FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission File Number 1-13722
WHITMAN EDUCATION GROUP, INC.
New Jersey 22-2246554
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 Biscayne Boulevard, 6th Floor, Miami, Florida 33137
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(Address of principal executive offices) (Zip Code)
(305) 575-6534
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
AS OF AUGUST 9, 1996, THERE WERE 11,893,108 SHARES OF COMMON STOCK
OUTSTANDING.
<PAGE>
WHITMAN EDUCATION GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
TABLE OF CONTENTS
PAGE
----
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.............................................. 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 10
PART II-OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................. 14
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, MARCH 31,
1996 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................ $ 68,760 $ 2,762,141
Restricted cash.......................................................... 342,446 363,314
Accounts receivable, net ................................................ 14,461,616 15,619,237
Inventories.............................................................. 802,913 795,350
Deferred income tax asset................................................ 591,307 515,041
Other current assets..................................................... 838,304 805,137
--------------- --------------
Total current assets.......................................................... 17,105,346 20,860,220
--------------- --------------
Property and equipment, net .................................................. 7,175,854 7,017,181
Marketable securities - related party......................................... 472,500 776,250
Deferred costs, net .......................................................... 441,481 553,929
Deposits and other assets, net ............................................... 1,019,208 1,025,633
Goodwill, net................................................................. 2,511,875 2,529,693
Restricted cash - escrow...................................................... 2,596,048 2,563,999
--------------- --------------
$ 31,322,312 $ 35,326,905
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................................... $ 1,553,872 $ 1,549,494
Accrued expenses......................................................... 1,648,289 1,537,216
Income taxes payable..................................................... 132,377 348,851
Current portion of capitalized lease obligations......................... 912,046 919,050
Deferred tuition revenue................................................. 9,940,202 11,705,521
--------------- --------------
Total current liabilities..................................................... 14,186,786 16,060,132
--------------- --------------
Deferred income tax liability................................................. 4,636 3,640
Other liability............................................................... 344,746 383,813
Capitalized lease obligations................................................. 1,750,228 1,994,035
Long-term debt................................................................ 7,312,912 9,500,000
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, authorized 100,000,000 shares, issued and
outstanding, excluding shares held in escrow, 10,570,636
shares at June 30, 1996 and 10,311,782 shares at March 31, 1996......... 8,316,125 7,590,793
Additional paid-in capital............................................... 616,500 616,500
Retained earnings ............................................... 300,252 62,040
Treasury stock, 279,694 shares at June 30, 1996 and 232,714 at
March 31, 1996 ....................................................... (1,212,273) (774,773)
Net unrealized loss on noncurrent marketable securities.................. (297,600) (109,275)
--------------- --------------
Total stockholders' equity.................................................... 7,723,004 7,385,285
--------------- --------------
$31,322,312 $35,326,905
=============== ==============
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
JUNE 30,
1996 1995
------ ------
<S> <C> <C>
REVENUES
Tuition.......................................................... $10,512,089 $ 7,728,405
Other educational materials...................................... 750,181 679,946
Other............................................................ 184,226 144,257
----------- -----------
Total revenues................................................... 11,446,496 8,552,608
----------- -----------
COSTS AND EXPENSES
Cost of educational services..................................... 6,190,891 4,964,729
Student services and administrative expense...................... 4,519,509 3,196,157
Bad debt expense................................................. 343,446 625,857
----------- -----------
Total costs and expenses......................................... 11,053,846 8,786,743
----------- -----------
Income (loss) from operations.................................... 392,650 (234,135)
Interest income.................................................. 28,192 12,999
Interest expense................................................. (250,346) (315,535)
----------- -----------
Income (loss) before income tax provision........................ 170,496 (536,671)
Income tax provision............................................. 94,479 109,705
----------- -----------
Net income (loss)................................................ $ 76,017 $ (646,376)
=========== ===========
Net income (loss) per share of common stock...................... $ .01 $ (.06)
=========== ===========
Average number of common stock and common stock
equivalent shares outstanding, excluding common
stock shares held in escrow for 1995........................... 13,726,469 10,209,366
=========== ===========
</TABLE>
See accompanying notes.
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<PAGE>
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Net
Unrealized
Loss on
Common Additional Noncurrent
Shares Common Paid-In Retained Treasury Marketable
Outstanding Stock Capital Earnings Stock Securities Total
----------- ------ ---------- -------- --------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1996 10,311,782 $7,590,793 $616,500 $62,040 ($774,773) ($109,275) $7,385,285
Shares issued for exercise
of options 305,834 725,332 -- -- -- -- 725,332
Shares repurchased in connection
with exercise of options (46,980) -- -- -- (437,500) -- (437,500)
Net unrealized loss on non-
current marketable
securities -- -- -- -- -- (188,325) (188,325)
Net income of MDJB for
the three months ended
March 31, 1996 -- -- -- 162,195 -- -- 162,195
Net income for the three months
ended June 30, 1996 -- -- -- 76,017 -- -- 76,017
--------- ---------- -------- -------- ------------ ---------- ---------
Balance at June 30, 1996 10,570,636 $8,316,125 $616,500 $300,252 $(1,212,273) $(297,600) $7,723,004
========== ========== ======== ======== ============ =========== ==========
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
JUNE 30,
1996 1995
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................................... $ 76,017 $ (646,376)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization..................................... 631,664 373,433
Bad debt expense.................................................. 343,446 625,858
Deferred tax provision............................................ 39,159 ---
Changes in operating assets and liabilities:
Accounts receivable............................................ 926,102 (1,648,915)
Inventories.................................................... (10,883) (168,773)
Other current assets........................................... (79,855) 97,817
Deferred costs................................................. --- (4,878)
Deposits and other assets...................................... (123,617) (71,105)
Accounts payable............................................... 77,240 (245,110)
Accrued expenses............................................... 28,707 69,912
Income taxes payable........................................... 37,913 (11,999)
Deferred tuition revenue....................................... (1,794,922) 1,696,578
-------------- ------------
Net cash provided by operating activities.............................. 150,971 66,442
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................................... (651,850) (332,799)
Interest payments into escrow for acquisition of
Sanford-Brown College................................................ (32,049) ---
-------------- ------------
Net cash used in investing activities.................................. (683,899) (332,799)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit and long-term
borrowings........................................................... 5,642,467 2,225,000
Principal payments on revolving line of credit,
long-term borrowings and other liability............................. (7,829,555) (2,785,000)
Principal payments on capitalized lease obligations.................... (245,775) (69,395)
Proceeds from exercise of options.................................. 287,833 ---
Repurchase of common stock............................................. --- (281,105)
--------------- ------------
Net cash used in financing activities.................................. $ (2,145,030) $ (910,500)
--------------- ------------
</TABLE>
Continued on the following page.
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<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
FOR THE THREE MONTHS ENDED
JUNE 30,
1996 1995
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<S> <C> <C>
Decrease in cash and cash equivalents $(2,677,958) $(1,176,857)
Cash and cash equivalents at beginning of year 2,762,141 1,787,281
Net MDJB activity for the three months
ended March 31, 1996 (15,423) --
--------------- -----------
Cash and cash equivalents at end of period $ 68,760 $ 610,424
=============== ==============
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING AND INVESTING ACTIVITIES:
Equipment acquired under capital leases $ 25,494 $ 936,201
=============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 164,436 $ 241,501
================= ==============
Income taxes paid $ 233,057 $ 123,389
================= ==============
</TABLE>
See accompanying notes.
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<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion of
the management of the Company, include all adjustments, which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However, the
financial statements do not include all information and footnotes required for a
presentation in accordance with generally accepted accounting principles. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto included or
incorporated by reference in the Company's Form 10-K for the fiscal year ended
March 31, 1996. The results of operations for the interim periods are not
necessarily indicative of the results of operations to be expected for the full
year.
The accompanying financial statements include the accounts of Whitman Education
Group, Inc., and its subsidiaries, all of which are wholly-owned. All
intercompany accounts and transactions have been eliminated.
Certain June 30, 1995 balances have been reclassified to conform to the current
year's presentation.
Pursuant to the Financial Accounting Standards Board No. 123, "Accounting for
Stock-Based Compensation", the Company has elected to continue to account for
issuance of stock options and other equity instruments under Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees."
New and continuing enrollment at the Company's post-secondary institutions is
typically strongest during the fall and winter terms, i.e., October through
December and January through March, respectively. Consequently, revenues would
normally be strongest during the Company's third and fourth quarters. The
Company has significant fixed costs and incurs its sales marketing costs in
advance of its enrollment. Consequently, the Company would expect earnings to be
weakest during the spring and summer terms, i.e., its first and second quarters,
with the greatest effect in the second quarter.
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<PAGE>
2. MERGER WITH M.D.J.B., INC.
On March 29, 1996, the Company completed the merger with M.D.J.B., Inc. ("MDJB")
which was accounted for using the pooling of interests method of accounting.
Accordingly, the Company's consolidated financial statements have been restated
to include the accounts and operations of MDJB for all periods prior to the
merger.
The Company reports its financial results on a fiscal year basis ending March
31, whereas MDJB had reported its financial results on a calendar year basis.
The consolidated financial statements for the three months ended June 30, 1996
have been adjusted to conform MDJB's year end with that of the Company. The
effect arising from the exclusion of net income of MDJB of $162,195 for their
three month period ended March 31, 1996 in the accompanying consolidated
statements of operations and cash flows for the three month period ended June
30, 1996, is presented in the accompanying condensed consolidated statement of
changes in stockholders' equity as an adjustment to retained earnings for the
change in fiscal year of MDJB. The consolidated financial statements for all
periods prior to fiscal 1997 have not been restated for the change in fiscal
year of MDJB. Accordingly, the consolidated financial statements for the periods
ending on or prior to March 31, 1996 include the operating results of the
Company on a March 31 fiscal year basis and of MDJB on a calendar year basis. If
the condensed consolidated financial statements for the three months ended June
30, 1995 had been adjusted to conform MDJB's year end with that of the Company,
the net effect would have resulted in a reduction of net income of approximately
$70,000.
3. LONG-TERM DEBT
In August 1996, the bank line of credit of $1.0 million expiring in May 1997 was
increased to $1.3 million and the expiration date was extended to May 1998.
4. CONTINGENCIES
An action has been commenced against the Company's wholly-owned subsidiary,
Ultrasound Technical Services, Inc. ("UTS"), operator of the Ultrasound
Diagnostic School, in the Circuit Court, Fourth Judicial Circuit, Duval County,
Florida. The amended complaint filed on behalf of 34 current or former students
of the School's Jacksonville and Tampa facilities alleges that at the time each
of the plaintiffs registered, UTS falsely represented that almost all of its
graduates were placed in positions of employment in the field of ultrasound
diagnostics and that its students were eligible upon graduation to take the
examination for the American Registry of Diagnostic Medical Sonographers or that
being registered was not a factor in obtaining employment in the ultrasound
field. The amended complaint further alleges that the plaintiffs were induced by
these alleged false representations to pay a total of over $300,000 in tuition
and fees to UTS. The amended complaint seeks an unspecified amount of damages.
UTS has not interposed its answer in the action. UTS intends to deny making the
alleged representations and believes that it has
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<PAGE>
meritorious defenses to the action. Management cannot at this stage in the
proceedings assess whether UTS will have any liability in this action and if so,
whether such liability will have a material adverse effect on the Company.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements of the Company, the related notes to
consolidated financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the Company's Form
10-K for the year ended March 31,1996 and the condensed consolidated financial
statements and the related notes to the condensed consolidated financial
statements included in Item 1 of this Quarterly Report on Form 10-Q.
MDJB is presented on a calendar year basis for the three months ended June 30,
1995. The explanations and fluctuations that follow approximate the results of
operations had the MDJB activity been combined to conform to the Company's
fiscal year.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1995
The following table sets forth the Company's revenues by subsidiary for the
three months ended June 30, 1996 and June 30, 1995 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------------------------------------------------
1996 1995
---------------------------------------------------------------------------
Tuition Other Tuition Other
Revenues Revenues Total Revenues Revenues Total
---------- ------------ ----------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
UDS $ 4,654 $177 $ 4,831 $2,115 $ 90 $2,205
SBC 3,663 341 4,004 3,640 337 3,977
MDJB 2,195 416 2,611 1,973 398 2,371
---------- -------- -------- --------- --------- --------
$10,512 $934 $11,446 $7,728 $825 $8,553
========== ========== ========== =========== ========== =========
</TABLE>
Tuition revenues increased by $2.8 million or 36.0% to $10.5 million for the
three months ended June 30, 1996 from $7.7 million for the three months ended
June 30, 1995. The increase was primarily due to an increase in student
enrollments in the Cardiovascular Technology ("CVT") and Medical Assisting
("MA") programs at Ultrasound Diagnostic School ("UDS") and an increase in
revenues at M.D.J.B., Inc. ("MDJB") due to an increase in revenues of $110,000
from the Doctorate programs and an increase in revenues from new products
offered in the Masters and undergraduate programs. The increase in student
enrollments in the CVT and MA programs in
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the first three months ended June 30, 1996 as compared to the first three months
ended June 30, 1995 generated an increase in revenues from such programs of
approximately $689,000 and $1.7 million, respectively.
Other revenues increased by $109,000 or 13.2% to $934,000 for the three months
ended June 30, 1996 from $825,000 for the three months ended June 30, 1995
primarily due to an increase in sales of books and uniforms for Ultrasound
Diagnostic School as a result of the increased student enrollments.
The following table sets forth the Company's expenses by subsidiary for the
three months ended June 30, 1996 and June 30, 1995 (in thousands):
<TABLE>
<CAPTION>
EDUCATIONAL STUDENT SERVICES INTEREST
SERVICES AND ADMINISTRATIVE BAD DEBT EXPENSE, NET
------------- -------------------- ------------- ----------------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 1996
UDS $2,155 $ 2,503 $135 $ 32
SBC 2,382 1,098 186 148
MDJB 1,654 545 23 14
Corporate -- 373 -- 28
------ ------- ---- ----
$6,191 $ 4,519 $344 $222
====== ======= ==== ====
THREE MONTHS ENDED JUNE 30, 1995
UDS $1,481 $ 1,286 $121 $119
SBC 1,968 1,160 486 176
MDJB 1,516 512 19 14
Corporate -- 238 -- (6)
------ ------- ---- ----
$4,965 $ 3,196 $626 $303
====== ======= ==== ====
</TABLE>
Cost of educational services increased by $1.2 million or 24.7% to $6.2 million
for the three months ended June 30, 1996 from $5.0 million for the three months
ended June 30, 1995. The increase was primarily due to an increase in costs
incurred by Ultrasound Diagnostic School for faculty and administrative salaries
of $578,000 and an increase in occupancy costs of $132,000. Such an increase was
primarily due to the costs incurred to support the increase in student
enrollments in the CVT and MA programs. The increase of $414,000 for
Sanford-Brown was primarily due to an increase in scholarships, salaries and
depreciation.
Student services and administrative expenses increased by $1.3 million or 41.4%
to $4.5 million for the three months ended June 30, 1996 from $3.2 million for
the three months ended June 30, 1995. The increase of $1.2 million in Ultrasound
Diagnostic School expenses was primarily due to the
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<PAGE>
additional administrative support for the increase in student enrollments in the
CVT and MA programs and consisted of increases in general and administrative
salaries, taxes and benefits of $473,000, travel expenses of $139,000, and other
administrative expenses. Corporate expenses increased by $135,000 due to an
increase in executive salaries and professional fees.
The following table reflects the activity in the allowance for doubtful accounts
and bad debt expense for the three months ended June 30, 1996 (in thousands):
ALLOWANCE FOR DOUBTFUL ACCOUNTS
UDS SBC MDJB Total
----- ----- ---- ------
Beginning balance $645 $657 $33 $1,335
Bad debt expense 135 186 23 344
Amounts charged off, net
of recoveries (53) (9) (9) (71)
---- ---- --- ------
Ending balance $727 $834 $47 $1,608
==== ==== === ======
Bad debt expense decreased by $282,000 for the first three months ended June 30,
1996 primarily due to a decrease in bad debt expense for Sanford-Brown of
$299,000. The decrease for Sanford-Brown was primarily due to an increase in bad
debt expense incurred in the three months ended June 30, 1995 in connection with
student balances that were not funded under Title IV programs as a result of the
length of time that elapsed before Title IV eligibility was reinstated in
connection with the acquisition of Sanford-Brown and its related change in
ownership process.
Net interest expense decreased by $81,000 or 26.7% for the three months ended
June 30, 1996 to $222,000 from $303,000 for the three months ended June 30,
1995. The decrease was due to lower interest rates and a reduction in the
amortization of deferred interest expense.
The Company reported net income of $76,000 and a net loss of $646,000 for the
three months ended June 30, 1996 and 1995, respectively. The increase in
earnings for the first three months of fiscal 1997 was primarily due to an
increase of $808,000 in the earnings of Ultrasound Diagnostic School from a net
loss of $802,000 to net income of $6,000 as a result of the increase in
student enrollments in the CVT and MA programs.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at June 30, 1996 and March 31, 1996 were $69,000 and
$2.8 million, respectively. The Company's working capital totalled $2.9 million
at June 30, 1996 and $4.8 million at March 31, 1996. In accordance with
Department of Education regulations, the Company maintained $342,000 and
$363,000 in restricted cash at June 30, 1996 and March 31, 1996, respectively,
for funds to be available for student refunds.
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<PAGE>
The Company generated $151,000 in cash from operating activities for the three
months ended June 30, 1996 compared to $66,000 for the three months ended June
30, 1995.
Net cash of $684,000 and $333,000 was used for investing activities in the three
months ended June 30, 1996 and 1995, respectively. The increase of $351,000 was
primarily due to an increase of $449,000 in cash utilized for capital
expenditures by SBC in the first quarter of fiscal 1997 for the purchase of
computers and related items.
Net cash of $2.1 million was used in financing activities in the first quarter
of fiscal 1997, an increase of $1.2 million from the first quarter of fiscal
1996. The increase was primarily due to the additional net payments made on the
long-term debt and capitalized lease obligations.
The Company has bank lines of credit of $500,000 and $1,000,000 expiring on
August 31, 1996 and May 1997, respectively, and a working capital facility
expiring in October 1997 in the amount of $2,500,000. In August 1996 the bank
line of credit of $1.0 million was increased to $1.3 million and the expiration
date was extended to May 1998. At June 30, 1996, the Company had $163,000
outstanding and $1,329,500 available under its lines of credit and $1.1 million
outstanding and $1.4 million available under its working capital facility.
Borrowings under these facilities decreased by $2.2 million from the amounts
outstanding at March 31, 1996. The amounts borrowed under the working capital
facility in the first quarter of fiscal 1997 were primarily used for capital
expenditures. The Company believes that with its working capital, its cash flow
from operations and its lines of credit and working capital facility it will
have sufficient resources to cover its ongoing operational requirements.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. EXHIBITS:
---------
10.1 Credit Agreement dated April 11, 1996 by
Whitman Education Group, Inc., Phillip Frost, M.D.,
and Barnett Bank of South Florida, N.A.
10.2 Term Note dated April 11, 1996 by Whitman Education
Group, Inc. in favor of Barnett Bank of South
Florida, N.A.
10.3 Revolver Note dated April 11, 1996 by Whitman
Education Group, Inc. in favor of Barnett Bank of
South Florida, N.A.
11 Computation of Net Income (Loss) Per Share of Common
Stock
27 Financial Data Schedule
b. REPORTS ON FORM 8-K:
--------------------
Whitman filed a report on Form 8-K dated April 11, 1996,
reporting the completion of the merger with and into the Company of M.D.J.B.,
Inc, which operates Colorado Technical University. The Form 8-K was amended by
Form 8-K/A on May 13, 1996. The Financial Statements filed with the Form 8-K/A
include, with respect to M.D.J.B., Inc., the following financial statements and
pro forma financial information:
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
PRO FORMA FINANCIAL INFORMATION:
Introduction to Unaudited Pro Forma Condensed Combined
Financial Information Unaudited Pro Forma Condensed Combined
Balance Sheet Unaudited Pro Forma Condensed Combined Statement
of Operations for Registrant
and M.D.J.B. for the nine month periods ended December 31,
1995 and September 30, 1995, respectively
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<PAGE>
Unaudited Pro Forma Condensed Combined Statement of operations
for the Registrant, Sanford Brown College, Inc. and M.D.J.B.
for the year ended March 31, 1995, the period from April 1,
1994 through December 20, 1994 and for the year ended
December 31, 1994, respectively
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Registrant and M.D.J.B. for the years ended March
31, 1994 and December 31, 193, respectively
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Registrant and M.D.J.B. for the years ended March
31, 1993 and December 31, 1992, respectively
Notes to Unaudited Pro Forma Condensed Combined Financial
Information
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<PAGE>
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 thereunto duly authorized.
Whitman Education Group, Inc.
------------------------------------------
(Registrant)
Date: August 14, 1996 /s/ Randy S. Proto
------------------------------------------
Randy S. Proto, President
Date: August 14, 1996 /s/ Fernando L. Fernandez
------------------------------------------
Fernando L. Fernandez, Chief Financial Officer
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EXHIBIT 10.1
CREDIT AGREEMENT
AMONG
BARNETT BANK OF SOUTH FLORIDA, N.A.
("BANK"),
WHITMAN EDUCATION GROUP, INC.
("BORROWER")
AND
PHILLIP FROST, M.D.
("GUARANTOR")
DATED AS OF APRIL 11, 1996
<PAGE>
TABLE OF CONTENTS
PRELIMINARY STATEMENTS.................................................... 3
Section 1. DEFINITIONS AND ACCOUNTING MATTERS............................ 3
Section 2. LOANS......................................................... 6
Section 3. PAYMENTS; COMPUTATIONS; ETC................................... 9
Section 4. CONDITIONS PRECEDENT.......................................... 10
Section 5. REPRESENTATIONS AND WARRANTIES................................ 10
Section 6. COVENANTS..................................................... 11
Section 7. EVENTS OF DEFAULT............................................. 14
Section 8. MISCELLANEOUS................................................. 16
ii
<PAGE>
CREDIT AGREEMENT, made and entered into this 11 day of April, 1996, by
and among BARNETT BANK OF SOUTH FLORIDA, N.A., a national banking corporation
("Bank"); WHITMAN EDUCATION GROUP, INC., f/k/a Whitman Medical Corp., a New
Jersey corporation (hereinafter referred to as the "Borrower"); and PHILLIP
FROST, M.D., an individual, (hereinafter referred to as the "Guarantor").
PRELIMINARY STATEMENTS
A. The Bank has agreed to establish two (2) credit facilities for the
Borrower, the first consisting of a term loan in the principal amount of
$6,000,000.00 ("Term Loan") to refinance existing obligations and the second
consisting of a revolving credit loan in the principal amount of $2,500,000.00
("Revolving Loan") to finance working capital and for general corporate
purposes.
B. It is a condition precedent of the Bank's funding the Loans
that the Borrower shall have agreed to the terms of, and shall have
signed, this Agreement.
SECTION 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.1 CERTAIN DEFINED TERMS. As used herein:
"BUSINESS DAY" shall mean any day of the year on
which banks are not authorized or required to close in Dade County,
Florida.
"CODE" means the Internal Revenue Code of 1986 as
amended from time to time.
"DEFAULT" shall mean an Event of Default or an event
that with notice or lapse of time or both would become an Event of Default.
"DOLLARS" and "$" shall mean lawful money of the
United States of America.
"EVENT OF DEFAULT" shall have the meaning assigned
to that term in Section 7 of this Agreement.
"GUARANTEE" shall mean the Continuing Unlimited
Guarantee, of even date herewith, issued by the Guarantor to the Bank.
"GUARANTOR" shall mean PHILLIP FROST, M.D., an
individual.
"INTEREST BUSINESS DAY" shall mean any day on which
banks are not authorized or required to close for business in London,
England or Miami, Florida.
"INTEREST PERIOD" shall mean any interest period
applicable to a Loan; PROVIDED, that there shall be no more than five (5)
Interest Periods for LIBOR Rate Loans outstanding at any time.
"LIBOR RATE" shall mean for any Interest Period, an
interest rate per annum obtained by dividing (a) the rate of interest
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determined by the Bank to be the arithmetic average (rounded upward, if
necessary, to the nearest one-sixteenth (1/16) of one percentage point of the
rate per annum) at which deposits in immediately available and freely
transferable dollars are offered by first class banks in the London interbank
market to the Bank at 10:00 a.m. (Miami, Florida, time) three (3) Interest
Business Days prior to the first day of such Interest Period for a period equal
to such Interest Period and in an amount substantially equal to the amount of
the LIBOR Rate Loan to be outstanding during such an Interest Period, by (b) the
percentage equal to one hundred percent (100%) (expressed as a decimal fraction)
minus the Reserve Requirement for such Interest Period. Each calculation by the
Bank of the applicable LIBOR Rate shall be conclusive and binding for all
purposes, absent manifest error.
"LIBOR RATE LOANS" shall mean Loans bearing interest
at rates determined by reference to the LIBOR Rate as provided in
Subsection 2.1.
"LIEN" shall mean, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect to such asset (including any agreement to give any of the foregoing and
the filing of or agreement to give any financing statement or other similar form
of public notice under the law of any jurisdiction). For the purposes of this
Agreement, the Borrower shall be deemed to own subject to a Lien any asset that
it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"LITIGATION EVENT" has the meaning assigned thereto
in Section 6.2 hereof.
"LOANS" shall mean the Term Loan and the Revolving
Loan as described in Section 2.1 of this Agreement.
"MATERIAL ADVERSE CHANGE" shall mean any change,
event, action, condition or effect which could, either individually
or in the aggregate:
(i) materially and adversely affect the assets,
financial condition or prospects of the
Borrower;
(ii) materially and adversely impair the ability of
the Borrower to perform any of its obligations
under this Agreement or any other Transaction
Document;
(iii) impairs the validity or enforceability of this
Agreement or any other Transaction Document.
"PERMITTED LIENS" shall mean (i) Liens imposed by
law, such as mechanics' liens, that arise in the ordinary course of business and
that secure amounts not yet due and payable or that arise out of judgments or
awards against the Borrower with respect to which the Borrower at the time shall
currently be prosecuting an appeal or proceedings for review, provided that the
Borrower shall have in effect a bond (or other security), satisfactory to the
Bank, for the full amount
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of the lien (or, if greater, such other amount as may be required by applicable
law); and (ii) Liens for taxes or assessments or other governmental charges not
yet due, or if due, are not yet delinquent.
"PERSON" shall mean an individual, a corporation, a
company, a voluntary association, a partnership, a trust, an unincorporated
organization or other entity or a government or any agency, instrumentality or
political subdivision thereof.
"POST-DEFAULT RATE" shall mean, in respect of any
principal of the Loan not paid when due or any other amount (including interest,
unless prohibited by law) payable by the Borrower under this Agreement or any
other Transaction Document that is not paid when due (whether at stated
maturity, by acceleration or otherwise), a fluctuating rate per annum during the
period commencing on the due date until such amount is paid in full equal at all
times to the sum of the rate otherwise applicable PLUS four percent (4%), per
annum.
"PRIME RATE" shall mean the annual rate of interest
established from time to time by Barnett Banks, Inc. as its prime
rate of interest, subject to change on a daily basis. Should Barnett
Banks, Inc. not publish a prime rate during the term of this
Agreement, the Bank, in its reasonable discretion, may choose a
comparable substitute prime rate.
"PRINCIPAL OFFICE" shall mean the principal office
of the Bank, currently located at 701 Brickell Avenue, Miami, Florida
33131.
"RESERVE REQUIREMENT" shall mean, for any LIBOR Rate
Loan for any Interest Period therefor, the daily average of the stated maximum
rate (expressed as a decimal) at which reserves (including any marginal,
supplemental, or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by the Bank against "Eurocurrency
liabilities" (as such term is used in Regulation D), but without benefit or
credit of proration, exemptions, or offsets that might otherwise be available to
the Bank from time to time under Regulation D. Without limiting the effect of
the foregoing, the Reserve Requirement shall reflect any other reserves required
to be maintained by the Bank against (a) any category of liabilities that
include deposits by reference to which the LIBOR Rate is to be determined; or
(b) any category of extension of credit or other assets that includes LIBOR Rate
Loans.
"REVOLVER NOTE" shall mean that certain Revolver
Note from the Borrower to the Bank in the original principal amount of
$2,500,000.00.
"TERM NOTE" shall mean that certain Term Note from
the Borrower to the Bank in the original principal amount of
$6,000,000.00.
"TRANSACTION DOCUMENTS" shall mean the Credit
Agreement, the Term Note, the Revolver Note, the Guarantee, the Notes and any
and all amendments to or any assignments of any of the aforesaid.
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1.2 ACCOUNTING TERMS AND DETERMINATIONS.
Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all determinations with respect to
accounting matters hereunder shall be made, and all financial statements and
certificates and reports as to financial matters required to be furnished by the
Borrower to any party hereunder shall be prepared, in accordance with generally
accepted accounting principles, applied on a basis consistent with the reviewed
financial statements of the Borrower referred to in Section 6.1 hereof (except
for changes concurred with by the Borrower's independent public accountants and
disclosed in any note to the financial statements of the Borrower furnished from
time to time hereunder as set forth in Section 6.1 hereof).
SECTION 2. LOANS
2.1 THE LOANS. On the date hereof, the Bank agrees to
make the following loans to the Borrower:
a. TERM LOAN
(i) PRINCIPAL. $6,000,000.00, which shall be
evidenced by a promissory note in like amount in substantially the form attached
to this Agreement as Exhibit A (the "Term Note").
(ii) INTEREST. Interest shall accrue on the
Term Loan from the date hereof until repayment in full. Interest shall be paid
monthly in arrears commencing one month from the date hereof. The applicable
interest rate per annum shall be selected by Borrower on the Closing Date from
the following two options.
PRIME RATE OPTION:
a) The Prime Rate, changing when and as the Prime Rate
changes, minus 125 basis points; or
LIBOR RATE OPTION:
b) The LIBOR Rate, plus 150 basis points.
The basis for determining the interest rate with respect to any Loan may be
changed from time to time pursuant to Section 2.4(c) hereinafter.
(iii) PURPOSE. The proceeds of the Term Loan
shall be used to enable the Borrower to refinance existing
obligations.
(iv) REPAYMENT. The Borrower agrees to pay
the principal indebtedness evidenced by the Term Note on or before April 14,
1999.
(v) PREPAYMENTS OF LOAN. The Borrower shall
have the right to prepay the Term Loan at any time or from time to time;
provided, all such prepayments are in a principal amount of $25,000.00 or
greater accompanied by a payment of any accrued but unpaid interest on any
amount(s) being prepaid. No amount prepaid under the Term Note may be
reborrowed.
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b. REVOLVING LOAN
(i) PRINCIPAL. $2,500,000.00, which shall
be evidenced by a promissory note in like amount in substantially the form
attached to this Agreement as Exhibit B (the "Revolver Note").
(ii) INTEREST. Interest shall accrue on
the Revolving Loan from the date of the first advance until repayment in full.
Interest shall be paid monthly in arrears commencing one month from the date of
the first advance. The applicable interest rate per annum shall be selected by
Borrower on the date of each advance from the following two options.
PRIME RATE OPTION:
a) The Prime Rate, changing when and as the Prime Rate
changes, minus 125 basis points; or
LIBOR RATE OPTION:
b) The LIBOR Rate, plus 150 basis points.
The basis for determining the interest rate with respect to any Loan may be
changed from time to time pursuant to Section 2.4(c) hereinafter.
(iii) PURPOSE. The proceeds of the Revolving
Loan shall be used for general corporate purposes and to finance working
capital. Provided no Event of Default has occurred and is continuing, the
Borrower may borrow, repay and reborrow up to an amount not to exceed at any
time and from time to time $2,500,000.00 until October 15, 1997.
(iv) REPAYMENT. The Borrower agrees to pay the
principal indebtedness evidenced by and outstanding under the Revolver Note in
full on or before October 15, 1997.
2.2 BORROWING. On the date hereof, the Bank shall make
available the amount of the Term Loan and so much of the Revolving Loan as may
be requested by Borrower by depositing the proceeds, in immediately available
funds, in an account of the Borrower maintained with the Bank at its Brickell
Office, or in such other account and at such other location as the Bank and
Borrower may agree.
2.3 LENDING OFFICE. The Loan made by the Bank shall be
made and maintained at the Bank's Brickell Office.
2.4 LIBOR RATE LOANS.
a. In connection with each LIBOR Rate Loan, Borrower
shall elect an interest period (each an "Interest Period") to be applicable to
such Loan, which Interest Period shall be either a one, two, three or six month
period PROVIDED that:
(i) the initial Interest Period for any Loan
shall commence on the funding date of such Loan;
(ii) 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;
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(iii) if an Interest Period would otherwise
expire on a day that is not a Business Day, such Interest Period shall
expire on the next succeeding Business Day; PROVIDED, that if any
Interest Period would otherwise expire on a day that is not a Business
Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(iv) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period) shall, subject to part (v) below, end on the last
Business Day of a calendar month;
(v) no Interest Period for a Revolver Loan
shall extend beyond October 15, 1997, no Interest Period for
the Term Loan shall extend beyond April 14, 1999;
(vi) no Interest Period with respect to any
of the Loans may extend beyond a date on which Borrower is required to
make a scheduled payment of principal with respect to the Loan; and
(vii) there shall be no more Interest Periods
relating to LIBOR Rate Loans outstanding at any time than permitted by
the definition of Interest Period contained in this Agreement.
b. In computing interest on any Loan, the date of
funding of the Loan or the first day of an Interest Period applicable to such
Loan shall be included and the date of payment of such Loan or the expiration
date of an Interest Period applicable to such Loan shall be excluded; PROVIDED,
that if a Loan is repaid on the same day on which it is made, one day's interest
shall be paid on that Loan.
c. CONVERSION OR CONTINUATION. Subject to the
provisions of this subparagraph (c) and the limitation on the number of Interest
Periods, Borrower shall have the option to (1) convert at any time all or any
part of outstanding Loans equal to $500,000 and integral multiples of $100,000
in excess of that amount from Loans bearing interest at a rate determined by
reference to one basis to Loans bearing interest at a rate determined by
reference to an alternative basis, or (2) upon the expiration of any Interest
Period applicable to a LIBOR Rate Loan, to continue all or any portion of such
Loan equal to $500,000 and integral multiples of $100,000 in excess of that
amount as a LIBOR Rate Loan and the succeeding Interest Period(s) of such
continued Loan shall commence on the last day of the Interest Period of the Loan
to be continued; PROVIDED, that LIBOR Rate Loans may only be converted into
Loans bearing interest determined by reference to an alternative basis on the
expiration date of an Interest Period applicable thereto; and provided, FURTHER,
that no outstanding Loan may be continued as, or be converted into, a LIBOR Rate
Loan when any Event of Default or Default has occurred and is continuing; and
PROVIDED, FURTHER, that no Loan may be converted into a LIBOR Rate Loan until
ten (10) days after the Closing Date.
Borrower shall deliver a fully and properly completed notice
of conversion/continuation to Lender no later than 11:00 a.m. (Miami time) at
least three (3) Business Days in advance of the proposed
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conversion/continuation date. In lieu of delivering the above-described notice
of conversion/continuation, Borrower may give Lender telephonic notice by the
required time of any proposed conversion/continuation under this subparagraph
(c); PROVIDED, that such notice shall be promptly confirmed in writing by
delivery of a notice of conversion/continuation to Lender on or before the
proposed conversion/continuation date.
Except as provided in this subsection 2.4(c), a notice of
conversion/continuation for conversion to, or continuation of, a LIBOR Rate Loan
(or telephonic notice in lieu thereof) shall be irrevocable once given, Borrower
shall be bound to convert or continue in accordance therewith and Lender shall
have no liability for acting in accordance with Borrower's instructions
contained therein.
d. Upon notice to the Borrower from the Bank, the
Borrower shall pay to the Bank such amount as the Bank reasonably determines
shall be sufficient to compensate it for any loss, cost or expense incurred as a
result of any payment of a LIBOR Rate Loan on a date other than the last day of
the Interest Period for such Loan, including, but not limited to acceleration of
the Loans by the Bank pursuant to Section 7 hereof; such compensation to
include, without limitation, an amount equal to, if any, (x) any loss sustained
by the Bank as a result of reinvesting or redeploying any amount prepaid at a
rate lower than the Bank's cost of match funding such amount, calculated for the
period consisting of the remainder of the relevant Interest Period or (y) any
direct breakage or unwinding costs resulting from the liquidation of deposits
that match funded any amount not borrowed for the duration of the relevant
Interest Period. The Bank's determination of any such amounts, as specified in
the Bank's notice to the Borrower which shall include the basis upon which such
amounts were calculated in reasonable detail, shall be conclusive absent bad
faith or manifest error.
2.5 GUARANTEE. The repayment of the indebtedness evidenced by
the Term Note and the Revolver Note shall be irrevocably and unconditionally
guaranteed by the Guarantor pursuant to the Guarantee.
SECTION 3. PAYMENTS; COMPUTATIONS; ETC.
3.1 PAYMENTS. Except to the extent otherwise provided herein,
all installments of interest and all other payments (including the principal of
the Notes) to be made by the Borrower under this Agreement and the Notes shall
be made in Dollars, in immediately available funds, to the Bank at the Brickell
Office not later than 12:00 p.m. Miami time on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). The Bank may (but
shall not be obligated to) debit the amount of any such payment which is not
made by such time to any ordinary deposit account of the Borrower with the Bank
(with notice to the Borrower promptly thereafter, but the failure of the Bank to
so notify shall not relieve the Borrower of any obligation hereunder). If the
due date of any payment under this Agreement or the Notes would otherwise fall
on a day that is not a Business Day such date shall be extended to the next
succeeding Business Day and interest shall be payable for the period of such
extension. The
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Borrower shall make all payments of principal, interest and other amounts to be
made by the Borrower under this Agreement and the Notes without setoff or
counterclaim, free and clear of any deductions. All payments by the Borrower to
the Bank pursuant to the terms of this Agreement shall be applied first to
accrued but unpaid interest, then to outstanding principal.
3.2 SETOFF. The Borrower and the Guarantor agree that, in
addition to (and without limitation of) any right of setoff, banker's lien or
counterclaim the Bank may otherwise have, the Bank shall be entitled, at its
option, upon the occurrence and during the continuance of an Event of Default to
offset balances held by it for account of the Borrower or the Guarantor at any
of its offices, in Dollars or in any other currency, against any principal of or
interest on the Loans, or any other amount payable to the Bank hereunder, which
is not paid when due (regardless of whether such balances are then due to the
Borrower or the Guarantor), in which case it shall promptly notify the Borrower
or the Guarantor thereof, provided that the Bank's failure to give such notice
shall not affect the validity of any such setoff.
SECTION 4. CONDITIONS PRECEDENT.
4.1 LOANS. The obligation of the Bank to make the Loans
hereunder is subject to the receipt by the Bank of the following documents, each
of which shall be satisfactory to the Bank in form and substance:
a. The Notes, duly completed and signed;
b. The Guarantee, duly completed and signed;
c. Financial Statements of the Borrower;
d. Guarantor's certificate certifying
compliance with the terms and conditions of this Agreement, including
maintenance of minimum net worth and marketable securities requirements, and
that there is presently no outstanding litigation that will adversely affect
Guarantor's current personal financial condition; and
f. Such other documents as the Bank or its
counsel may reasonably request.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Each of the
Borrower and the Guarantor represents and warrants to the Bank that:
5.1 LITIGATION. Except as disclosed to the Bank in writing
prior to the date of this Agreement or as otherwise disclosed in the Borrower's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1995, there are
no material legal or arbitral proceedings or any material proceedings by or
before any governmental or regulatory authority or agency, now pending or (to
the knowledge of the Borrower) threatened against the Borrower or the Guarantor.
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5.2 NO BREACH. The execution and delivery of the Transaction
Documents to which the Borrower or the Guarantor is a signatory, the
consummation of the transactions therein contemplated or compliance with the
terms and provisions thereof will not conflict with or result in a breach of, or
require any consent (other than consents which have been obtained and are in
full force and effect) under any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority or agency, or
any material agreement or instrument to which the Borrower or the Guarantor is a
party or by which it is bound or to which it is subject, or constitute a default
under any such agreement or instrument, or result in the creation or imposition
of any Lien upon any of the revenues or assets of the Borrower or the Guarantor
pursuant to the terms of any such agreement or instrument.
5.3 AUTHORITY. Each of the Borrower and the Guarantor has all
necessary authority to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly and validly executed and delivered by
the Borrower and the Guarantor and constitutes its legal, valid and binding
obligations, enforceable in accordance with its terms, except as the
enforceability thereof and may be limited by (i) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and (ii) equitable principles.
5.4 USE OF LOAN PROCEEDS. Each of the Borrower and the
Guarantor is not engaged principally, nor as one of its important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying margin stock (within the meaning of
Regulation U or X of the Board of Governors of the Federal Reserve system), and
no part of the proceeds of the Loans will be used to buy or carry any margin
stock or for the purpose of permitting anyone else to do so.
5.5 TAXES. Each of the Borrower and the Guarantor has filed
all United States Federal income tax returns and all other materials tax returns
which are required to be filed by it and has paid all taxes due pursuant to such
returns or pursuant of any assessment received by each except such taxes, the
payment of which is not yet due, are not yet delinquent, or are being contested
in good faith and for which adequate reserves or other provisions have been made
or that has not yet been finally determined. The charges, accruals and reserves
on the books of the Borrower and the Guarantor in respect of taxes and other
governmental charges are, in the opinion of the Borrower and the Guarantor,
adequate.
SECTION 6. COVENANTS. Each of the Borrower and the Guarantor
agrees that, until payment in full of the Loans, all interest thereon
and all other amounts payable by the Borrower hereunder or under the
Transaction Documents:
6.1 FINANCIAL STATEMENTS. The Borrower shall deliver to
the Bank:
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a. Within sixty (60) days after the end of each
fiscal quarter, beginning with the current quarter, a consolidated balance sheet
of the Borrower, as of the close of each quarter, and statements of revenue and
expense, and cash flow for that portion of the fiscal year to date then ended,
internally prepared by Borrower in accordance with GAAP, applied on a basis
consistent with that of the preceding period or containing disclosure of the
effect on the financial position or results of operations of any change in the
application of accounting principles and practices during the period, and
certified by the Chief Financial Officer of the Borrower;
b. Within ninety (90) days after the close of the
fiscal year, beginning with the year ending March 31, 1996, audited financial
statements of the Borrower as of the fiscal year then ended, prepared in
accordance with GAAP, applied on a basis consistent with the preceding year or
containing disclosure of the effect on financial position or results of
operation of any change in the application of accounting principles and
practices during the year, and accompanied by (i) a report thereon, containing
an unqualified opinion, without scope limitations imposed by the Borrower, from
a firm of independent certified public accountants selected by the Borrower and
reasonably acceptable to the Bank, and (ii) a copy of each "management letter",
if any, from such accountants to the Borrower in connection with such
accountants' audit;
c. All other documents which Borrower may file with
the U.S. Securities and Exchange Commission and any state regulatory
authorities.
d. promptly after the Borrower or the Guarantor
knows that any default or Event of Default has occurred, a notice of such
default, describing the same in reasonable detail and describing the action that
the Borrower or Guarantor proposes to take to cure the same; and
e. from time to time, such other information
regarding the business affairs or financial condition of the Borrower or
Guarantor as the Bank may reasonably request.
6.2 CERTIFICATE OF COMPLIANCE. The Guarantor agrees to deliver
to the Bank annually a certificate of compliance in substantially the form
attached to this Agreement as Exhibit C (the "Certificate of Compliance")
attesting that he is in compliance with the provisions of Section 13 of the
Guarantee Agreement, certifying that so long as any Indebtedness of Borrower to
Bank exists, the Guarantor agrees to maintain, at a minimum, (i) unencumbered
cash and/or marketable securities having an aggregate value of no less than
$100,000,000.00 and (ii) a net worth of $200,000,000.00. As used herein, (i) the
term "marketable securities" shall mean publicly traded stocks and bonds (rated
A or better by Standard & Poor's) trading at a price equal to or higher than
$15.00 per share and (ii) the term "net worth" shall mean assets less direct and
contingent liabilities.
6.3 LITIGATION. The Borrower and the Guarantor shall promptly
give the Bank notice of all legal or arbitral proceedings, affecting the
Borrower or Guarantor, except proceedings (proceedings involving less than
$100,000.00) that, if adversely determined, would
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have no material adverse effect on the financial condition or operations, or the
prospects or business of the Borrower or the Guarantor.
6.4 AFFIRMATIVE COVENANTS. So long as the Loans shall
remain unpaid, each of the Borrower or the Guarantor, will, unless
the Bank shall otherwise consent in writing:
a. PAYMENT OF TAXES AND OTHER CHARGES. Pay and
discharge all taxes and assessments imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become a
lien or charge upon any properties of the Borrower or Guarantor, PROVIDED that
the Borrower or the Guarantor shall not be required to pay and such tax,
assessment, charge, levy or claim which is being contested in good faith and by
appropriate proceedings and for which adequate reserves have been established on
its financial books.
b. COMPLIANCE WITH LAWS. Comply in all material
respects with all applicable laws, rules, regulations and orders relating to the
conduct of its business.
c. KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep
adequate records and books of account reflecting all of its business
affairs and transactions.
d. PERFORMANCE AND COMPLIANCE WITH OTHER AGREEMENTS.
Perform all the obligations to be performed pursuant to the terms of each
indenture, agreement, contract and other instrument by which it is bound, unless
the same shall be contested in good faith by appropriate proceedings or where
performance thereof is prevented through no fault of the Borrower, or the
Guarantor.
e. USE OF PROCEEDS. The Borrower shall use the
proceeds of the Loans solely for the purposes set forth in Section
2.1 above.
f. MINIMUM MARKETABLE SECURITIES. The
Guarantor agrees to maintain, at a minimum, UNENCUMBERED CASH AND/OR MARKETABLE
securities having an aggregate market value of no less than $100,000,000.00. As
used herein, the term "marketable securities" shall mean publicly traded stocks
trading at a price equal to or higher than $15.00 per share and bonds (rated A
or better by Standard & Poor's).
g. NET WORTH. The Guarantor agrees to maintain
a net worth of not less than $200,000,000.00. As used herein, the term "net
worth" shall mean assets less direct and indirect liabilities.
6.5 NEGATIVE COVENANTS. So long as the Loans shall
remain unpaid, the Borrower and the Guarantor, will not, without the
prior written consent of the Bank:
a. INDEBTEDNESS. Create, incur, assume or suffer
to exist any Indebtedness, except (i) Indebtedness of the Borrower hereunder or
under the Transaction Documents; (ii) Indebtedness of the Borrower incurred in
the ordinary course of business (trade credits); and (iii) Indebtedness of the
Borrower otherwise permitted under this Agreement.
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b. LIENS AND ENCUMBRANCES. Create, incur, assume
or suffer to exist any mortgage, deed of trust, pledge, lien, security interest,
or other charge or encumbrance (including the lien or retained security title of
a conditional vendor) of any nature or any other type of preferential
arrangement, upon or with respect to any of its properties, now owned or
hereafter acquired, or assign or otherwise convey, any right to receive income,
except that the foregoing restrictions shall not apply to:
(i) liens for taxes, assessment or governmental
charges or levies on property of the Borrower, or
the Guarantor if the same shall not at the time be
delinquent or thereafter can be paid without
penalty, or are being contested in good faith and
by appropriate proceedings;
(ii) liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other
similar liens arising in the ordinary course of
business; and
(iii) liens arising out of pledges or deposits
under worker's compensation laws, unemployment
insurance, repairmen's materialmen's and other like
liens arising in the ordinary course of business in
respect of obligations which are not due or are
being contested in good faith.
c. CHANGE IN NATURE OF BUSINESSES. Make or permit
to be made, any material change in the nature of its business as
carried on at the date hereof.
6.5 INDEMNITY. Each of the Borrower or the Guarantor hereby
agrees to indemnify and hold the Bank, its directors, officers, employees,
agents, successors and assigns harmless on demand from and against any and all
claims, demands or liabilities, including reasonable attorney's fees (which
includes allocated costs for services of in-house attorneys) incurred by any of
the Bank, its directors, officers, employees, agents, successors and assigns
directly or indirectly arising out of or in any way attributable to any action,
inaction, negligence or wilful misconduct of the Borrower or the Guarantor in
connection with the loans; PROVIDED, HOWEVER, the Borrower shall have no
obligation hereunder with regard to liability arising from the negligence or
wilful misconduct of the Bank. This indemnity shall survive repayment of any
indebtedness evidenced by the Notes.
SECTION 7. EVENTS OF DEFAULT. If one or more of the following
events (herein called "Events of Default") shall occur and be
continuing:
a. The Borrower shall default in the payment of any
principal or interest evidenced by the Notes when due and the default
remains unremedied for three (3) consecutive Business Days;
b. Any representation, warranty or certification
made or deemed made herein by the Borrower or the Guarantor, or any certificate
or other document furnished to the Bank pursuant of the provisions
12
<PAGE>
hereof, shall prove to have been false or misleading as of the time made or
furnished in any material respect;
c. Borrower or the Guarantor shall default in the
performance or any of its other obligations in this Agreement, any other
Transaction Document or in connection with any other obligation, whether direct
or indirect, of Borrower or the Guarantor to the Bank howsoever arising and, if
remediable, such default shall continue unremedied for a period of 30 Business
Days after notice thereof to the Borrower or the Guarantor, by the Bank;
PROVIDED that if the Borrower or the Guarantor is diligently pursuing a cure of
such default, such cure period may (but need not) be extended (not to exceed 90
days in the aggregate) at the sole discretion of the Bank;
d. Borrower or the Guarantor shall admit in writing
its inability to, or be generally unable to pay its debts as such debts become
due;
e. Any proceeding by or against Borrower or the
Guarantor in any court of competent jurisdiction, seeking (i) its liquidation,
or the composition or readjustment of its debts; (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower or the
Guarantor or of all or any substantial part of its assets; or (iii) similar
relief in respect of the Borrower or Guarantor under any law relating to
bankruptcy, insolvency, reorganization, winding up, or composition or
adjustments of debts, and such proceeding or case shall continue undismissed, or
an order, judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 days; or an
order for relief against the Borrower or the Guarantor shall be entered in an
involuntary case under the Bankruptcy Code;
f. A final judgment or judgments for the payment of
money in excess of $100,000.00 in the aggregate shall be rendered by a court or
courts against Borrower or Guarantor and the same shall not be discharged (or
provision shall not have been made for such discharge), or a stay of execution
thereof shall not have been procured, within 30 days from the date of entry
thereof and the Borrower or the Guarantor shall not, within said period of 30
days, or such longer period during which execution and the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal;
g. The occurrence of any Material Adverse Change;
h. Any default shall occur under the terms applicable to
any material indebtedness of Borrower or the Guarantor representing any
borrowing or financing otherwise under this Agreement or any other material
agreement, and such default shall (i) consist of the failure to pay such
Indebtedness at the maturity thereof, (ii) continue unremedied for a period of
time sufficient to permit acceleration of such Indebtedness, or (iii) continue
unremedied (and not be waived by the holder thereof) for a period of 45 days
after notice thereof to the Borrower or the Guarantor by the Bank; or
i. The death or incapacity of the Guarantor.
13
<PAGE>
THEREUPON, in the case of an Event of Default, the Bank's
obligation to make advances under the Revolver Note shall immediately terminate
and the Bank may declare the principal amount then outstanding and all accrued
interest evidenced by the Notes and all other amounts payable by the Borrower or
the Guarantor hereunder and under the Notes to be forthwith due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Borrower and the Guarantor.
SECTION 8. MISCELLANEOUS
8.1 WAIVER. No failure on the part of the Bank to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement or the Notes shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or the Notes preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
8.2 NOTICES. All notices and other communications provided for
herein (including any modifications of, or waivers or consents under, this
Agreement) shall be in writing and telexed, telecopied, telegraphed, cabled,
mailed or hand-delivered to the intended recipient as follows:
If to the Bank:
Barnett Bank of South Florida, N.A.
701 Brickell Avenue
Miami, Florida 33131
Attention: Guillermo Castillo
Facsimile No.: 305-350-7005
Telephone No.: 305-789-3058
With a copy to:
Jimmy L. Morales, Esq.
Coll Davidson Carter Smith
Salter & Barkett, P.A.
201 So. Biscayne Blvd.
Suite 3200
Miami, Florida 33131
Facsimile No.: 305-374-7296
Telephone No.: 305-373-5200
If to the Borrower or the Guarantor:
8800 Northwest 36th Street
Miami, Florida 33178
Attention: Richard C. Phenniger, Jr.
Facsimile No.: (305) 590-2268
Telephone No.: (305) 590-2309
14
<PAGE>
With a copy to:
Randy S. Proto, President
Whitman Education Group, Inc.
4400 Biscayne Boulevard
Miami, Florida 33137
Facsimile No.: (305) 575-6535
Telephone No.: (305) 575-6510
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when transmitted
by telex (with answer back) or telecopier (with electronic confirmation),
delivered to the telegraph or cable office or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforementioned.
8.3 EXPENSES, ETC. Each of the Borrower and the Guarantor
agrees to pay or reimburse the Bank for paying: (a) the reasonable fees and
expenses of Coll Davidson Carter Smith Salter & Barkett, P.A., Florida counsel
to the Bank, in connection with (i) the preparation, execution and delivery of
this Agreement, the Notes, and the making of the Loans hereunder, and (ii) any
actual or proposed amendment, modification or waiver of any of the terms of this
Agreement or of the Notes or of the other Transaction Documents whether or not
such amendments, modifications or waivers shall become effective; (b) all costs
and expenses of the Bank (including reasonable counsel's fees and the reasonable
allocated costs for services of the Bank's in-house counsel if any is involved
with the Loans) in connection with the enforcement of this Agreement or the
Notes; and (c) all transfer, stamp, documentary or other similar taxes,
assessments or charges regardless of when levied by any governmental or revenue
authority in respect of this Agreement or the Notes.
8.4 AMENDMENTS, ETC. This Agreement embodies the entire
agreement and understanding between the parties with respect to the subject
matter hereof, and supersedes all prior agreements, except those contained in
the Notes and understandings with respect thereto. The Transaction Documents may
not be modified, amended, waived or terminated, except by an instrument in
writing signed by duly authorized representatives of the Bank, the Borrower, and
the Guarantor.
8.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and the successors and
assigns of the Borrower and the Guarantor and the successors and assigns of the
Bank. However, the reference to assigns shall not be authority for the Borrower
or the Guarantor to transfer of assign its interest under the Transaction
Documents.
8.6 SURVIVAL. The obligations of the Borrower under
Section 8.3 hereof shall survive the repayment of the Loans.
8.7 COUNTERPARTS. This agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an
15
<PAGE>
original and all of which taken together shall constitute one and the same
agreement.
8.9 JURISDICTION. Each of the Borrower and the Guarantor
hereby submits to the nonexclusive jurisdiction of any United States Federal
Court or Florida State Court located in Dade County, State of Florida in any
action or proceeding brought against them or any of them by the Bank under this
Agreement, the Notes and hereby irrevocably appoints Richard C. Phenniger, Jr.,
of 8800 Northwest 36 Street, Miami, Florida 33178 as its attorney-in-fact and
agent for the service of summons or other legal process with respect thereto.
Such service may be made by serving a copy of any summons or other legal process
in any such action or proceeding on said agent. Such agent is authorized and
specifically directed to accept by and on behalf of the Borrower and the
Guarantor service of summons and other legal process of any such action or
proceeding against it. The service, as herein provided, of such summons or other
legal process in any such action or proceeding shall be deemed personal service
and accepted by Borrower and the Guarantor as such and shall be legal and
binding on it for all purposes of any such action or proceeding. Each of the
Borrower and the Guarantor agrees that so long as it shall be obligated to the
Bank, it shall maintain in Dade County, Florida a duly appointed agent for the
aforesaid purpose. The Borrower and the Guarantor will advise the Bank of any
change of address of the foregoing agent or of the substitution of another agent
therefor. In the event the foregoing agent or any other agent appointed by
Borrower or the Guarantor shall not be conveniently available for such service
or if the Borrower and the Guarantor fails to initially designate or thereafter
maintain an agent as herein provided, each of the Borrower and the Guarantor
shall not be conveniently available for such service or if the Borrower and the
Guarantor fails to initially designate or thereafter maintain an agent as herein
provided, each of the Borrower and the Guarantor hereby irrevocably appoints the
person who is then holding the office of Secretary of State, State of Florida,
as such attorney-in-fact and agent. Each of the Borrower and the Guarantor
agrees to advise the foregoing agent or any substitute agent of the appointment
made hereby but the failure to do so shall not affect such appointment. Nothing
herein shall be construed to prohibit the Bank from bringing any action in any
other appropriate jurisdiction or from serving process on the Borrower or the
Guarantor in any other manner provided by law.
8.10 WAIVER OF TRIAL BY JURY. EACH OF THE BANK AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE MAXIMUM
EXTENT PERMITTED BY LAW, THE RIGHT EACH MAY HAVE TO TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THE
TRANSACTION DOCUMENTS AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OF ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE BANK'S AGREEING TO EXTEND CREDIT TO THE BORROWER.
16
<PAGE>
THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE DULY EXECUTED AS OF
THE DAY AND YEAR FIRST ABOVE WRITTEN.
BANK:
BARNETT BANK OF SOUTH FLORIDA, N.A.
By: /s/ Guillermo Castillo
-------------------------------------
Guillermo Castillo
Vice President
BORROWER:
WHITMAN EDUCATION GROUP, INC.
By: /s/ Randy S. Proto
-------------------------------------
Randy S. Proto
President
GUARANTOR:
/s/ Phillip Frost, M.D.
------------------------------------
PHILLIP FROST, M.D.
17
EXHIBIT 10.2
TERM NOTE
$6,000,000.00 April 11, 1996
FOR VALUE RECEIVED, WHITMAN EDUCATION GROUP, INC., f/k/a
Whitman Medical Corp., a New Jersey corporation ("Borrower"), promises to pay
to the order of
BARNETT BANK OF SOUTH FLORIDA, N.A.
a national banking corporation ("Lender"), the principal sum of
SIX MILLION DOLLARS
and the Borrower further promises to pay to the Lender interest monthly,
commencing May 30, 1996 until repaid in full, on the principal amount
evidenced hereby and from time to time outstanding at a rate per annum
determined in accordance with the Credit Agreement (as defined below). The rate
of interest to be applied and the amount of interest to be paid on the daily
outstanding balance of principal evidenced hereby shall be calculated on an
assumed year of 360 days for the number of days actually elapsed.
The Borrower agrees to pay the outstanding principal
indebtedness evidence by this note in full on April 14, 1999
The Borrower further promises and agrees that:
1. This Note is the "Term Note" referred to in, and is
entitled to the benefits of, that certain Credit Agreement, dated as of April
11, 1996 among the Lender, the Borrower and the Guarantor (hereafter
collectively the "Credit Agreement"), the terms of which are incorporated herein
by this reference as if fully set forth herein. The Borrower may prepay the
indebtedness evidenced by this Note at any time without premium or penalty;
PROVIDED, HOWEVER, any sums which have been prepaid may not be reborrowed.
2. This Borrower shall be in default under the terms of this
note upon the occurrence and continuation of an Event of Default as defined and
described in the Credit Agreement.
3. At any time after the occurrence and continuation of any
Event of Default, the indebtedness evidenced by this note and/or any note(s) or
other obligation(s) which may be taken in renewal, extension, substitution, or
modification of all or any part of the indebtedness evidenced thereby and all
other Obligations of the Borrower to the Lender, howsoever created and existing
under the Credit Agreement, that certain Revolver Note, dated April __, 1996
from the Borrower to the Lender or otherwise, shall immediately become due and
payable without demand upon or notice to the Borrower, and the Lender shall be
<PAGE>
entitled to exercise the other remedies set forth in the Credit Agreement or as
otherwise provided at law or in equity.
4. Upon the occurrence and during the continuance of any Event
of Default, the Lender is authorized, without further notice to the Borrower
(the giving of notice being expressly waived by the Borrower) to set off and
apply any indebtedness owing by the Lender to the Borrower against the
indebtedness evidenced by this note, although then contingent or unmatured. The
Lender agrees to notify the Borrower after any such setoff and application;
PROVIDED, HOWEVER, the failure to give such notice shall not affect the validity
of such setoff and application. The rights of the Lender under this Paragraph 4
are in addition to any other rights and remedies which the Lender may have.
5. The Lender may transfer this note and the transferee(s)
shall thereupon become vested with all the powers, rights, and obligations
herein given to the Lender with respect thereto; and the Lender shall thereafter
be forever relieved and fully discharged from any liability or responsibility in
the matter.
6. The Borrower hereby waives presentment for payment, demand,
notice of dishonor and protest and agrees that (i) any right of setoff securing
any indebtedness evidenced by this note may, from time to time, in whole or in
part, be exchanged or released, and any person liable on or with respect tot he
indebtedness evidenced by this note may be released -- all without notice to or
further reservations of rights against the Borrower, any indorser, surety or
guarantor and all without in any way affecting or releasing the liability of the
Borrower, any indorser, surety or guarantor; and (ii) none of the terms or
provisions of this note may be waived, altered, modified or amended except as
the Lender may consent thereto in writing.
7. In the event of any litigation involving this note, the
prevailing party shall be entitled to collect reasonable attorneys' fees,
out-of-pocket expenses, and court costs. As used in this note, the term,
"attorneys' fees", shall mean reasonable charges and expenses for legal services
at the trial and/or appellate level and/or in pre- and post-judgment or
bankruptcy proceedings.
8. Both principal and interest of this note shall be payable
in lawful currency of the United States of America to the Lender at 701 Brickell
Avenue, Miami, Florida 33131 or at such other place or to such other person as
may be designated in writing by the Lender, in immediately available (same day)
funds without deduction for or on account of any present or future taxes levied
or imposed on this note, the proceeds hereof, or on the Borrower or holder
hereof by any government, or any
2
<PAGE>
instrumentality, authority or political subdivision thereof. The Borrower
agrees, upon the request of the Lender, to pay all such taxes (other than taxes
on or measured by net income of the holder hereof) in addition to the principal
and interest evidenced by this note.
9. Any installment of principal and/or interest evidenced by
this note which is not paid on the day when such payment is scheduled to be
made, regardless of whether or not the Lender has accelerated payment of any or
all sums outstanding under this note, shall bear interest from the day when due
(including any grace period) until said amount is paid in full, payable on
demand, at a rate per annum equal at all times to the sum of (i) the rate
otherwise applicable hereunder PLUS (ii) four percent (4%).
10. This note shall be deemed to have been made under and
shall be governed by the laws of the State of Florida in all respects [except as
to interest rates and other terms of lending which, by virtue of a federal
preemption or, at the election of the Lender, are or may be governed by the laws
of the United States], including matters of construction, validity, and
performance. If any provision of this note shall be deemed unenforceable under
applicable law, such provision shall be ineffective, but only to the extent of
such unenforceability, without invalidating the remainder of such provision or
the remaining provisions of this note. If more than one person signs this note
as a maker, each shall be jointly and severally liable hereunder. All of the
terms and provisions of this note shall be applicable to and be binding upon
each and every maker, indorser, surety, guarantor, all other persons who are or
may become liable for the payment hereof and their heirs, personal
representatives, successors or assigns.
11. THE BORROWER, AND THE LENDER IN ACCEPTING DELIVERY OF THIS
NOTE, HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT EITHER
MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED ON THIS NOTE, THE
CREDIT AGREEMENT OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, THE
CREDIT AGREEMENT AND ANY OTHER AGREEMENT SIGNED OR CONTEMPLATED TO BE SIGNED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER PARTY OR THE DIRECTORS, OFFICERS,
EMPLOYEES OR AGENTS THEREOF. THE INCLUDING OF THIS PROVISION IS A MATERIAL
INDUCEMENT TO THE LENDER TO EXTEND CREDIT TO THE BORROWER.
WHITMAN EDUCATION GROUP, INC.
By: [ILLEGIBLE]
------------------------
Title: President
---------------------
3
<PAGE>
STATE OF COLORADO )
)SS.
COUNTY OF El Paso )
The foregoing Term Note was acknowledged was before me this
11th day of April 1996, by Randy S. Proto, as President of WHITMAN EDUCATION
GROUP, INC., a New Jersey corporation. He/She:
___X___ is personally known to me, or
______ produced _________________ as identification.
/s/ Candy Spangler
--------------------------
NOTARY PUBLIC
My Commission Expires: Printed Name of Notary:
12/30/96 Candy Spangler
4
EXHIBIT 10.3
REVOLVER NOTE
$2,500,000.00 April 11, 1996
FOR VALUE RECEIVED, WHITMAN EDUCATION GROUP, INC., f/k/a
Whitman Medical Corp., a New Jersey corporation
("Borrower"), promises to pay to the order of
BARNETT BANK OF SOUTH FLORIDA, N.A.
a national banking corporation ("Lender"), the principal sum of
TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
and the Borrower further promises to pay to the Lender interest monthly,
commencing May 30, 1996 until repaid in full, on the principal amount
evidenced hereby and from time to time outstanding at a rate per annum
determined in accordance with the Credit Agreement (as defined below). The rate
of interest to be applied and the amount of interest to be paid on the daily
outstanding balance of principal evidenced hereby shall be calculated on an
assumed year of 360 days for the number of days actually elapsed.
The Borrower agrees to pay the outstanding principal
indebtedness evidence by this note in full on October 15, 1997. All advances
made hereunder by the Lender to the Borrower and all payments made on account of
principal hereof shall be recorded by the Lender and, prior to transfer hereof,
endorsed on the grid attached hereto.
The Borrower further promises and agrees that:
1. This Note is the "Revolver Note" referred to in, and is
entitled to the benefits of, that certain Credit Agreement, dated as of April
11, 1996 among the Lender, the Borrower and the Guarantor, the terms of which
are incorporated herein by this reference as if fully set forth herein. Provided
no Event of Default has occurred and is continuing, the Borrower may borrow,
prepay and reborrow provided the aggregate principal amount outstanding from
time to time and at any time does not exceed $2,500,000.00.
2. This Borrower shall be in default under the terms of this
note upon the occurrence and continuation of an Event of Default as defined and
described in the Credit Agreement.
3. At any time after the occurrence and continuation of any
Event of Default, the indebtedness evidenced by this note and/or any note(s) or
other obligation(s) which may be taken in renewal, extension, substitution, or
modification of all or any part of the indebtedness evidenced thereby and all
other Obligations of the Borrower to the Lender, howsoever created and existing
under the Credit Agreement, that certain Term Note,
<PAGE>
dated April __, 1996 from the Borrower to the Lender or otherwise, shall
immediately become due and payable without demand upon or notice to the
Borrower, and the Lender shall be entitled to exercise the other remedies set
forth in the Credit Agreement or as otherwise provided at law or in equity.
4. Upon the occurrence and during the continuance of any Event
of Default, the Lender is authorized, without further notice to the Borrower
(the giving of notice being expressly waived by the Borrower) to set off and
apply any indebtedness owing by the Lender to the Borrower against the
indebtedness evidenced by this note, although then contingent or unmatured. The
Lender agrees to notify the Borrower after any such setoff and application;
PROVIDED, HOWEVER, the failure to give such notice shall not affect the validity
of such setoff and application. The rights of the Lender under this Paragraph 4
are in addition to any other rights and remedies which the Lender may have.
5. The Lender may transfer this note and the transferee(s)
shall thereupon become vested with all the powers, rights, and obligations
herein given to the Lender with respect thereto; and the Lender shall thereafter
be forever relieved and fully discharged from any liability or responsibility in
the matter.
6. The Borrower hereby waives presentment for payment, demand,
notice of dishonor and protest and agrees that (i) any right of setoff securing
any indebtedness evidenced by this note may, from time to time, in whole or in
part, be exchanged or released, and any person liable on or with respect tot he
indebtedness evidenced by this note may be released -- all without notice to or
further reservations of rights against the Borrower, any indorser, surety or
guarantor and all without in any way affecting or releasing the liability of the
Borrower, any indorser, surety or guarantor; and (ii) none of the terms or
provisions of this note may be waived, altered, modified or amended except as
the Lender may consent thereto in writing.
7. In the event of any litigation involving this note, the
prevailing party shall be entitled to collect reasonable attorneys' fees,
out-of-pocket expenses, and court costs. As used in this note, the term,
"attorneys' fees", shall mean reasonable charges and expenses for legal services
at the trial and/or appellate level and/or in pre- and post-judgment or
bankruptcy proceedings.
8. Both principal and interest of this note shall be payable
in lawful currency of the United States of America to the Lender at 701 Brickell
Avenue, Miami, Florida 33131 or at such other place or to such other person as
may be designated in writing by the Lender, in immediately available (same day)
funds
2
<PAGE>
without deduction for or on account of any present or future taxes levied
or imposed on this note, the proceeds hereof, or on the Borrower or holder
hereof by any government, or any instrumentality, authority or political
subdivision thereof. The Borrower agrees, upon the request of the Lender, to pay
all such taxes (other than taxes on or measured by net income of the holder
hereof) in addition to the principal and interest evidenced by this note.
9. Any installment of principal and/or interest evidenced by
this note which is not paid on the day when such payment is scheduled to be
made, regardless of whether or not the Lender has accelerated payment of any or
all sums outstanding under this note, shall bear interest from the day when due
(including any grace period) until said amount is paid in full, payable on
demand, at a rate per annum equal at all times to the sum of (i) the rate
otherwise applicable hereunder PLUS (ii) four percent (4%).
10. This note shall be deemed to have been made under and
shall be governed by the laws of the State of Florida in all respects [except as
to interest rates and other terms of lending which, by virtue of a federal
preemption or, at the election of the Lender, are or may be governed by the laws
of the United States], including matters of construction, validity, and
performance. If any provision of this note shall be deemed unenforceable under
applicable law, such provision shall be ineffective, but only to the extent of
such unenforceability, without invalidating the remainder of such provision or
the remaining provisions of this note. If more than one person signs this note
as a maker, each shall be jointly and severally liable hereunder. All of the
terms and provisions of this note shall be applicable to and be binding upon
each and every maker, indorser, surety, guarantor, all other persons who are or
may become liable for the payment hereof and their heirs, personal
representatives, successors or assigns.
3
<PAGE>
11. THE BORROWER, AND THE LENDER IN ACCEPTING DELIVERY OF THIS
NOTE, HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT EITHER
MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED ON THIS NOTE OR THE
CREDIT AGREEMENT OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, THE
CREDIT AGREEMENT OR ANY OTHER AGREEMENT SIGNED OR CONTEMPLATED TO BE SIGNED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER PARTY OR THE DIRECTORS, OFFICERS,
EMPLOYEES OR AGENTS THEREOF. THE INCLUDING OF THIS PROVISION IS A MATERIAL
INDUCEMENT TO THE LENDER TO EXTEND CREDIT TO THE BORROWER.
WHITMAN EDUCATION GROUP, INC.
By: [ILLEGIBLE]
------------------------
Title: President
---------------------
STATE OF COLORADO )
)SS.
COUNTY OF El Paso )
The foregoing Revolver Note was acknowledged was before me
this 11th day of April, 1996, by Randy S. Proto, as President of WHITMAN
EDUCATION GROUP, INC., a New Jersey ____________ corporation. He/She:
___X___ is personally known to me, or
______ produced _________________ as identification.
/s/ Candy Spangler
------------------------------
NOTARY PUBLIC
My Commission Expires: Printed Name of Notary:
12/30/96 Candy Spangler
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER SHARE OF COMMON STOCK
FOR THE THREE MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
Primary:
Average shares outstanding.......................... 10,428,323 10,209,366
Net effect of dilutive stock options and
warrants based on the treasury stock
method using the average market price.......... 2,276,534 --
Sanford-Brown shares held in escrow................. 1,021,612 --
----------- ----------
Total............................................... 13,726,469 10,209,366
========== ==========
Net income (loss)................................... $ 76,017 $ (646,376)
Per share amount.................................... $ .01 $ (.06)
Fully diluted:
Average shares outstanding.......................... 10,428,323 10,209,366
Net effect of stock options and warrants
based on the treasury stock method
using quarter-end market price.................. 2,508,131 529,266
Sanford-Brown shares held in escrow................. 1,021,612 1,021,612
------------ ----------
Total............................................... 13,958,066 11,760,244
========== ==========
Net income (loss)................................... $ 76,017 $ (646,376)
Per share amount.................................... $ .01 $ (.05)
</TABLE>
Net income (loss) per share of common stock for primary purposes is computed
by dividing net income (loss) by the weighted average number of shares
outstanding during the period adjusted for common stock equivalents when such
adjustments result in dilution of earnings per share. The Company has considered
all common stock equivalents for purposes of calculating fully diluted earnings
per share regardless of their anti-dilutive effect. Included as common stock
equivalents for the three months ended June 30, 1996 for fully diluted purposes
are 1,021,612 shares issued in connection with the acquisition of Sanford-Brown
College that remain in escrow to be disbursed to the seller or returned to the
Company upon the occurrence of, or failure to achieve, certain events.
Exhibit 11
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 411,206
<SECURITIES> 472,500
<RECEIVABLES> 16,068,320
<ALLOWANCES> (1,606,704)
<INVENTORY> 802,913
<CURRENT-ASSETS> 17,105,346
<PP&E> 12,021,866
<DEPRECIATION> (4,846,012)
<TOTAL-ASSETS> 31,322,312
<CURRENT-LIABILITIES> 14,186,786
<BONDS> 0
0
0
<COMMON> 8,316,125
<OTHER-SE> (593,121)
<TOTAL-LIABILITY-AND-EQUITY> 31,322,312
<SALES> 11,446,496
<TOTAL-REVENUES> 11,446,496
<CGS> 6,190,891
<TOTAL-COSTS> 11,053,846
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 222,154
<INCOME-PRETAX> 170,496
<INCOME-TAX> 94,479
<INCOME-CONTINUING> 76,017
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,017
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
