UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of
1934
Date of report (Date of earliest event reported): May 10,
2019
National American University Holdings, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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001-34751
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83-0479936
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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5301 Mt. Rushmore RoadRapid City, SD
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55701
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(Address of principal executive Offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(605)
721-5220
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging
growth company [ ]
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
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Securities registered pursuant to Section 12(b) of the Act:
None
Item 1.01
Entry into a Material Definitive Agreement.
On May 10, 2019, Dlorah, Inc., a South Dakota
corporation (“Dlorah”) and a wholly owned subsidiary of
National American University Holdings, Inc., a Delaware corporation
(the “Company”), entered into a Loan Agreement (the
“Loan Agreement”) with Center for Excellence in Higher
Education, Inc., an Indiana non-profit corporation (the
“Lender”). The Loan Agreement provides for a term loan
in
the principal amount of $8,500,000 (the
“Loan”), which is evidenced by that certain Promissory
Note dated May 10, 2019 (the “Note”). The Loan is
secured by certain other loan instruments given by Dlorah in favor
of the Lender, including the Real Estate Mortgage encumbering
certain land situated in Pennington County, South Dakota (the
“Mortgage”), the Account Control Agreement granting a
security interest in the Letter of Credit Collateral Account, two
Aircraft and Engine Security Agreements granting security interests
in two aircraft, the Absolute
Assignment of Leases and Rents granting a security
interests to certain lease and rent proceeds, the Partnership
Security Agreement granting a security interest in certain
ownership interests in a partnership, and such other documents and
instruments which evidence
,
secure, or
pertain to the Loan
(collectively, together with the Note and the
Mortgage, the “Loan Documents”). Any terms not defined
herein have the meanings set forth in the Loan
Agreement.
Amount
. The
Loan Agreement provides for an $8,500,000 million term
loan.
Purpose
.
The purpose of the Loan is to provide a source of cash collateral
to Dlorah to secure a
letter of credit issued by Black Hills
Community Bank N.A. (the “Senior Lender”) for the
benefit of the United States Department of Education
(“Department”) in the amount of $7,330,557 (the
“Letter of Credit”) and to discharge a judgment lien on
real estate owned by Dlorah in the amount of
$838,871.31.
Maturity
. The
Loan matures on May 31, 2020 (the “Maturity Date”)
unless accelerated pursuant to an event of default, as described
below. All amounts outstanding under the Loan will be due and
payable upon the earlier of the Maturity Date or the acceleration
of the Loan upon an Event of Default.
Interest
Rate
. The Loan bears
interest at a rate per annum of (a) 7%, until the Maturity Date,
accruing on an Actual 360 Basis (as defined below); and (b) the
Default Rate (as defined below), on and after the Maturity Date.
The term “Actual 360 Basis” means the method of
calculation of interest under the Note, whereby interest shall
accrue based on the actual number of calendar days in each month
and a 360 day year. The term “Default Rate” means
interest at the lesser of: (a) the highest rate allowed under
applicable law at the time of an Event of Default, as determined by
Lender, or (b) ten percent (10%) per annum.
Loan
Origination Fee
. Dlorah paid
a non-refundable loan origination fee equal to $250,000
to the Lender, along with the Lender’s attorney’s
fees.
Prepayment
Privilege
.
Dlorah has the right to prepay all or any
part of the outstanding indebtedness at any time, without premium
or penalty, without waiving any right to demand subsequent advances
pursuant to the terms of the Note.
Repayment
Terms
. Under the Note,
Dlorah agreed to make (a) monthly payments of accrued and unpaid
interest beginning on July 1, 2019, and (b) a final payment of all
outstanding principal, accrued and unpaid interest and all other
sums payable pursuant to the Note on the Maturity
Date.
Covenants;
Representations and Warranties; Other Provisions
. The Loan Agreement contains customary
representations, warranties and covenants. Covenants of Dlorah
include: payment of taxes, maintenance of existence, preservation
of property, maintenance of insurance, completion of financial
statements and tax returns, notification to the Lender of default
or litigation, allowing the Lender to inspect Dlorah’s books
and records, payment of all other liens against the Collateral,
obtaining no other liens, no change in control, no material change
in business, and no material cash distributions. Also, if Dlorah
obtains a loan from
Dougherty Mortgage LLC, a Delaware
limited liability company
, secured by
all or a portion of the real estate subject to the Mortgage, the
Lender will
release the Mortgage or subordinate the Mortgage
to the Lien of Dougherty’s mortgage if Dlorah complies with
certain conditions, including depositing proceeds into
Lender’s account and preparing a plan for the sale of real
estate owned by Dlorah.
Default
Provisions
. The Loan
Agreement provides for Events of Default customary for loan
agreements of this type, including late payment, breach of any term
or covenant of any Loan Document, certain judgments against Dlorah,
material injury or destruction of the Collateral, transfer or
encumbrance of the Collateral, bankruptcy, and the occurrence of a
Material Adverse Effect on Dlorah. Upon an event of default
relating to the payment of money, destruction or conveyance of the
Collateral, or bankruptcy, the amounts outstanding under the Loan
Agreement will become immediately due and payable. For all other
events of default, the Lender must give Dlorah notice and an
opportunity to cure the default. Upon the occurrence of any Event
of Default, the Lender may, after giving notice and the expiration
of the cure period, accelerate the Note and declare all
Indebtedness immediately due and payable.
Intercreditor
Agreement
. In connection with
the Loan Agreement, Dlorah and the Lender entered into an
Intercreditor and Subordination Agreement with the Senior Lender,
which provides that the Senior Lender has a first priority security
interest in the Letter of Credit Collateral
Account.
The
foregoing description of the Loan Agreement is qualified in its
entirety by reference to the full text of the Loan Agreement, a
copy of which is attached hereto as Exhibit 99.1 and incorporated
herein by reference.
Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On
March 8, 2019, the Company received a letter from the Department in
which it determined that National American University
(“NAU”) did not meet its financial responsibility
standards for institutions that participate in Title IV programs.
As a result, the letter required, among other things, NAU to post a
letter of credit to the Department in the amount of $10,995,835,
representing 15% of the Title IV program funds awarded during the
Company’s fiscal year ended May 31, 2018, to be accompanied
by the provisional form of certification to participate in Title IV
programs (the “Provisional Certification Alternative”).
The March 8, 2019 letter from the Department also placed NAU on the
Heightened Cash Monitoring 1 payment method for receipt of Title IV
funds, and required ongoing cash balance and cash flow reports to
the Department and notification to the Department of certain
specified financial events.
In
response to a request from NAU, the Department provided NAU with
two additional options under the Provisional Certification
Alternative: (1) NAU may post an irrevocable letter of credit in
the amount of 10% of its Title IV program funds for its fiscal year
ended May 31, 2018 (calculated by the Department to be $7,330,557);
or (2) NAU may be placed on the Heightened Cash Monitoring 2
(“HCM2”) payment method for receipt of Title IV program
funds and the Department will withhold a percentage of each HCM2
payment until NAU has funded an account equal to the letter of
credit requirement of $7,330,557. The Department further stated
that there will be a supplemental review of the Company’s
total Title IV receipts for its fiscal year ending May 31, 2019 to
determine at that time if the additional 5% letter of credit amount
(calculated by the Department to be $3,665,278) requested by the
Department’s letter of March 8, 2019 will still be
required.
On
April 30, 2019, NAU responded to the Department’s letter and
selected the posting of an irrevocable letter of credit in the
amount of 10% of its Title IV program funds for its fiscal year
ended May 31, 2018. On May 10, 2019, the Senior Lender issued an
irrevocable letter of credit on behalf of NAU in the amount of
$7,330,557 for the benefit of the Department. The letter of credit
expires on May 31, 2020.
The
information set forth under Item 1.01 of this Current Report on
Form 8-K is incorporated by reference into this Item
2.03.
Item 9.01.
Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No.
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Description
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Loan
Agreement, dated May 10, 2019
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly
authorized.
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NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
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Date:
May 14, 2019
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By:
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/s/
Ronald
L. Shape
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Ronald
L. Shape, Ed. D.
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Chief
Executive Officer
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EXHIBIT INDEX
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Exhibit No.
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Description
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Loan
Agreement, dated May 10, 2019
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Grafico Azioni National American Univer... (QB) (USOTC:NAUH)
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