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) March 31, 2006.
THE AMERICAN EDUCATION CORPORATION
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(Exact name of registrant as specified in its charter)
Nevada 0-11078 73-1621446
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
7506 N. Broadway Extension, Suite 505
Oklahoma City, Oklahoma 73116
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(Address of principal executive offices) (Zip Code)
(405) 840-6031
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(Registrant's telephone number, including area code)
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:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12(b) under the Exchange
Act (17 CFR 240.14a-12(b))
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Information to be Included in the Report
Item 8.01 Other events.
On March 31, 2006, The American Education Corporation extended its current
revolving loan agreement with UMB Bank until April 30, 2006 under the same
terms and conditions it has currently. The Company is continuing discussions
to extend the line until March 31, 2007.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
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10.1 Promissory Note dated March 31, 2006 from The American
Education Corporation in favor of UMB Bank, N.A.
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.
THE AMERICAN EDUCATION CORPORATION
/s/ Jeffrey E. Butler
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Jeffrey E. Butler, Chief Executive Officer
April 4, 2006
Exhibit 99.1
PROMISSORY NOTE DATED MARCH 31, 2006 FROM
THE AMERICAN EDUCATION CORPORATION IN FAVOR OF
UMB BANK, N.A.
UMB
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B A N K
MEMBER FDIC
PROMISSORY NOTE
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Principal Loan Date Maturity Loan No. Call/Coll Account Officer Initials
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$450,000.00 03-31-2006 04-30-2006 0001 4A0/9215 0017232 MXW2
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References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length
limitations.
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Borrower: THE AMERICAN EDUCATION Lender: UMB BANK, n.a.
CORPORATION DOWNTOWN OKLAHOMA CITY
7506 N. BROADWAY, STE 505 BANKING CENTER
OKLAHOMA CITY, OK 73116 204 NORTH ROBINSON
OKLAHOMA CITY, OK 73102
(405) 239-5800
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Principal Amount: $450,000.00 Initial Rate 9.750% Date of Note: March 31,
2006
PROMISE TO PAY. THE AMERICAN EDUCATION CORPORATION ("Borrower") promises
to pay to UMB BANK, n.a. ("Lender"), or order, in lawful money of the
United States of America, the principal amount of Four Hundred Fifty
Thousand & 00/100 Dollars ($450,000.00) or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each advance until
repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on April 30, 2006. Unless
otherwise agreed or required by applicable law, payments will be
applied first to any accrued unpaid interest; then to principal; then to
any late charges; and then to any unpaid collection costs. The annual
interest rate for this Note is computed on a 365/360 basis; that is, by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender
may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to
change from time to time based on changes in an independent index which is
the UMB Bank, N.A. Prime Rate as the Index Rate. (the "Index"). The Index
is not necessarily the lowest rate charged by Lender on its loans. If the
Index becomes unavailable during the term of this loan, Lender may designate
a substitute index after notice to Borrower. Lender will tell Borrower the
current Index rate upon Borrower's request. The Interest rate change will
not occur more often than each day. Borrower understands that Lender may
make loans based on other rates as well. The Index currently is 7.750% per
annum. The interest rate to be applied to the unpaid principal balance of
this Note will be at a rate of 2.000 percentage points over the Index,
resulting in an initial rate of 9.750% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum
rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments. Rather, early payments will reduce the principal
balance due. Borrower agrees not to send Lender payments marked "paid in
full", "without recourse", or similar language. If Borrower sends such a
payment, Lender may accept it without losing any of Lender's rights under
this Note, and Borrower will remain obligated to pay any further amount owed
to Lender. All written communications concerning disputed amounts, including
any check or other payment instrument that indicates that the payment
constitutes "payment in full" of the amount owed or that is tendered with
other conditions or limitations or as full satisfaction of a disputed amount
must be mailed or delivered to: UMB BANK, n.a.; DOWNTOWN OKLAHOMA CITY
BANKING CENTER; 204 NORTH ROBINSON; OKLAHOMA CITY, OK 73102.
LATE CHARGE. If a payment is 30 days or more late, Borrower will be charged
10.000% of the regularly scheduled payment or $50.00, whichever is less.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the total sum due under this Note will bear interest from the
date of acceleration or maturity at the variable interest rate on this
Note. The interest rate will not exceed the maximum rate permitted by
applicable law.
DEFAULT. Each of the following shall constitute an event of default
("Event of Default") under this Note:
Payment Default. Borrower fails to make any payment when due under this Note.
Other Defaults. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Note or in any
of the related documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note or
the related documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading
at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against
Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate
reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any guarantor, endorser, surety, or accommodation party of
any of the indebtedness or any guarantor, endorser, surety, or
accommodation party dies or becomes incompetent, or revokes or disputes
the validity of, or liability under, any guaranty of the indebtedness
evidenced by this Note.
Change In Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of this Note is impaired.
Insecurity. Lender in good faith believes itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest
immediately due, and then Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses, whether or not
there is a lawsuit, including without limitation all attorneys' fees and
legal expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), and appeals. If not prohibited by
applicable law, Borrower also will pay any court costs, in addition to
all other sums provided by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other.
GOVERNING LAW. This Note will be governed by applicable to Lender and, to
the extent not preempted by federal law, the laws of the State of Oklahoma
without regard to its conflicts of law provisions. This Note has been
accepted by Lender in the State of Oklahoma.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of Oklahoma County,
State of Oklahoma.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if
Borrower makes a payment on Borrower's loan and the check or other payment
order including any preauthorized charge with which Borrower pays is later
dishonored.
PROMISSORY NOTE
Loan No: 0001 (Continued) Page 2
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender
reserves a right of setoff in all Borrower's accounts with Lender
(whether checking, savings, or some other account). This includes all
accounts Borrower holds jointly with someone else and all accounts Borrower
may open in the future. However, this does not include any IRA or Keogh
accounts, or any trust accounts for which setoff would be prohibited by
law. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on the indebtedness against any
and all such accounts, and, at Lender's option, to administratively
freeze all such accounts to allow Lender to protect Lender's charge and
setoff rights provided in this paragraph.
COLLATERAL. Borrower acknowledges this Note is secured by all Accounts
Receivable and Inventory, Equipment, Furniture and Fixtures as further
described in Security Agreements dated 12-23-99. All stock certificates,
bonds, receipts, confirmations and other similar documents as described
in Security Agreements dated 12-23-99 & 3-31-05. All Accounts Receivable,
Inventory and Equipment as further described in Security Agreement
dated March 31, 2004.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral
requests be confirmed in writing. Borrower agrees to be liable for all
sums either: (A) advanced in accordance with the instructions of an
authorized person or (B) credited to any of Borrower's accounts with
Lender. The unpaid principal balance owing on this Note at any time may
be evidenced by endorsements on this Note or by Lender's internal records,
including daily computer print-outs. Lender will have no obligation to
advance funds under this Note if: (A) Borrower or any guarantor is in
default under the terms of this Note or any agreement that Borrower or
any guarantor has with Lender, including any agreement made in connection
with the signing of this Note; (B) Borrower or any guarantor ceases doing
business or is insolvent; (C) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this
Note or any other loan with Lender; (D) Borrower has applied funds
provided pursuant to this Note for purposes other than those authorized
by Lender; or (E) Lender in good faith believes itself insecure.
ADDITIONAL TERMS. Each and every advance made under this Note shall be
at Lender's sole discretion, Lender having made no commitment to make any
such advances.
Borrower shall not a) voluntarily transfer any assets into trust or, b)
if already owned in trust, shall not voluntarily transfer title to such
trust assets to any other person or entity, without giving Lender at least 30
days prior written notice thereof.
ADDITIONAL TERMS. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND
CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT
YOU (BORROWER(S) AND US (LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT,
ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS
WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon
Borrower, and upon Borrower's heirs, personal representatives,
successors and assigns, and shall inure to the benefit of Lender and its
successors and assigns.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact
will not affect the rest of the Note. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Borrower
and any other person who signs, guarantees or endorses this Note, to the
extent allowed by law, waive presentment, demand for payment, and notice of
dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for
any length of time) this loan or release any party or guarantor or collateral;
or impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made. The obligations under this Note
are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
THE AMERICAN EDUCATION CORPORATION
By: /s/ Neil R. Johnson
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Authorized Signer for
THE AMERICAN EDUCATION
CORPORATION
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