts in the Executive Medical Reimbursement Plan, the plan shall remain in effect (with no additional funds added) until such time as those remaining funds are exhausted.
7. Confidential Information
(a) During and after the Term of Employment, Executive will not,
directly or indirectly in one or a series of transactions, disclose to any
person, or use or otherwise exploit for the Executive's own benefit or for the
benefit of anyone other than the Company, any Confidential Information (as
defined in Section 9), whether prepared by Executive or not; provided, however,
that any Confidential Information may be disclosed (i) to officers,
representatives, employees and agents of the Company who need to know such
Confidential Information in order to perform the services or conduct the
operations required or expected of them in the Business (as defined in Section
9) and (ii) in good faith by the Executive in connection with the performance of
his duties hereunder. Executive shall use his best efforts to prevent the
removal of any Confidential Information from the premises of the Company, except
as required in his normal course of employment by the Company. Executive shall
use his best efforts to cause all persons or entities to whom any Confidential
Information shall be disclosed by him hereunder to observe the terms and
conditions set forth herein as though each such person or entity was bound
hereby. Executive shall have no obligation hereunder to keep confidential any
Confidential Information if and to the extent disclosure of any thereof is
specifically required by law; provided, however, that in the event disclosure is
required by applicable law, the Executive shall provide the Company with prompt
notice of such requirement, prior to making any disclosure, so that the Company
may seek an appropriate protective order. At the request of the Company,
Executive agrees to deliver to the Company, at any time during the Term of
Employment, or thereafter, all Confidential Information which he may possess or
control. Executive agrees that all Confidential Information of the Company
(whether now or hereafter existing) conceived, discovered or made by him during
the Term of Employment exclusively belongs to the Company (and not to
Executive). Executive will promptly disclose such Confidential Information to
the
Company and perform all actions reasonably requested by the Company to establish and confirm such exclusive ownership.
(b) The terms of this Section 7 shall survive the termination of this Agreement regardless of who terminates this Agreement, or the reasons therefor.
8. Non-Interference
(a) Executive acknowledges that services to be provided give him the opportunity to have special knowledge of the Company and its Confidential Information and the capabilities of individuals employed by or affiliated with the Company and that interference in these relationships would cause irreparable injury to the Company. In consideration of this Agreement, Executive covenants and agrees that:
(i) Unless Executive is terminated pursuant to Sections 3(b)(iv) or 3(c)(iii), from the date hereof until the later to occur of March 31, 2007, or the first anniversary of expiration or termination of the Term of Employment (the "Restricted Period"). Executive will not, without the express written approval of the Board of Directors of the Company, anywhere in the Market, directly or indirectly, in one or a series of transactions, own, manage, operate, control, invest or acquire an interest in, or otherwise engage or participate in, whether as a proprietor, partner, stockholder, lender, director, officer, employee, joint venturer, investor, lessor, agent, representative or other participant, in any business which competes, directly or indirectly, with the Business in the Market ("Competitive Business") without regard to (A) whether the Competitive Business has its office or other business facilities within or without the Market, (B) whether any of the activities of the Executive referred to above occur or are performed within or without the Market or (C) whether the Executive resides, or reports to an office, within or without the market; provided, however, that (x) the Executive may, anywhere in the market, directly or indirectly, in one or a series of transactions, own, invest or acquire an interest in up to five percent (5%) of the capital stock of a corporation whose capital stock is traded publicly, or that (y) Executive may accept employment with a successor company to the Company.
(ii) Without regard to the reason for Executive's termination, during the Restricted Period (which shall not be reduced by (x) any period of violation of this Agreement by Executive or (y) if the Company is the prevailing party in any litigation to enforce its rights under this Section 8, the period which is required for such litigation), Executive will not without the express prior written approval of the Board of Directors of the Company (A) in one or a series of transactions, recruit, solicit or otherwise induce or influence any proprietor, partner, stockholder, lender, director, officer, employee, sales agent, joint venturer, investor, lessor, customer, agent, representative or any other person which has a business relationship with the Company Group or had a business relationship with the Company Group within the twenty-four (24) month period preceding the date of the incident in question, to discontinue, reduce or modify such employment, agency or business relationship with the Company Group, or (B) employ or seek to employ or cause any Competitive Business or any other private post-secondary educational institution to employ or seek to employ any person or agent who is then (or was at any time within
twenty-four (24) months prior to the date the Executive or the Competitive Business employs or seeks to employ such person) employed or retained by the Company Group. Notwithstanding the foregoing, nothing herein shall prevent the Executive from providing a letter of recommendation to an employee with respect to a future or any other employment opportunity.
(iii) The scope and term of this Section 8 would not preclude Executive from earning a living with an entity that is not a Competitive Business.
(b) Upon the determination of a majority of the Board of Directors that
the Executive has breached his obligations in any material respect under this
Section 8, the Company, in addition to pursuing all available remedies under
this Agreement, at law or otherwise, and without limiting its right to pursue
the same, shall cease all payments to the Executive under this Agreement.
9. Definitions
"Asset Purchase Agreement" means the Asset Purchase Agreement, dated as of September 30, 1997, for the purchase of all of the assets of the Clinton Harley Corporation and Clinton Education Group, Inc., each an Arizona corporation, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Authority" means any governmental, regulatory or administrative body, agency or authority, any court or judicial authority, any public, private or industry regulatory authority, whether national, Federal, state or local or otherwise, or any Person lawfully empowered by any of the foregoing to enforce or seek compliance with any applicable law, statute, regulation, order or decree.
"Business" means (a) the ownership and operation of private post-secondary educational institutions of the type owned and operated by the Company Group, or (b) any similar or incidental business conducted, or engaged in, by the Company Group prior to the date hereof or at any time during the Term of Employment.
"Cause" has the meaning set forth in Section 3(d).
"Company" has the meaning set forth in the preamble.
"Company Group" has the meaning set forth in Section 1.
"Competitive Business" has the meaning set forth in Section 8(a)(i).
"Confidential Information" means any confidential information including, without limitation, any study, data, calculations, software storage media or other compilation of information, patent, patent application, copyright, "know-how", trade secrets, customer lists, details of client or consultant contracts, pricing policies, operational methods, marketing plans or strategies, product development techniques or plans, business acquisition plans or any portion or phase of any scientific or technical information, ideas, discoveries, designs, computer programs (including source of object codes), processes, procedures, formulae, improvements or other proprietary or intellectual property of the Company Group, whether or not in written or tangible
form, and whether or not registered, and including all files, records, manuals, books, catalogues, memoranda, notes, summaries, plans, reports, records, documents and other evidence thereof. Notwithstanding the foregoing, the term "Confidential Information" does not include, and there shall be no obligation hereunder with respect to, information that is or becomes generally available to the public other than as a result of a disclosure by the Executive not permissible hereunder.
"Credit Agreement" means the Second Amendment and Restatement of Credit Agreement dated as of March 29,2002 among UTI Holdings, Inc., Universal Technical Institute, Inc., and the various lenders party thereto, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Exchange Agreement" means the Exchange Agreement, dated as of September 30, 1997, among Universal Technical Institute, Inc., Mayer, Brown & Platt, and certain other parties, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Executive" means Robert D. Hartman or his estate, if deceased.
"knowing" and "knowledge" shall each refer to actual knowledge without any duty of investigation.
"Market" means any county in the United States of America and each similar jurisdiction in any other country in which the Business was conducted by or engaged in by the Company Group prior to the date hereof or is conducted or engaged in by the Company Group at any time during the Term of Employment.
"Penske/Charlesbank Stock Purchase Agreement" means the Preferred Stock Purchase Agreement dated as of January 8, 2002 among Universal Technical Institute, Inc., Worldwide Training Group, LLC and Charlesbank Equity Fund V, Limited Partnership, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Regulations" means any laws, statues, regulations, rulings, rules, orders or permits of administered or enforced by or on behalf of any Authority, and the Certificate of Incorporation and By-laws of the Company, as applicable.
"Restricted Period" has the meaning set forth in Section 8(a)(i).
"Securities Purchase Agreement" means the Agreement for the Purchase of Securities of Lincoln Technical Institute of Arizona, Inc., d/b/a Universal Technical Institute ("Old UTT"), dated as of September 30, 1997, among the current stockholders of Universal Technical Institute, Inc., the successor corporation to Old UTI, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Stockholders Agreement" means the Stockholders Agreement dated as of September 30, 1997 among the stockholders of Universal Technical Institute, Inc., as the same may be amended, extended, restated, supplemented or modified from time to time.
"Term of Employment" has the meaning set forth in Section 3(a).
10. Notice
Any notice, request, demand or other communication required or permitted to be given under this Agreement shall be given in writing and if delivered personally, sent by certified or registered mail, return receipt requested, sent by overnight courier or sent by facsimile transmission (with confirmation and a copy sent by mail within one day) as follows (or to such other addressee or address as shall be set forth in a notice given in the same manner):
If to Executive: Robert D. Hartman Universal Technical Institute 10851 North Black Canyon Highway Phoenix, Arizona 85029 Facsimile No.: (602) 216-7602 with a copy to: Brobeck, Phleger & Harrison 550 West C Street, Suite 1300 San Diego, California 92101 Attention: Richard Kintz Facsimile No.: (619) 234-3848 If to the Company: Chairman of the Compensation Committee of the Board of Directors c/o Universal Technical Institute 10851 North Black Canyon Highway Phoenix, Arizona 85029 Facsimile No.: (602) 216-7602 with a copy to: The Jordan Company 767 Fifth Avenue 48th Floor New York, NY 10153 Attention: A. Richard Caputo, Jr. Facsimile No.: (212) 755-5263 |
Any such notices shall be deemed to be given on the date personally delivered or sent by facsimile transmission or such return receipt is issued or the day after if sent by overnight courier.
11. Executive's Representation
Executive hereby warrants and represents to the Company that: (i)
Executive has carefully reviewed this Agreement and has consulted with such
advisors as Executive considers appropriate in connection with this Agreement,
(ii) Executive is not subject to any covenants, agreements or restrictions which
would be breached or violated by Executive's execution of this Agreement or by
Executive's performance of his duties hereunder and (iii) Executive will not
knowingly breach or violate any provision of any Regulations in any material
respect or in any manner which might reasonably have a material adverse effect
in respect of the ongoing
business, operations, conditions, or other business relationships or properties of any of the companies in the Company Group.
12. Company's Obligation
Executive agrees and acknowledges that the obligations owed to Executive under this Agreement are solely the obligations of the Company, and that none of the Company's stockholders, directors, officers or lenders will have any obligations or liabilities in respect of this Agreement and the subject matter hereof.
13. Validity
If, for any reason, any provision hereof shall be determined to be invalid or unenforceable, the validity and effect of the other provisions hereof shall not be affected thereby.
14. Severability
Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. If any court determines that any provision of Section 8 or any other provision hereof is unenforceable and therefore acts to reduce the scope or duration or such provision, the provision in its reduced form, shall then be enforceable.
15. Waiver of Breach; Specific Performance
The waiver by the Company or Executive of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other breach of such other party. Each of the parties (and third party beneficiaries) to this Agreement will be entitled to enforce its rights under this breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of Sections 7 and 8 of this Agreement and that any party (and third party beneficiaries) may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions in order to enforce or prevent any violations of the provisions of this Agreement. In the event either party takes legal action to enforce any of the terms or provisions of this Agreement, the nonprevailing party shall pay the successful party's costs and expenses, including but not limited to, reasonable attorneys' fees, incurred in such action.
16. Assignment; Third Parties; Successors
Neither the Executive not the Company may assign, transfer, pledge, hypothecate, encumber of otherwise dispose of this Agreement or any of his or its respective rights or obligations hereunder, without the prior written consent of the other. The parties agree and
acknowledge that each of the Companies and the stockholders of, lenders to and investors therein are intended to be third party beneficiaries of, and have rights and interests in respect of, Executive's agreements set forth in Sections 7 and 8. Any successor in interest to the Company (whether indirect or direct and whether by purchase, merger, or consolidation) shall assume the obligations under this agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession.
17. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an agreement in writing agreed to by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter of this Agreement, and supersedes and replaces all prior Agreements, understandings and commitments with respect to such subject matter.
18. Litigation
(a) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 18 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OF A NEW YORK FEDERAL OR STATE COURT, OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SUCH A JUDGMENT, IN ANY OTHER APPROPRIATE JURISDICTION.
(b) IN THE EVENT ANY PARTY TO THIS AGREEMENT COMMENCES ANY LITIGATION,
PROCEEDING OR OTHER LEGAL ACTION IN CONNECTION WITH OR RELATING TO THIS
AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN
OR THEREIN, THE PARTIES TO THIS AGREEMENT HEREBY (1) AGREE UNDER ALL
CIRCUMSTANCES ABSOLUTELY AND IRREVOCABLY TO INSTITUTE ANY LITIGATION, PROCEEDING
OR OTHER LEGAL ACTION IN A COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE
SOUTHERN DISTRICT OF NEW YORK, WHETHER A STATE OR FEDERAL COURT;(2) AGREE THAT
IN THE EVENT OF ANY SUCH LITIGATION, PROCEEDING OR ACTION, SUCH PARTIES WILL
CONSENT AND SUBMIT TO THE PERSONAL JURISDICTION OF ANY SUCH COURT DESCRIBED IN
CLAUSE (1) OF THIS SECTION AND TO SERVICE OF PROCESS UPON THEM IN ACCORDANCE
WITH THE RULES AND STATUTES GOVERNING SERVICE OF PROCESS (IT BEING UNDERSTOOD
THAT NOTHING IN THIS SECTION SHALL BE DEEMED TO PREVENT ANY PARTY FROM SEEKING
TO REMOVE ANY ACTION TO A FEDERAL COURT IN THE SOUTHERN DISTRICT OF NEW YORK;
(3) AGREE TO WAIVE TO THE FULL EXTENT PERMITTED
BY LAW ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH LITIGATION, PROCEEDING OR ACTION IN ANY SUCH COURT OR THAT ANY SUCH LITIGATION, PROCEEDING OR ACTION WAS BROUGHT IN ANY INCONVENIENT FORUM; (4) AGREE TO DESIGNATE, APPOINT AND DIRECT AN AUTHORIZED AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS AND DOCUMENTS IN ANY LEGAL PROCEEDING IN THE SOUTHERN DISTRICT OF NEW YORK; (5) AGREE TO PROVIDE THE OTHER PARTIES TO THIS AGREEMENT WITH THE NAME, ADDRESS AND FACSIMILE NUMBER OF SUCH AGENT; (6) AGREE AS AN ALTERNATIVE METHOD OF SERVICE TO SERVICE OF PROCESS IN ANY LEGAL PROCEEDING BY MAILING OF COPIES THEREOF TO SUCH PARTY AT ITS ADDRESS SET FORTH HEREIN FOR COMMUNICATIONS TO SUCH PARTY; (7) AGREE THAT ANY SERVICE MADE AS PROVIDED HEREIN SHALL BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (8) AGREE THAT NOTHING HEREIN SHALL AFFECT THE RIGHTS OF ANY PARTY TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. TO THE EXTENT PERMITTED BY LAW IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
19. Further Action
Executive and the Company agree to perform any further acts and to execute and deliver any documents which may be reasonable to carry out the provisions hereof.
20. Headings
The headings contained in this Agreement are for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
21. Counterparts
This Agreement may be executed in counterparts, each of which shall be deemed an original, but all which together shall constitute one and the same instrument.
[End of page]
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day and year first written above.
EXECUTIVE:
/s/ Robert D. Hartman ------------------------------------------ Name: Robert D. Hartman |
UNIVERSAL TECHNICAL INSTITUTE
OF ARIZONA, INC.
By: /s/ Kimberly J. McWaters -------------------------------------- Name: Kimberly J. McWaters Title: President |
SCHEDULE 1
Additional Companies in the Company Group
1. Universal Technical Institute, Inc.
2. UTI Holdings, Inc.
3. U.T.I. of Illinois, Inc.
4. Universal Technical Institute of Texas, Inc.
5. Universal Technical Institute of California, Inc.
6. Custom Training Group, Inc.
7. The Clinton Harley Corporation
8. Clinton Education Group, Inc.
9. Universal Technical Institute of North Carolina, Inc.
EXHIBIT 10.9
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
This Agreement, dated as of April 1, 2002, by and between John C. White (the "Executive") and Universal Technical Institute of Arizona, Inc., a Delaware corporation (the "Company");
W I T N E S S E T H:
WHEREAS, the Company wishes to obtain the future services of the Executive for the Company; and
WHEREAS, the Executive is willing, upon the terms and conditions herein set forth, to provide services hereunder; and
WHEREAS, the Company wishes to secure the Executive's non-interference, upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive, and
Executive agrees to accept such employment, during the Term of Employment (as
defined in Section 3 (a)), (a) as Strategic Planning Officer of the Company and
(b) as Co-Chairman of the Board of Directors of the Company. The Company shall
also cause the Executive to be employed, and Executive hereby agrees to be
employed, during the Term of Employment by each of the companies listed in
Schedule 1 (which companies, together with the Company, shall be referred to
collectively as the "Company Group"), in each case as Strategic Planning
Officer of such company and as Co-Chairman of its Board of Directors.
2. Extent of Employment
(a) During the Term of Employment, the Executive shall perform his obligations hereunder faithfully and to the best of his ability at the principal executive offices of the Company, under the direction of the Board of Directors of the Company to which the Executive shall directly report, and shall abide by the rules, customs and usages from time to time established by the Company.
(b) During the Term of Employment, the Executive shall devote all of his business time, energy and skill as may be reasonably necessary for the performance of his duties, responsibilities and obligations hereunder (except for vacation periods and reasonable periods of illness or other incapacity), consistent with past practices and norms in similar positions.
(c) Nothing contained herein shall require Executive to follow any directive or to perform any act which would violate any laws, ordinances, regulations or rules of any governmental, regulatory or administrative body, agent or authority, any court or judicial authority, or any public, private or industry regulatory authority (collectively "Regulations").
Executive will not knowingly (i) breach or violate any provision of any Regulations in any material respect or (ii) otherwise act in any manner which might reasonably be expected to have a material adverse effect on the ongoing business, operations, conditions, prospects or other business relationships or properties of any company in the Company Group.
(d) During the term of his employment, the Executive shall live in the Phoenix, Arizona area and generally perform his duties under this Agreement from the Company's offices in the Phoenix area.
3. Term of Employment; Termination
(a) The "Term of Employment" shall commence on the date hereof and shall continue through September 30, 2006 (such term ending on September 30, 2006 being the "Original Term"). Should the Executive's employment be earlier terminated by the Company pursuant to Section 3(b) or by the Executive pursuant to Section 3(c), the Term of Employment shall and on the date of such earlier termination.
(b) Subject to the payments contemplated by Section 3(e), Term of Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental disability the Executive is unable to perform, and does not perform, as certified by a mutually agreeable competent medical physician, his material duties hereunder for 180 days in any continuous 210 day period;
(iii) for Cause (as defined in Section 3(d));
(iv) for any other reason not referred to in clauses (i) through (iii) or no reason, such that this Agreement, subject to the provisions of Section 3(e), shall be construed as terminable at will by the Company.
Executive acknowledges that no representations or promises have been made concerning the grounds for termination or the future operation of the Company's business, and that, except as set forth in the following sentence, nothing contained herein or otherwise stated by or on behalf of the Company modifies or amends the right of the Company to terminate Executive at any time, with or without Cause. Termination shall become effective 30 days after, or, if for Cause, upon the delivery by the Company to the Executive of notice specifying such termination and, if for Cause, the reasons therefor.
(c) Subject to the Company's obligations to make the payments contemplated by Section 3(e), the Term of Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental disability the Executive is unable to perform, and does not perform, as certified by a mutually agreeable competent medical physician, his duties hereunder for 180 days in any continuous 210 day period;
(iii) as a result of a material reduction in Executive's authority, perquisites, position or responsibilities (other than such a reduction which affects all of the Company's senior executives on a substantially equal or proportionate basis), a requirement that the Executive relocate outside the Phoenix, Arizona metropolitan area or the Company's willful, material violation of its obligations under this Agreement, in each case, after 30 days' prior written notice to the Company and its Board of Directors and the Company's failure thereafter to cure such reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred to in clauses (i) through (iii) in each case, after 120 days' prior written notice to the Company and its Board of Directors.
(d) For the purposes of this Section 3, "Cause" shall mean any of the following:
(i) Executive's conviction of, or plea of guilty or nolo contendere to, a serious felony or a crime involving embezzlement, conversion of property or moral turpitude;
(ii) a finding by a majority of the Board of Directors of Executive's fraud, embezzlement or conversion of property;
(iii) Executive's conviction of, or plea of guilty or nolo contendere to, a crime involving the acquisition, use or expenditure of federal, state or local government funds;
(iv) an administrative or judicial determination that Executive committed fraud or any other violation of law involving federal, state or local government funds;
(v) a finding by a majority of the Board of Directors of Executive's knowing breach of any of his fiduciary duties to any company in the Company Group or the Company's stockholders or making of a misrepresentation or omission which breach, misrepresentation or omission would reasonably be expected to materially adversely affect the business, properties, assets, condition (financial or other) or prospects of any company in the Company Group; provided, that the Executive has been given notice and 30 days from such notice fails to cure the breach, misrepresentation or omission;
(vi) Executive's willful and continual neglect or failure to discharge his material duties, responsibilities or obligations prescribed by this Agreement or any other agreement between the Executive and any company in the Company Group; provided, that the Executive has been given notice and 30 days from such notice fails to cure the neglect or failure;
(vii) Executive's alcohol or substance abuse, which materially interferes with Executive's ability to discharge his duties, responsibilities and obligations prescribed by this Agreement; provided, that Executive has been given notice and 30 days from such notice fails to cure such abuse;
(viii) Any material violation, with the actual knowledge of Executive, of any obligations imposed upon Executive, personally, as opposed to upon the Company, whether as a stockholder or otherwise, under this Agreement, the Securities Purchase Agreement, the Asset Purchase Agreement, the Stockholders Agreement, the Exchange Agreement, the Penske/Charlesbank Stock Purchase Agreement, the Credit Agreement, the Certificate of Incorporation or By-Laws of the Company; provided, that the Executive has been given notice and 30 days from such notice fails to cure the violation; or
(ix) Executive's personal (as opposed to the Company's) material and knowing failure, to observe or comply with Regulations whether as an officer, stockholder or otherwise, in any material respect or in any manner which would reasonably be expected to have a material adverse effect in respect of the Company Group's ongoing business, operations, conditions, other business relationships or properties; provided, that the Executive has been given notice and 30 days from such notice fails to cure the failure.
(e) If Executive's employment is terminated for any reason whatsoever, then Executive shall be entitled to (i) accrued and unpaid base salary and benefits (including sick pay, vacation pay and benefits under Section 6) with respect to the period prior to termination, (ii) reimbursement for expenses under Section 5 with respect to such period, and (iii) any other benefits (including COBRA) required by law to be provided after termination of employment under the circumstances. In the event Executive's employment is terminated pursuant to:
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), the Company will also pay to Executive (or his estate or representative) the full amounts to which he would be entitled under Section 4(a) for the period from effectiveness of termination through the first anniversary of such termination;
(ii) Section 3(b)(iii) or 3(c)(iv) there will be no additional amounts owing by the Company to Executive under this Agreement from and after such termination; and
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will also pay
the Executive the full amounts to which he would be entitled under
Section 4(a) for the period from effectiveness of termination to the
earlier to occur of (i) September 30, 2006 (or the end of any
applicable renewal term) or (ii) the date 4 years following such
effectiveness of termination, on the regular payment dates established
pursuant to Section 4(a) in accordance with Company practices.
(f) (i) Termination of the Term of Employment will not terminate Sections 7, 8, 10 through 21, or any other provisions not associated specifically with the Term of Employment.
(ii) In the event of termination, the Executive shall not have a duty to mitigate the Company's payment obligations under Section 3(e) by seeking alternative employment.
(g) Upon the conclusion of the Original Term of this Agreement and upon each succeeding anniversary of this Agreement, the Executive's Term of Employment will be automatically renewed for an additional one year term; provided, that neither the Company nor the Executive terminates this Agreement pursuant to Section 3 during the Original Term or any subsequent renewal term; and provided Further, that during such original Term, or any renewal
term, if either the Company or the Executive provides notice to the other party of its intent not to renew the Term of Employment at least 90 days before the end of such term, this Agreement will expire upon the succeeding anniversary of this Agreement unless earlier terminated pursuant to Section 3. If this Agreement is terminated pursuant to Section 3 during any renewal term, the Company shall pay to the Executive the amount (if any) to which such Executive is entitled pursuant to and in accordance with Section 3(e) hereunder.
4. Compensation. During the Term of Employment, the Company shall pay compensation to Executive as follows:
(a) As base compensation for his services hereunder, in twenty-six (26) equal installments, a base salary at a rate of $312,500 per annum, subject to annual cost of living adjustments based on the Consumer Price Index. The Board of Directors shall annually, and in its sole discretion, determine whether the base salary should be increased and, if so, the amount of such increase.
(b) An annual bonus compensation based on Executive's performance as determined and approved by the Board of Directors, in its sole discretion, based on performance parameters set by the Board at the beginning of each fiscal year. Such bonus will be at the full discretion of the Board of Directors, and may not be paid at all. Executive acknowledges that no such bonuses will be paid if the established performance parameters are not met. If the Board of Directors pays a bonus, it is to be paid within 30 days after the issuance of audited financial statements for the Company and shall not exceed 60% of Executive's annual base salary. The Board of Directors in its sole discretion may establish a higher bonus level based on the performance of Executive.
5. Reimbursement of Expenses
During the Term of Employment, the Company shall reimburse Executive for reasonably documented travel, entertainment and other expenses reasonably incurred by Executive in connection with the performance of his duties hereunder and, in each case, in accordance with the reasonable rules, customs and usages promulgated by the Company from time to time in effect.
6. Benefits
(a) During the Term of Employment the Executive shall be entitled to the following benefits from the Company:
(i) a car allowance of $1,000 per month, which shall include reimbursement for cellular car phone fees and gasoline;
(ii) automobile insurance coverage paid by the Company consistent with the Company's past practice; and
(iii) coverage by an executive medical reimbursement plan for up to an aggregate total of $15,000 per calendar year (subject to annual cost of living adjustments based on the Consumer Price Index) in noninsurable medical matters for Executive and his family,
including but not limited to Executive's purchase of supplemental or additional insurance policies that provide coverage not offered by the Company. Any unused portion of such $15,000 annual maximum amount, including cumulative unused amounts from prior years, will be carried forward and added to the following calendar year's maximum dollar amount.
In addition to the foregoing, during the Term of Employment the Executive shall be entitled to such other perquisites and benefits (including, without limitation, health, short and long term disability, pension and life insurance benefits consistent with past practice, or as increased from time to time) established from time to time, at the sole discretion of the Board of Directors for executives of the Company and their families.
(b) Following the Term of Employment, the Company shall maintain at Company expense health care insurance benefits for the Executive and his spouse comparable to that provided to the executives of the Company and the Executive Medical Reimbursement Plan as described in 6 (a) (iii) above. These benefits will be provided until and including age 65. If, at this time, there remains any unused amounts in the Executive Medical Reimbursement Plan, the plan shall remain in effect (with no additional funds added) until such time as those remaining funds are exhausted.
7. Confidential Information
(a) During and after the Term of Employment, Executive will not,
directly or indirectly in one or a series of transactions, disclose to any
person, or use or otherwise exploit for the Executive's own benefit or for the
benefit of anyone other than the Company, any Confidential Information (as
defined in Section 9), whether prepared by Executive or not; provided, however,
that any Confidential Information may be disclosed (i) to officers,
representatives, employees and agents of the Company who need to known such
Confidential Information in order to perform the services or conduct the
operations required or expected of them in the Business (as defined in Section
9) and (ii) in good faith by the Executive in connection with the performance of
his duties hereunder. Executive shall use his best efforts to prevent the
removal of any Confidential Information from the premises of the Company, except
as required in his normal course of employment by the Company. Executive shall
use his best efforts to cause all persons or entities to whom any Confidential
Information shall be disclosed by him hereunder to observe the terms and
conditions set forth herein as though each such person or entity was bound
hereby. Executive shall have no obligation hereunder to keep confidential any
Confidential Information if and to the extent disclosure of any thereof is
specifically required by law; provided, however, that in the event disclosure is
required by applicable law, the Executive shall provide the Company with prompt
notice of such requirement, prior to making any disclosure, so that the Company
may seek an appropriate protective order. At the request of the Company,
Executive agrees to deliver to the Company, at any time during the Term of
Employment, or thereafter, all Confidential Information which he may possess or
control. Executive agrees that all Confidential Information of the Company
(whether now or hereafter existing) conceived, discovered or made by him during
the Term of Employment exclusively belongs to the Company (any not to
Executive). Executive will promptly disclose such Confidential Information to
the Company and perform all actions reasonably requested by the Company to
establish and confirm such exclusive ownership.
(b) The terms of this Section 7 shall survive the termination of this Agreement regardless of who terminates this Agreement, or the reasons therefor.
8. Non-Interference
(a) Executive acknowledges that services to be provided give him the opportunity to have special knowledge of the Company and its Confidential Information and the capabilities of individuals employed by or affiliated with the Company and that interference in these relationships would cause irreparable injury to the Company. In consideration of this Agreement, Executive covenants and agrees that:
(i) Unless Executive is terminated pursuant to Sections 3(b)
(iv) or 3(c)(iii), from the date hereof until the later to occur of
March 31, 2007, or the first anniversary of expiration or termination
of the Term of Employment (the "Restricted Period"), Executive will
not, without the express written approval of the Board of Directors of
the Company, anywhere in the Market, directly or indirectly, in one or
a series of transactions, own, manage, operate, control, invest or
acquire an interest in, or otherwise engage or participate in, whether
as a proprietor, partner, stockholder, lender, director, officer,
employee, joint venturer, investor, lessor, agent, representative or
other participant, in any business which competes, directly or
indirectly, with the Business in the Market ("Competitive Business")
without regard to (A) whether the Competitive Business has its office
or other business facilities within or without the Market, (B) whether
any of the activities of the Executive referred to above occur or are
performed within or without the Market or (C) whether the Executive
resides, or reports to an office, within or without the Market;
provided, however, that (x) the Executive may, anywhere in the Market,
directly or indirectly, in one or a series of transactions, own, invest
or acquire an interest in up to five percent (5%) of the capital stock
of a corporation whose capital stock is traded publicly, or that (y)
Executive may accept employment with a successor company to the
Company.
(ii) Without regard to the reason for Executive's termination, during the Restricted Period (which shall not be reduced by (x) any period of violation of this Agreement by Executive or (y) if the Company is the prevailing party in any litigation to enforce its rights under this Section 8, the period which is required for such litigation), Executive will not without the express prior written approval of the Board of Directors of the Company (A) in one or a series of transactions, recruit, solicit or otherwise induce or influence any proprietor, partner, stockholder, lender, director, officer, employee, sales agent, joint venturer, investor, lessor, customer, agent, representative or any other person which has a business relationship with the Company Group or had a business relationship with the Company Group within the twenty-four(24) month period preceding the date of the incident in question, to discontinue, reduce or modify such employment, agency or business relationship with the Company Group, or (B) employ or seek to employ or cause any Competitive Business or any other private post-secondary educational institution to employ or seek to employ any person or agent who is then (or was at any time within twenty-four (24) months prior to the date the Executive or the Competitive Business employs or seeks to employ such person) employed or retained by the Company Group. Notwithstanding the foregoing, nothing herein shall prevent the Executive from
providing a letter of recommendation to an employee with respect to a future or any other employment opportunity.
(iii) The scope and term of this Section 8 would not preclude Executive from earning a living with an entity that is not a Competitive Business.
(b) Upon the determination of a majority of the Board of Directors that
the Executive has breached his obligations in any material respect under this
Section 8, the Company, in addition to pursuing all available remedies under
this Agreement, at law or otherwise, and without limiting its right to pursue
the same, shall cease all payments to the Executive under this Agreement.
9. Definitions
"Asset Purchase Agreement" means the Asset Purchase Agreement, dated as of September 30, 1997, for the purchase of all the assets of the Clinton Harley Corporation and Clinton Education Group, Inc. each an Arizona corporation, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Authority" means any governmental, regulatory or administrative body, agency or authority, any court or judicial authority, any public, private or industry regulatory authority, whether national, Federal, state or local or otherwise, or any Person lawfully empowered by any of the foregoing to enforce or seek compliance with any applicable law, statute, regulation, order or decree.
"Business" means (a) the ownership and operation of private post-secondary educational institutions of the type owned and operated by the Company Group, or (b) any similar or incidental business conducted, or engaged in, by the Company Group prior to the date hereof or at any time during the Term of Employment.
"Cause" has the meaning set forth in Section 3(d).
"Company" has the meaning set forth in the preamble.
"Company Group" has the meaning set forth in Section 1.
"Competitive Business" has the meaning set forth in the Section 8(a)(i).
"Confidential Information" means any confidential information including, without limitation, any study, data, calculations, software storage media or other compilation of information, patent, patent application, copyright, "know-how", trade secrets, customer lists, details of client or consultant contacts, pricing policies, operational methods, marketing plans or strategies, product development techniques or plans, business acquisition plans or any portion or phase of any scientific or technical information, ideas, discoveries, designs, computer programs (including source of object codes), processes, procedures, formulae, improvements or other proprietary or intellectual property of the Company Group, whether or not in written or tangible form, and whether or not registered, and including all files, records, manuals, books, catalogues, memoranda, notes, summaries, plans, reports, records, documents and other evidence thereof. Notwithstanding the foregoing, the term "Confidential Information" does not include, and there
shall be no obligation hereunder with respect to, information that is or becomes generally available to the public other than as a result of a disclosure by the Executive not permissible hereunder.
"Credit Agreement" means the Second Amendment and Restatement of credit Agreement dated as of March 29, 2002 among UTI Holdings, Inc., Universal Technical Institute, Inc. and the various lenders party thereto, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Exchange Agreement" means the Exchange Agreement, dated as of September 30, 1997, among Universal Technical Institute, Inc., Mayer, Brown & Platt, and certain other parties, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Executive" means John C. White or his estate, if deceased.
"knowing" and "knowledge" shall each refer to actual knowledge without any duty of investigation.
"Market" means any county in the United States of America and each similar jurisdiction in any other country in which the Business was conducted by or engaged in by the Company Group prior to the date hereof or is conducted or engaged in by the Company Group at any time during the Term of Employment.
"Penske/Charlesbank Stock Purchase Agreement" means the Preferred Stock Purchase Agreement dated as of January 8, 2002 among Universal Technical Institute, Inc., Worldwide Training Group, LLC and Charlesbank Equity Fund V, Limited Partnership, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Regulations" means any laws, statutes, regulations, rulings, rules, orders or permit of, administered or enforced by or on behalf of any Authority, and the Certificate of Incorporation and By-laws of the Company, as applicable.
"Restricted Period" has the meaning set fourth in Section 8(a)(i).
"Securities Purchase Agreement" means the Agreement for the Purchase of Securities of Lincoln Technical Institute of Arizona, Inc., d/b/a Universal Technical Institute ("Old UTI"), dated as of September 30, 1997, among the current stockholders of Universal Technical Institute, Inc., the successor corporation to Old UTI, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Stockholders Agreement" means the Stockholders Agreement dated as of September 30, 1997 among the stockholders of Universal Technical Institute, Inc., as the same may be amended, extended, restated, supplemented or modified from time to time.
"Term of Employment" has the meaning set forth in Section 3(a).
10. Notice
Any notice, request, demand or other communication required or permitted to be given under this Agreement shall be given in writing and if delivered personally, sent by certified or registered mail, return receipt requested, sent by overnight courier or sent by facsimile transmission (with confirmation and a copy sent by mail within one day) as follows (or to such other addressee or address as shall be set forth in a notice given in the same manner):
If to Executive: John C. White Universal Technical Institute, Inc. 10851 North Black Canyon Highway, Suite 600 Phoenix, Arizona 85029 Facsimile No.: (602) 216-7602 with a copy to: Gallagher & Kennedy 2575 E. Camelback Road Phoenix,Arizona 85016-9225 Attention: Michael W. Murphy Business Fax: (602) 530-8500 If to the Company: Chairman of the Compensation Committee of the Board of Directors c/o Universal Technical Institute 10851 North Black Canyon Highway Phoenix, Arizona 85029 Facsimile No.: (602) 216-7602 with a copy to: The Jordan Company 767 Fifth Avenue 48th Floor New York, NY 10153 Attention: A. Richard Caputo, Jr. Facsimile No.: (212) 755-5263 |
Any such notices shall be deemed to be given on the date personally delivered or sent by facsimile transmission or such return receipt is issued or the day after if sent by overnight courier.
11. Executive's Representation
Executive hereby warrants and represents to the Company that: (i)
Executive has carefully reviewed this Agreement and has consulted with such
advisors as Executive considers appropriate in connection with this Agreement,
(ii) Executive is not subject to any covenants, agreements or restrictions which
would be breached or violated by Executive's execution of this Agreement or by
Executive's performance of his duties hereunder and (iii) Executive will not
knowingly breach or violate any provision of any Regulations in any material
respect or in any manner which might reasonably have a material adverse effect
in respect of the ongoing
business, operations, conditions, or other business relationships or properties of any of the companies in the Company Group.
12. Company's Obligation
Executive agrees and acknowledges that the obligations owed to Executive under this Agreement are solely the obligations of the Company, and that none of the Company's stockholders, directors, officers or lenders will have any obligations or liabilities in respect of this Agreement and the subject matter hereof.
13. Validity
If, for any reason, any provision hereof shall be determined to be invalid or unenforceable, the validity and effect of the other provisions hereof shall not be affected thereby.
14. Severability
Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. If any court determines that any provision of Section 8 or any other provision hereof is unenforceable and therefore acts to reduce the scope or duration of such provision, the provision in its reduced form, shall then be enforceable.
15. Waiver of Breach; Specific Performance
The waiver by the Company or Executive of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other breach of such other party. Each of the parties (and third party beneficiaries) to this Agreement will be entitled to enforce its rights under this breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of Sections 7 and 8 of this Agreement and that any party (and third party beneficiaries) may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions in order to enforce or prevent any violations of the provisions of this Agreement. In the event either party takes legal action to enforce any of the terms or provisions of this Agreement, the nonprevailing party shall pay the successful party's costs and expenses, including but not limited to, reasonable attorneys' fees, incurred in such action.
16. Assignment; Third Parties, Successors
Neither the Executive nor the Company may assign, transfer, pledge, hypothecate, encumber or otherwise dispose of this Agreement or any of his or its respective rights or obligations hereunder, without the prior written consent of the other. The parties agree and
acknowledge that each of the Companies and the stockholders of, lenders to and investors therein are intended to be third party beneficiaries of, and have rights and interests in respect of, Executive's agreements set forth in Sections 7 and 8. Any successor in interest to the Company (whether indirect or direct and whether by purchase, merger, or consolidation) shall assume the obligations under this agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession.
17. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an agreement in writing agreed to by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter of this Agreement, and supersedes and replaces all prior Agreements, understandings and commitments with respect to such subject matter.
18. Litigation
(a) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 18 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OF A NEW YORK FEDERAL OR STATE COURT, OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SUCH A JUDGMENT, IN ANY OTHER APPROPRIATE JURISDICTION.
(b) IN THE EVENT ANY PARTY TO THIS AGREEMENT COMMENCES ANY LITIGATION,
PROCEEDING OR OTHER LEGAL ACTION IN CONNECTION WITH OR RELATING TO THIS
AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN
OR THEREIN, THE PARTIES TO THIS AGREEMENT HEREBY (1) AGREE UNDER ALL
CIRCUMSTANCES ABSOLUTELY AND IRREVOCABLY TO INSTITUTE ANY LITIGATION, PROCEEDING
OR OTHER LEGAL ACTION IN A COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE
SOUTHERN DISTRICT OF NEW YORK, WHETHER A STATE OR FEDERAL COURT; (2) AGREE THAT
IN THE EVENT OF ANY SUCH LITIGATION, PROCEEDING OR ACTION, SUCH PARTIES WILL
CONSENT AND SUBMIT TO THE PERSONAL JURISDICTION OF ANY SUCH COURT DESCRIBED IN
CLAUSE (1) OF THIS SECTION AND TO SERVICE OF PROCESS UPON THEM IN ACCORDANCE
WITH THE RULES AND STATUTES GOVERNING SERVICE OF PROCESS (IT BEING UNDERSTOOD
THAT NOTHING IN THIS SECTION SHALL BE DEEMED TO PREVENT ANY PARTY FROM SEEKING
TO REMOVE ANY ACTION TO A FEDERAL COURT IN THE SOUTHERN DISTRICT OF NEW YORK;
(3) AGREE TO WAIVE TO THE FULL EXTENT PERMITTED
BY LAW ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH LITIGATION, PROCEEDING OR ACTION IN ANY SUCH COURT OR THAT ANY SUCH LITIGATION, PROCEEDING OR ACTION WAS BROUGHT IN ANY INCONVENIENT FORUM; (4) AGREE TO DESIGNATE, APPOINT AND DIRECT AN AUTHORIZED AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS AND DOCUMENTS IN ANY LEGAL PROCEEDING IN THE SOUTHERN DISTRICT OF NEW YORK; (5) AGREE TO PROVIDE THE OTHER PARTIES TO THIS AGREEMENT WITH THE NAME, ADDRESS AND FACSIMILE NUMBER OF SUCH AGENT; (6) AGREE AS AN ALTERNATIVE METHOD OF SERVICE TO SERVICE OF PROCESS IN ANY LEGAL PROCEEDING BY MAILING OF COPIES THEREOF TO SUCH PARTY AT ITS ADDRESS SET FORTH HEREIN FOR COMMUNICATIONS TO SUCH PARTY; (7) AGREE THAT ANY SERVICE MADE AS PROVIDED HEREIN SHALL BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (8) AGREE THAT NOTHING HEREIN SHALL AFFECT THE RIGHTS OF ANY PARTY TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. TO THE EXTENT PERMITTED BY LAW IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
19. Further Action
Executive and the Company agree to perform any further acts and to execute and deliver any documents which may be reasonable to carry out the provisions hereof.
20. Headings
The headings contained in this Agreement are for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
21. Counterparts
This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[End of page]
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day and year first written above.
EXECUTIVE:
/s/ John C. White ----------------- Name: John C. White |
UNIVERSAL TECHNICAL INSTITUTE
OF ARIZONA, INC.
By: /s/ Kimberly J. McWaters ------------------------- Name: Kimberly J. McWaters Title: President |
SCHEDULE 1
Additional Companies in the Company Group
1. Universal Technical Institute, Inc.
2. UTI Holdings, Inc.
3. U.T.I. of Illinois, Inc.
4. Universal Technical Institute of Texas, Inc.
5. Universal Technical Institute of California, Inc.
6. Custom Training Group, Inc.
7. The Clinton Harley Corporation
8. Clinton Education Group, Inc.
9. Universal Technical Institute of North Carolina, Inc.
EXHIBIT 10.10
EMPLOYMENT AND NON-INTERFERENCE AGREEMENT
This Agreement, dated as of April 1, 2002, by and between Kimberly J. McWaters (the "Executive") and Universal Technical Institute of Arizona, Inc., a Delaware corporation (the "Company");
W I T N E S S E T H:
WHEREAS, the Company wishes to obtain the future services of the Executive for the Company; and
WHEREAS, the Executive is willing, upon the terms and conditions herein set forth, to provide services hereunder; and
WHEREAS, the Company wishes to secure the Executive's non-interference, upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Nature of Employment
Subject to Section 3, the Company hereby employs Executive, and Executive agrees to accept such employment, during the Term of Employment (as defined in Section 3(a)) as President of the Company. The Company shall also cause the Executive to be employed, and Executive hereby agrees to be employed, during the Term of Employment by each of the companies listed in Schedule 1 (which companies, together with the Company, shall be referred to collectively as the "Company Group"), in each case as President of such company.
2. Extent of Employment
(a) During the Term of Employment, the Executive shall perform her obligations hereunder faithfully and to the best of her ability at the principal executive offices of the Company, under the direction of the Board of Directors of the Company to which the Executive shall directly report, and shall abide by the rules, customs and usages from time to time established by the Company.
(b) During the Term of Employment, the Executive shall devote all of her business time, energy and skill as may be reasonably necessary for the performance of her duties, responsibilities and obligations hereunder (except for vacation periods and reasonable periods of illness or other incapacity), consistent with past practices and norms in similar positions.
(c) Nothing contained herein shall require Executive to follow any directive or to perform any act which would violate any laws, ordinances, regulations or rules of any governmental, regulatory or administrative body, agent or authority, any court or judicial authority, or any public, private or industry regulatory authority (collectively "Regulations"). Executive will not knowingly (i) breach or violate any provision of any Regulations in any material respect or (ii) otherwise act in any manner which might reasonably be expected to have
a material adverse effect on the ongoing business, operations, conditions, prospects or other business relationships or properties of any company in the Company Group.
(d) During the term of her employment, the Executive shall live in the Phoenix, Arizona area and generally perform her duties under this Agreement from the Company's offices in the Phoenix area.
3. Term of Employment; Termination
(a) The "Term of Employment" shall commence on the date hereof and shall continue through March 31, 2005. Should the Executive's employment be earlier terminated by the Company pursuant to Section 3(b) or by the Executive pursuant to Section 3(c), the Term of Employment shall end on the date of such earlier termination.
(b) Subject to the payments contemplated by Section 3(e), Term of Employment may be terminated at any time by the Company:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental disability the Executive is unable to perform, and does not perform, as certified by a mutually agreeable competent medical physician, her material duties hereunder for 180 days in any continuous 210 day period;
(iii) for Cause (as defined in Section 3(d));
(iv) for any other reason not referred to in clauses (i) through (iii) or no reason, such that this Agreement, subject to the provisions of Section 3(e), shall be construed as terminable at will by the Company.
Executive acknowledges that no representations or promises have been made concerning the grounds for termination or the future operation of the Company's business, and that, except as set forth in the following sentence, nothing contained herein or otherwise stated by or on behalf of the Company modifies or amends the right of the Company to terminate Executive at any time, with or without Cause. Termination shall become effective 30 days after, or, if for Cause, upon the delivery by the Company to the Executive of notice specifying such termination and, if for Cause, the reasons therefor.
(c) Subject to the Company's obligations to make the payments contemplated by Section 3(e), the Term of Employment may be terminated at any time by the Executive:
(i) upon the death of Executive;
(ii) in the event that because of physical or mental disability the Executive is unable to perform, and does not perform, as certified by a mutually agreeable competent medical physician, her duties hereunder for 180 days in any continuous 210 day period;
(iii) as a result of a material reduction in Executive's authority, perquisites, position or responsibilities (other than such a reduction which affects all of the Company's senior executives on a substantially equal or proportionate basis), a requirement that the Executive relocate outside the Phoenix, Arizona metropolitan area or the Company's willful, material violation of its obligations under this Agreement, in each case, after 30 days' prior written notice to the Company and its Board of Directors and the Company's failure thereafter to cure such reduction or violation; or
(iv) voluntarily or for any reason or no reason not referred to in clauses (i) through (iii) in each case, after 120 days' prior written notice to the Company and its Board of Directors.
(d) For the purposes of this Section 3, "Cause" shall mean any of the following:
(i) Executive's conviction of, or plea of guilty or nolo contendere to, a serious felony or a crime involving embezzlement, conversion of property or moral turpitude;
(ii) a finding by a majority of the Board of Directors of Executive's fraud, embezzlement or conversion of property;
(iii) Executive's conviction of, or plea of guilty or nolo contendere to, a crime involving the acquisition, use or expenditure of federal, state or local government funds;
(iv) an administrative or judicial determination that Executive committed fraud or any other violation of law involving federal, state or local government funds;
(v) a finding by a majority of the Board of Directors of Executive's knowing breach of any of her fiduciary duties to any company in the Company Group or the Company's stockholders or making of a misrepresentation or omission which breach, misrepresentation or omission would reasonably be expected to materially adversely affect the business, properties, assets, condition (financial or other) or prospects of any company in the Company Group; provided, that the Executive has been given notice and 30 days from such notice fails to cure the breach, misrepresentation or omission;
(vi) Executive's willful and continual neglect or failure to discharge her material duties, responsibilities or obligations prescribed by this Agreement or any other agreement between the Executive and any company in the Company Group; provided, that the Executive has been given notice and 30 days from such notice fails to cure the neglect or failure;
(vii) Executive's alcohol or substance abuse, which materially interferes with Executive's ability to discharge her duties, responsibilities and obligations prescribed by this Agreement; provided, that Executive has been given notice and 30 days from such notice fails to cure such abuse;
(viii) Any material violation, with the actual knowledge of Executive, of any obligations imposed upon Executive, personally, as opposed to upon the Company, whether as a stockholder or otherwise, under this Agreement, the Securities Purchase
Agreement, the Asset Purchase Agreement, the Stockholders Agreement, the Exchange Agreement, the Penske/Charlesbank Stock Purchase Agreement, the Credit Agreement, the Certificate of Incorporation or By-Laws of the Company; provided, that the Executive has been given notice and 30 days from such notice fails to cure the violation; or
(ix) Executive's personal (as opposed to the Company's) material and knowing failure, to observe or comply with Regulations whether as an officer, stockholder or otherwise, in any material respect or in any manner which would reasonably be expected to have a material adverse effect in respect of the Company Group's ongoing business, operations, conditions, other business relationships or properties; provided, that the Executive has been given notice and 30 days from such notice fails to cure the failure.
(e) If Executive's employment is terminated for any reason whatsoever, then Executive shall be entitled to (i) accrued and unpaid base salary and benefits (including sick pay, vacation pay and benefits under Section 6) with respect to the period prior to termination, (ii) reimbursement for expenses under Section 5 with respect to such period, and (iii) any other benefits (including COBRA) required by law to be provided after termination of employment under the circumstances. In the event Executive's employment is terminated pursuant to:
(i) Section 3(b)(i) or (ii) or 3(c)(i) or (ii), the Company will also pay to Executive (or her estate or representative) the full amounts to which she would be entitled under Section 4(a) for the period from effectiveness of termination through the first anniversary of such termination;
(ii) Section 3(b)(iii) or 3(c)(iv) there will be no additional amounts owing by the Company to Executive under this Agreement from and after such termination; and
(iii) Section 3(b)(iv) or 3(c)(iii), the Company will also pay
to Executive the full amounts to which she would be entitled under
Section 4(a) for the period from effectiveness of termination to the
later to occur of (y) the date 18 months following such effectiveness
of termination and (z) March 31, 2005, on the regular payment dates
established pursuant to Section 4(a) in accordance with Company
practices; provided, however, that any such amounts paid to Executive
for the first 12 months following the effectiveness of termination
pursuant to Section 3(b)(iv) or 3(c)(iii) shall not be subject to
reduction under Section 6(f)(ii) below.
(f) (i) Termination of the Term of Employment will not terminate Sections 7, 8, 10 through 21, or any other provisions not associated specifically with the Term of Employment.
(ii) In the event of termination, the Executive shall not
have a duty to mitigate the Company's payment obligations under Section
3(e) by seeking alternative employment; provided, however, that if the
Executive does accept alternative employment, payment obligations under
Section 3(e) shall be reduced to the extent of Executive's compensation
under such alternative employment.
(g) Upon the conclusion of the original three year term of this Agreement ("Original Term") and upon each succeeding anniversary of this Agreement, the Executive's Term of Employment will be automatically renewed for an additional one year term; provided, that
neither the Company nor the Executive terminates this Agreement pursuant to
Section 3 during the Original Term or any subsequent renewal term; and provided
further, that during such Original Term, or any renewal term, if either the
Company or the Executive provides notice to the other party of its intent not to
renew the Term of Employment at least 90 days before the end of such term, this
Agreement will expire upon the succeeding anniversary of this Agreement unless
earlier terminated pursuant to Section 3. If this Agreement is terminated
pursuant to Section 3 during any renewal term, the Company shall pay to the
Executive the amount (if any) to which such Executive is entitled pursuant to
and in accordance with Section 3(e) hereunder.
4. Compensation. During the Term of Employment, the Company shall pay compensation to Executive as follows:
(a) As base compensation for her services hereunder, in twenty-six (26) equal installments, a base salary at a rate of $280,000 per annum, subject to annual cost of living adjustments based on the Consumer Price Index. The Board of Directors shall annually, and in its sole discretion, determine whether the base salary should be increased and, if so, the amount of such increase.
(b) An annual bonus compensation based on Executive's performance as determined and approved by the Board of Directors, in its sole discretion, based on performance parameters set by the Board. Such bonus will be at the full discretion of the Board of Directors, and may not be paid at all. Executive acknowledges that no such bonuses will be paid if the established performance parameters are not met. If the Board of Directors pays a bonus, it is to be paid within 30 days after the issuance of audited financial statements for the Company and shall not exceed 60% of Executive's annual base salary. The Board of Directors in its sole discretion may establish a higher bonus level based on the performance of Executive.
5. Reimbursement of Expenses
During the Term of Employment, the Company shall reimburse Executive for reasonably documented travel, entertainment and other expenses reasonably incurred by Executive in connection with the performance of her duties hereunder and, in each case, in accordance with the reasonable rules, customs and usages promulgated by the Company from time to time in effect.
6. Benefits
During the Term of Employment the Executive shall be entitled to the following benefits from the Company:
(a) a car allowance of $1,000 per month, which shall include reimbursement for cellular car phone fees and gasoline;
(b) automobile insurance coverage paid by the Company consistent with the Company's past practice; and
(c) coverage by an executive medical reimbursement plan for up to an aggregate total of $7,500 per calendar year (subject to annual cost of living adjustments based on the Consumer
Price Index) in noninsurable medical matters for Executive and her family, including but not limited to Executive's purchase of supplemental or additional insurance policies that provide coverage not offered by the Company. Any unused portion of such $7,500 annual maximum amount, including cumulative unused amounts from prior years, will be carried forward and added to the following calendar year's maximum dollar amount.
In addition to the foregoing, during the Term of Employment the Executive shall be entitled to such other perquisites and benefits (including, without limitation, health, short and long term disability, pension and life insurance benefits consistent with past practice, or as increased from time to time) established from time to time, at the sole discretion of the Board of Directors for executives of the Company and their families.
7. Confidential Information
(a) During and after the Term of Employment, Executive will not,
directly or indirectly in one or a series of transactions, disclose to any
person, or use or otherwise exploit for the Executive's own benefit or for the
benefit of anyone other than the Company, any Confidential Information (as
defined in Section 9), whether prepared by Executive or not; provided, however,
that any Confidential Information may be disclosed (i) to officers,
representatives, employees and agents of the Company who need to know such
Confidential Information in order to perform the services or conduct the
operations required or expected of them in the Business (as defined in Section
9) and (ii) in good faith by the Executive in connection with the performance of
her duties hereunder. Executive shall use her best efforts to prevent the
removal of any Confidential Information from the premises of the Company, except
as required in her normal course of employment by the Company. Executive shall
use her best efforts to cause all persons or entities to whom any Confidential
Information shall be disclosed by him hereunder to observe the terms and
conditions set forth herein as though each such person or entity was bound
hereby. Executive shall have no obligation hereunder to keep confidential any
Confidential Information if and to the extent disclosure of any thereof is
specifically required by law; provided, however, that in the event disclosure is
required by applicable law, the Executive shall provide the Company with prompt
notice of such requirement, prior to making any disclosure, so that the Company
may seek an appropriate protective order. At the request of the Company,
Executive agrees to deliver to the Company, at any time during the Term of
Employment, or thereafter, all Confidential Information which she may possess or
control. Executive agrees that all Confidential Information of the Company
(whether now or hereafter existing) conceived, discovered or made by him during
the Term of Employment exclusively belongs to the Company (and not to
Executive). Executive will promptly disclose such Confidential Information to
the Company and perform all actions reasonably requested by the Company to
establish and confirm such exclusive ownership.
(b) The terms of this Section 7 shall survive the termination of this Agreement regardless of who terminates this Agreement, or the reasons therefor.
8. Non-Interference
(a) Executive acknowledges that services to be provided give him the opportunity to have special knowledge of the Company and its Confidential Information and the capabilities of
individuals employed by or affiliated with the Company and that interference in these relationships would cause irreparable injury to the Company. In consideration of this Agreement, Executive covenants and agrees that:
(i) Unless Executive is terminated pursuant to Sections 3(b)(iv) or 3(c)(iii), from the date hereof until the later to occur of March 31, 2005, or the first anniversary of expiration or termination of the Term of Employment (the "Restricted Period"), Executive will not, without the express written approval of the Board of Directors of the Company, anywhere in the Market, directly or indirectly, in one or a series of transactions, own, manage, operate, control, invest or acquire an interest in, or otherwise engage or participate in, whether as a proprietor, partner, stockholder, lender, director, officer, employee, joint venturer, investor, lessor, agent, representative or other participant, in any business which competes, directly or indirectly, with the Business in the Market ("Competitive Business") without regard to (A) whether the Competitive Business has its office or other business facilities within or without the Market, (B) whether any of the activities of the Executive referred to above occur or are performed within or without the Market or (C) whether the Executive resides, or reports to an office, within or without the Market; provided, however, that (x) the Executive may, anywhere in the Market, directly or indirectly, in one or a series of transactions, own, invest or acquire an interest in up to five percent (5%) of the capital stock of a corporation whose capital stock is traded publicly, or that (y) Executive may accept employment with a successor company to the Company.
(ii) Without regard to the reason for Executive's termination, during the Restricted Period (which shall not be reduced by (x) any period of violation of this Agreement by Executive or (y) if the Company is the prevailing party in any litigation to enforce its rights under this Section 8, the period which is required for such litigation), Executive will not without the express prior written approval of the Board of Directors of the Company (A) in one or a series of transactions, recruit, solicit or otherwise induce or influence any proprietor, partner, stockholder, lender, director, officer, employee, sales agent, joint venturer, investor, lessor, customer, agent, representative or any other person which has a business relationship with the Company Group or had a business relationship with the Company Group within the twenty-four (24) month period preceding the date of the incident in question, to discontinue, reduce or modify such employment, agency or business relationship with the Company Group, or (B) employ or seek to employ or cause any Competitive Business or any other private post-secondary educational institution to employ or seek to employ any person or agent who is then (or was at any time within twenty-four (24) months prior to the date the Executive or the Competitive Business employs or seeks to employ such person) employed or retained by the Company Group. Notwithstanding the foregoing, nothing herein shall prevent the Executive from providing a letter of recommendation to an employee with respect to a future or any other employment opportunity.
(iii) The scope and term of this Section 8 would not preclude Executive from earning a living with an entity that is not a Competitive Business.
(b) Upon the determination of a majority of the Board of Directors that
the Executive has breached her obligations in any material respect under this
Section 8, the Company, in addition to pursuing all available remedies under
this Agreement, at law or otherwise, and without limiting its right to pursue
the same, shall cease all payments to the Executive under this Agreement.
9. Definitions
"Asset Purchase Agreement" means the Asset Purchase Agreement, dated as of September 30, 1997, for the purchase of all of the assets of the Clinton Harley Corporation and Clinton Education Group, Inc., each an Arizona corporation, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Authority" means any governmental, regulatory or administrative body, agency or authority, any court or judicial authority, any public, private or industry regulatory authority, whether national, Federal, state or local or otherwise, or any Person lawfully empowered by any of the foregoing to enforce or seek compliance with any applicable law, statute, regulation, order or decree.
"Business" means (a) the ownership and operation of private post-secondary educational institutions of the type owned and operated by the Company Group, or (b) any similar or incidental business conducted, or engaged in, by the Company Group prior to the date hereof or at any time during the Term of Employment.
"Cause" has the meaning set forth in Section 3(d).
"Company" has the meaning set forth in the preamble.
"Company Group" has the meaning set forth in Section 1.
"Competitive Business" has the meaning set forth in Section 8(a)(i).
"Confidential information" means any confidential information including, without limitation, any study, data, calculations, software storage media or other compilation of information, patent, patent application, copyright, "know-how", trade secrets, customer lists, details of client or consultant contracts, pricing policies, operational methods, marketing plans or strategies, product development techniques or plans, business acquisition plans or any portion or phase of any scientific or technical information, ideas, discoveries, designs, computer programs (including source of object codes), processes, procedures, formulae, improvements or other proprietary or intellectual property of the Company Group, whether or not in written or tangible form, and whether or not registered, and including all files, records, manuals, books, catalogues, memoranda, notes, summaries, plans, reports, records, documents and other evidence thereof. Notwithstanding the foregoing, the term "Confidential Information" does not include, and there shall be no obligation hereunder with respect to, information that is or becomes generally available to the public other than as a result of a disclosure by the Executive not permissible hereunder.
"Credit Agreement" means the Second Amendment and Restatement of Credit Agreement dated as of March 29, 2002 among UTI Holdings, Inc., Universal Technical Institute, Inc. and the various lenders party thereto, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Exchange Agreement" means the Exchange Agreement, dated as of September 30, 1997, among Universal Technical Institute, Inc., Mayer, Brown & Platt, and certain other parties, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Executive" means Kimberly J. McWaters or her estate, if deceased.
"knowing" and "knowledge" shall each refer to actual knowledge without any duty of investigation.
"Market" means any county in the United States of America and each similar jurisdiction in any other country in which the Business was conducted by or engaged in by the Company Group prior to the date hereof or is conducted or engaged in by the Company Group at any time during the Term of Employment.
"Penske/Charlesbank Stock Purchase Agreement" means the Preferred Stock Purchase Agreement dated as of January 8, 2002 among Universal Technical Institute, Inc., Worldwide Training Group, LLC and Charlesbank Equity Fund V, Limited Partnership, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Regulations" means any laws, statutes, regulations, rulings, rules, orders or permits of, administered or enforced by or on behalf of any Authority, and the Certificate of Incorporation and By-laws of the Company, as applicable.
"Restricted Period" has the meaning set forth in Section 8(a)(i).
"Securities Purchase Agreement" means the Agreement for the Purchase of Securities of Lincoln Technical Institute of Arizona, Inc., d/b/a Universal Technical Institute ("Old UTI"), dated as of September 30, 1997, among the current stockholders of Universal Technical Institute, Inc., the successor corporation to Old UTI, as the same may be amended, extended, restated, supplemented or modified from time to time.
"Stockholders Agreement" means the Stockholders Agreement dated as of September 30, 1997 among the stockholders of Universal Technical Institute, Inc., as the same may be amended, extended, restated, supplemented or modified from time to time.
"Term of Employment" has the meaning set forth in Section 3(a).
10. Notice
Any notice, request, demand or other communication required or permitted to be given under this Agreement shall be given in writing and if delivered personally, sent by certified or registered mail, return receipt requested, sent by overnight courier or sent by facsimile
transmission (with confirmation and a copy sent by mail within one day) as follows (or to such other addressee or address as shall be set forth in a notice given in the same manner):
If to Executive: Kimberly J. McWaters Universal Technical Institute 10851 North Black Canyon Highway Phoenix, Arizona 85029 Facsimile No.: (602) 216-7602 with a copy to: [___________________________________ ____________________________________ ____________________________________ ATTENTION: _________________________ FACSIMILE NO.:______________________ If to the Company: Chairman of the Compensation Committee of the Board of Directors c/o Universal Technical Institute 10851 North Black Canyon Highway Phoenix, Arizona 85029 Facsimile No.: (602) 216-7602 with a copy to: The Jordan Company 767 Fifth Avenue 48th Floor New York, NY 10153 Attention: A. Richard Caputo, Jr. Facsimile No.: (212)755-5263 |
Any such notices shall be deemed to be given on the date personally delivered or sent by facsimile transmission or such return receipt is issued or the day after if sent by overnight courier.
11. Executive's Representation
Executive hereby warrants and represents to the Company that: (i)
Executive has carefully reviewed this Agreement and has consulted with such
advisors as Executive considers appropriate in connection with this Agreement,
(ii) Executive is not subject to any covenants, agreements or restrictions which
would be breached or violated by Executive's execution of this Agreement or by
Executive's performance of her duties hereunder and (iii) Executive will not
knowingly breach or violate any provision of any Regulations in any material
respect or in any manner which might reasonably have a material adverse effect
in respect of the ongoing business, operations, conditions, or other business
relationships or properties of any of the companies in the Company Group.
12. Company's Obligation
Executive agrees and acknowledges that the obligations owed to Executive under this Agreement are solely the obligations of the Company, and that none of the Company's stockholders, directors, officers or lenders will have any obligations or liabilities in respect of this Agreement and the subject matter hereof.
13. Validity
If, for any reason, any provision hereof shall be determined to be invalid or unenforceable, the validity and effect of the other provisions hereof shall not be affected thereby.
14. Severability
Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. If any court determines that any provision of Section 8 or any other provision hereof is unenforceable and therefore acts to reduce the scope or duration of such provision, the provision in its reduced form, shall then be enforceable.
15. Waiver of Breach; Specific Performance
The waiver by the Company or Executive of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other breach of such other party. Each of the parties (and third party beneficiaries) to this Agreement will be entitled to enforce its rights under this breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of Sections 7 and 8 of this Agreement and that any party (and third party beneficiaries) may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions in order to enforce or prevent any violations of the provisions of this Agreement. In the event either party takes legal action to enforce any of the terms or provisions of this Agreement, the nonprevailing party shall pay the successful party's costs and expenses, including but not limited to, reasonable attorneys' fees, incurred in such action.
16. Assignment; Third Parties
Neither the Executive nor the Company may assign, transfer, pledge, hypothecate, encumber or otherwise dispose of this Agreement or any of her or its respective rights or obligations hereunder, without the prior written consent of the other. The parties agree and acknowledge that each of the Companies and the stockholders of, lenders to and investors therein are intended to be third party beneficiaries of, and have rights and interests in respect of, Executive's agreements set forth in Sections 7 and 8. Any successor in interest to the Company
(whether indirect or direct and whether by purchase, merger, or consolidation)
shall assume the obligations under this agreement in the same manner and to the
same extent as the Company would be required to perform such obligations in the
absence of a succession.
17. Amendment; Entire Agreement
This Agreement may not be changed orally but only by an agreement in writing agreed to by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter of this Agreement, and supersedes and replaces all prior Agreements, understandings and commitments with respect to such subject matter.
18. Litigation
(a) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE ENTITLED TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 18 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OF A NEW YORK FEDERAL OR STATE COURT, OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SUCH A JUDGMENT, IN ANY OTHER APPROPRIATE JURISDICTION.
(b) IN THE EVENT ANY PARTY TO THIS AGREEMENT COMMENCES ANY LITIGATION,
PROCEEDING OR OTHER LEGAL ACTION IN CONNECTION WITH OR RELATING TO THIS
AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN
OR THEREIN, THE PARTIES TO THIS AGREEMENT HEREBY (1) AGREE UNDER ALL
CIRCUMSTANCES ABSOLUTELY AND IRREVOCABLY TO INSTITUTE ANY LITIGATION, PROCEEDING
OR OTHER LEGAL ACTION IN A COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE
SOUTHERN DISTRICT OF NEW YORK, WHETHER A STATE OR FEDERAL COURT;(2) AGREE THAT
IN THE EVENT OF ANY SUCH LITIGATION, PROCEEDING OR ACTION, SUCH PARTIES WILL
CONSENT AND SUBMIT TO THE PERSONAL JURISDICTION OF ANY SUCH COURT DESCRIBED IN
CLAUSE (1) OF THIS SECTION AND TO SERVICE OF PROCESS UPON THEM IN ACCORDANCE
WITH THE RULES AND STATUTES GOVERNING SERVICE OF PROCESS (IT BEING UNDERSTOOD
THAT NOTHING IN THIS SECTION SHALL BE DEEMED TO PREVENT ANY PARTY FROM SEEKING
TO REMOVE ANY ACTION TO A FEDERAL COURT IN THE SOUTHERN DISTRICT OF NEW YORK;
(3) AGREE TO WAIVE TO THE FULL EXTENT PERMITTED BY LAW ANY OBJECTION THAT THEY
MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH LITIGATION, PROCEEDING OR
ACTION IN ANY SUCH COURT OR THAT ANY SUCH LITIGATION, PROCEEDING OR ACTION WAS
BROUGHT IN
ANY INCONVENIENT FORUM; (4) AGREE TO DESIGNATE, APPOINT AND DIRECT AN AUTHORIZED AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS AND DOCUMENTS IN ANY LEGAL PROCEEDING IN THE SOUTHERN DISTRICT OF NEW YORK; (5) AGREE TO PROVIDE THE OTHER PARTIES TO THIS AGREEMENT WITH THE NAME, ADDRESS AND FACSIMILE NUMBER OF SUCH AGENT; (6) AGREE AS AN ALTERNATIVE METHOD OF SERVICE TO SERVICE OF PROCESS IN ANY LEGAL PROCEEDING BY MAILING OF COPIES THEREOF TO SUCH PARTY AT ITS ADDRESS SET FORTH HEREIN FOR COMMUNICATIONS TO SUCH PARTY; (7) AGREE THAT ANY SERVICE MADE AS PROVIDED HEREIN SHALL BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (8) AGREE THAT NOTHING HEREIN SHALL AFFECT THE RIGHTS OF ANY PARTY TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. TO THE EXTENT PERMITTED BY LAW IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
19. Further Action
Executive and the Company agree to perform any further acts and to execute and deliver any documents which may be reasonable to carry out the provisions hereof.
20. Headings
The headings contained in this Agreement are for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
21. Counterparts
This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[End of page]
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day and year first written above.
EXECUTIVE:
UNIVERSAL TECHNICAL INSTITUTE
OF ARIZONA, INC.
By: ______________________________
Name: Kimberly J. McWaters
Title: President
SCHEDULE 1
Additional Companies in the Company Group
1. Universal Technical Institute, Inc.
2. UTI Holdings, Inc.
3. U.T.I. of Illinois, Inc.
4. Universal Technical Institute of Texas, Inc.
5. Universal Technical Institute of California, Inc.
6. Custom Training Group, Inc.
7. The Clinton Harley Corporation
8. Clinton Education Group, Inc.
9. Universal Technical Institute of North Carolina, Inc.
EXHIBIT 10.12
AMENDMENT 4 TO LEASE
This Amendment 4 to Lease ("Amendment") is made and entered into as of this 28th day of January, 2000, by and between 2844 WEST DEER VALLEY L.L.C., an Arizona limited liability company ("Landlord"), and THE CLINTON HARLEY CORPORATION, an Arizona corporation ("Tenant").
R E C I T A L S
A. Landlord and Tenant previously entered into that certain Lease Agreement dated April 1, 1994 for premises commonly known as 2844 W. Deer Valley Road and 2837 W. Louise Drive, Phoenix, Arizona 85027 ("Lease Agreement"), as amended by that certain Amendment 2 for Lease of Commercial Building Located at 2844 W. Deer Valley Road, Phoenix, Arizona 85027, dated August 15, 1995 ("Amendment 2") and that certain Amendment 3 to Lease of Commercial Building dated September 30, 1997 ("Amendment 3") (collectively, the "Lease").
B. Landlord and Tenant desire to amend the terms of the Lease in accordance with the provisions hereof.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms and conditions herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby amend the Lease as follows:
1. PARAGRAPH D OF BASIC LEASE PROVISIONS. Paragraph D of the Basic Lease Provisions is amended to include the real property identified as Tax Parcel 4E crosshatched on Exhibit "A1" attached hereto, along with the real property described on Exhibit "B" to Amendment 2 and the property described in the Lease Agreement. Exhibit "A2" attached hereto identifies by crosshatch the real property described on Exhibit "B" to Amendment 2 and the property described in the Lease Agreement.
2. PARAGRAPH E OF BASIC LEASE PROVISIONS. Paragraph E of the Basic Lease Provisions is deleted in its entirety and replaced with the following:
E. TERM: Through February 28, 2015
3. PARAGRAPH F OF BASIC LEASE PROVISIONS. Paragraph F of the Basic Lease Provisions is deleted in its entirety and replaced with the following:
F. LEASE COMMENCEMENT DATE: This Lease shall commence on February 1, 2000 and expire at midnight on February 28, 2015.
4. PARAGRAPH G OF BASIC LEASE PROVISIONS. Paragraph G of the Basic Lease Provisions is deleted in its entirety and replaced with the following:
G. RENT*: The sum of $29,177.85 payable on or before the
first day of February, 2000 and on or before the
first day of each consecutive month thereafter during
the term of this Lease. In addition, the annual
minimum rent shall be adjusted as provided in Article
3.B hereof.
* In addition to the monthly rent stated above, Tenant shall also be responsible for the payment of any and all property taxes, property insurance, rental taxes, general assessments, special assessments, association fees and other added charges as specified in the Lease ("Additional Charges").
5. PARAGRAPH H OF BASIC LEASE PROVISIONS. Paragraph H of the Basic Lease Provisions is deleted in its entirety and replaced with the following:
H. USE OF PREMISES: The Premises may be used for educational purposes only. Consistent with the foregoing, Tenant may use the land described in Exhibit "B" to Amendment 2 and Exhibit "A" attached hereto to construct and complete parking lot improvements for Clinton Technical Institute. The Tenant shall obtain Landlord's written consent prior to constructing any improvements other than parking lot improvements on said land and/or using said land for any use other than a parking lot for Clinton Technical Institute.
6. ARTICLE 3 - RENT. Irrespective of any mechanism for calculating rental increases set forth in the Lease Agreement, Amendment 2 or Amendment 3, cost of living or otherwise, Article 3, paragraph 3.B is deleted in its entirety and replaced with the following:
B. The annual Minimum Rent shall be adjusted and increased as of the first day of January of each lease year (hereinafter the "Adjustment Date") commencing January 1,2001, by the amount equal to 4% of the Minimum Rent for the immediately preceding lease year and such adjusted Minimum Rent shall be payable monthly, as provided herein, beginning with the Adjustment Date. The 4% increase is a fiat percentage rate increase which shall be applied to the Minimum Rent annually, as provided for herein. Accordingly, the annual Minimum Rent under the Lease for calendar years 2000 through 2015 shall be as follows:
2000: $347,045.07 2008: $479,182.83 2001: $364,139.57 2009: $498,350.14 2002: $378,705.15 2010: $518,284.15 2003: $393,853.36 2011: $539,015.52 2004: $409,607.49 2012: $560,576,14 2005: $425,991.79 2013: $582,999.19 2006: $443,031.46 2014: $606,319.16 |
2007: $460,752.72 2015: $630,571.93 |
In addition to the foregoing, Tenant shall pay such Additional Charges as specified in the Lease.
7. ARTICLE 10 - INDEMNITY AND INSURANCE. Article 10, Paragraph 10(i) is amended to delete the reference to "One Million Dollars ($1,000,000)" and replace it with "Five Million Dollars ($5,000,000)".
8. ARTICLE 11 - OTHER PAYMENTS BY TENANT. The first two paragraphs of Article 11 in the Lease Agreement (that is, the paragraphs beginning with the words "In addition to rental" and "With respect to any assessments," respectively) are hereby reinserted and incorporated into Article 11 in their entirety (including subparagraphs (i) and (ii) of said first paragraph), and hereafter shall be deemed a part of Article 11.
9. ARTICLE 34 - MISCELLANEOUS. Article 34 is amended to add the following:
G. On February 1, 2000 and annually thereafter, Tenant shall deliver to Landlord such financial statements as Landlord reasonably requires to verify the net worth of Tenant or any assignee or subtenant of Tenant. In addition, at such time as Landlord may request in writing, Tenant shall deliver to any lender designated by Landlord any financial statements required by such lender to facilitate the financing or refinancing of the Property. Tenant represents and warrants to Landlord that each such financial statement is a true and accurate statement as of the date of such statement. All financial statements shall be confidential and shall be used only for the purposes set forth in the Lease.
10. CAPITALIZED TERMS. Capitalized terms used herein and not defined herein shall have the meaning given to them in the Lease.
11. TELECOPY SIGNATURES. Landlord and Tenant agree that telecopy counterparts of this Amendment 4 to Lease shall be binding.
12. RATIFICATION. Except as amended hereby, the Lease is in all other respects ratified and confirmed.
13. WHOLE AGREEMENT. This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein. In the event of any conflict or inconsistency between the terms and provisions of this Amendment and the terms and provisions of the Lease, the terms and provisions of this Amendment shall control to the extent necessary to resolve such conflict or inconsistency.
14. EFFECTIVE DATE. The Effective Date hereof shall be the date first written above. 2844 WEST DEER VALLEY L.L.C., an THE CLINTON HARLEY CORPORATION, Arizona Limited Liability Company an Arizona corporation ("Tenant") ("Landlord") By_______________________________ By_______________________________ Its______________________________ Its______________________________ Date_____________________________ Date_____________________________ |
AMENDMENT 3 TO LEASE OF COMMERCIAL BUILDING
THIS AMENDMENT 3 TO LEASE OF COMMERCIAL BUILDING ("AMENDMENT") is made and entered into as of the 30th day of September, 1997, by and between 2844 WEST DEER VALLEY, L.L.C. ("LANDLORD") and THE CLINTON HARLEY CORPORATION, an Arizona corporation ("TENANT").
W I T N E S S E T H:
A. Landlord and have previously entered into that certain Lease Agreement dated April 1, 1994 for premises commonly known as 2844 West Deer Valley Road and 2837 West Louise Drive, Phoenix, Arizona 85027 (the "PREMISES"), as amended by that certain Amendment 2 for Lease of Commercial Building dated August 15, 1995 (collectively, the "Lease').
B. Landlord and Tenant desire to amend the provisions relating to the payment of rent under the Lease and term of the Lease, all as more fully set forth herein.
NOW THEREFORE, in consideration of the mutual terms and conditions herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
1. AMENDMENT. Paragraph G of the Basic Lease Provisions is hereby deleted in its entirety and replaced with the following:
"G. RENT* : The sum of $ 28,278,21 payable on or before the first
(1st) day of October, 1997 and on or before the first
(1st) day of each consecutive month thereafter during
the term of this Lease. In addition, the annual
minimum rent shall be adjusted the greater of (i) the
cost of living increases as provided in Article 3.B
hereof, and (ii) increases in real property taxes and
assessments.
* Tenant shall also be responsible for the payment of property insurance, rental taxes and other added charges as specified in this Lease ("Additional Charges")."
2. AMENDMENT. Paragraph E and F of the Basic Lease Provisions are hereby deleted in their entirety and replaced with the following:
"E. TERM: The term of the Lease shall expire on September 30, 2007." "F. LEASE COMMENCEMENT DATE: This Lease shall commence on October 1, 1997 and expire on September 30, 2007." |
3. AMENDMENT. The cost of living increase specified in Article
3.B shall be made annually on the first day of January of each lease year
commencing January 1, 1999.
3. AMENDMENT. The first two paragraphs of Article 11 (that is, the paragraphs beginning with the words "In addition to rental" and "With respect to any assessments", respectively) are hereby deleted in their entirety.
3. EFFECTIVE DATE. The effective date hereof ("EFFECTIVE DATE") shall be the date first written above.
4. WHOLE AGREEMENT. This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein. In the event of any conflict or inconsistency between the terms and provisions of this Amendment and the terms and provisions of the Lease, the terms and provisions of this Amendment shall control to the extent necessary to resolve such conflict or inconsistency.
5. COUNTERPARTS. This Amendment may be executed in one (1) or more counterparts, all of which taken together shall constitute one (1) original document.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.
LANDLORD:
2844 WEST DEER VALLEY, LLC.
By:____________________________________________
Its:___________________________________________
TENANT:
THE CLINTON HARLEY CORPORATION, an
Arizona corporation
By:___________________________________________
Its: President
AMENDMENT 2 FOR
LEASE OF COMMERCIAL BUILDING
LOCATED AT 2844 W. DEER VALLEY RD.
PHOENIX, AZ 85027
Lease Effective Date: April 1, 1994 Amendment Effective Date: August 15, 1995
LESSOR: 2844 West Deer Valley, LLC., an Arizona limited liability company
LESSEE: The Clinton Harley Corporation, dba Clinton Technical Institute
2844 West Deer Valley Road
Phoenix, AZ 85027
Subject Leased Premises: Land as described in Exhibit "B" located in Maricopa County, Phoenix, Arizona adjacent to the Clinton Technical Institute located at 2844 West Deer Valley Road
AMENDMENT TO BASIC LEASE PROVISIONS FOR
LEASE OF COMMERCIAL BUILDING
E. Term of Lease. This lease shall be in effect for a period of 174.5 months, commencing at 12:00 noon on August 15, 1995, and ending at 12:00 noon on February 28, 2010.
G. Rent for the Land, as describe in Exhibit "B". Rent for the Land shall be in the amount of $2,000 (two thousand dollars) per month, plus applicable sales taxes. Increase in the base rent shall be calculated based upon the Retail cost of living increases at the end of years 2, 4, 6, 8, 10 and 12.
H. Use of Premises. This lease is a land lease. Lessee is authorized to build and complete parking lot improvements. Lessor authorizes the Lessee to use the land described in this lease agreement as a parking lot for Clinton Technical Institute.
_______________________ __________ ______________________ ___________ LESSOR Date LESSEE Date _______________________ _____________________ Title Title |
EXHIBIT "B"
DESCRIPTION OF LAND
FOR PHOENIX CAMPUS PARKING LOT
2844 WEST DEER VALLEY ROAD
PHOENIX, AZ 85027
Lot, 28, said Lot 28 sometimes described as the East half of the Southeast quarter of the Southwest quarter of the Southeast quarter of Section 14, Township 4 North, Range 2 East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona;
EXCEPT the North 318 feet thereof; and
EXCEPT the South 280.4 feet thereof; and
EXCEPT all coal, oil, gas and other mineral deposits and except all uranium, thorium or any other material which is or may be determined to be peculiarly essential to the production of fissionable materials, whether or not of commercial value, as reserved in Patent from the United States of America.
LEASE AGREEMENT
In consideration of the rents and covenants hereinafter set forth, Landlord hereby leases and demises to Tenant and Tenant hereby leases and takes from Landlord the "Premises," hereinafter described in the terms and conditions set forth in this Lease Agreement, hereinafter called "this Lease."
BASIC LEASE PROVISIONS
The words and figures set forth in Paragraphs A to L, both inclusive, are part of this Lease wherever appropriate reference is made thereto, unless expressly modified elsewhere in this Lease.
A. DATE OF EXECUTION: As of the 1st day of April, 1994.
B. LANDLORD: 2844 West Deer Valley, L.L.C., an Arizona limited liability company ("Landlord ")
C. TENANT: The Clinton Harley Corporation, an Arizona corporation
D. PREMISES: White Subdivision, Lots 1 and 2, Maricopa County, Arizona (2844 W. Deer Valley Road, and 2837 W. Louise Drive, Phoenix, Arizona 85027)
E. TERM: [through February 28, 2010]
F. LEASE COMMENCEMENT DATE: This Lease shall commence on April 1, 1994 and expire at midnight on February 28, 2010.
G. RENT * : The sum of $35,413.55 payable on or before the first
(1st) day of April 1994 and on or before the first
(1st) day of each consecutive month thereafter during
the term of this Lease. In addition, the annual
minimum rent shall be adjusted as provided in Article
3.B hereof.
* Tenant shall also be responsible for the payment of property taxes, property insurance, rental taxes and other added charges as specified in this Lease ("Additional Charges ").
H. USE OF PREMISES: Educational
I. SECURITY DEPOSIT: $ None
J. LANDLORD'S ADDRESS FOR RENT AND NOTICES:
2844 W. Deer Valley Road
Phoenix, AZ 85027
K. TENANT'S ADDRESS FOR NOTICE: Attn: President The Clinton Harley Corporation 2844 W. Deer Valley Road Phoenix, Arizona 85027 LANDLORD: TENANT: 2844 West Deer Valley, L.L.C., THE CLINTON HARLEY CORPORATION, an Arizona limited liability company an Arizona corporation By By __________________________________ ______________________________ Its Kenneth R. Miller _________________________________ Its: Vice President |
W I T N E S S E T H:
ARTICLE 1
LEASED PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, that certain Premises described in Paragraph D of the Basic Lease Provisions.
ARTICLE 2
TERM
The term of this Lease shall be for the period set forth in Paragraph E of the Basic Lease Provisions. Notwithstanding the commencement and expiration date set forth in Paragraph F of the Basic Lease Provisions, if for any reason Landlord cannot deliver possession of the Premises to Tenant on said date, Landlord shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or the obligations of Tenant hereunder, but the commencement date and expiration date of this Lease shall be extended the same period of time until Landlord delivers possession of the Premises to Tenant. If Tenant occupies the Premises prior to said commencement date, said occupancy shall be subject to all the provisions hereof, such occupancy shall not advance the expiration date and Tenant shall pay rent for such period at the initial monthly rate set forth in Paragraph G of the Basic Lease Provisions.
ARTICLE 3
RENT
Tenant shall pay in advance to Landlord as rent for the Premises without notice, demand, deduction or any setoff whatsoever at the address of Landlord as set forth in Paragraph J of the
Basic Lease Provisions or such other address as may be specified by Landlord, the following amounts:
A. Annual minimum rent (herein called' "Minimum Rent") in the total sum and in the manner set forth in Paragraph G of the Basic Lease provisions together with all applicable taxes as set forth in Article 11 herein, payable monthly on the first day of each month during the term hereof, with adjustments for fractional months. Said rent shall commence on the date set forth in Paragraph F of the Basic Lease Provisions.
B. The annual Minimum Rent shall be adjusted and increased as of the first day of January of each lease year (hereinafter the "Adjustment Date") commencing January 1, 1995, by the amount equal to 4 percent of the Minimum Rent for the immediately preceding lease year and such adjusted Minimum Rent shall be payable monthly, as provided herein, beginning with the Adjustment Date.
C. The term "lease year" as used herein shall be deemed to mean a period of twelve (12) consecutive months commencing with the 1st day of January and ending with the 31st day of December of each year, both dates inclusive, provided that the first "lease year" shall begin with the date the term of this Lease commences and shall end on the succeeding December 3lst, and except that the last "lease year" shall end on the last day of the lease term.
ARTICLE 4
POSSESSION
Possession of the Premises shall be delivered to Tenant on an AS IS condition.
ARTICLE 5
BUSINESS USE
The Premises shall be used and occupied by Tenant only for the purpose set forth in Paragraph H of the Basic Lease Provisions, and for no other purpose. Tenant shall, at its sole cost, comply with and shall faithfully observe all the requirements of municipal, state and federal authorities now in force, or which hereafter may be in force, pertaining to the use of said Premises as well as the requirements and regulations of the Board of Fire Underwriters, Landlords' insurance companies, and other organizations establishing insurance rates.
ARTICLE 6
SIGNS
Notwithstanding the above, Tenant shall upon request of Landlord immediately remove any exterior or interior sign, advertisement, decoration, lettering or notice which Tenant may hereafter place or permit to be placed in, upon, above or about the Premises and which Landlord reasonably deems objectionable or offensive, and if Tenant fails or refuses so to do Landlord may enter upon the Premises and remove the same.
ARTICLE 7
MAINTENANCE AND SANITATION
A. Tenant shall repair any damage to the Premises caused by Tenant or by any of Tenant's employees, agents, customers, invitees or licensees, other than from ordinary wear. Tenant shall maintain the interior of the Premises and all doors, windows, heating, cooling and mechanical equipment and plate glass, and Landlord agrees whenever possible to extend to Tenant the benefit of any enforceable manufacturer's warranties on such equipment. If Tenant refuses or neglects to make repairs and/or maintain the Premises, or any part thereof, in a manner reasonably satisfactory to Landlord, Landlord shall have the right, upon giving tenant reasonable written notice of its election to do so, to make such repairs or perform such maintenance on behalf of and for the account of Tenant. In such event such work shall be paid for by Tenant promptly upon receipt of a bill therefor. Tenant shall not decorate or paint the exterior of the Premises, or any part thereof, except in the manner and color approved by Landlord. Landlord may, at its option, enter into a maintenance agreement for the maintenance of any heating and air conditioning units serving the Premises. The cost of any such agreement attributable to the Premises shall be paid by Tenant promptly upon receipt of a bill therefor.
B. Tenant shall also maintain the roof and exterior walls. Landlord shall not in any way be liable to Tenant for failure to maintain the Premises or make repairs.
C. Tenant shall provide and maintain trash receptacles, with covers thereon, about the Premises in which to place any trash, and cause such trash to be removed from the area as often as required to maintain a sanitary condition but in no instance less than twice weekly.
ARTICLE 8
ALTERATION, REPAIR AND LIENS
A. Tenant shall not make any alterations or additions upon said Premises without the prior written consent of Landlord, except that Tenant may at its own expense make reasonable changes in interior partitions which do not affect the structural integrity of the building, or decrease the value of the Premises.
B. If any liens should be asserted against the Premises arising out of work performed or materials furnished upon or at the instance of Tenant, Tenant shall, within fifteen (15) days thereafter, cause said lien to be discharged either by paying the same or by recording a surety bond in accordance with the provisions of Section 33-1004, Arizona Revised Statutes.
C. Tenant shall be solely responsible for all repair, modification, alteration or reconstruction required to be made to the Premises as a result of any governmental act, law, rule or regulation including but not limited to the Americans With Disabilities Act.
ARTICLE 9
UTILITY SERVICES
Tenant shall pay for all utilities and services which may be furnished to or used in or about the Premises and shall keep the same free and clear of any lien or encumbrance of any kind whatsoever created by Tenant's acts or omissions. Landlord shall not be liable for any failure or
interruption of any utility service being furnished to the Premises, and no such failure or interruption shall entitle Tenant to terminate this Lease.
ARTICLE 10
INDEMNITY AND INSURANCE
Tenant covenants that Landlord shall not be liable for any damage or liability of any kind or for any injury to or death of persons or damage to property of Tenant or any other person during the term of this Lease, from any cause whatsoever, by reason of the use, occupancy and enjoyment of the Premises by Tenant or any person thereon or holding under said Tenant, and that Tenant will indemnify and save harmless Landlord from all liability whatsoever on account of any such real or claimed damage or injury and from all liens, claims and demands arising out of the use of the Premises and its facilities or any repairs or alterations which Tenant may make upon said Premises, but Tenant shall not be liable for damage or injury occasioned by the negligence or intentional acts of Landlord and its designated agents, servants or employees unless covered by insurance Tenant is required to provide. This obligation to indemnify shall include reasonable legal counsel and investigation costs and all other reasonable costs, expenses and liabilities from the first notice that any claim or demand is to be made or may be made.
Landlord and Tenant hereby waive any rights each may have against the other on account of any loss or damage occasioned to Landlord or Tenant, as the case may be, their respective property, the Premises, or its contents arising from any risk generally covered by fire and extended coverage insurance policies then in use in the State of Arizona; and the parties each, on behalf of their respective insurance companies insuring the property of either Landlord or Tenant against any such loss, waive any right of subrogation that such companies may have against Landlord or Tenant, as the case may be. In the event that the insurance company of Tenant does not waive the right of subrogation against Landlord and its insurance company, Tenant shall (i) maintain during the term of this Lease, fire legal liability coverage with respect to the Premises and (ii) shall pay to Landlord upon demand, Landlord's cost incurred in securing fire legal liability insurance protecting Landlord in the event of the destruction of Tenant's property.
From and after the date of delivery of the Premises to Tenant, Tenant will maintain, at its expense, the following types of insurance:
(i) Public Liability Insurance. Comprehensive general public liability insurance (including personal injury, contractual, products and completed operations, and automobile liability including non-owned and hired) with limits of not less than One Million Dollars ($1,000,000.00) per occurrence insuring against any and all liability of the insured with respect to said Premises or arising out of the maintenance, use or occupancy thereof. All insurance shall specifically insure the performance by Tenant of the indemnity agreement in this Article 10 contained. Said insurance shall be the primary insurance as respects to the Landlord and not participating with any other available insurance. In no event shall the limits of said policies be considered as limiting the liability of Tenant under this Lease.
(ii) Fire and Extended Coverage Insurance. Tenant shall provide and pay for fire and extended coverage insurance insuring the building and improvements to the
Premises. Such fire and extended coverage insurance shall be obtained by Tenant in an amount equal to at least one hundred percent (100%) of the full insurable value of the building and improvements.
(iii) Insurance of Personalty. Tenant shall at all times during the term hereof, and at its cost and expense, maintain in effect policies of insurance covering (i) its fixtures and equipment located on the Premises, in an amount not less than one hundred percent (100%) of their replacement value, providing protection against any peril included within the classification "Fire and Extended Coverage," together with insurance against sprinkler damage, vandalism and malicious mischief, and (ii) all plate glass on the Premises. The proceeds of such insurance, so long as this Lease remains in effect, shall be used to repair or replace the fixtures, equipment and plate glass to insured.
(iv) Business Interruption Insurance. Tenant shall carry business interruption insurance in an amount sufficient to pay all rental amounts coming due hereunder.
All policies of insurance to be provided by Tenant hereunder shall be issued by insurance companies acceptable to Landlord and qualified to do business in the State of Arizona, and shall be issued in the names of Landlord and Tenant, for the mutual joint benefit and protection of Landlord and Tenant, and executed copies of such policies of insurance or certificates thereof shall be delivered to Landlord within ten (10) days after delivery of possession of the Premises to Tenant and thereafter new policies or renewal certificates within thirty (30) days prior to the expiration of the term of each such policy. All public liability and property damage policies shall contain a provision that Landlord, although named as an insured, shall nevertheless be entitled to recovery under said policies for any loss occasioned to it, its servants, agents and employees by reason of the negligence or intended acts of Tenant. As often as any such policy shall expire or terminate, renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent. All policies of insurance delivered to Landlord must contain a provision that the company writing said policy will give to Landlord twenty (20) days notice in writing in advance of any cancellation or lapse of the effective date of any reduction in the amounts of insurance. All policies shall be written as primary policies, not contributing with and not in excess of coverage which Landlord may carry.
ARTICLE 11
OTHER PAYMENTS BY TENANT
In addition to rental Tenant shall pay to Landlord, during each lease year or partial lease year, all real estate taxes and assessments levied and assessed for any such year upon the Improvements and the underlying realty including taxes currently due but not yet paid. Payment shall be made by Tenant in the following manner:
(i) Commencing on the date that Minimum Rent commences and thereafter on the first day of each calendar month throughout the term of this Lease, Tenant shall pay to Landlord along with Minimum Rent the real estate taxes and assessments (including special and improvement district assessments) as estimated by Landlord from time to time.
(ii) Within sixty (60) days following the end of any lease year, Landlord shall furnish Tenant a statement covering the year just expired, certified as correct by an authorized representative of Landlord, setting forth the total real estate taxes and assessments. If such real estate taxes and assessments exceed Tenant's payments so made, Tenant shall pay to Landlord the deficiency within ten (10) days after receipt of said statement. If said payment exceed such real estate taxes and assessments, Tenant shall be entitled to offset the excess against payments next thereafter to become due Landlord as set forth herein.
With respect to any assessments levied against or upon the Premises and the underlying realty, which may be paid in annual installments, only the amount of such annual installment (with appropriate proration for any partial year) and statutory interest shall be included within the computation of the annual taxes and assessments levied against the Premises and the underlying realty.
Tenant shall pay prior to delinquency all taxes against and levied upon fixtures, furnishings, equipment and all other personal property of Tenant contained in the leased Premises.
Tenant shall pay to Landlord, in addition to and along with the rental otherwise payable hereunder, any excise, transaction, sales or privilege tax now or hereafter imposed by any government or agency upon Landlord and attributed to or measured by rent or prorations payable by Tenant.
In the event of the imposition of a parking lot tax, charge or assessment by any governmental or administrative entity, Tenant shall pay to Landlord within ten (10) days after demand therefor, said tax, charge or assessment as determined hereinabove.
In the event the real property taxes are withdrawn in whole or in part and any assessments, taxes, fees, levies or charges are imposed as a substitute for, or otherwise in lieu of increases in said real property taxes, so as to pay for governmental services formerly provided without separate charge to property owners or occupants, such as fire protection, sidewalk and street maintenance, and refuse collection and removal, the same shall be considered "real property taxes" for purposes of this Lease regardless of how denominated or the source from which they are collected. The term "real property taxes" shall also include all expenses reasonably incurred by Landlord in seeking reduction by the taxing authorities of real property taxes applicable to the Premises.
ARTICLE 12
ASSIGNMENT AND SUBLETTING
Tenant shall not either voluntarily or by operation of law, assign, sell, encumber, pledge or otherwise transfer all or any part of Tenant's leasehold estate hereunder, or permit the Premises to be occupied by anyone other than Tenant or Tenant's employees, or sublet the Premises or any portion thereof, without obtaining, in each such instance, Landlord's prior written consent. Any such assignment or other transfer or subletting shall be subject in each instance to the recapture option of Landlord set forth herein. Landlord's consent shall not be
unreasonably withheld for any proposed assignment, provided that substantially the same type, class, nature and quality of business, merchandise, services, management and financial soundness of ownership is maintained and will continue to be furnished in a manner compatible with the high standards contemplated by this Lease and, provided further, that none of the covenants, conditions or obligations imposed upon Tenant by this Lease, nor any of the rights, remedies or benefits afforded Landlord by this Lease are thereby impaired or diminished. Consent by Landlord to one or more assignments of this Lease or to one or more sublettings of the Premises shall not operate to exhaust Landlord's rights under this Article. The voluntary or other surrender of this Lease by Tenant or a mutual cancellation hereof shall not work a merger and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or shall operate as an assignment to Landlord of such subleases or subtenancies. If Tenant is a corporation or is an unincorporated association or partnership, the transfer, assignment or hypothecation of any stock or interest in such corporation, association or partnership in the aggregate in excess of forty nine percent (49%) shall be deemed an assignment within the meaning and provisions of this Article.
If Tenant desires at any time to assign this Lease or to sublet the Premises or any portion thereof, it shall first notify Landlord of its desire to do so and shall submit in writing to Landlord (i) the name of the proposed subtenant or assignee; (ii) the nature of the proposed subtenant's or assignee's business to be carried on in the Premises; (iii) the terms and provisions of the proposed sublease or assignment; and (iv) such reasonable financial information as Landlord may request concerning the proposed subtenant or assignee. Any request for Landlord's approval of a sublease or assignment shall be accompanied with a check in such reasonable amount as Landlord shall advise for the cost of review and/or preparation of any documents relating to such proposed transfer but in no event less than $250.00.
At any time within fifteen (15) days after Landlord's receipt of the information specified above, and provided that Landlord approves of the assignee, assignment or sublet, Landlord may by written notice to Tenant elect to either (i) sublease the Premises or the portion thereof as shall be specified in said notice for its own account upon the same terms as those offered to the proposed subtenant or assignee, as the case may be; or (ii) terminate this Lease as to the portion (including all) of the Premises so proposed to be subleased or assigned with a proportionate abatement in the rent payable hereunder. If Landlord does not exercise either of these options within said fifteen-day period, Tenant may thereafter within ninety (90) days after the expiration of said fifteen-day period enter into a valid assignment or sublease of the Premises or portion thereof, upon the terms and conditions described in the information required to be furnished by Tenant to Landlord hereunder, or other terms not less favorable to Tenant, subject, however, to Landlord's consent as herein provided.
No subletting or assignment, even with the consent of Landlord, shall relieve Tenant of its obligation to pay the rent and perform all the other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any assignment or subletting.
ARTICLE 13
MORTGAGE SUBORDINATION
Upon the written request of Landlord or of any lessor under a sale and
leaseback of the land and/or building in which the Premises are situated or of
any mortgagee or beneficiary of Landlord, Tenant will from time to time in
writing subordinate its rights hereunder to the interest of any such lessor, as
well as to the lien of any mortgage or deed of trust now or hereafter in force
against the land and building of which the Premises are a part or against any
buildings hereafter placed upon the land of which the Premises are a part, and
to all advances made or hereafter to be made upon the security thereof. Such
written subordination shall be executed and delivered to Landlord within ten
(10) days from Tenant's receipt of a request for the same. If Tenant fails to
execute and deliver such statement to Landlord within said ten-day period,
Landlord may, as attorney-in-fact of Tenant, coupled with an interest, execute
such statement for, and on behalf, and in the name of Tenant. If requested by
Landlord in writing, Tenant shall give similar certificates from time to time
during the term of this Lease in the manner hereinabove provided.
Tenant agrees to give any mortgagees and/or trust deed holders, by registered mail, a copy of any notice of default served upon the Landlord, provided that prior to such notice Tenant has been notified, in writing, (by way of Notice of Assignment of Rents and Leases, or otherwise) of the address of such mortgagees and/or trust deed holders. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the mortgagees and/or trust deed holders shall have an additional thirty (30) days within which to cure such default or if such default cannot be cured within that time, then such additional time as may be necessary if within such thirty (30) days, any mortgagee and/or trust deed holders has commenced and is diligently pursuing the remedies necessary to cure such default, including but not limited to commencement of foreclosure proceedings, if necessary to effect such cure), in which event this Lease shall not be terminated while such remedies are being so diligently pursued.
Landlord agrees to obtain from its lender, if any, a non-disturbance agreement in form acceptable to Landlord and the lender, providing that as long as Tenant performs its obligations hereunder, no foreclosure, deed in lieu of foreclosure or trustee's sale shall affect Tenants rights.
Notwithstanding anything to the contrary expressed in this Lease, Tenant agrees to amend or modify this Lease in any particulars as may be reasonably required by any mortgagee or beneficiary of Landlord so long as any such amendments or modifications do not materially alter the substantive rights of Tenant herein and so long as Landlord has agreed to the same.
ARTICLE 14
EMINENT DOMAIN
In the event the entire Premises shall be appropriated or taken under the power of eminent domain this Lease shall terminate and expire as of the date of such taking.
In the event more than twenty-five percent (25%) of the square footage of the Premises is taken under the power of eminent domain, or if by reason of any appropriation or taking,
regardless of the amount so taken, the remainder of the Premises is not one undivided parcel of property, either Landlord or Tenant shall have the right to terminate this Lease as of the date Tenant is required to vacate a portion of the Premises upon giving notice in writing of such election within thirty (30) days after receipt by Tenant from Landlord of written notice that said Premises have been so appropriated or taken.
If neither Landlord or Tenant elects to so terminate this Lease, Tenant shall remain in that portion of the Premises which shall not have been appropriated or taken as herein provided, or in the event less than twenty-five percent (25%) of the square footage of the Premises shall be appropriated under the power of eminent domain by any public or quasi-public authority, and the remainder thereof is an undivided parcel of property, then in either such event Landlord agrees, at Landlord's cost and expense, as soon as reasonably possible to restore the Premises on the land remaining to a complete unit of like quality and character as existed prior to such taking; and thereafter the Minimum Rent shall be reduced on an equitable basis, taking into account the relative value of the portion taken as compared to the portion remaining.
All awards for the taking of any part of the Premises shall be the property of Landlord, whether made as compensation for diminution of value of the leasehold estate, for the taking of the fee, or as severance damages, provided that Tenant shall be entitled to any award for loss or damage to Tenant's fixtures or removable personal property if the same is sought by Tenant and is awarded separately.
For the purposes of this Article 14, a voluntary sale or conveyance in lieu of condemnation shall be deemed an appropriation or taking under the power of eminent domain.
ARTICLE 15
DESTRUCTION OF LEASED PREMISES
If the Premises be destroyed or damaged by fire or other perils to such
an extent that they cannot be repaired and restored within one hundred twenty
(120) days, Landlord shall have the option to terminate this Lease; otherwise
Landlord shall forthwith and with due diligence, repair and restore said
building and Premises to substantially their condition immediately prior to such
damage or destruction. Tenant's Minimum Rent and other charges during the period
of such repair and restoration shall not abate and Tenant shall promptly pay all
amounts coming due hereunder.
If the damage or destruction referred to in the preceding paragraph amounts to at least 25% of the Premises and occurs during the last year of the term of this Lease, then Landlord and Tenant shall each have the option, at the election of either of them, to terminate this Lease effective as of the date of such damage or destruction, and any unearned rents paid in advance shall be refunded. If this Lease shall not be terminated as provided in this paragraph, the Premises shall be repaired and restored as hereinabove provided.
In the event Landlord is either obligated or elects to repair and restore the building and Premises, Landlord shall have the immediate right to enter the Premises for such purpose.
ARTICLE 16
BANKRUPTCY - INSOLVENCY
Tenant agrees that in the event all or substantially all Tenant's assets be placed in the hands of a receiver or trustee, and such receivership continues for a period of thirty (30) days, or should Tenant make an assignment for the benefit of creditors or be finally adjudicated a bankrupt, or should Tenant institute any proceedings under the Bankruptcy Act as the same now exists or under any amendment thereof which may hereafter be enacted, or under any other act relating to the subject of bankruptcy, wherein Tenant seeks to be adjudicated a bankrupt or to be discharged of its debts or to effect a plan of liquidation, composition of reorganization, or should any voluntary proceedings be filed against Tenant under any such bankruptcy laws and such proceeding not be removed within ninety (90) days thereafter, then this Lease or any interest in and to the Premises shall not become an asset in any of such proceedings and, in any such events and in addition to any and all rights or remedies of Landlord hereunder or by law provided, it shall be lawful for Landlord to declare the term hereof ended and to re-enter the Premises and take possession thereof and remove all persons therefrom, and Tenant shall have no further claim thereon or hereunder. The provisions of this Article 16 shall also apply to any Guarantor of this Lease. In no event shall this Lease or any interest of the Tenant therein be assigned or transferred by operation of law without the express written consent of Landlord.
ARTICLE 17
DEFAULT RE-ENTRY REMEDIES
In the event of any breach of any of the terms of this Lease by Tenant, then Landlord, besides other rights and remedies it may have under the laws in force, shall have the immediate right of re-entry and may move all persons and property from the Premises. Such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant. Should Landlord elect to re-enter or should it take possession pursuant to legal proceedings it may either terminate this Lease or it may, without terminating this Lease, re-let said Premises or any part thereof for such term or terms and at such rental and upon such other terms and conditions as Landlord in its sole discretion may deem advisable with the right to make alterations and repairs to said Premises. Rentals received by Landlord from such re-letting shall be applied: first, to the payment of any indebtedness, other than rent due hereunder; second, to the payment of rent due and unpaid hereunder; third, to the payment of any cost of such re-letting; fourth, to the payment of the cost of any alterations and repairs to the Premises; and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. Should such rentals received from such re-letting during any month be less than that agreed to be paid during that month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord monthly. Tenant shall also pay as soon as ascertained the cost and expense incurred by Landlord in such re-letting or in making such alterations and repairs. No such re-entry or taking possession of said Premises shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant. Notwithstanding any such re-letting without termination, Landlord may at any time thereafter elect to terminate this Lease in addition to any other remedy it may have, it may recover from Tenant all damages it may incur by reason of such breach, including the cost of recovering the Premises and including the worth at the time of such termination of the excess, if any, of the amount or rent and charges equivalent to rent reserved in this Lease for the remainder
of the stated term over the then reasonable rental value of the Premises for the remainder of the stated term.
For the purposes of this Article 17, the rental agreed to be paid by tenant or the amount of rental payable by Tenant shall be deemed to be the Minimum Rental and all other sums required to be paid by Tenant pursuant to the terms of this Lease. All such sums, other than the Minimum Rental, shall be computed on the basis of the average monthly amount thereof, accruing during the preceding term of the lease.
In the event of default, all Tenant's fixtures, furniture, equipment, improvements, additions, alterations, and other personal property shall remain on the Premises and in that event, and continuing during the length of said default, Landlord shall have the right to take the exclusive possession of same and to use same, rent or charge free, until all defaults are cured or, at its option, at any time during the term of this Lease, to require Tenant to forthwith remove same.
The waiver by Landlord of any breach of any term herein contained shall not be deemed to be a waiver of such term or any subsequent breach of the same or any other term herein contained. The subsequent acceptance of rent by Landlord shall not be deemed to be a waiver of any preceding breach of Tenant of any term of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. No term of this Lease shall be deemed to have been waived by Landlord unless such waivers shall be in writing.
ARTICLE 18
SURRENDER OF PREMISES
Tenant shall, upon expiration or termination of the term hereby created, surrender the Premises in good condition and repair, reasonable wear and tear excepted. Tenant shall promptly surrender all keys for the Premises at the place then fixed for payment of rent and shall inform Landlord of combinations on any locks and safes on the Premises. At the expiration or earlier termination of this Lease, Tenant shall execute, acknowledge and deliver to Landlord, within five days after written demand from Landlord to Tenant, any quit-claim deed or other document required by a reputable title company to remove the cloud of this Lease from the real property upon which the Premises are situated.
ARTICLE 19
FOLDING OVER
If Tenant shall hold over after the term of this Lease, Tenant shall become a tenant on a month-to-month basis upon all the terms, covenants and conditions herein specified, but exclusive of any renewal options.
ARTICLE 20
FIXTURES AND PERSONAL PROPERTY
Any trade fixture, signs and other personal property of Tenant not permanently affixed to the Premises shall remain the property of Tenant, and Landlord agrees that Tenant shall have the
right, provided Tenant be not in default under the terms of this Lease, at any time, and from time to time, to remove any and all of its trade fixtures, signs and other personal property which it may have stored or installed in the Premises. Tenant at its expense shall immediately repair any damage occasioned to the Premises by reason of the removal of any such trade fixtures, signs and other personal property, and upon expiration or earlier termination of this Lease, shall leave the Premises in a neat and clean condition, free of debris. All other improvements to the Premises by Tenant, including but not limited to floor coverings, carpeting, and partitions, shall become the property of Landlord upon expiration or earlier termination of this Lease.
ARTICLE 21
REIMBURSEMENT
All covenants and terms herein contained to be performed by Tenant shall be performed by it at its expense, and if Landlord shall pay any sum of money or do any act which required the payment of money by reason of the failure of Tenant to perform such covenant or term, the sum or sums of money so paid shall be considered as additional rental and shall be payable by Tenant on the first of the month next succeeding such payment, together with interest at the maximum contractual rate permitted by law.
ARTICLE 22
CONSENTS BY LANDLORD
Whenever under this Lease provision is made for Tenant to secure the written consent or approval by Landlord, such consent or approval shall be in writing and shall not be unreasonably withheld.
ARTICLE 23
NOTICES
Any notice required or permitted under this Lease shall be deemed sufficiently given or served when sent by certified mail to Tenant at the address of the leased Premises as set forth in Paragraph D of the Basic Lease Provisions, and to Landlord at the address then fixed for payment of rent, and either party may by like written notice at any time designate a different address to which notices shall subsequently be sent.
ARTICLE 24
LITIGATION, COURT COSTS, ATTORNEY'S FEES
In the event at any time either Landlord or Tenant shall institute any action or proceeding against the other relating to the provisions of this Lease, or any default hereunder, then and in that event, the prevailing party in such action or proceeding shall be entitled to recover from the other party its reasonable costs, expenses and attorneys' fees, which shall be deemed to have accrued on the commencement of such action or proceeding and shall be enforceable whether or not such action is prosecuted to judgment. In addition, Landlord shall be entitled to all attorney's fees and all other costs incurred in the preparation and service of any notice or demand hereunder, whether or not a legal action is subsequently commenced. The parties waive trial by jury in any action, proceeding or counterclaim brought by either of them against the other on any matters whatsoever arising under this Lease. This Lease shall be construed in accordance with
the laws of the State of Arizona and the proper venue for any legal action shall be Maricopa County, Arizona.
ARTICLE 25
SALE OF PREMISES BY LANDLORD OR RE-LEASING
In the event of any sale or exchange of the Premises by Landlord and assignment by Landlord of this Lease, Landlord shall be and is hereby entirely relieved of all liability under all of its covenants and obligations contained in or derived from this Lease arising out of any act, occurrence or omission relating to the Premises or this Lease occurring after the consummation of such sale or exchange and assignment. Landlord and its authorized agents and representatives shall be entitled to enter the Premises at all reasonable times for the purpose of exhibiting the same to prospective purchasers and, during the final six (6) months of the term and any extension or renewal of the term hereof, Landlord shall be entitled to exhibit the Premises for hire and/or for sale and to display thereon in such manner as will not unreasonably interfere with Tenant's business the usual "For Sale" or "For Lease" signs, and such signs shall remain unmolested on the Premises.
ARTICLE 26
SECURITY DEPOSIT
Tenant will, on or before __________________, 1994, deposit with Landlord the sum, if any, set forth in Paragraph I of the Basic Lease Provisions as "Security Deposit." Said deposit shall be held by Landlord without liability for interest as security for the faithful performance by Tenant of all the terms of this Lease. Landlord shall have the right to commingle said security deposit with its other funds.
If any of the rent or any other sum payable by Tenant should be overdue and unpaid or if Landlord should make payments on behalf of Tenant, or if Tenant should fail to perform any of the terms of this Lease, then Landlord may, at its option and without prejudice to any other remedy appropriate and apply said deposit or so much thereof as may be necessary to compensate Landlord toward the payment of rent or Additional Charges or loss or damage sustained by Landlord due to such breach on the part of Tenant; and Tenant shall upon demand restore said security to the original sum deposited. Should Tenant comply with all of the terms of this Lease, said deposit or any balance thereof shall be returned to Tenant or, at the option of Landlord, to the last assignee of Tenant's interest in this Lease at the expiration of the lease term.
ARTICLE 27
NO PERSONAL LIABILITY TO LANDLORD
Tenant shall look solely to Landlord's interest in the Premises for the satisfaction of any judgment or decree requiring the payment of money by Landlord based upon any default under this Lease, and no other property or assets of Landlord shall be subject to levy, execution or other enforcement procedures or satisfaction of any such judgment or decree.
ARTICLE 28
GRANT OF EASEMENTS
Tenant hereby consents to any and all conveyances or grants of easements upon the Premises which Landlord reasonably determines to be necessary in order to adequately provide utilities to, or ingress and egress from, the Premises.
ARTICLE 29
PARTIAL INVALIDITY
If any provision of this Lease is determined to be void by any court of competent jurisdiction, such determination shall not attest any other provision of this Lease and such other provision shall remain in full force and effect. If any provision of this Lease is capable of two constructions, one of which would render the provision void and one of which would render the provision valid, the provision shall be interpreted in the manner which would render it valid.
ARTICLE 30
ESTOPPEL CERTIFICATE
Tenant shall, within five (5) days of Landlord's written request, execute and deliver to Landlord a written declaration that this Lease is in full force and effect, that there are no incurred defaults in Landlord's performance, that this Lease has not been assigned, modified, supplemented or amended (except by such writings as shall be stated); that all conditions under this Lease to be performed by Landlord have been satisfied; that there are no defenses or offsets against the enforcement of this Lease by the Landlord, or stating those claimed by Tenant; the amount of advance rental, if any, (or none if such is the case) paid by Tenant the date to which rental has been paid; and the amount of security deposited with Landlord. Such declaration shall be executed and delivered by Tenant from time to time as may be requested by Landlord. Landlord's mortgage lenders and/or purchasers shall be entitled to rely upon same. Tenant's failure to deliver such declaration within the time permitted hereby shall be conclusive upon Tenant that this Lease is in full force and effect, except to the extent any modification has been represented by Landlord, and that there are no incurred defaults in Landlord's performance, and that not more than one month's rent has been paid in advance.
ARTICLE 31
LATE PAYMENT CHARGE
Tenant shall pay to Landlord a late payment charge in the amount of $25.00 per day for each and every day any amount remains due and payable to Landlord hereunder commencing on the fifth day after any such amount first becomes due and payable; provided, however, the delay in imposition of the late payment charge shall not be construed as extending the date on which sums become due and payable hereunder, nor as extending the date on which a default shall be deemed to have occurred by its failure to pay sums due to Landlord hereunder.
ARTICLE 32
BROKER'S FEE
Tenant represents and warrants to Landlord that there is no agent, broker, finder, or other party with whom Tenant has dealt who are or may be entitled to any commission or fee with respect to this Lease or the Premises.
ARTICLE 33
ENVIRONMENTAL COMPLIANCE.
Tenant covenants and agrees not to use, generate, manage, treat,
manufacture, store or dispose of on, under or about the Premises or transport to
or from the Premises any Hazardous Materials (other than De Minimis Amounts).
For the purpose of this Lease, "Hazardous Materials" shall include but not be
limited to any and all chemicals, materials or substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes" or "toxic substances" in
the laws of any governmental authority having jurisdiction over the Premises
(and any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any such governmental authority) or any rules or
regulations adopted and guidelines promulgated pursuant to any of the foregoing
laws, as all such laws, rules or regulations may be amended or replaced from
time to time (collectively "Hazardous Materials Laws"). The term "De Minimis
Amounts" shall mean, with respect to any given level of Hazardous Materials,
that such level or quantity of Hazardous materials in any form or combination of
forms (i) does not constitute a violation of any Hazardous Materials Laws and
(ii) is customarily employed in, or associated with, similar projects in the
county where the Premises are located. Tenant further covenants and agrees to
pay all costs and expenses associated with all enforcement, removal, remedial or
other governmental or regulatory actions, agreements or orders threatened,
instituted or completed pursuant to any Hazardous Materials Laws, and all
audits, tests, investigations, "cleanup," reports and other such items incurred
in connection with any efforts to complete, satisfy or resolve ay matters,
issues or concerns, whether governmental or otherwise, arising out of the use,
generation, management, treatment, manufacturing, storage, disposal or
transportation of Hazardous Materials in any amount by Tenant, its employees,
agents, invitees, subtenants, licensees, assignees or contractors.
ARTICLE 34
MISCELLANEOUS
A. Time is of the essence of this Lease and the terms and conditions hereof shall extend to and be binding upon the heirs, executors, successors and assigns of the parties hereto, and any mention of the singular shall include the plural and the plural shall include the singular.
B. Tenant shall not record this Lease without the written consent of Landlord.
C. The section headings contained in this Lease are for purposes of reference only and shall not limit or define the meaning of any of the terms or provisions hereof.
D. The word "Landlord" shall include not only the original Landlord, but also any person or entity hereafter acquiring the Landlord's interest in this Lease.
E. This Lease may be amended only by an instrument in writing signed by both parties.
F. It is agreed that nothing contained in this Lease shall be deemed or construed as creating a partnership of joint venture between Landlord and Tenant or between Landlord and any other party, or cause Landlord to be responsible in any way for the debts or obligations of Tenant, or any other party.,
IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written.
LANDLORD:
2844 West Deer Valley, L.L.C.,
an Arizona limited liability company
By:_________________________________________
Its:________________________________________
TENANT:
The Clinton Harley Corporation, an Arizona
corporation
EXHIBIT 10.13
LEASE AMENDMENT
In consideration of the rents and covenants set forth herein and in the Lease (as defined below), Landlord and Tenant hereby amend the Lease.
BASIC LEASE PROVISIONS
A. DATE: The date of this Lease Amendment is August 19, 2002.
B. LEASE: That certain lease dated as of July 2, 2001.
C. LANDLORD: John C. White and Cynthia L. White as Trustees of the John C.
and Cynthia L. White Family Trust.
D. TENANT: The Clinton Harley Corporation, a Delaware corporation.
E. PREMISES: 9751 Delegates Drive, Orlando, Florida; see Exhibit "A" of the Lease for legal description.
ARTICLE 1
TERM
Landlord and Tenant hereby agree that the Term for the Premises shall be extended, and that the Lease expiration shall be midnight, August 19, 2022.
ARTICLE 2
EFFECT
Other than as set forth above, the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written.
TENANT:
The Clinton Harley Corporation,
a Delaware corporation
By: /s/ ROBERT D. HARTMAN -------------------------------------- Robert D. Hartman, President/CEO |
LANDLORD:
John C. White and Cynthia L. White as
Trustees of the John C. and Cynthia L. White
1989 Family Trust
By: /s/ JOHN C. WHITE -------------------------------------- John C. White By: /s/ CYNTHIA L. WHITE -------------------------------------- Cynthia L. White |
LEASE AGREEMENT
In consideration of the rents and covenants hereinafter set forth, Landlord hereby leases and demises to Tenant and Tenant hereby leases and takes from Landlord the "Premises," hereinafter described in the terms and conditions set forth in the Lease Agreement, hereinafter called "this Lease."
BASIC LEASE PROVISIONS
The words and figures set forth in Paragraphs A to K, both inclusive, are part of this Lease wherever appropriate reference is made thereto, unless expressly modified elsewhere in the Lease.
A. DATE OF EXECUTION: As of the 2nd of July, 2001.
B. LANDLORD: John C. White and Cynthia L. White as Trustees of the John C.
and Cynthia L. White 1989 Family Trust.
C. TENANT: The Clinton Harley Corporation, a Delaware corporation.
D. PREMISES: 9751 Delegates Drive, Orlando, Florida; see Exhibit "A" attached hereto and incorporated herein.
E. TERM: Fifteen (15) years.
F. LEASE COMMENCEMENT DATE: This lease shall commence on January 1, 2002, and expire at midnight on December 31, 2016.
G. BASE RENT: Twenty-seven thousand one hundred seventy-two and 14/100 Dollars ($27,172.14) per month during the first year of the Term, plus applicable taxes plus expenses as outlined in the lease agreement.
H. USE OF PREMISES: EDUCATIONAL
I. SECURITY DEPOSIT: NONE
J. LANDLORD'S ADDRESS FOR RENT AND NOTICES:
John C. White and Cynthia L. White as Trustees of the John C. and Cynthia
L. White
1989 Family Trust
% Cutler Commercial
2150 East Highland Avenue, Suite 207
Phoenix, AZ 85016
K. TENANT'S ADDRESS FOR NOTICE:
Robert D. Hartman, President
The Clinton Harley Corporation
10851 North Black Canyon Highway, Suite 600
Phoenix, AZ 85029
ARTICLE 1
LEASED PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, that certain Premises described in Paragraph D of the Basic Lease Provisions.
ARTICLE 2
TERM
The term of this Lease shall be for the period set forth in Paragraph E of the Basic Lease Provisions. Notwithstanding the commencement and expiration date set forth in Paragraph F of the Basic Lease Provisions, if for any reason Landlord cannot deliver possession of the Premises to Tenant on said date, Landlord shall not be subject to any liability therefore, nor shall such failure affect the validity of this Lease or the obligations of Tenant hereunder, but the commencement date and expiration date of this Lease shall be extended the same period of time until Landlord delivers possession of the Premises to Tenant. If Tenant occupies the Premises prior to said commencement date, said occupancy shall be subject to all the provisions hereof, such occupancy shall not advance the expiration date, and Tenant shall pay rent for such period at the initial monthly rate set forth in Paragraph G of the Basic Lease Provisions.
ARTICLE 3
RENT
Tenant shall pay in advance to Landlord as rent for the Premises without notice, demand, deduction or any setoff whatsoever at the address of Landlord as set forth in Paragraph J of the Basic Lease Provisions or such other address as may be specified by Landlord, the following amounts:
A. Minimum rent (herein called "Minimum Rent") in the total sum and in the manner set forth in Paragraph G of the Basic Lease Provisions together with all applicable taxes as set forth in Article 11 herein, payable monthly on the first day of each month during the term hereof, with adjustments for fractional months. Said rent shall commence on the date set forth in Paragraph F of the Basic Lease Provisions.
B. The annual Minimum Rent shall be adjusted and increased as of the first day of January of each lease year (hereinafter the "Adjustment Date") commencing the first of January following the Lease Commencement Date, as set forth in Paragraph F of the Basic Lease Provisions, in the following manner:
i. For the first five (5) years of the Term, the annual rent shall be:
1/1/02-12/31/02 $5.99 psf $326,065.65 / 12 = 27,172.14 1/1/03-12/31/03 6.21 psf 338.041.35 / 12 = 28,170.11 1/1/04-12/31/04 6.43 psf 350,017.05 / 12 = 29,168.09 1/1/05-12/31/05 6.67 psf 363.081.45 / 12 = 30,256.79 1/1/06-12/31/06 8.83 psf 480,661.05 / 12 = 40,055.09 |
ii. After the first five (5) years of the Term, the annual rent shall be increased by the greater of (a) an amount equal to 4 percent of the annual rent for the immediately preceding lease year, or (b) the percentage of increase in the Consumer Price Index ("CPI"). The CPI is defined as the Consumer Price Index of the Bureau of Labor Statistics of the Department of Labor for All Urban Consumers, (1967=100), "All Items," for the city nearest the location of the Premises. The CPI increase shall be calculated by multiplying the rent for the prior year by a fraction, the numerator of which shall be the CPI of the calendar month and year in which the adjustment is to take effect, and the denominator of which shall be the CPI for the same calendar month and year prior. In the event the compilation and/or publication of the Consumer Price Index shall be transferred to any other governmental department or bureau or agency, or shall be discontinued, then the index most nearly the same as the CPI shall be used to make the increase calculation. In the event that Landlord and Tenant cannot agree on such alternative index, then the matter shall be submitted for decision to the American Arbitration Association in the County in which the Premises are located, in accordance with the then rules of said association and the decision of the arbitrators shall be binding upon the parties, notwithstanding one party failing to appear after due notice of the proceeding. The cost of said Arbitrators shall be paid equally by Landlord and Tenant. Until the arbitration is settled, the Tenant shall continue to pay the rent at the rate determined by the 4 percent increase calculation set forth above. Within five (5) days following the date on which the increase is determined, if it is greater than the 4 percent calculation, the Tenant shall make such payment to the Landlord as will bring the increased rent current, commencing with the effective date of such increase through the date of any rent installments then due. Thereafter the rent shall be paid at the increased rate. Such adjusted annual rent shall be payable monthly, as provided herein, beginning with the Adjustment Date.
C. The term "lease year" as used herein shall be deemed to mean a period of twelve (12) consecutive months commencing with the 1st day of January and ending with the 31st day of December of each year, both dates inclusive, provided that the first "lease year" shall begin with the date the term of this Lease commences and shall end on the succeeding December 31st, and except that the last "lease year" shall end on the last day of the lease term.
ARTICLE 4
POSSESSION
Possession of the Premises shall be delivered to Tenant on an AS IS condition.
ARTICLE 5
BUSINESS USE
The Premises shall be used and occupied by Tenant only for the purpose set forth in Paragraph H of the Basic Lease Provisions, and for no other purpose. Tenant shall, at its sole cost, comply with and shall faithfully observe all the requirements of municipal, state, and
federal authorities now in force, or that hereafter may be in force, pertaining to the use of the Premises as well as the requirements and regulations of the Board of Fire Underwriters, Landlord's and/or Tenant's insurance companies, and other organizations establishing insurance rates.
ARTICLE 6
SIGNS
Tenant may place any sign on the Premises that is consistent with the regulations of Orange County and the deed restrictions of Orlando Central Park. Notwithstanding the above, Tenant shall upon request of Landlord immediately remove any exterior or interior sign, advertisement, declaration, lettering or notice that Tenant may hereafter place or permit to be placed in, upon, above, or about the Premises and that Landlord reasonably deems objectionable or offensive, and if Tenant fails or refuses so to do Landlord may, at Tenant's sole cost, enter upon the Premises and remove the same.
ARTICLE 7
MAINTENANCE AND SANITATION
A. Tenant shall repair any damage to the Premises caused by Tenant or by any of Tenant's employees, agents, customers, invitees or licensees, other than from ordinary wear. Tenant shall maintain the interior of the Premises and all doors, windows, heating, cooling and mechanical equipment and plate glass, and Landlord agrees whenever possible to extend to Tenant the benefit of any enforceable manufacturer's warranties on such equipment. If Tenant refuses or neglects to make repairs and/or maintain the Premises, or any part thereof, in a manner reasonably satisfactory to Landlord, Landlord shall have the right, upon giving tenant reasonable written notice of its election to do so, to make such repairs or perform such maintenance on behalf of and for the account of Tenant. In such event such work shall be paid for by Tenant promptly upon receipt of a bill therefor. Tenant shall not decorate or paint the exterior of the Premises, or any part thereof, except in the manner and color approved by Landlord. Landlord may, at its option, enter into a maintenance agreement for the maintenance of any heating and air conditioning units serving the Premises. The cost of any such agreement attributable to the Premises shall be paid by Tenant promptly upon receipt of a bill therefor.
B. Tenant shall also maintain the roof, exterior walls, all aspects of the exterior of the building, parking lot, as well as all aspects of the property (including but not limited to sidewalks, landscaping, drainage, etc.). Landlord shall not in any way be liable to Tenant for failure to maintain the Premises or make repairs.
C. Tenant shall provide and maintain trash receptacles, with covers thereon, about the Premises in which to place any trash, and cause such trash to be removed from the area as often as required to maintain a sanitary condition but in no instance less than twice weekly.
ARTICLE 8
ALTERATION, REPAIR AND LIENS
A. Tenant shall not make any alterations or additions upon the Premises without the prior written consent of Landlord. Any alterations or additions that are approved will be made by the Tenant at its own expense.
B. If any liens should be asserted against the Premises arising out of work performed or materials furnished upon or at the instance of Tenant, Tenant shall, within fifteen (15) days thereafter, cause said lien to be discharged either by paying the same or by recording a surety bond in accordance with the provisions of Chapter 713, Florida Statutes.
C. Tenant shall be solely responsible for all repair, modification, alteration or reconstruction required to be made to the Premises as a result of any governmental act, law, rule, or regulation, including but not limited to the Americans With Disabilities Act.
ARTICLE 9
UTILITY SERVICES
Tenant shall pay for all utilities and services that may be furnished to or used in or about the Premises and shall keep the same free and clear of any lien or encumbrance of any kind whatsoever created by Tenant's acts or omissions. Landlord shall not be liable for any failure or interruption of any utility service being furnished to the Premises and no such failure or interruption shall entitle Tenant to terminate this Lease or abate any payment of rent.
ARTICLE 10
INDEMNITY AND INSURANCE
Tenant covenants that Landlord shall not be liable for any damage or liability of any kind or for any injury to or death of persons or damage to property of tenant or any other person during the term of this Lease, from any cause whatsoever, by reason of the use, occupancy and enjoyment of the Premises by Tenant or any person thereon or holding under said Tenant, and that Tenant will indemnify and save harmless Landlord from all liability whatsoever on account of any such damage or injury and from all liens, claims, and demands arising out of the use of the Premises and its facilities or any repairs or alterations that Tenant may make upon the Premises, but Tenant shall not be liable for damage or injury occasioned by the gross negligence or intentional acts of Landlord and its designated agents, servants, or employees, unless covered by insurance Tenant is required to provide. This obligation to indemnify shall include reasonable attorney's fees and investigation costs and all other reasonable costs, expenses, and liabilities from the first notice that any claim or demand is to be made or may be made.
Landlord and Tenant hereby waive any rights each may have against the other on account of any loss or damage occasioned to Landlord or Tenant, as the case may be, their respective property, the Premises, or its contents, arising from any risk generally covered by fire and extended coverage insurance policies then in use in the State of Florida, and the parties each, on behalf of their respective insurance companies insuring the property of either Landlord or Tenant against any such loss, waive any right of subrogation that such companies may have against Landlord or Tenant, as the case may be. In the event that the insurance company of Tenant does not
waive the right of subrogation against Landlord and its insurance company, Tenant shall (i) maintain during the term of this Lease, fire legal liability coverage with respect to the Premises, and (ii) shall pay to Landlord upon demand, Landlord's cost incurred in securing fire legal liability insurance protecting Landlord in the event of the destruction of Tenant's property.
From and after the date of delivery of the Premises to Tenant, Tenant shall maintain, at its expense, the following types of insurance:
(i) Public Liability Insurance. Comprehensive general public liability insurance (including personal injury, contractual, products and completed operations, and automobile liability including non-owned and hired) with limits of not less than One Million Dollars ($1,000,000.00) per occurrence insuring against any and all liability of the insured with respect to the Premises or arising out of the maintenance, use, or occupancy thereof. All insurance shall specifically insure the performance by Tenant of the indemnity agreement in this Article 10 contained. Said insurance shall be the primary insurance as respects to the Landlord and not participating with any other available insurance. In no event shall the limits of said policies be considered as limiting the liability of Tenant under this Lease.
(ii) Fire and Extended Coverage Insurance. Tenant shall provide and pay for fire and extended coverage insurance insuring the building and improvements to the Premises. Such fire and extended coverage insurance shall be obtained by Tenant in an amount equal to at least one hundred percent (100%) of the full insurable value of the building and improvements. Any and all such policies shall show Landlord as an additional insured and sole loss payee.
(iii) Insurance of Personal Property. Tenant shall at all times during the Term hereof, and at its cost and expense, maintain in effect policies of insurance covering (i) its fixtures and equipment located on the Premises, in an amount not less than one hundred percent (100%) of their replacement value, providing protection against any peril included within the classification "Fire and Extended Coverage," together with insurance against sprinkler damage, vandalism, and malicious mischief, and (ii) all plate glass on the Premises. The proceeds of such insurance, so long as this Lease remains in effect, shall be used to repair or replace the fixtures, equipment and plate glass so insured.
(iv) Business Interruption Insurance. Tenant shall carry business interruption insurance in an amount sufficient to pay all rent amounts coming due hereunder.
All policies of insurance to be provided by Tenant hereunder shall be issued by insurance companies acceptable to Landlord and qualified to do business in the State of Florida, and shall be issued in the names of Landlord and Tenant, for the mutual joint benefit and protection of Landlord and Tenant, and executed copies of such policies of insurance or certificates thereof shall be delivered to Landlord within ten (10) days after delivery of possession of the Premises to Tenant and thereafter new policies or renewal certificates within thirty (30) days prior to the expiration of the term of each such policy. All public liability and property damage policies shall contain a provision that Landlord, although named as an insured, shall nevertheless be entitled to recovery under said policies for any loss occasioned to it, its servants, agents and employees by reason of the negligence or intended acts of Tenant. As often as any such policy shall expire or terminate, renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent. All policies of insurance delivered to Landlord must contain a provision that the company writing said policy will give to Landlord twenty (20) days notice in writing in advance of any cancellation or lapse of the effective date of any reduction in the amounts of insurance. All policies shall be written as primary policies, not contributing with and not in excess of coverage that Landlord may carry.
ARTICLE 11
OTHER PAYMENTS BY TENANT
In addition to rent, Tenant shall pay to Landlord, during each lease year or partial lease year, all ad valorem taxes and assessments levied and assessed for any such year upon the Improvements and the underlying realty, including taxes `currently due but not yet paid. Payment shall be made by Tenant in the following manner:
(i) Commencing on the date that Minimum Rent commences and thereafter on the first day of each calendar month throughout the term of this Lease, Tenant shall pay to Landlord along with Minimum Rent the ad valorem taxes and assessments (including special and improvement district assessments) as estimated by Landlord from time to time.
(ii) Within sixty (60) days following the end of any lease year, Landlord shall furnish Tenant a statement covering the year just expired, certified as correct by an authorized representative of Landlord, setting forth the total ad valorem taxes and assessments. If such ad valorem taxes and assessments exceed Tenant's payments so made, Tenant shall pay to Landlord the deficiency within ten (10) days after receipt of said statement. If said payments exceed such ad valorem taxes and assessments, Tenant shall be entitled to offset the excess against payments next thereafter to become due Landlord as set forth herein.
With respect to any assessments levied against or upon the Premises and the underlying realty, which may be paid in annual installments, only the amount of such annual installment (with appropriate proration for any partial year) and statutory interest shall be included within the
computation of the annual taxes and assessments levied against the Premises and the underlying realty.
Tenant shall pay prior to delinquency all taxes against and levied upon fixtures, furnishings, equipment and all other personal property of Tenant contained in the leased Premises.
Tenant shall pay to Landlord, in addition to and along with the rent otherwise payable hereunder, any excise, transaction, sales or privilege tax, or any other tax now or hereafter imposed by any government or agency upon Landlord and attributed to or measured by rent or prorations payable by Tenant.
In the event the real property taxes are withdrawn in whole or in part and any assessments, taxes, fees, levies or charges are imposed as a substitute for, or otherwise in lieu of increases in said real property taxes, so as to pay for governmental services formerly provided without separate charge to property owners or occupants, such as fire protection, sidewalk and street maintenance, and refuse collection and removal, the same shall be considered "real property taxes" for purposes of this Lease regardless of how denominated or the source from which they are collected. The term "real property taxes" shall also include all expenses reasonably incurred by Landlord in seeking reduction by the taxing authorities of real property taxes applicable to the Premises.
ARTICLE 12
ASSIGNMENT AND SUBLETTING
Tenant shall not either voluntarily or by operation of law, assign, sell, encumber, pledge or otherwise transfer all or any part of Tenant's leasehold estate hereunder, or permit the Premises to be occupied by anyone other than Tenant or Tenant's employees, or sublet the Premises or any portion thereof, without obtaining, in each such instance, Landlord's prior written consent. Any such assignment or other transfer or subletting shall be subject in each instance to the recapture option of Landlord set forth herein. Landlord's consent shall not be unreasonably withheld for any proposed assignment, provided that substantially the same type, class, nature and quality of business, merchandise, services, management and financial soundness of ownership is maintained and will continue to be furnished in a manner compatible with the high standards contemplated by this Lease and/ provided further, that none of the covenants, conditions or obligations imposed upon Tenant by this Lease, nor any of the rights, remedies or benefits afforded Landlord by this Lease are thereby impaired or diminished. Consent by Landlord to one or more assignments of this Lease or to one or more sublettings of the Premises shall not operate to exhaust Landlord's rights under this Article. The voluntary or other surrender of this Lease by Tenant or a mutual cancellation hereof shall not work a merger and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or shall operate as an assignment to Landlord of such subleases or subtenancies. If Tenant is a corporation or is an unincorporated association or partnership, the transfer, assignment or hypothecation of any stock or interest in such corporation, association or partnership in the aggregate in excess of forty-nine percent (49%) shall be deemed an assignment within the meaning and provisions of this Article.
If Tenant desires at any time to assign this Lease or to sublet the Premises or any portion thereof, it shall first notify Landlord of its desire to do so and shall submit in writing to Landlord (i) the name of the proposed subtenant or assignee; (ii) the nature of the proposed subtenant's or assignee's business to be carried on in the Premises; (iii) the terms and provisions of the proposed sublease or assignment; and (iv) such reasonable financial information as Landlord may request concerning the proposed subtenant or assignee. Any request for Landlord's approval of a sublease or assignment shall be accompanied with a check in such reasonable amount as Landlord shall advise for the cost of review and/or preparation of any documents relating to such proposed transfer, but in no event less than $250.00.
At any time within fifteen (15) days after Landlord's receipt of the information specified above, and provided that Landlord approves of the assignee, assignment, or sublet, Landlord may by written notice to Tenant elect to either (i) sublease the Premises or the portion thereof as shall be specified in said notice for its own account upon the same terms as those offered to the proposed subtenant or assignee, as the case may be; or (ii) terminate this Lease as to the portion (including all) of the Premises so proposed to be subleased or assigned with a proportionate abatement in the rent payable hereunder. If Landlord does not exercise either of these options within said fifteen-day period, Tenant may thereafter within ninety (90) days after the expiration of said fifteen-day period enter into a valid assignment or sublease of the Premises or portion thereof, upon the terms and conditions described in the information required to be furnished by Tenant to Landlord hereunder, or other terms not less favorable to Tenant, subject, however, to Landlord's consent as herein provided.
No subletting or assignment, even with the consent of Landlord, shall relieve Tenant of its obligation to pay the rent and perform all the other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any assignment or subletting.
ARTICLE 13
MORTGAGE SUBORDINATION
Upon the written request of Landlord or of any successor under a sale and
leaseback of the land and/or building in which the Premises are situated or of
any mortgagee or beneficiary of Landlord, Tenant shall from time to time in
writing subordinate its rights hereunder to the interest of any such successor,
as well as to the lien of any mortgage or deed of trust now or hereafter in
force against the land and building of which the Premises are a part or against
any buildings hereafter placed upon the land of which the Premises are a part,
and to all advances made or hereafter to be made upon the security thereof Such
written subordination shall be executed and delivered to Landlord within ten
(10) days from Tenant's receipt of a request for the same. If Tenant fails to
execute and deliver such statement to Landlord within said ten-day period,
Landlord may, as attorney-in-fact of Tenant, coupled with an interest, execute
such statement for, and on behalf, and in the name of Tenant. If requested by
Landlord in writing, Tenant shall give similar certificates from time to time
during the term of this Lease in the manner hereinabove provided.
Tenant agrees to give any mortgagee, by registered mail, a copy of any
notice of default served upon the Landlord, provided that prior to such notice
Tenant has been notified, in writing, (by way of Notice of Assignment of Rents
and Leases, or otherwise) of the address of such mortgagee. Tenant further
agrees that if Landlord shall have failed to cure such default within the time
provided for in this Lease, then the mortgagee shall have an additional thirty
(30) days within which to cure such default or if such default cannot be cured
within that time, then such additional time as may be necessary if, within such
thirty (30) days, any mortgagee has commenced and is diligently pursuing the
remedies necessary to cure such default, including but not limited to
commencement of foreclosure proceedings, if necessary to effect such cure, in
which event this Lease shall not be terminated while such remedies are being so
diligently pursued.
Landlord agrees to obtain from its lender, if any, a nondisturbance agreement in form acceptable to Landlord and the lender, providing that as long as Tenant performs its obligations hereunder, no foreclosure or deed in lieu of foreclosure shall affect Tenants rights.
Notwithstanding anything to the contrary expressed in this Lease, Tenant agrees to amend or modify this Lease in any particulars as may be reasonably required by any mortgagee or beneficiary of Landlord so long as any such amendments or modifications do not materially alter the substantive rights of Tenant herein and so long as Landlord has agreed to the same.
ARTICLE 14
EMINENT DOMAIN
In the event the entire Premises shall be appropriated or taken under the power of eminent domain this Lease shall terminate and expire as of the date of such taking.
In the event more than twenty-five percent (25%) of the square footage of the Premises is taken under the power of eminent domain, or if by reason of any appropriation or taking, regardless of the amount-so taken, the remainder of the Premises is not one undivided parcel of property, either Landlord or Tenant shall have the right to terminate this Lease as of the date Tenant is required to vacate a portion of the Premises upon giving notice in writing of such election within thirty (30) days after receipt by Tenant from Landlord of written notice that said Premises have been so appropriated or taken.
If neither Landlord nor Tenant elects to so terminate this Lease, Tenant shall remain in that portion of the Premises that shall not have been appropriated or taken as herein provided, or in the event less than twenty-five percent (25%) of the square footage of the Premises shall be appropriated under the power of eminent domain by any public or quasi-public authority, and the remainder thereof is an undivided parcel of property, then in either such event Landlord agrees, at Landlord's cost and expense, as soon as reasonably possible to restore the Premises on the land remaining to a complete unit of like quality and character as existed prior to such taking; and thereafter the Minimum Rent shall be reduced on an equitable basis, taking into account the relative value of the portion taken as compared to the portion remaining.
All awards for the taking of any part of the Premises shall be the property of Landlord, whether made as compensation for diminution of value of the leasehold estate, for the taking or
the fee, or as severance damages, provided that Tenant shall be entitled to any award for loss or damage to Tenant's fixtures or removable personal property if the same is sought by Tenant and is awarded separately.
For the purposes of this Article 14, a voluntary sale or conveyance in lieu of condemnation shall be deemed an appropriation or taking under the power of eminent domain.
ARTICLE 15
DESTRUCTION OF LEASED PREMISES
If the Premises are destroyed or damaged by fire or other perils to such
an extent that they cannot be repaired and restored within one hundred twenty
(120) days, Landlord shall have the option to terminate this Lease; otherwise
Landlord shall forthwith and with due diligence, immediately following receipt
of proceeds of applicable insurance policy(ies), repair and restore said
building and Premises to substantially their condition immediately prior to such
damage or destruction. Tenant's Minimum Rent and other charges during the period
of such repair and restoration shall not abate and Tenant shall promptly pay all
amounts coming due hereunder.
If the damage or destruction referred to in the preceding paragraph amounts to at least 25% of the Premises and occurs during the last year of the term of this Lease, then Landlord and Tenant shall each have the option, at the election of either of them, to terminate this Lease effective as of the date of such damage or destruction, and any unearned rents paid in advance shall be refunded. If this Lease shall not be terminated as provided in this paragraph, the Premises shall be repaired and restored as hereinabove provided.
In the event Landlord is either obligated or elects to repair and restore the building and Premises, Landlord shall have the immediate right to enter the Premises for such purpose.
ARTICLE 16
BANKRUPTCY - INSOLVENCY
Tenant agrees that in the event all or substantially all Tenant's assets are placed in the hands of a receiver or trustee, and such receivership continues for a period of thirty (30) days, or should Tenant make an assignment for the benefit of creditors or be finally adjudicated a bankrupt, or should Tenant institute any proceedings under the Bankruptcy Act as the same now exists or under any amendment thereof that may hereafter be enacted, or under any other act relating to the subject of bankruptcy, wherein Tenant seeks to be adjudicated a bankrupt or to be discharged of its debts or to effect a plan or liquidation, composition of reorganization, or should any involuntary proceedings be filed against Tenant under any such bankruptcy laws and such proceeding not be removed within ninety (90) days thereafter, then this Lease or any interest in and to the Premises shall not become an asset in any of such proceedings and, in any such events and in addition to any and all rights or remedies of Landlord hereunder or by law provided, it shall be lawful for Landlord to declare the term hereof ended and to re-enter the Premises and take possession thereof and remove all persons therefrom, and Tenant shall have no further claim thereon or hereunder. The provisions of this Article 16 shall also apply to any Guarantor of this Lease. In no event shall this Lease or any interest of the Tenant therein be assigned or transferred by operation of law without the express written consent of Landlord.
ARTICLE 17
DEFAULT; RE-ENTRY; REMEDIES
In the event of any breach of any of the terms of this Lease by Tenant,
then Landlord, besides other rights and remedies it may have under the laws in
force, shall have the immediate right of re-entry and may move all persons and
property from the Premises. Such property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant. Should
Landlord elect to re-enter or should it take possession pursuant to legal
proceedings it may either terminate this Lease or it may, without terminating
this Lease, re-let said Premises or any part thereof for such term or terms and
at such rent and upon such other terns and conditions as Landlord in its sole
discretion may deem advisable with the right to make alterations and repairs to
said Premises. Rents received by Landlord from such re-letting shall be applied:
first, to the payment of any indebtedness, other than rent due hereunder;
second, to the payment of rent due and unpaid hereunder; third, to the payment
of any cost of such re-letting; fourth, to the payment of the cost of any
alterations and repairs to the Premises; and the residue, if any, shall be held
by Landlord and applied in payment of future rent as the same may become due and
payable hereunder. Should such rents received from such re-letting during any
month be less than that agreed to be paid during that month by Tenant hereunder,
then Tenant shall pay such deficiency to Landlord monthly. Tenant shall also pay
as soon as ascertained the cost and expense incurred by Landlord in such
re-letting or in making such alterations and repairs. No such re-entry or taking
possession of said Premises shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention be given to
Tenant. Notwithstanding any such re-letting without termination, Landlord may at
any time thereafter elect to terminate this Lease in addition to any other
remedy it may have, it may recover from Tenant all damages it may. incur by
reason of such breach, including the cost of recovering the Premises and
including the worth at the time or such termination of the excess, if any, of
the amount or rent and charges equivalent to rent reserved in this Lease for the
remainder of the stated term over the then reasonable rent value of the Premises
for the remainder of the stated term.
For the purposes or this Article 17, the rent agreed to be paid by Tenant or the amount of rent payable by Tenant shall be deemed to be the Minimum Rent and all other sums required to be paid by Tenant pursuant to the terms of this Lease. All such sums, other than the Minimum Rent, shall be computed on the basis of the average monthly amount thereof, accruing during the preceding term of the lease.
In the event of default, all Tenant's fixtures, furniture, equipment, improvements, additions, alterations, and other personal property shall remain on the Premises and in that event, and continuing during the length of said default, Landlord shall have the right to take the exclusive possession of same and to use same, rent or charge free, until all defaults are cured or, at its option, at any time during the term of this Lease, to require Tenant to forthwith remove same.
The waiver by Landlord of any breach of any term herein contained shall not be deemed to be a waiver of such term or any subsequent breach of the same or any other term herein contained. The subsequent acceptance of rent by Landlord shall not be deemed to be a waiver of any preceding breach of Tenant of any term of this Lease, other than the failure of Tenant to pay
the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. No term of this Lease shall be deemed to have been waived by Landlord unless such waivers shall be in writing.
Neither party hereto shall bring any action for breach of this Lease unless such party has given the other written notice of such breach, and such breach remains uncured after the curative period. If the breach is the failure pay rent or other monies due, the curative period shall be five (5) days; for any other breach the curative period shall be thirty (30) days.
ARTICLE 18
SURRENDER OF PREMISES
Tenant shall, upon expiration or termination of the term hereby created, surrender the Premises in good condition and repair, reasonable wear and tear excepted. Tenant shall promptly surrender all keys for the Premises at the place then fixed for payment of rent and shall inform Landlord of combinations on any locks and safes on the Premises. At the expiration or earlier termination of this Lease, Tenant shall execute, acknowledge and deliver to Landlord, within five days after written demand from Landlord to Tenant, any quit-claim deed or other document required by a title company to remove the cloud of this Lease from the real property upon which the Premises are situated.
ARTICLE 19
HOLDING OVER
If Tenant shall hold over after the Term of this Lease, Tenant shall become a tenant on a month-to-month basis upon all the terms, covenants and conditions herein specified, but exclusive of any renewal options. Notwithstanding the above, if Tenant shall hold over after the Term of this Lease without Landlord's consent, Tenant shall pay double the Minimum Rent paid during the prior year of the Term.
ARTICLE 20
FIXTURES AND PERSONAL PROPERTY
Any trade fixtures, signs, and other personal property of Tenant not permanently affixed to the Premises shall remain the property of Tenant, and Landlord agrees that Tenant shall have the right; provided Tenant is not in default under the terms of this Lease, at any time, and from time to time, to remove any and all of its trade fixtures, signs, and other personal property that, it may have stored or installed in the Premises. Tenant at its expense shall immediately repair any damage occasioned to the Premises by reason of the removal of any such trade fixtures, signs, and other personal property, and upon expiration or earlier termination of this Lease, shall leave the Premises in a neat and clean condition, free of debris. All other improvements to the Premises by Tenant, including but not limited to floor coverings, carpeting, and partitions, shall become the property of Landlord upon expiration or earlier termination of this Lease.
ARTICLE 21
REIMBURSEMENT
All covenants and terms herein contained to be performed by Tenant shall be performed by it at its expense, and if Landlord shall pay any sum of money or do any act that requires the payment of money by reason of the failure of Tenant to perform such covenant or term, the sum or sums of money so paid by Landlord shall be considered as additional rent and shall be payable by Tenant on the first of the month next succeeding such payment, together with interest at the maximum contractual rate permitted by law.
ARTICLE 22
CONSENTS BY LANDLORD
Whenever under this Lease provision is made for Tenant to secure the written consent or approval by Landlord, such consent or approval shall be in writing and shall not be unreasonably withheld.
ARTICLE 23
NOTICES
Any notice required or permitted under this Lease shall be deemed sufficiently given or served when sent by certified mail to Tenant at the address of the Premises as set forth in Paragraph D of the Basic Lease Provisions, and to Landlord at the address then fixed for payment of rent, and either party may by like written notice at any time designate a different address to which notices shall subsequently be sent.
ARTICLE 24
LITIGATION, COURT COSTS, ATTORNEY'S FEES
In the event at any time either Landlord or Tenant shall institute any action or proceeding against the other relating to the provisions of this Lease, or any default hereunder, then and in that event, the prevailing party in such action or proceeding shall be entitled to recover from the other party its reasonable costs, expenses, and attorney's fees, which shall be deemed to have accrued on the commencement of such action or proceeding and shall be enforceable whether or not such action is prosecuted to judgment. In addition, Landlord shall be entitled to all attorney's fees and all other costs incurred in the preparation and service of any notice or demand hereunder, whether or not a legal action is subsequently commenced. The parties waive trial by jury in any action, proceeding, or counterclaim brought by either of them against the other on any matters whatsoever arising under this Lease. This Lease shall be construed in accordance with the laws of the Sate of Florida and the proper venue for any legal action shall be Orange County, Florida.
ARTICLE 25
SALE OF PREMISES BY LANDLORD OR RE-LEASING
In the event of any sale or exchange of the Premises by Landlord and assignment by Landlord of this Lease, Landlord shall be and is hereby entirely relieved of all liability under all or its covenants and obligations contained in or derived from this Lease arising out of any act,
occurrence or omission relating to the Premises or this Lease occurring after the consummation of such sale or exchange and assignment. Landlord and its authorized agents and representatives shall be entitled to enter the Premises at all reasonable times for the purpose of exhibiting the same to prospective purchasers and, during the final six (6) months of the term and any extension or renewal of the term hereof, Landlord shall be entitled to exhibit the Premises for hire and/or for sale and to display thereon in such manner as will not unreasonably interfere with Tenant's business the usual "For Sale" or "For Lease" signs, and such signs shall remain unmolested on the Premises.
ARTICLE 26
SECURITY DEPOSIT
Tenant shall, on or before N/A, deposit with Landlord the sum, if any, set forth in Paragraph I of the Basic Lease Provisions as "Security Deposit" The Security Deposit shall be held by Landlord without liability for interest as security for the faithful performance by Tenant of all the terms of this Lease. Landlord shall have the right to commingle the Security Deposit with its other funds.
If any of the rent or any other sum payable by Tenant should be overdue and unpaid or if Landlord should make payments on behalf of Tenant, or if Tenant should fail. to perform any of the terms of this Lease, then Landlord may, at its option and without prejudice to any other remedy appropriate, apply the Security Deposit or so much thereof as may be necessary to compensate Landlord toward the payment of rent or Additional Charges or loss or damage sustained by Landlord due to such breach on the part of Tenant; and Tenant shall upon demand restore the Security Deposit to the original sum deposited. Should Tenant comply with all of the terms of this Lease, the Security Deposit or any balance thereof shall be returned to Tenant or, at the option of Landlord, to the last assignee of Tenant's interest in this Lease at the expiration of the lease term.
ARTICLE 27
NO PERSONAL LIABILITY-OF LANDLORD
Tenant shall look solely to Landlord's interest in the Premises for the satisfaction of any judgment or decree requiring the payment of money by Landlord based upon any default under this Lease, and no other property or assets of Landlord shall be subject to levy, execution, or other enforcement procedures or satisfaction of any such judgment or decree.
ARTICLE 28
GRANT OF EASEMENTS
Tenant hereby consents to any and all conveyances or grants of easements upon the Premises that Landlord reasonably determines to be necessary in order to adequately provide utilities to, or ingress and egress from, the Premises.
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ARTICLE 29
PARTIAL INVALIDITY
If any provision of this Lease is determined to be void by any court of competent jurisdiction, such determination shall not affect any other provision of this Lease and such other provision shall remain in full force and effect. If any provision of this Lease is capable of two constructions, one of which would render the provision void and one of which would render the provision valid, the provision shall be interpreted in the manner that would render it valid.
ARTICLE 30
ESTOPPEL CERTIFICATE
Tenant shall, within Ten (10) days after Landlord's written request, execute and deliver to Landlord a written declaration that this Lease is in full force and effect; that there are no incurred defaults in Landlord's performance; that this Lease has not been assigned, modified, supplemented, or amended (except by such writings as shall be stated); that all conditions under this Lease to be performed by Landlord have been satisfied; that there are no defenses or offsets against the enforcement of this Lease by the Landlord, or stating those claimed by Tenant; the amount of advance rent, if any (or none if such is the case) paid by Tenant; the date to which rent has been paid; and the amount of security deposited with Landlord. Such declaration shall be executed and delivered by Tenant from time to time as may be requested by Landlord. Landlord's mortgage lenders and/or purchasers shall be entitled to rely upon same. Tenant's failure to deliver such declaration within the time permitted hereby shall be conclusive upon Tenant that this Lease is in full force and effect, except to the extent any modification has been represented by Landlord, and that there are no incurred defaults in Landlord's performance, and that not more than one month's rent has been paid in advance.
ARTICLE 31
LATE PAYMENT CHARGE
Tenant agrees that in the event that rent and other sums due hereunder are received by Landlord more than five (5) business days after the date on which they are due, Tenant shall pay to Landlord a late payment charge equal to five percent (5%) of the total sum due, plus applicable sales tax, as liquidated damages and not as a penalty; provided, however, the delay in imposition of the late payment charge shall not be construed as extending the date on which sums become due and payable hereunder, nor as extending the date on which a default shall be deemed to have occurred by Tenant's failure to timely pay sums due to Landlord hereunder.
ARTICLE 32
BROKER'S FEE
Tenant represents and warrants to Landlord that there is no agent, broker, finder, or other party with whom Tenant has dealt who are or may be entitled to any commission or fee with respect to this Lease or the Premises. Tenant shall indemnify and hold Landlord harmless from any claims arising out of a breach of Tenant's representation and warranty set forth in the preceding sentence.
ARTICLE 33
ENVIRONMENTAL COMPLIANCE
Tenant covenants and agrees not to use, generate, manage, treat, manufacture, store, or dispose of on, under, or about the Premises or transport to or from the Premises any Hazardous Materials (other than De Minimis Amounts). For the purpose or this Lease, "Hazardous Materials" shall include but not be limited to any and all chemicals, materials, or substances defined as "hazardous substances," "hazardous materials," "hazardous wastes" or "toxic substances" in the laws or any governmental authority having jurisdiction over the Premises. (and any other chemical, material ,or substance, exposure to which is prohibited, limited, or regulated by any such governmental authority) or any rules or regulations adopted and guidelines promulgated pursuant to any of the foregoing laws, as all such laws, rules, or regulations may be amended or replaced from time to time (collectively "Hazardous Materials Laws"). The term "De Minimis Amounts" shall mean, with respect to any given level of Hazardous Materials, that such level or quantity of Hazardous Materials in any form or combination of forms (i) does not constitute a violation of any Hazardous Materials Laws, and (ii) is customarily employed in, or associated with, similar projects in the county where the Premises are located. Tenant further covenants and agrees to pay all costs and expenses associated with all enforcement, removal, remedial, or other governmental or regulatory actions, agreements, or orders threatened, instituted, or completed pursuant to any Hazardous Materials Laws, and all audits, tests, investigations, "cleanup" reports, and other such items incurred in connection with any efforts to complete, satisfy, or resolve any matters, issues, or concerns, whether governmental or otherwise, arising out of the use, generation, management, treatment, manufacturing, storage, disposal, or transportation of Hazardous Materials in any amount by Tenant, its employees, agents, invitees, subtenants, licensees, assignees, or contractors.
ARTICLE 34
MISCELLANEOUS
A. Time is of the essence of this Lease and the terms and conditions hereof shall extend to and be binding upon the heirs, executors, successors, and assigns of the parties hereto, and any mention of the singular shall include the plural and the plural shall include the singular.
B. Tenant shall not record this Lease without the written consent of Landlord.
C. The section headings contained in this Lease are for purposes of reference only and shall not limit or define the meaning of any of the terms or provisions hereof.
D. The word "Landlord" shall include not only the original Landlord, but also any person or entity hereafter acquiring the Landlord's interest in this lease.
E. This Lease may be amended only by an instrument in writing signed by both parties.
F. It is agreed that nothing contained in this Lease shall be deemed or construed as creating a partnership or joint venture between Landlord and Tenant or between Landlord and any other party, or cause Landlord to be responsible in any way for the debts or obligations of Tenant, or any other party.
G. Pursuant to Section 404.056(8), Florida Statutes, Tenant is hereby notified as follows: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health unit.
[The balance of this page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written.
LANDLORD:
John C. White and Cynthia L. White as
Trustees of the John C. and Cynthia L. White
1989 Family Trust.
By: /s/ JOHN C. WHITE -------------------------------------- John C. White By: /s/ CYNTHIA L. WHITE -------------------------------------- Cynthia L. White |
TENANT:
The Clinton Harley Corporation, a Delaware
corporation
By: /s/ ROBERT D. HARTMAN -------------------------------------- Robert D. Hartman, President |
Exhibit "A"
LEGAL DESCRIPTION
9751 Delegates Drive, Orlando, Florida
Orange County Tax Parcel I.D. #04-24-29-6401-02-002 and #04-24-29-6351-01-001
From the Northeast corner of Block "B", ORLANDO CENTRAL PARK NUMBER SIXTY-ONE, as recorded in Plat Book 20, Page 22, Public Records of Orange County, Florida, run South 00 degrees 16 minutes 38 seconds East 385.00 feet along the East boundary of said Block "B" to the Point of Beginning; thence continue South 00 degrees 16 minutes 38 seconds East 500.00 feet along the said East boundary; thence run South 89 degrees 43 minutes 22 seconds West 269.77 feet to a point on the West boundary of said Block "B"; thence run North 00 degrees 13 minutes 59 seconds West 500.00 feet along the said West boundary; thence run North 89 degrees 43 minutes 22 seconds East 269.39 feet to the Point of Beginning;
and
That part of Block "A", ORLANDO CENTRAL PARK NUMBER SIXTY-ONE-A as recorded in Plat Book 29, Page 51, Public Records of Orange County, Florida, being described as follows: BEGIN at the Northeast corner of Block "A", ORLANDO CENTRAL PARK NUMBER SIXTY-ONE-A as recorded in Plat Book 29, Page 51, Public Records of Orange County, Florida; thence run South 00 degrees 16 minutes 38 seconds East 130.00 feet along the East boundary of said Block "A"; thence run South 89 degrees 43 minutes 22 seconds West 240.10 feet to a point on the Westerly boundary of said Block "A", said point being on a nontangent curve concave Westerly and having a radius of 60.00 feet; thence from a tangent bearing of North 04 degrees 51 minutes 15 seconds East, run Northerly 68.16 feet along the arc of said curve and said Westerly boundary through a central angle of 65 degrees 05 minutes 14 seconds to the end of said curve; thence run North 00 degrees 13 minutes 59 seconds West 72.70 feet along said Westerly boundary to the Northwesterly corner of said Block "A"; thence run North 89 degrees 43 minutes 22 seconds East 269.77 feet along the North boundary of said Block "A" to the Point of Beginning.
EXHIBIT 10.14
LEASE AMENDMENT
In consideration of the rents and covenants set forth herein and in the Lease (as defined below), Landlord and Tenant hereby amend the Lease.
BASIC LEASE PROVISIONS
A. DATE: The date of this Lease Amendment is September 25, 2002.
B. LEASE: That certain lease dated as of July 2, 2001.
C. LANDLORD: Delegates LLC, an Arizona limited liability company.
D. TENANT: The Clinton Harley Corporation, a Delaware corporation.
E. PREMISES: 9755 Delegates Drive, Orlando, Florida; see Exhibit "A" of the Lease for legal description.
ARTICLE 1
TERM
Landlord and Tenant hereby agree that the Term for the Premises shall be amended to a fifteen (15) year term. The Lease expiration shall be midnight, July 1, 2016.
ARTICLE 2
EFFECT
Other than as set forth above, the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written.
LANDLORD:
Delegates LLC, an Arizona limited liability company
By: The White Family Trust, managing member
By:____________________________________________
R. Randy Stolworthy, Trustee
TENANT:
The Clinton Harley Corporation,
a Delaware corporation
By:_____________________________________________
Robert D. Hartman, President/CEO
LEASE AMENDMENT
In consideration of the rents and covenants set forth herein and in the Lease (as defined below), Landlord and Tenant hereby amend the Lease.
BASIC LEASE PROVISIONS
A. DATE: The date of this Lease Amendment is August 19, 2002.
B. LEASE: That certain lease dated as of July 2, 2001.
C. LANDLORD: Delegates LLC, an Arizona limited liability company.
D. TENANT: The Clinton Harley Corporation, a Delaware corporation.
E. PREMISES: 9755 Delegates Drive, Orlando, Florida; see Exhibit "A" of the Lease for legal description.
Article 1
LANDLORD
The managing member of Delegates LLC has changed, and the new managing
member is the White Family Trust, R. Randy Stolworthy, Trustee, whose address
for purposes of payment of rent and receipt of notices is Delegates LLC, Attn:
White Family Trust - R. Randy Stolworthy, Trustee, c/o Cutler Commercial, 2150
E. Highland Ave., Suite 207, Phoenix, AZ 85016.
Article 2
TERM
Landlord and Tenant hereby agree that the Term for the Premises shall be extended, and that the Lease expiration shall be midnight, August 19, 2022.
Article 3
RENT
Landlord and Tenant agree that a Certificate of Occupancy was issued for the Phase III building as of August 19, 2002. Therefore, Tenant shall begin paying rent for the Phase III building in addition to the Minimum Rent, as set forth in Article 3(D) of the Lease. The current annual Minimum Rent of Four Hundred Eighteen Thousand Eight Hundred Sixty- four and 19/100 Dollars ($418,864.19) shall be increased by the new Phase III rent of Two Hundred Sixty Thousand Six Hundred Seventy-four and 98/100 Dollars ($260,674.98) resulting in a new annual rent of Six Hundred Seventy-nine Thousand Five Hundred Thirty-nine and 17/100 Dollars ($679,539.17). The additional fractional rent for Phase III for August, payable immediately, is Eight Thousand Four Hundred Eight and 87/100 Dollars ($8,408.87).
Article 4
EFFECT
Other than as set forth above, the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written.
LANDLORD:
Delegates LLC, an Arizona limited liability company
By: The White Family Trust, managing member
By:________________________________________________
R. Randy Stolworthy, Trustee
TENANT:
The Clinton Harley Corporation,
a Delaware corporation
By:________________________________________________
Robert D. Hartman, President/CEO
LEASE AGREEMENT
In consideration of the rents and covenants hereinafter set forth, Landlord hereby leases and demises to Tenant and Tenant hereby leases and takes from Landlord the "Premises," hereinafter described in the terms and conditions set forth in the Lease Agreement, hereinafter called "this Lease."
BASIC LEASE PROVISIONS
The words and figures set forth in Paragraphs A to K, both inclusive, are part of this Lease wherever appropriate reference is made thereto, unless expressly modified elsewhere in the Lease.
A. DATE OF EXECUTION: As of the 2nd of July, 2001.
B. LANDLORD: Delegates LLC, an Arizona limited liability company.
C. TENANT: The Clinton Harley Corporation, a Delaware corporation.
D. PREMISES: 9755 Delegates Drive, Orlando, Florida; see Exhibit "A" attached hereto and incorporated herein.
E. TERM: Commencing on the date of issuance of a Certificate of Occupancy for Phase II through December 31, 2001, plus fifteen (15) years commencing January 1, 2002 [see Article 2 below].
F. LEASE COMMENCEMENT DATE: This lease shall commence on the date of issuance of a Certificate of Occupancy for Phase II, and expire at midnight on December 31, 2016.
G. BASE RENT: Forty-three thousand seven hundred eighteen and 67/100 Dollars ($43,718.67) per month during the first year of the Term, plus applicable taxes plus expenses as outlined in the lease agreement.
H. USE OF PREMISES: Educational
I. SECURITY DEPOSIT: None
J. LANDLORD'S ADDRESS FOR RENT AND NOTICES:
Delegates LLC
Attn: John C. White, managing member
c/o Cutler Commercial
2150 E. Highland Ave., Suite 207
Phoenix, AZ 85016
K. TENANT'S ADDRESS FOR NOTICE:
Robert D. Hartman, President
The Clinton Harley Corporation
10851 N. Black Canyon Highway, Suite 600
Phoenix, AZ 85029
ARTICLE 1
LEASED PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, that certain Premises described in Paragraph D of the Basic Lease Provisions. The Premises are composed of Phase I (20,825 square foot building, completed), Phase II (20,825 square foot building, under construction), and Phase III (41,650 square foot two-story building, planned).
ARTICLE 2
TERM
The term of this Lease shall be for the period commencing from the date of issuance of a Certificate of Occupancy for Phase II and continuing through December 31, 2001, plus fifteen (15) years commencing January 1, 2002. In the event Phase III is constructed by Landlord for the benefit of Tenant, the Term may be extended, at Landlord's option, to be fifteen (15) years commencing with the issuance of a certificate of occupancy for such Phase III building. Notwithstanding the commencement date set forth in Paragraph F of the Basic Lease Provisions, if for any reason Landlord cannot deliver possession of the Premises to Tenant on said date, Landlord shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or the obligations of Tenant hereunder, but the commencement date of this Lease shall be extended until Landlord delivers possession of the Premises to Tenant. If Tenant occupies the Premises prior to said commencement date, said occupancy shall be subject to all the provisions hereof, such occupancy shall not advance the expiration date, and Tenant shall pay rent for such period at the initial monthly rate set forth in Paragraph G of the Basic Lease Provisions.
ARTICLE 3
RENT
Tenant shall pay in advance to Landlord as rent for the Premises without notice, demand, deduction or any setoff whatsoever at the address of Landlord as set forth in Paragraph J of the Basic Lease Provisions or such other address as may be specified by Landlord, the following amounts, payable monthly on the first day of each month during the Term hereof, with adjustments for fractional months, commencing on the date set forth in Paragraph F of the Basic Lease Provisions:
A. (i). Initial annual minimum rent (herein called "Minimum Rent") in the sum of Four Hundred Two Thousand Seven Hundred Fifty-four and 3/100 Dollars ($402,754.03), together with all applicable taxes as set forth in Article 11 herein; plus
(ii). As additional rent, annual allocation and opportunity costs for Phase III in the amount of One Hundred Twenty-One Thousand Eight Hundred Seventy and no/100 Dollars
($121,870.00), together with all applicable taxes as set forth in Article 11 herein, payable until such time as Phase III is constructed and rent payments become due and payable for Phase III, at which time such allocation and opportunity costs shall no longer be due and payable. The allocation and opportunity costs are a combination of allocation of land and construction costs in the amount of $61,870.00 ("Allocation Costs"), and opportunity costs in the amount of $60,000.00 ("Opportunity Costs"). In the event Tenant elects to have constructed substantially less than 41,650 in Phase III (i.e., less than 95% of that amount of building space) a pro rata portion of the Opportunity Costs shall continue as additional annual rent, payable monthly. Such pro rata portion of Opportunity Costs shall be calculated by multiplying the Opportunity Costs amount (as increased annually as set forth below) by a fraction, the numerator of which shall be a number obtained by subtracting from 41,650 the amount of building square footage actually constructed in Phase III, and the denominator of which shall be 41,650.
B. The total annual rent shall be adjusted and increased as of the first day of January of each lease year (hereinafter the "Adjustment Date") commencing the first of January, 2002, in the following manner: the total annual rent (which term shall mean Minimum Rent, Opportunity Costs, and Phase III Rent) shall be increased by the greater of (a) an amount equal to 4 percent of the total annual rent for the immediately preceding lease year, or (b) the percentage of increase in the Consumer Price Index ("CPI"). The CPI is defined as the Consumer Price Index of the Bureau of Labor Statistics of the Department of Labor for All Urban Consumers, (1967=100), "All Items," for the city nearest the location of the Premises. The CPI increase shall be calculated by multiplying the annual rent for the prior year by a fraction, the numerator of which shall be the CPI of the calendar month and year in which the adjustment is to take effect, and the denominator of which shall be the CPI for the same calendar month and year prior. In the event the compilation and/or publication of the Consumer Price Index shall be transferred to any other governmental department or bureau or agency, or shall be discontinued, then the index most nearly the same as the CPI shall be used to make the increase calculation. In the event that Landlord and Tenant cannot agree on such alternative index, then the matter shall be submitted for decision to the American Arbitration Association in the County in which the Premises are located, in accordance with the then rules of said association and the decision of the arbitrators shall be binding upon the parties, notwithstanding one party failing to appear after due notice of the proceeding. The cost of said Arbitrators shall be paid equally by Landlord and Tenant. Until the arbitration is settled, the Tenant shall continue to pay the rent at the rate determined by the 4 percent increase calculation set forth above. Within five (5) days following the date on which the increase is determined, if it is greater than the 4 percent calculation, the Tenant shall make such payment to the Landlord as will bring the increased rent current, commencing with the effective date of such increase through the date of any rent installments then due. Thereafter the rent shall be paid at the increased rate. Such adjusted annual rent shall be payable monthly, as provided herein, beginning with the Adjustment Date.
C. The term "lease year" as used herein shall be deemed to mean a period of twelve (12) consecutive months commencing with the 1st day of January and ending with the 31st day of December of each year, both dates inclusive, provided that for the purposes of this article, the first "lease year" shall begin January 1, 2002, and shall end on the succeeding December 31st, and except that the last "lease year" shall end on the last day of the lease term.
D. At such time as Phase III is constructed and a Certificate of Occupancy is issued for the Phase III building, Tenant shall begin paying rent for the Phase III building in addition to the Minimum Rent described above in Art. III(A)(i). The rent for the Phase III building ("Phase III Rent") shall be calculated as follows:
1. The land, general site preparation, and general administrative cost allocation to Phase III is hereby agreed to be $618,700.00 as of the date of this Lease; for purposes of calculation of rent, that amount shall be increased annually by four percent (4%), compounded, until such time as the certificate of occupancy for Phase III is received.
2. All other project costs shall be added along with a five percent (5%) administrative fee. For purposes of rent calculation, "project costs" shall include but not be limited to building construction costs, assessments, fees (building permit, impact fees, etc.), accounting fees, insurance costs, construction loan points and interest, legal fees, architectural fees, and taxes.
3. For purposes of calculation of Phase III Rent, the interior construction amount (i.e., the costs of construction of all but the shell building) shall be increased by a pro rata share of the soft costs of the project (i.e., accounting fees, insurance costs, construction loan points and interest legal fees, architectural fees, and taxes). Such increase shall be accomplished by dividing the interior construction amount by the total construction amount (i.e. the interior construction amount plus the shell building construction amount) to arrive at a percentage, multiplying the project soft costs by that percentage, then adding the resulting amount to the interior construction amount.
4. Of the interior construction amount, $15 per square foot shall be allocated to a Tenant buildout allowance. If the amount resulting from the calculations in subparagraph (3) above is greater than the Tenant buildout allowance, as part of the Phase III Rent, such overage shall be amortized over the term of the lease at 10.5%.
5. The annual Minimum Rent for Phase III shall be calculated as follows:
Minimum Rent = [(a + (b - c)) x .105] + d
where a = land, general site preparation, and general
admin. costs
b = total Phase III building cost (shell and
interior)
c = interior construction overage
d = annual amortization of interior
construction overage
Example (using assumptions as to size of building, costs, etc.):
Phase III: 40,000 sf
Land, Gen. Site Prep, Gen. Admin Cost: $618,700.00
[Note: This amount shall be increased by 4% per annum, compounded.]
Project Costs:
Legal: $ 2,500.00 x 1.05 = $ 2,625.00 COC Ins. $ 4,500.00 x 1.05 = $ 4,725.00 Points/Interest: $150,000.00 x 1.05 = $157,500.00 |
Plans/Fees: $ 105,000.00 x 1.05 = $ 110,250.00 Exterior Shell: $ 903,000.00 x 1.05 = $ 948,150.00 Int. Construction: $1,197,000.00 x 1.05 = $1,256,850.00 Total: $2,480,100.00 |
Interior Construction (Interior Construction + Exterior Shell) = 1,256,850/(1,256,850 + 948,150) = 1 ,256,850/2,205,000 = 57%
.57 x (Project Soft Costs) =
.57 x $275,100 = $156,807
Interior Construction Amount + $156,807 = $1,256,850 + $156,807 = $1,413,657.00
Build Out Allowance @ $15 = 40,000 x $15 = $600,000
Overage to be Amortized = $1,413,657 - $600,000 = $813,657
Annual overage amortization amount (15-year lease) @ 10.5% = $107,348.67
Base Rent = ($618,700 + ($2,480,100 - $813,657)) x 10.5% = $2,285,143 x 10.5% = $239,940.02 |
Total Initial Annual Rent = $239,940.02 + $107,348.61 = $347,288.69
ARTICLE 4
POSSESSION
Possession of the Premises shall be delivered to Tenant on an AS IS condition.
ARTICLE 5
BUSINESS USE
The Premises shall be used and occupied by Tenant only for the purpose set forth in Paragraph H of the Basic Lease Provisions, and for no other purpose. Tenant shall, at its sole cost, comply with and shall faithfully observe all the requirements of municipal, state, and federal authorities now in force, or that hereafter may be in force, pertaining to the use of the Premises as well as the requirements and regulations of the Board of Fire Underwriters, Landlord's and/or Tenants insurance companies, and other organizations establishing insurance rates.
ARTICLE 6
SIGNS
Tenant may place any sign on the Premises that is consistent with the regulations of Orange County and the deed restrictions of Orlando Central Park. Notwithstanding the above, Tenant shall upon request of Landlord immediately remove any exterior or interior sign, advertisement, declaration, lettering or notice that Tenant may hereafter place or permit to be placed in, upon, above, or about the Premises and that Landlord reasonably deems objectionable or offensive, and if Tenant fails or refuses so to do Landlord may, at Tenant's sole cost, enter upon the Premises and remove the same.
ARTICLE 7
MAINTENANCE AND SANITATION
A. Tenant shall repair any damage to the Premises caused by Tenant or by any of Tenant's employees, agents, customers, invitees or licensees, other than from ordinary wear. Tenant shall maintain the interior of the Premises and all doors, windows, heating, cooling and mechanical equipment and plate glass, and Landlord agrees whenever possible to extend to Tenant the benefit of any enforceable manufacturer's warranties on such equipment. If Tenant refuses or neglects to make repairs and/or maintain the Premises, or any part thereof, in a manner reasonably satisfactory to Landlord, Landlord shall have the right, upon giving tenant reasonable written notice of its election to do so, to make such repairs or perform such maintenance on behalf of and for the account of Tenant. In such event such work shall be paid for by Tenant promptly upon receipt of a bill therefor. Tenant shall not decorate or paint the exterior of the Premises, or any part thereof, except in the manner and color approved by Landlord. Landlord may, at its option, enter into a maintenance agreement for the maintenance of any heating and air conditioning units serving the Premises. The cost of any such agreement attributable to the Premises shall be paid by Tenant promptly upon receipt of a bill therefor.
B. Tenant shall also maintain the roof, exterior walls, all aspects of the exterior of the building, parking lot, as well as all aspects of the property (including but not limited to
sidewalks, landscaping, drainage, etc.). Landlord shall not in any way be liable to Tenant for failure to maintain the Premises or make repairs.
C. Tenant shall provide and maintain trash receptacles, with covers thereon, about the Premises in which to place any trash, and cause such trash to be removed from the area as often as required to maintain a sanitary condition but in no instance less than twice weekly.
ARTICLE 8
ALTERATIONS, REPAIR AND LIENS
A. Tenant shall not make any alterations or additions upon the Premises without the prior written consent of Landlord. Any alterations or additions that are approved will be made by the Tenant at its own expense.
B. If any liens should be asserted against the Premises arising out of work performed or materials furnished upon or at the instance of Tenant, Tenant shall, within fifteen (15) days thereafter, cause said lien to be discharged either by paying the same or by recording a surety bond in accordance with the provisions of Chapter 713, Florida Statutes.
C. Tenant shall be solely responsible for all repair, modification, alteration or reconstruction required to be made to the Premises as a result of any governmental act, law, rule, or regulation, including but not limited to the Americans With Disabilities Act.
ARTICLE 9
UTILITY SERVICES
Tenant shall pay for all utilities and services that may be furnished to or used in or about the Premises and shall keep the same free and clear of any lien or encumbrance of any kind whatsoever created by Tenant's acts or omissions. Landlord shall not be liable for any failure or interruption of any utility service being furnished to the Premises and no such failure or interruption shall entitle Tenant to terminate this Lease or abate any payment of rent.
ARTICLE 10
INDEMNITY AND INSURANCE
Tenant covenants that Landlord shall not be liable for any damage or liability of any kind or for any injury to or death of persons or damage to properly of Tenant or any other person during the term of this Lease, from any cause whatsoever, by reason of the use, occupancy and enjoyment of the Premises by Tenant or any person thereon or holding under said Tenant, and that Tenant will indemnify and save harmless Landlord from all liability whatsoever on account of any such damage or injury and from all liens, claims, and demands arising out of the use of the Premises and its facilities or any repairs or alterations that Tenant may make upon the Premises, but Tenant shall not be liable for damage or injury occasioned by the gross negligence or intentional acts of Landlord and its designated agents, servants, or employees, unless covered by insurance Tenant is required to provide. This obligation to indemnify shall include reasonable attorney's fees and investigation costs and all other reasonable costs, expenses, and liabilities from the first notice that any claim or demand is to be made or may be made.
Landlord and Tenant hereby waive any rights each may have against the
other on account of any loss or damage occasioned to Landlord or Tenant, as the
case may be, their respective property, the Premises, or its contents, arising
from any risk generally covered by fire and extended coverage insurance policies
then in use in the State of Florida, and the parties each, on behalf of their
respective insurance companies insuring the property of either Landlord or
Tenant against any such loss, waive any right of subrogation that such companies
may have against Landlord or Tenant, as the case may be. In the event that the
insurance company of Tenant does not waive the right of subrogation against
Landlord and its insurance companies, Tenant shall (i) maintain during the term
of this Lease, fire legal liability coverage with respect to the Premises, and
(ii) shall pay to Landlord upon demand, Landlord's cost incurred in securing
fire legal liability insurance protecting Landlord in the event of the
destruction of Tenant's property.
From and after the date of delivery of the Premises to Tenant, Tenant shall maintain, at its expense, the following types of insurance:
(i) Public Liability Insurance. Comprehensive general public liability insurance (including personal injury, contractual, products and completed operations, and automobile liability including non-owned and hired) with limits of not less than One Million Dollars ($1,000,000.00) per occurrence insuring against any and all liability of the insured with respect to the Premises or arising out of the maintenance, use, or occupancy thereof. All insurance shall specifically insure the performance by Tenant of the indemnity agreement in this Article 10 contained. Said insurance shall be the primary insurance as respects to the Landlord and not participating with any other available insurance. In no event shall the limits of said policies be considered as limiting the liability of Tenant under this Lease.
(ii) Fire and Extended Coverage Insurance. Tenant shall provide and pay for fire and extended coverage insurance insuring the building and improvements to the Premises. Such fire and extended coverage insurance shall be obtained by Tenant in an amount equal to at least one hundred percent (100%) of the full insurable value of the building and improvements. Any and all such policies shall show Landlord as an additional insured and sole loss payee.
(iii) Insurance of Personal Property. Tenant shall at all times during the Term hereof, and at its cost and expense, maintain in effect policies of insurance covering (i) its fixtures and equipment located on the Premises, in an amount not less than one hundred percent (100%) of their replacement value, providing protection against any peril included within the classification "Fire and Extended Coverage," together with insurance against sprinkler damage, vandalism, and malicious mischief, and (ii) all plate glass on the Premises. The proceeds of such insurance, so long as this Lease remains in effect, shall be used to repair or replace the fixtures, equipment and plate glass so insured.
(iv) Business Interruption Insurance. Tenant shall carry business interruption insurance in an amount sufficient to pay, all rent amounts coming due hereunder.
All policies of insurance to be provided by Tenant hereunder shall be issued by insurance companies acceptable to Landlord and qualified to do business in the State of Florida, and shall be issued in the names of Landlord and Tenant, for the mutual joint benefit and protection of Landlord and Tenant, and executed copies of such policies of insurance or certificates thereof shall be delivered to Landlord within ten (10) days after delivery of possession of the Premises to Tenant and thereafter new policies or renewal certificates within thirty (30) days prior to the expiration of the term of each such policy. All public liability and property damage policies shall contain a provision that Landlord, although named as an insured, shall nevertheless be entitled to recovery under said policies for any loss occasioned to it, its servants, agents and employees by reason of the negligence or intended acts of Tenant. As often as any such policy shall expire or terminate, renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent. All policies of insurance delivered to Landlord must contain a provision that the company writing said policy will give to Landlord twenty (20) days notice in writing in advance of any cancellation or lapse of the effective date of any reduction in the amounts of insurance. All policies shall be written as primary policies, not contributing with and not in excess of coverage that Landlord may carry.
ARTICLE 11
OTHER PAYMENTS BY TENANT
In addition to rent, Tenant shall pay to Landlord, during each lease year or partial lease year, all ad valorem taxes and assessments levied and assessed for any such year upon the Improvements and the underlying realty, including taxes currently due but not yet paid. Payment shall be made by Tenant in the following manner:
(i) Commencing on the date that Minimum Rent commences and thereafter on the first day of each calendar month throughout the term of this Lease, Tenant shall pay to Landlord along with Minimum Rent the ad valorem taxes and assessments (including special and improvement district assessments) as estimated by Landlord from time to time.
(ii) Within sixty (60) days following the end of any lease year, Landlord shall furnish Tenant a statement covering the year just expired, certified as correct by an authorized representative of Landlord, setting forth the total ad valorem taxes and assessments. If such ad valorem taxes and assessments exceed Tenant's payments so made, Tenant shall pay to Landlord the deficiency within ten (10) days after receipt of said statement. If said payments exceed such ad valorem taxes and assessments, Tenant shall be entitled to offset the excess against payments next thereafter to become due Landlord as set forth herein.
With respect to any assessments levied against or upon the Premises and the underlying realty, which may be paid in annual installments, only the amount of such annual installment (with appropriate proration for any partial year) and statutory interest shall be included within the computation of the annual taxes and assessments levied against the Premises and the underlying realty.
Tenant shall pay prior to delinquency all taxes against and levied upon fixtures, furnishings, equipment and all other personal property of Tenant contained in the leased Premises.
Tenant shall pay to Landlord, in addition to and along with the rent otherwise payable hereunder, any excise, transaction, sales or privilege tax, or any other tax now or hereafter imposed by any government or agency upon Landlord and attributed to or measured by rent or prorations payable by Tenant.
In the event the real property taxes are withdrawn in whole or in part and any assessments, taxes, fees, levies or charges are imposed as a substitute for, or otherwise in lieu of increases in said real property taxes, so as to pay for governmental services formerly provided without separate charge to property owners or occupants, such as fire protection, sidewalk and street maintenance, and refuse collection and removal, the same shall be considered "real property taxes" for purposes of this Lease regardless of how denominated or the source from which they are collected. The term "real property taxes" shall also include all expenses reasonably incurred by Landlord in seeking reduction by the taxing authorities of real property taxes applicable to the Premises.
ARTICLE 12
ASSIGNMENT AND SUBLETTING
Tenant shall not either voluntarily or by operation of law, assign, sell, encumber, pledge or otherwise transfer all or any part of Tenant's leasehold estate hereunder, or permit the Premises to be occupied by anyone other than Tenant or Tenant's employees, or sublet the Premises or any portion thereof, without obtaining, in each such instance, Landlord's prior written consent. Any such assignment or other transfer or subletting shall be subject in each instance to the recapture option of Landlord set forth herein. Landlord's consent shall not be unreasonably withheld for any proposed assignment, provided that substantially the same type, class, nature and quality of business, merchandise, services, management and financial soundness of ownership is maintained and will continue to be furnished in a manner compatible with the high standards contemplated by this Lease and/ provided further, that none of the covenants, conditions or obligations imposed upon Tenant by this Lease, nor any of the rights, remedies or benefits afforded Landlord by this Lease are thereby impaired or diminished. Consent by Landlord to one or more assignments of this Lease or to one or more sublettings of the Premises shall not operate to exhaust Landlord's rights under this Article. The voluntary or other surrender of this Lease by Tenant or a mutual cancellation hereof shall not work a merger and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or shall operate as an assignment to Landlord of such subleases or subtenancies. If Tenant is a corporation or is an unincorporated association or partnership, the transfer, assignment or hypothecation of any stock or interest in such corporation, association or partnership in the aggregate in excess of forty-nine percent (49%) shall be deemed an assignment within the meaning and provisions of this Article.
If Tenant desires at any time to assign this Lease or to sublet the Premises or any portion thereof, it shall first notify Landlord of its desire to do so and shall submit in writing to Landlord (i) the name of the proposed subtenant or assignee; (ii) the nature of the proposed subtenant's or
assignee's business to be carried on in the Premises; (iii) the terms and provisions of the proposed sublease or assignment; and (iv) such reasonable financial information as Landlord may request concerning the proposed subtenant or assignee. Any request for Landlord's approval of a sublease or assignment shall be accompanied with a check in such reasonable amount as Landlord shall advise for the cost of review and/or preparation of any documents relating to such proposed transfer, but in no event less than $250.00.
At any time within fifteen (15) days after Landlord's receipt of the information specified above, and provided that Landlord approves of the assignee, assignment, or sublet, Landlord may by written notice to Tenant elect to either (i) sublease the Premises or the portion thereof as shall be specified in said notice for its own account upon the same terms as those offered to the proposed subtenant or assignee, as the case may be; or (ii) terminate this Lease as to the portion (including all) of the Premises so proposed to be subleased or assigned with a proportionate abatement in the rent payable hereunder. If Landlord does not exercise either of these options within said fifteen-day period, Tenant may thereafter within ninety (90) days after the expiration of said fifteen-day period enter into a valid assignment or sublease of the Premises or portion thereof, upon the terms and conditions described in the information required to be furnished by Tenant to Landlord hereunder, or other terms not less favorable to Tenant, subject, however, to Landlord's consent as herein provided.
No subletting or assignment, even with the consent of Landlord, shall relieve Tenant of its obligation to pay the rent and perform all the other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any assignment or subletting.
ARTICLE 13
MORTGAGE SUBORDINATION
Upon the written request of Landlord or of any successor under a sale
and leaseback of the land and/or building in which the Premises are situated or
of any mortgagee or beneficiary of Landlord, Tenant shall from time to time in
writing subordinate its rights hereunder to the interest of any such successor,
as well as to the lien of any mortgage or deed of trust now or hereafter in
force against the land and building of which the Premises are a part or against
any buildings hereafter placed upon the land of which the Premises are a part,
and to all advances made or hereafter to be made upon the security thereof. Such
written subordination shall be executed and delivered to Landlord within ten
(10) days from Tenant's receipt of a request for the same. If Tenant fails to
execute and deliver such statement to Landlord within said ten-day period,
Landlord may, as attorney-in-fact of Tenant, coupled with an interest, execute
such statement for, and on behalf, and in the name of Tenant. If requested by
Landlord in writing, Tenant shall give similar certificates from time to time
during the term of this Lease in the manner hereinabove provided.
Tenant agrees to give any mortgagee, by registered mail, a copy of any notice of default served upon the Landlord, provided that prior to such notice Tenant has been notified, in writing, (by way of Notice of Assignment of Rents and Leases, or otherwise) of the address of such mortgagee. Tenant further agrees that if Landlord shall have failed to cure such default within
the time provided for in this Lease, then the mortgagee shall have an additional thirty (30) days within which to cure such default or if such default cannot be cured within that time, then such additional time as may be necessary if, within such thirty (30) days, any mortgagee has commenced and is diligently pursuing the remedies necessary to cure such default, including but not limited to commencement of foreclosure proceedings, if necessary to effect such cure, in which event this Lease shall not be terminated while such remedies are being so diligently pursued.
Landlord agrees to obtain from its lender, if any, a nondisturbance agreement in form acceptable to Landlord and the lender, provided that as long as Tenant performs its obligations hereunder, no foreclosure or deed in lieu of foreclosure shall affect Tenants rights.
Notwithstanding anything to the contrary expressed in this Lease, Tenant agrees to amend or modify this Lease in any particulars as may be reasonably required by any mortgagee or beneficiary of Landlord so long as any such amendments or modifications do not materially alter the substantive rights of Tenant herein and so long as Landlord has agreed to the same.
ARTICLE 14
EMINENT DOMAIN
In the event the entire Premises shall be appropriated or taken under the power of eminent domain this Lease shall terminate and expire as of the date of such taking.
In the event more than twenty-five percent (25%) of the square footage of the Premises is taken under the power of eminent domain or by reason of any appropriation or taking, regardless of the amount so taken, the remainder of the Premises is not one undivided parcel of property, either Landlord or Tenant shall have the right to terminate this Lease as of the date Tenant is required to vacate a portion of the Premises upon giving notice in writing of such election within thirty (30) days after receipt by Tenant from Landlord of written notice that said Premises have been so appropriated or taken.
If neither Landlord nor Tenant elects to so terminate this Lease, Tenant shall remain in that portion of the Premises that shall not have been appropriated or taken as herein provided, or in the event less than twenty-five percent (25%) of the square footage of the Premises shall be appropriated under the power of eminent domain by any public or quasi-public authority, and the remainder thereof is an undivided parcel of property, then in either such event Landlord agrees, at Landlord's cost and expense, as soon as reasonably possible to restore the Premises on the land remaining to a complete unit of like quality and character as existed prior to such taking; and thereafter the Minimum Rent shall be reduced on an equitable basis, taking into account the relative value of the portion taken as compared to the portion remaining.
All awards for the taking of any part of the Premises shall be the property of Landlord, whether made as compensation for diminution of value of the leasehold estate, for the taking or the fee, or as severance damages, provided that Tenant shall be entitled to any award for loss or damage to Tenant's fixtures or removable personal property if the same is sought by Tenant and is awarded separately.
For the purposes of this Article 14, a voluntary sale or conveyance in lieu of condemnation shall be deemed an appropriation or taking under the power of eminent domain.
ARTICLE 15
DESTRUCTION OF LEASED PREMISES
If the Premises are destroyed or damaged by fire or other perils to such an extent that they cannot be repaired and restored within one hundred twenty (120) days, Landlord shall have the option to terminate this Lease; otherwise Landlord shall forthwith and with due diligence, immediately following receipt of proceeds of applicable insurance policy(ies), repair and restore said building and Premises to substantially their condition immediately prior to such damage or destruction. Tenant's Minimum Rent and other charges during the period of such repair and restoration shall not abate and Tenant shall promptly pay all amounts coming due hereunder
If the damage or destruction referred to in the preceding paragraph amounts to at least 25% of the Premises and occurs during the last year of the term of this Lease, then Landlord and Tenant shall each have the option, at the election of either of them, to terminate this Lease effective as of the date of such damage or destruction, and any unearned rents paid in advance shall be refunded. If this Lease shall not be terminated as provided in this paragraph, the Premises shall be repaired and restored as hereinabove provided.
In the event Landlord is either obligated or elects to repair and restore the building and Premises, Landlord shall have the immediate right to enter the Premises for such purpose.
ARTICLE 16
BANKRUPTCY INSOLVENCY
Tenant agrees that in the event all or substantially all Tenant's assets are placed in the hands of a receiver or trustee, and such receivership continues for a period of thirty (30) days, or should Tenant make an assignment for the benefit of creditors or be finally adjudicated a bankrupt, or should Tenant institute any proceedings under the Bankruptcy Act as the same now exists or under any amendment thereof that may hereafter be enacted, or under any other act relating to the subject of bankruptcy, wherein Tenant seeks to be adjudicated a bankrupt or to be discharged of its debts or to effect a plan or liquidation, composition of reorganization, or should any involuntary proceedings be filed against Tenant under any such bankruptcy laws and such proceeding not be removed within ninety (90) days thereafter, then this Lease or any interest in and to the Premises shall not become an asset in any of such proceedings and, in any such events and in addition to any and all rights or remedies of Landlord hereunder or by law provided, it shall be lawful for Landlord to declare the term hereof ended and to re-enter the Premises and take possession thereof and remove all persons therefrom, and Tenant shall have no further claim thereon or hereunder. The provisions of this Article 16 shall also apply to any Guarantor of this Lease. In no event shall this Lease or any interest of the Tenant therein be assigned or transferred by operation of law without the express written consent of Landlord.
ARTICLE 17
DEFAULT; RE-ENTRY; REMEDIES
In the event of any breach of any of the terms of this Lease by Tenant,
then Landlord, besides other rights and remedies it may have under the laws in
force, shall have the immediate right of re-entry and may move all persons and
property from the Premises. Such property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant. Should
Landlord elect to re-enter or should it take possession pursuant to legal
proceedings it may either terminate this Lease or it may, without terminating
this Lease, re-let said Premises or [any part thereof for such term or terms and
at such rent and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable with the right to make alterations and repairs to
said Premises. Rents received by Landlord from such re-letting shall be applied:
first, to the payment of any indebtedness, other than rent due hereunder;
second, to the payment of rent due and unpaid hereunder; third, to the payment
of any cost of such re-letting; fourth, to the payment of the cost of any
alterations and repairs to the Premises; and the residue, if any, shall be held
by Landlord and applied in payment of future rent as the same may become due and
payable hereunder. Should such rents: received from such re-letting during any
month be less than that agreed to be paid during that month by Tenant hereunder,
then Tenant shall pay such deficiency to Landlord monthly. Tenant shall also pay
as soon as ascertained the cost and expense incurred by Landlord in such
re-letting or in making such alterations and repairs. No such re-entry or taking
possession of said Premises shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention be given to
Tenant. Notwithstanding any such re-letting without termination, Landlord may at
any time thereafter elect to terminate this Lease in addition to any other
remedy it may have, it may recover from Tenant all damages it may incur by
reason of such breach, including the cost of recovering the Premises and
including the worth at the time or such termination of the excess, if any, of
the amount or rent and charges equivalent to rent reserved in this Lease for the
remainder of the stated term over the then reasonable rent value of the Premise
for the remainder of the stated term.
For the purposes or this Article 17, the rent agreed to be paid by Tenant or the amount of rent payable by Tenant shall be deemed to be the Minimum Rent and all other sums required to be paid by Tenant pursuant to the terms of this Lease. All such sums, other than the Minimum Rent, shall be computed on the basis of the average monthly amount thereof, accruing during the preceding term of the lease.
In the event of default, all Tenant's fixtures, furniture, equipment, improvements, additions, alterations, and other personal property shall remain on the Premises and in that event, and continuing during the length of said default, Landlord shall have the right to take the exclusive possession of same and to use same, rent or charge free, until all defaults are cured or, at its option, at any time during the term of this Lease, to require Tenant to forthwith remove same.
The waiver by Landlord of any breach of any term herein contained shall not be deemed to be a waiver of such term or any subsequent breach of the same or any other term herein contained. The subsequent acceptance of rent by Landlord shall not be deemed to be a waiver of any preceding breach of Tenant of any term of this Lease, other than the failure of Tenant to pay
the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. No term of this Lease shall be deemed to have been waived by Landlord unless such waivers shall be in writing.
Neither party hereto shall bring any action for breach of this Lease unless such party has given the other written notice of such breach, and such breach remains uncured after the curative period. If the breach is the failure pay rent or other monies due, the curative period shall be five (5) days; for any other breach the curative period shall be thirty (30) days.
ARTICLE 18
SURRENDER OF PREMISES
Tenant shall, upon expiration or termination of the term hereby created, surrender the Premises in good condition and repair, reasonable wear and tear excepted. Tenant shall promptly surrender all keys for the Premises at the place then fixed for payment of rent and shall inform Landlord of combinations on any locks and safes on the Premises. At the expiration or earlier termination of this Lease, Tenant shall execute, acknowledge and deliver to Landlord, within five days after written demand from Landlord to Tenant, any quit-claim deed or other document required by a title company to remove the cloud of this Lease from the real property upon which the Premises are situated.
ARTICLE 19
HOLDING OVER
If Tenant shall hold over after the Term of this Lease, Tenant shall become a tenant on a month-to-month basis upon all the terms, covenants and conditions herein specified, but exclusive of any renewal options. Notwithstanding the above, if Tenant shall hold over after the Term of this Lease without Landlord's consent, Tenant shall pay double the Minimum Rent paid during the prior year of the Term.
ARTICLE 20
FIXTURES AND PERSONAL PROPERTY
Any trade fixtures, signs, and other personal property of Tenant not permanently affixed to the Premises shall remain the property of Tenant, and Landlord agrees that Tenant shall have the right, provided Tenant is not in default under the terms of this Lease, at any time, and from time to time, to remove any and all of its trade fixtures, signs, and other personal property that, it may have stored or installed in the Premises. Tenant at its expense shall immediately repair any damage occasioned to the Premises by reason of the removal of any such trade fixtures, signs, and other personal property, and upon expiration or earlier termination of this Lease, shall leave the Premises in a neat and clean condition, free of debris. All other improvements to the Premises by Tenant, including but not limited to floor coverings, carpeting, and partitions, shall become the property of Landlord upon expiration or earlier termination of this Lease.
ARTICLE 21
REIMBURSEMENT
All covenants and terms herein contained to be performed by Tenant shall be performed by it at its expense, and if Landlord shall pay any sum of money or do any act that requires the payment of money by reason of the failure of Tenant to perform such covenant or term, the sum or sums of money so paid by Landlord shall be considered as additional rent and shall be payable by Tenant on the first of the month next succeeding such payment, together with interest at the maximum contractual rate permitted by law.
ARTICLE 22
CONSENTS BY LANDLORD
Whenever under this Lease provision is made for Tenant to secure the written consent or approval by Landlord, such consent or approval shall be in writing and shall not be unreasonably withheld.
ARTICLE 23
NOTICES
Any notice required or permitted under this Lease shall be deemed sufficiently given or served when sent by certified mail to Tenant at the address of the Premises as set forth in Paragraph D of the Basic Lease Provisions, and to Landlord at the address then fixed for payment of rent, and either party may by like written notice at any time designate a different-address to which notices shall subsequently be sent.
ARTICLE 24
LITIGATION, COURT COSTS, ATTORNEY'S FEES
In the event at any time either Landlord or Tenant shall institute any action or proceeding against the other relating to the provisions of this Lease, or any default hereunder, then and in that event, the prevailing party in such action or proceeding shall be entitled to recover from the other party its reasonable costs, expenses, and attorney's fees, which shall be deemed to have accrued on the commencement of such action or proceeding and shall be enforceable whether or not such action is prosecuted to judgment. In addition, Landlord shall be entitled to all attorney's fees and all other costs incurred in the preparation and service of any notice of demand hereunder, whether or not a legal action is subsequently commenced. The parties waive trial by jury in any action, proceeding, or counterclaim brought by either of them against the other on any matters whatsoever arising under this Lease. This Lease shall be construed in accordance with the laws of the Sate of Florida and the proper venue for any legal action shall be Orange County, Florida.
ARTICLE 25
SALE OF PREMISES BY LANDLORD OR RE-LEASING
In the event of any sale or exchange of the Premises by Landlord and assignment by Landlord of this Lease, Landlord shall be and is hereby entirely relieved of all liability under all or its covenants and obligations contained in or derived from this Lease arising out of any act,
occurrence or omission relating to the Premises or this Lease occurring after the consummation of such sale or exchange and assignment Landlord and its authorized agents and representatives shall be entitled to enter the Premises at all reasonable times for the purpose of exhibiting the same to prospective purchasers and, during the final six (6) months of the term and any extension or renewal of the term hereof, Landlord shall be entitled to exhibit the Premises for hire and/or for sale and to display thereon in such manner as will not unreasonably interfere with Tenant's business the usual "For Sale" or "For Lease" signs, and such signs shall remain unmolested on the Premises.
ARTICLE 26
SECURITY DEPOSIT
Tenant shall, on or before N/A, deposit with Landlord the sum, if any, set forth in Paragraph I of the Basic Lease Provisions as "Security Deposit." The Security Deposit shall be held by Landlord without liability for interest as security for the faithful performance by Tenant of all the terms of this Lease. Landlord shall have the right to commingle the Security Deposit with its other funds.
If any of the rent or any other sum payable by Tenant should be overdue and unpaid or if Landlord should make payments on behalf of Tenant, or if Tenant should fail to perform any of the terms of this Lease, then Landlord may, at its option and without prejudice to any other remedy appropriate, apply the Security Deposit or so much thereof as may be necessary to compensate Landlord toward the payment of rent or Additional Charges or loss or damage sustained by Landlord due to such breach on the part of Tenant; and Tenant shall upon demand restore the Security Deposit to the original sum deposited. Should Tenant comply with all of the terms of this Lease, the Security Deposit or any balance thereof shall be returned to Tenant or, at the option of Landlord, to the last assignee of Tenant's interest in this Lease at the expiration of the lease term.
ARTICLE 27
NO PERSONAL LIABILITY OF LANDLORD
Tenant shall look solely to Landlord's interest in the Premises for the satisfaction of any judgment or decree requiring the payment of money by Landlord based upon any default under this Lease, and no other property or assets of Landlord shall be subject to levy, execution, or other enforcement procedures or satisfaction of any such judgment or decree.
ARTICLE 28
GRANT OF EASEMENTS
Tenant hereby consents to any and all conveyances or grants of easements upon the Premises that Landlord reasonably determines to be necessary in order to adequately provide utilities to, or ingress and egress from, the Premises.
ARTICLE 29
PARTIAL INVALIDITY
If any provision of this Lease is determined to be void by any court of competent jurisdiction, such determination shall not affect any other provision of this Lease and such other provision shall remain in full force and effect. If any provision of this Lease is capable of two constructions, one of which would render the provision void and one of which would render the provision valid, the provision shall be interpreted in the manner that would render it valid.
ARTICLE 30
ESTOPPEL CERTIFICATE
Tenant shall, within Ten (10) days after Landlord's written request, execute and deliver to Landlord a written declaration that this Lease is in full force and effect; that there are no incurred defaults in Landlord's performance; that this Lease has not been assigned, modified, supplemented, or amended (except by such writings as shall be stated); that all conditions under this Lease to be performed by Landlord have been satisfied; that there are no defenses or offsets against the enforcement of this Lease by the Landlord, or stating those claimed by Tenant; the amount of advance rent, if any (or none if such is the case) paid by Tenant; the date to which rent has been paid; and the amount of security deposited with Landlord. Such declaration shall be executed and delivered by Tenant from time to time as may be requested by Landlord. Landlord's mortgage lenders and/or purchasers shall be entitled to rely upon same. Tenant's failure to deliver such declaration within the time permitted hereby shall be conclusive upon Tenant that this Lease is in full force and effect, except to the extent any modification has been represented by Landlord, and that there are no incurred defaults in Landlord's performance, and that not more than one month's rent has been paid in advance.
ARTICLE 31
LATE PAYMENT CHARGE
Tenant agrees that in the event that rent and other sums due hereunder are received by Landlord more than five (5) business days after the date on which they are due, Tenant shall pay to Landlord a late payment charge equal to five percent (5%) of the total sum due, plus applicable sales tax, as liquidated damages and not as a penalty; provided, however, the delay in imposition of the late payment charge shall not be construed as extending the date on which sums become due and payable hereunder, nor as extending the date on which a default shall be deemed to have occurred by Tenant's failure to timely pay sums due to Landlord hereunder.
ARTICLE 32
BROKER'S FEE
Tenant represents and warrants to Landlord that there is no agent, broker, finder, or other party with whom Tenant has dealt who are or may be entitled to any commission or fee with respect to this Lease or the Premises. Tenant shall indemnify and hold Landlord harmless from any claims arising out of a breach of Tenant's representation and warranty set forth in the preceding sentence.
ARTICLE 33
ENVIRONMENTAL COMPLIANCE
Tenant covenants and agrees not to use, generate, manage, treat, manufacture, store, or dispose of on, under, or about the Premises or transport to or from the Premises any Hazardous Materials (other than De Minimis Amounts). For the purpose or this Lease, "Hazardous Materials" shall include but not be limited to any and all chemicals, materials, or substances defined as "hazardous substances," "hazardous materials," "hazardous wastes" or "toxic substances" in the laws or any governmental authority having jurisdiction over the Premises (and any other chemical, material, or substance, exposure to which is prohibited, limited, or regulated by any such governmental authority) or any rules or regulations adopted and guidelines promulgated pursuant to any of the foregoing laws, as all such laws, rules, or regulations may be amended or replaced from time to time (collectively "Hazardous Materials Laws"). The term "De Minimis Amounts" shall mean, with respect to any given level of Hazardous Materials, that such level or quantity of Hazardous Materials in any form or combination of forms (i) does not constitute a violation of any Hazardous Materials Laws, and (ii) is customarily employed in, or associated with, similar projects in the county where the Premises are located. Tenant further covenants and agrees to pay all costs and expenses associated with all enforcement, removal, remedial, or other governmental or regulatory actions, agreements, or orders threatened, instituted, or completed pursuant to any Hazardous Materials Laws, and all audits, tests, investigations, "cleanup" reports, and other such items incurred in connection with any efforts to complete, satisfy, or resolve any matters, issues, or concerns, whether governmental or otherwise, arising out of the use, generation, management, treatment, manufacturing, storage, disposal, or transportation of Hazardous Materials in any amount by Tenant, its employees, agents, invitees, subtenants, licensees, assignees, or contractors.
ARTICLE 34
MISCELLANEOUS
A. Time is of the essence of this Lease and the terms and conditions hereof shall extend to and be binding upon the heirs, executors, successors, and assigns of the parties hereto, and any mention of the singular shall inc1ude the plural and the plural shall include the singular.
B. Tenant shall not record this Lease without the written consent of Landlord.
C. The section headings contained in this Lease are for purposes of reference only and shall not limit or define the meaning of any of the terms or provisions hereof.
D. The word "Landlord" shall include not only the original Landlord, but also any person or entity hereafter acquiring the Landlord's interest in this lease.
E. This Lease may be amended only by an instrument in writing signed by both parties.
F. It is agreed that nothing contained in this Lease shall be deemed or construed as creating a partnership or joint venture between Landlord and Tenant or between Landlord and any other party, or cause Landlord to be responsible in any way for the debts or obligations of Tenant, or any other party.
G. Pursuant to Section 404.056(8), Florida Statutes, Tenant is hereby notified as follows: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health unit.
IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written.
LANDLORD:
Delegates, LLC, an Arizona limited liability
company
By:______________________________________________
John C. White, managing member
TENANT:
The Clinton Harley Corporation,
a Delaware corporation
By:______________________________________________
Robert D. Hartman, President
Exhibit "A"
LEGAL DESCRIPTION
9755 Delegates Drive, Orlando, Florida
Orange County Tax Parcel I.D. #04-24-29-6351-01-000
That part of Block "A", ORLANDO CENTRAL PARK NUMBER SIXTY-ONE-A as recorded in Plat Book 29, Page 51, Public Records of Orange County, Florida, being described as follows: From the Northeast corner of Block "A", ORLANDO CENTRAL PARK NUMBER SIXTY-ONE-A as recorded in Plat Book 29, Page 51, Public Records of Orange County, Florida, run South 00 degrees 16 minutes 38 seconds East 130.00 feet along the East boundary of said Block "A" for the POINT OF BEGINNING; thence run South 89 degrees 43 minutes 22 seconds West 240.10 feet to a point on the Northerly boundary of said Block "A", said point being on a nontangent curve concave Northerly and having a radius of 60.00 feet; thence from a tangent bearing of South 04 degrees 51 minutes 15 seconds West, run Westerly 162.60 feet along the arc of said curve and said Northerly boundary through a central angle of 155 degrees 16 minutes 28 seconds to the end of said curve and the beginning of a reverse curve concave Southwesterly, having a radius of 30.00 feet and an intersection angle 70 degrees 31 minutes 43 seconds; thence run Northwesterly 36.93 feet along the arc of said curve and said Northerly boundary to the end of said curve; thence run South 89 degrees 36 minutes 00 seconds West 90.85 feet along said Northerly boundary to a 4" X 4" concrete monument with a disc stamped "LS1585 LS1819 LS3186", said 4" X 4" concrete monument being North 89 degrees 36 minutes 00 seconds East 390.67 feet from the Northwest corner of the aforesaid Block "A"; thence-run South, 00 degrees 24 minutes 00 seconds East 557.50 feet to a 4" X 4" concrete monument with a disc stamped "LS1585 LS1819 LS3186" being on the South boundary of said Block "A"; thence run North 89 degrees 36 minutes 00 seconds East 474.37 feet to the Southeast corner of said Block "A"; thence run North 00 degrees 16 minutes 38 seconds West 551.49 feet to the Point of Beginning.
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.
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EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
STATE OF SUBSIDIARY INCORPORATION DBA -------------------------------------------------------- ------------- ----------------- UTI Holdings, Inc.(1) Arizona None Universal Technical Institute of Arizona, Inc.(2) Arizona None Universal Technical Institute of California, Inc.(2) California None U.T.I. of Illinois, Inc. (2) Illinois None Universal Technical Institute of North Carolina, Inc.(2) Delaware None Universal Technical Institute of Texas, Inc.(2) Texas None Universal Technical Institute of Pennsylvania, Inc.(2) Delaware None Custom Training Group, Inc.(2) California None The Clinton Harley Corporation(2) Delaware Clinton Technical Institute and Motorcycle Mechanics Institute |
(2) Wholly owned subsidiaries of UTI Holdings, Inc.
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our reports dated October 2, 2003 relating to the financial statements and financial statement schedules of Universal Technical Institute, Inc., which appear in such Registration Statement. We also consent to the reference to us under the headings "Experts" and in such Registration Statement.
PricewaterhouseCoopers LLP
/s/ PricewaterhouseCoopers LLP Phoenix, Arizona October 3, 2003 |