SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1997 COMMISSION FILE NUMBER 1-13722
WHITMAN EDUCATION GROUP, INC.
INCORPORATED UNDER THE LAWS OF THE I.R.S. EMPLOYER IDENTIFICATION NUMBER
STATE OF NEW JERSEY 22-2246554
4400 BISCAYNE BOULEVARD, 6TH FLOOR
MIAMI, FLORIDA 33137
(305) 575-6534
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK, NO PAR VALUE AMERICAN STOCK EXCHANGE
Indicate by check mark whether the registrant (1) has filed all reports 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of June 17, 1997, there were 12,677,882 shares of Common Stock
outstanding.
The aggregate market value of the voting stock held by non-affiliates of
the registrant on June 17, 1997 was approximately $33,537,136.
DOCUMENTS INCORPORATED BY REFERENCE: None
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WHITMAN EDUCATION GROUP, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED MARCH 31, 1997
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 17
Item 3. Legal proceedings........................................... 18
Item 4. Submission of matters to a vote of security holders......... 19
PART II
Item 5. Market for registrant's common equity and related stockholder
matters...................................................... 19
Item 6. Selected financial data...................................... 20
Item 7. Management's discussion and analysis of financial condition
and results of operations.................................... 21
Item 8. Financial statements and supplementary data.................. 30
Item 9. Changes in and disagreements with accountants on accounting
and financial disclosure..................................... 30
PART III
Item 10. Directors and executive officers of the registrant............ 30
Item 11. Executive compensation........................................ 33
Item 12. Security ownership of certain beneficial owners and
management.................................................... 36
Item 13. Certain relationships and related transactions................ 40
PART IV
Item 14. Exhibits, financial statement schedules, and reports
on Form 8-K................................................... 40
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PART I
ITEM 1. BUSINESS
Readers are cautioned that the following text concerning the business
of the Company should be read in conjunction with the "Safe Harbor Statement"
appearing at the end of Item 7 of this Report and that certain statements made
in this Item 1 are qualified by the risk factors set forth in the Safe Harbor
Statement.
GENERAL
Whitman Education Group, Inc. ("the Company") is a proprietary provider
of career-oriented postsecondary education. The Company currently operates 24
schools in 13 states offering a range of graduate, undergraduate and non-degree
certificate or diploma programs primarily in the fields of healthcare, business
and computer and electronic technology to more than 6,000 students.
The Company is organized into a University Degree Division and an
Associate Degree Division through which its education programs are offered
through three wholly-owned subsidiaries. The University Degree Division
primarily offers doctorate, master's and bachelor's degrees through Colorado
Technical University ("Colorado Tech") and its Huron University division. The
Associate Degree Division offers associate's degrees and diplomas or
certificates through Sanford-Brown College ("Sanford-Brown") and the Ultrasound
Diagnostic School ("UDS").
The Company's students are predominantly adults, generally between the
ages of 24 and 35, who commute to its schools and require limited ancillary
student services. The students are seeking to acquire basic knowledge and skills
necessary for entry-level employment in technical careers or to acquire new or
additional skills to either change careers or advance in their current careers.
The Company's executive offices are located at 4400 Biscayne Boulevard,
6th Floor, Miami, Florida 33137, and its telephone number is (305) 575-6534.
COMPANY DEVELOPMENT
The Company was founded in New Jersey in 1979. In 1983, the Company
acquired two UDS schools in New York which offered non-degree programs only in
diagnostic medical ultrasound. Enrollment in the two schools was less than 50
students. Over the next nine years, the Company opened eight additional UDS
schools and increased its total enrollment to approximately 400 students.
In 1992, Dr. Phillip Frost invested in the Company and became its
Chairman. At the time of his investment, the Company had revenues of
approximately $3.8 million from UDS operations, and total enrollment at the ten
then existing UDS schools was approximately 675. Following this, the Company
continued to expand UDS by adding five additional locations by 1994, for a total
of 15 locations.
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In 1994, the Company determined to expand the scope of its business to
offer a broader range of certificate programs in UDS schools. Beginning in late
1994, the Company began introducing cardiovascular technology and medical
assisting programs to its UDS schools. In addition, in 1994 the Company decided
to expand its educational offerings and began to evaluate acquisition candidates
that would permit the Company to offer a broad range of career-oriented
programs, including degree programs, in addition to its healthcare diploma and
certificate programs.
In December 1994, the Company acquired Sanford-Brown, a college founded
in 1868, which offers associate degree programs in business, computer technology
and healthcare. With three campuses in and around St. Louis, Missouri, one in
Kansas City, Missouri and one in Granite City, Illinois, Sanford-Brown added
approximately 1,500 students to the Company's enrollment. The purchase price
paid for Sanford-Brown consisted of $5,900,000 in cash and 1,218,076 shares of
the Company's common stock. Sanford-Brown, together with UDS, created a network
of 20 schools offering both associate's degrees and non-degree programs in
business, computer technology and healthcare. These 20 schools have become the
foundation of the Company's Associate Degree Division.
In March 1996, the Company further broadened its degree program
offerings by acquiring Colorado Tech in Colorado Springs, Colorado. Founded in
1965, Colorado Tech is a regionally- accredited institution offering bachelor's,
master's and doctorate degrees in management, engineering, computer science and
other technology fields. The Company issued 2,499,870 shares of common stock in
connection with the merger with Colorado Tech. Through the acquisition of
Colorado Tech, the Company realized one of its goals of offering a full range of
degree programs. The maturity of Colorado Tech and the quality of its programs
also created the opportunity for the Company to expand by replicating the
Colorado Tech model either in new locations or through the conversion of
acquired institutions. Colorado Tech was acquired as the foundation for the
Company's University Degree Division.
Colorado Tech began an expansion program in late 1996. In October 1996, Colorado
Tech opened its second campus in Denver, Colorado; and in December 1996,
Colorado Tech expanded its educational content and infrastructure through the
acquisition of two campuses of Huron University ("Huron") in Huron and Sioux
Falls, South Dakota. Huron, which was founded in 1883, offers an MBA program as
well as bachelor degree programs in healthcare, business, computer information
systems and education. The acquisition of Huron served two primary purposes: it
introduced the Company to another niche market of more traditional yet still
career-oriented adults in the 18 to 24 year-old range while, at the same time,
allowing for the more rapid expansion of Colorado Tech through the conversion of
the Huron Sioux Falls campus into an additional location of Colorado Tech.
Moreover, as a result of the dedication of the City of Huron to the university,
the Company was able to acquire Huron on what management believes were very
attractive terms. The City of Huron created a non-profit entity to acquire all
of the real property of Huron, consisting of seven buildings on approximately 15
acres of land, all of which was simultaneously leased to Colorado Tech upon
consummation of the transaction. The City's new financing of the real property
provided the purchase price to the seller in the amount of $2.25 million, the
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pay-off of existing liens on the Huron real property of approximately $750,000
and a working capital infusion to Colorado Tech in the approximate amount of
$1,200,000 at closing. In addition, Colorado Tech assumed $500,000 in payables
of the university.
In connection with the expansion of programs and locations and the
acquisition of new schools, the Company has continually focused on strengthening
its management and improving its facilities to foster effective oversight of its
operations. In March 1996, the Company relocated its headquarters from New
Jersey to Miami, Florida. In addition, the Company, through both recruitment and
acquisition, has since 1994 established an entirely new executive management
team and has broadened and upgraded its middle management team by adding
individuals with broad experience in proprietary education. The Company has also
expanded the breadth and depth of its Board of Directors to provide a diverse
base of knowledge and skills in education, regulated industry, mergers and
acquisitions, and business generally, particularly high-growth businesses.
THE POSTSECONDARY EDUCATION MARKET
The postsecondary education market is estimated to be approximately
$200 billion market, with nearly 15 million students enrolled in over 6,000
single and multi-location institutions nationwide. According to the United
States Department of Education, the population enrolled in such institutions
will increase by nearly 1.5 million students to over 16 million students by the
year 2005. Further, of the 6,000 Title IV financial aid eligible institutions,
approximately 3,000 are for-profit, with approximately 500 of those offering
associate's degrees or higher. Total enrollment in for-profit institutions is
estimated to be less than 5% of the overall market.
The United States Department of Education estimates that by the year
2001 approximately 6.6 million or 42% of the students attending postsecondary
institutions will be adults over the age of 24. Additionally, the Company
believes that the market for entry-level associate's degrees is enhanced by the
increasing number of new high school graduates, projected to increase from 2.5
million in 1994 to 3.1 million in 2004. It is further enhanced by an increase in
the percentage of recent high school graduates who continue their education
after graduation. According to the National Center For Education Statistics,
this percentage increased from 53% in 1983 to 63% in 1993.
Further, the continuing shift in the information age from non-skilled
to skilled workers is dramatic. According to economists, in 1950, 40% of the
workforce in the United States was considered skilled or professional; in 1991
this number had risen to 65% and, it is projected that in the year 2000, 85% of
jobs will require education or training beyond high school. This shift is
reflected by and further driven by the income premium placed on postsecondary
education. According to the United States Census Bureau, in 1995, a full-time
male worker with an associate degree earned an average of 37% more per year than
a comparable worker with only a high school diploma, and a full-time male worker
with a bachelor's degree earned an average of 72% more per year than a
comparable worker with only a high school diploma. Based on these trends, the
Company believes that with its associate and graduate program offerings it can
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capitalize on the different submarkets of the 52% of adults over 25 who have not
yet attained an associate's or higher degree.
The Company believes that these trends fuel two distinct groups toward
postsecondary education: those who desire rapid career change or entry, and
those who desire career enhancement. The Company believes that providing both an
associate degree focus to the former market segment and a university degree
focus to the latter market segment will enable it to capitalize on both these
growing markets.
BUSINESS STRATEGY
The Company intends to capitalize on what management believes are
favorable trends in the postsecondary education market by focusing on
career-oriented education programs designed primarily for adult learners seeking
to acquire basic knowledge and skills necessary for entry-level employment or to
acquire new or additional skills to change careers or advance in their current
careers. Having established a broad base of educational content offered in a
broad range of degree (associate's, bachelor's, master's and doctorate) and
non-degree programs, management believes the Company is now well-positioned to
focus its efforts on further internal growth.
In the short term, management believes that its best opportunity for
achieving growth will come from the integration of existing operations with the
basic objectives of increasing revenues at existing schools and improving
overall operating efficiencies at each school and within the Company as a whole.
To accomplish the Company's goal of increasing revenues from its existing
schools, the Company intends to increase enrollment by improving its student
recruitment efforts and programs and by adding existing curricula to more
locations. In addition, the Company intends to improve operating efficiencies by
centralizing numerous administrative functions which had previously been
performed by the schools. These functions include accounting, finance,
purchasing, human resources, real estate, legal, regulatory affairs and
compliance monitoring, information systems and technology support services and
certain curriculum development. The Company believes that the centralization of
these functions will not only reduce, and permit better control of, overhead
costs, but it will allow local school personnel to better concentrate their
efforts on service to their students. In addition, the Company intends to
further enhance operating efficiencies by the implementation of an integrated
information network linking schools with each other and with the Company's
corporate headquarters.
While management expects to continue to strive for increased revenues
and enhanced operating efficiencies from its current operations in the short
term, in the intermediate and longer term, management believes that its best
opportunities for growth will result from the expansion of its educational
programs and the opening or acquisition of additional schools. The expansion of
educational programs will include the elevation of certain certificate and
diploma programs to associate degree programs as well as the development of new
curricula. The Company also intends to develop and offer continuing education
programs and corporate training programs for which the Company's curricula is
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well-suited and can be customized on a cost-effective basis. The Company is also
exploring various alternatives to offer certain of its programs on a
distance-learning basis to new and existing students.
Management also intends in the long term to establish new locations of
its existing schools. The Company may seek to establish new locations where
management believes the population of working adults, the local employment
market, the availability of management talent and demographic trends will enable
its schools to successfully replicate their operational models. Establishment of
new locations will be subject to the Company's ability to comply with or satisfy
applicable regulatory requirements of the United States Department of Education
and state licensing and accreditation requirements.
In addition to the establishment of new locations and the elevation of
certain schools to a higher degree level, the Company will augment its expansion
through selective strategic acquisitions where an acquisition is a more feasible
alternative both financially and operationally. The Company intends to focus on
acquisition candidates that provide the Company with additional geographic scope
or educational content, that are historically profitable, compliant with
applicable regulations, have low student loan default rates and that can be
efficiently assimilated into the Company's operations.
OPERATING STRUCTURE
The Company operates as two divisions: the University Degree Division
and the Associate Degree Division. Each division focuses on a different segment
of the postsecondary career education market. The Company provides various
centralized administrative services to each of its divisions and has a
management structure which projects and implements corporate strategies and
approaches within each division. Each division has a divisional president,
regional supporting staff and local operating managers who oversee the daily
operations of their respective areas of responsibility. The Company believes
that this management structure allows local school management to develop
valuable local market experience and community and employer relationships that
are vital to the adult career education market, while still realizing the
economies of scale and degree of control associated with centralization.
The University Degree Division is currently comprised of Colorado Tech,
a regionally- accredited institution which, except for its Huron University
division, grants degrees primarily to working adults seeking career enhancement,
primarily in the areas of healthcare, computer and electronic technology and
business. Huron University, being a more traditional institution, primarily
serves the traditional student attending college immediately following high
school. Colorado Tech, including Huron, has approximately 2,500 students
enrolled at four campuses. Colorado Tech and Huron offer various bachelor's
degrees in computer science, management, engineering and education; master's
degrees in computer science and business administration; and doctorate degrees
in computer science and management. The Company believes that flexible course
structures, class schedules designed for the working adult, and the recent
introduction of local-campus doctorate programs have solidified Colorado Tech's
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position as a recognized leading source of adult education in its current
markets and have established a successful, replicable model for growth and
expansion into new markets.
The Associate Degree Division focuses on the adult learner who desires
rapid career change or to quickly enter a new career field. The Associate Degree
Division is currently comprised of Sanford-Brown and UDS, which provide adult
students with associate's degrees and professional certificate programs
primarily in the areas of healthcare, computer technology and business.
Sanford-Brown is a nationally-accredited institution that provides various
associate's degrees in computer science, including networking and multimedia,
business management, and allied health, including nursing, and similar
professional certificate programs. UDS is also nationally accredited and
provides professional certificate programs in diagnostic medical ultrasound,
cardiovascular technology and medical assisting. The Associate Degree Division
has approximately 3,900 students enrolled at 20 campuses, of which 1,600
students are enrolled at five Sanford-Brown campuses and 2,300 students are
enrolled at 15 UDS campuses.
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EDUCATIONAL PROGRAMS
The Company offers a range of career-oriented educational programs,
substantially all of which are in the areas of healthcare, business and computer
and electronic technology. The Company offers various concentrations in these
programs at the associate's, bachelor's, master's and doctorate levels as well
as the professional diploma and certificate levels. The programs are designed
primarily to serve the adult learner seeking to acquire basic knowledge and
skills necessary for entry-level employment or to acquire new or additional
skills to change careers or to advance in their current careers. Program
revisions occur frequently as a result of feedback from students, local advisory
boards, comprised of professionals in career fields related to the programs, and
local employers.
The Company's educational programs, by degree level, are set forth
below:
<TABLE>
<CAPTION>
UNIVERSITY DEGREE DIVISION ASSOCIATE DEGREE DIVISION
- --------------------------------------------------------------- -----------------------------------------------------------------
<S> <C>
Colorado Technical University Huron University Sanford-Brown College Ultrasound Diagnostic School
- ----------------------------- ---------------------------- -------------------------------- -------------------------------
DOCTORATE PROGRAMS MASTERS PROGRAM ASSOCIATE OF APPLIED PROFESSIONAL CERTIFICATE
Computer Science Business Administration SCIENCE DEGREE PROGRAMS PROGRAMS
Management Accounting/Business Management Diagnostic Medical Ultrasound
BACHELOR OF SCIENCE Computer Information Systems Non-Invasive Cardiovascular
MASTER OF SCIENCE DEGREE DEGREE PROGRAMS Network Administration Technology
PROGRAMS Elementary Education Computer Multimedia Medical Assistant
Computer Engineering Secondary Education Paralegal Studies
Computer Science Criminal Justice Office Administration
Electrical Engineering Business Administration Travel and Hospitality Management
Accounting Medical Administrative Assistant
BACHELOR OF SCIENCE Computer Information Systems Physical Therapy Assistant
DEGREE PROGRAMS Applied Management Occupational Therapy Assistant
Business Management Nursing
Computer Engineering ASSOCIATE DEGREE
Computer Science PROGRAMS PROFESSIONAL CERTIFICATE
Electrical Engineering Business Administration PROGRAMS
Electronic Engineering Technology Microcomputers/Business Intermediate Accounting
Logistics Systems Management Applied Management Computer Applications
Management Information Systems Nursing Computer Programming
Systems Management Network Administration
Legal Office Assistant
ASSOCIATE DEGREE Administrative Office Assistant
PROGRAM Travel and Hospitality Service
Electronics Technology Medical Administrative Assistant
Practical Nursing Program
</TABLE>
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The following table provides information as of June 1, 1997 regarding
the programs offered by each of the Company's schools:
LENGTH OF
TYPE OF NUMBER OF NUMBER OF PROGRAM
SCHOOL PROGRAM LOCATIONS STUDENTS (IN MONTHS)
- ----------------------------- -------- --------- --------- ----------
UNIVERSITY DEGREE DIVISION
Colorado Technical University Doctoral 2 110 24
Master 3 376 21
Bachelor 3 1,204 48
Associate 1 84 24
Non-degree 3 185 N/A
-----
School Total 1,959
=====
Huron University Master 1 32 11
Bachelor 1 230 48
Associate 1 50 24
Non-degree 1 20 N/A
----
School Total 332
====
ASSOCIATE DEGREE DIVISION
Sanford-Brown College Associate 5 1,098 18-24
Diploma 5 493 12-15
-----
School Total 1,591
=====
Ultrasound Diagnostic School Diploma 15 2,326 9-18
-----
Company Total 6,208
=====
Tuition and fees for the Company's programs vary depending on the
nature of the program and the location of the school. Tuition and fees for the
non-degree programs in the Associate Degree Division range from $8,950 for the
nine-month medical assistant program offered by UDS to $15,000 for the six
quarter associate degree programs offered by Sanford-Brown. In the University
Degree Division, tuition and fees range from $26,000 to $32,000 for the 48-month
bachelor's degree programs, $11,000 for the 21-month master's program and
$22,000 for the 24-month doctorate program.
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Academic schedules are designed flexibly to meet the needs of the adult
student. UDS offers all three of its programs during the day or night and
classes begin generally every five weeks. Sanford-Brown's non-degree programs
begin quarterly and are offered both during the day and night. Sanford-Brown's
associate degree programs also begin quarterly and are currently offered
principally during the day, although Sanford-Brown has redesigned its associate
degree program to enable evening students to complete the program in the same
time-frame as day students. Degree programs at Colorado Tech's Colorado Springs,
Denver and Sioux Falls campuses are offered principally at night to accommodate
the typical Colorado Tech student who is a working adult. Classes at Huron, a
more traditional university, are offered principally during the day.
STUDENT RECRUITMENT
The Company utilizes a wide array of advertising and marketing
strategies to attract students to its schools, including various combinations of
newspaper, radio, direct contact with human resources departments of various
corporations, television and direct mail. The Company markets each of its
schools on a local basis, and draws the vast majority of its students from the
local areas surrounding each school. The Company measures the effectiveness of
its marketing efforts by tracking the enrollment rates and costs associated with
each form of marketing on an individual basis. Typically, 25% to 30% of the
Company's schools' new enrollment is generated by referrals from graduates or
in-school students with the remainder resulting from advertising efforts.
STUDENT ADMISSIONS
Each school employs several admissions representatives who interview
and enroll students on-site and a variety of support personnel to assist
students in the admissions process. Each of the Company's schools has admission
requirements designed to ensure that entering students have the educational and
work background, personal circumstances and the ability necessary to
successfully complete their program of study. Admission requirements differ from
program to program and school to school, but at a minimum, each applicant must
be a high school graduate or possess the recognized equivalent credential,
perform successfully on a personal interview, and in most cases, successfully
pass an entrance examination. The admissions process is monitored by a director
or dean of admissions in each location, and reviewed by the Company's compliance
department.
GRADUATE CAREER SERVICES
Each of the Company's schools operates a career services department
which provides career development services to in-school students and alumni.
These services include various combinations of seminars/courses covering
interviewing skills, resume preparation and enhancement, job search skills, and
career planning advice. In addition, the career services departments of the
various schools make contact with potential employers on behalf of the schools
and individual graduates, schedule interviews, attempt to obtain feedback
regarding graduate performance on interviews, and provide on-going re-placement
assistance to employed graduates.
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COMPETITION
The postsecondary school industry is highly fragmented. Typically, no
single school or group of schools dominates markets on a local or national
basis. However, on a local level, each of the Company's schools has varied
levels of competition. Competition is typically based on the nature and quality
of the programs offered, flexibility of class scheduling and service to the
student customers.
Colorado Tech competes with various educational institutions in its
market area. The University of Colorado at Colorado Springs, the University of
Phoenix, Colorado Christian University, Chapman University, Webster University
and Regis University are all located in Colorado Tech's Colorado Springs market
area. In Denver, Colorado Tech competes with the University of Denver,
University of Phoenix, Metro State University, Colorado University, Regis
University and Colorado Christian University. The Colorado Tech campus in Sioux
Falls, South Dakota competes with Dakota Wesleyan, Augustana University,
University of South Dakota, Nettleton College, National College and Southeast
Vocational Technical Institute. All such institutions represent postsecondary
education options to that of Colorado Tech. Colorado Tech competes with these
and other universities in its market areas by offering business degree programs
that combine contemporary leadership strategies with technical working knowledge
which the Company believes make Colorado Tech's business degrees a unique
alternative to the traditional business graduate degrees offered by traditional
liberal arts and business-oriented universities and colleges.
The Huron campus is unique within the Company in that it is a more
traditional university serving a younger student, most of which attend Huron
directly after graduating high school. In a market area of only approximately
15,000, Huron attracts students from South Dakota and surrounding states, other
states across the country and, due to its former ownership, from the Far East as
well. In the City of Huron, the Huron campus has no direct competition. Students
are attracted to Huron for its focus on teaching, the small class sizes, the
safe campus and environment and the appeal of a university that is an integral
part of the surrounding community.
In the St. Louis, Missouri and Granite City, Illinois area,
Sanford-Brown has ten competitors, four of which are regionally accredited,
which provide selected comparable educational degrees and curriculum of which
four offer comparable healthcare programs. In the Kansas City area, Sanford-
Brown has two principal competitors to its practical nursing program.
In almost all of the geographic areas in which UDS teaching facilities
are located, hospitals and community colleges operate programs to train medical
sonographers. Generally, hospitals operate these programs for their own staffing
requirements. Community colleges and the proprietary and private schools compete
directly with UDS. However, there are few proprietary schools or community
colleges that offer the cardiovascular technology program. Currently, most of
the teaching of this program is hospital-based for the hospital's own staffing
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needs. Medical assisting is a commonly offered healthcare program and is not
exclusive to healthcare education institutions. Both proprietary schools and
community colleges also offer medical assisting programs.
REGULATION
FEDERAL AND STATE REGULATION. Each of the Company's schools is subject
to regulation by: (i) the state in which it operates; (ii) accrediting bodies;
and (iii) because they are certified to participate in Title IV Federal
financial aid programs ("Title IV Programs"), the United States Department of
Education (the "DOE"). The loss of authorization to operate in states in which
the Company currently operates, the withdrawal of accreditation from the
Company's schools, or the loss of the schools' eligibility to participate in
Title IV Programs would have a material adverse effect on the Company.
ACCREDITATION. The Company's schools are accredited by accrediting
bodies recognized by the DOE. Accreditation serves as: (i) the basis for the
recognition and acceptance by employers, other higher education institutions and
governmental entities of degrees and credits earned by students; (ii) one of the
qualifications to participate in Title IV Programs; and (iii) the qualification
for authorization to operate in certain states.
STATE AUTHORIZATION. The Company is required to have authorization to
operate in each state where it physically provides educational programs. Certain
states accept accreditation as evidence of meeting minimum state standards for
authorization. Other states require separate evaluations for authorization.
Depending on the state, the addition of a program not offered previously or the
addition of a new location must be included in the institution's accreditation
and/or be approved by the appropriate state authorization agency. The Company's
schools are currently authorized to operate in all states in which they have
physical locations.
FEDERAL FINANCIAL AID PROGRAMS. The Company derives a majority of its
revenue from students who participate in Title IV Programs under the Higher
Education Act of 1965, as amended (the "HEA"), and the regulations promulgated
thereunder by the DOE (the "Regulations"). In order to participate in Title IV
Programs, the Company must comply with complex standards set forth in the HEA
and the Regulations. Compliance with such standards is subject to periodic
reviews by the DOE and state and national agencies which guarantee the loans
made in the Title IV Programs. Disbursements made under the Programs are subject
to disallowance as a result of such reviews and to repayment by the schools. In
1992, in reauthorizing the HEA, Congress imposed more stringent standards upon
proprietary institutions participating in Title IV Programs. The new standards
placed proprietary institutions under increased regulatory scrutiny. It is
anticipated that the HEA will again be reauthorized in early 1998 which again
may change certain standards applicable to proprietary institutions.
THE 85/15 RULE. The HEA requires that an annual comparison be made for
each proprietary school of the percentage of its Title IV Program receipts to
its total receipts from Title IV eligible programs. Under the 85/15 Rule, a
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proprietary school will be ineligible to participate in Title IV programs if, on
a cash basis of accounting, more than 85% of its revenues from Title IV eligible
Programs for the prior fiscal year were derived from Title IV Program funds.
Each of the Company's schools is currently in compliance with the 85/15 Rule.
STANDARDS OF FINANCIAL RESPONSIBILITY. Under the Regulations, each
eligible proprietary institution must satisfy certain standards of financial
responsibility to continue to participate in Title IV Programs. For purposes of
these standards, Sanford-Brown and Colorado Tech have been evaluated as distinct
entities, while the DOE has evaluated UDS on the basis of the financial
performance of the Company as a whole. The three principal standards of
financial responsibility are profitability, the acid test ratio and tangible net
worth.
PROFITABILITY. A school may not have operating losses, as
defined by the Regulations, in either or both of its two most recent fiscal
years that in sum result in a decrease in tangible net worth in excess of ten
percent of the school's tangible net worth at the beginning of the two-year
period. The Company has incurred operating losses (applicable to UDS) in both
fiscal 1997 and fiscal 1996. However, as a result of increases in capital of the
Company from a private placement of the Company's common stock in October 1996
and the exercise of outstanding options to purchase the Company's common stock,
the operating losses have not resulted in a ten percent decrease in the
Company's tangible net worth from the beginning of fiscal 1996. In fact, the
Company's tangible net worth increased over the two-year period. Although there
is no interpretive guidance available as to when the tangible net worth is to be
measured for purposes of determining compliance with this regulation, the
Company believes it is in compliance with the profitability standards based on a
reasonable reading of the regulation. However, in the event the DOE adopts a
different interpretation, the Company could be subject to the disciplinary
measures outlined below.
ACID TEST RATIO. A second standard of financial responsibility
is the "acid test ratio." A school must maintain a ratio of cash, cash
equivalents, certain restricted cash and current accounts receivable to total
current liabilities of at least one to one at the end of its fiscal year. At
March 31, 1997, the Company's acid test ratio (applicable to UDS) was 1.19 to
1.00, Colorado Tech's acid test ratio was 1.22 to 1.00, and Sanford-Brown's acid
test ratio was 1.21 to 1.00.
TANGIBLE NET WORTH. An eligible institution is required to have
a positive tangible net worth at the completion of its fiscal year. At March 31,
1997, Colorado Tech, Sanford-Brown and the Company each had a positive tangible
net worth.
An institution that is determined by the DOE not to meet the standards of
financial responsibility on the basis of failing to meet one or more of the
specified standards is nonetheless entitled to participate in Title IV Programs
if it can demonstrate to the DOE that it is financially responsible on an
alternative basis. An institution may do so by demonstrating, with the support
of a statement from a certified public accountant, that it has the ability to
meet all of its financial obligations and, by proof of compliance with certain
standards specified in the regulations, that it is not subject to precipitous
closure. Alternatively, an institution may submit an irrevocable letter of
credit in favor of the DOE, either in an amount equal to at least one-half of
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the total Title IV Program funds received by students enrolled at such
institution during the prior award year or in an amount equal to at least ten
percent of such prior award year's funds if the institution agrees to disburse
Title IV funds only after earned by the institution and approved by the DOE. If
required to do so, there is no assurance that the Company would be able to
secure the necessary funds or collateral to post a sufficient letter of credit
to comply with this alternative.
If an institution fails to satisfy any one of the foregoing financial
responsibility standards or the alternative means described in the preceding
paragraph, the DOE may impose a fine, place restrictions on an institution's
participation in Title IV Programs or terminate its eligibility to participate
in Title IV Programs. A fine, up to $25,000 per violation, is determined by the
DOE based on the gravity of the violation and taking into account the size of
the institution. Potential restrictions may include a suspension of an
institution's ability to participate in Title IV Programs for up to 60 days
and/or a limitation of an institution's participation in the Title IV Programs,
either by limiting the number or percentage of students enrolled who may
participate in Title IV aid or by limiting the percentage of an institution's
total receipts derived from Title IV Programs. A limitation may also include a
requirement that the institution obtain surety in an amount specified by the
DOE, to assure its ability to meet its financial obligations to students who
participate in Title IV Programs. An institution may apply for removal of a
limitation no sooner than 12 months from the effective date of the limitation
and must demonstrate that the violation at issue has been corrected. Depending
on the severity of the fine, suspension or limitation, such action could have a
material adverse effect on the Company. A termination of eligibility to
participate in Title IV Programs would have a material adverse effect on the
Company.
COHORT DEFAULT RATES. The Regulations also require the calculation of a
cohort default rate on Federal Family Education Loans ("FFEL") received by
current and former students to attend the institution. The cohort default rate
measures the percentage of students who enter repayment in a particular federal
fiscal year on FFEL loans and default before the end of the following federal
fiscal year. If a school's official cohort default rate exceeds 25% for each of
its three most recent federal fiscal years, it becomes ineligible to participate
in the FFEL programs. A school's cohort default rate is published annually by
the DOE. The most recent official cohort year published was 1994. UDS' official
1994 rates ranged from 3.6% to 10.5%; Sanford-Brown's official 1994 rates were
22.5% and 22.0% and Colorado Tech's official 1994 rate was 11.0%. In addition,
all of the Company's schools' preliminary 1995 default rates were below 25%.
Sanford-Brown's Granite City, Illinois campus, however, had a default
rate for 1993 of 41.3%. A default rate of greater than 40% in any one year may
also result in a loss of FFEL eligibility. The Company believes that it is
highly unlikely that the DOE would take any adverse action against the Granite
City campus for the excess 1993 rate in that the 1994 official rate for that
campus was less than 25% and the 1995 preliminary rate just released was 11.7%.
In the event the DOE does take such action, however, the failure of
Sanford-Brown to maintain FFEL eligibility at its Illinois campus would not have
a material adverse effect on the operations or financial condition of the
Company.
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<PAGE>
CHANGE OF CONTROL. A change of ownership in the Company which results
in a change in control may result in the schools operated by the Company
becoming ineligible to participate in Title IV Programs pending recertification
by the DOE, require reauthorization to operate by individual states and could
trigger a review by each of its school's accrediting bodies.
With regard to the participation in Title IV Programs of institutions
owned by publicly held companies, the DOE has adopted the change of ownership
and control standards used in federal securities law. A change in control which
would require the filing of a Current Report on Form 8-K with the Securities and
Exchange Commission would result in the Company's schools becoming ineligible to
participate in Title IV Programs pending recertification by the DOE. A failure
to obtain such recertification would have a material adverse impact on the
Company.
Each of the Company's school's accrediting bodies and the state
agencies which authorize the Company to operate schools have different
regulations regarding changes in control which could require re-authorization or
re-accreditation. The failure of the Company to obtain state authorization or
re-accreditation of any of its schools subsequent to a change in control would
have a material adverse effect on the Company.
Acquisitions of other institutions by the Company typically would
result in a change of ownership resulting in a change of control. The
acquisition of Sanford-Brown in December 1994 automatically terminated the
participation of Sanford-Brown in Title IV Programs. After the closing, the
Company applied for eligibility, and Sanford-Brown was declared eligible for
participation in the Title IV Programs in early May 1995. Students who enrolled
in Sanford-Brown during the period in which its participation was terminated
could not utilize some Title IV funds which they would otherwise have been
entitled to utilize. Therefore, as a result of Sanford-Brown's interruption in
eligibility, a portion of the monies due from its students were not received and
were unrecoverable. This adversely affected Sanford-Brown's fiscal 1995 and 1996
operating income by approximately $353,000. In addition, the period during which
Sanford-Brown was ineligible to participate in Title IV Programs had an adverse
effect on the cash flow of Sanford-Brown.
The acquisition of Colorado Tech in March 1996 likewise automatically
terminated its eligibility to participate in Title IV Programs. Colorado Tech
was recertified by DOE in June 1996. Colorado Tech's operating income and cash
flow was not materially impacted by its period of ineligibility. Colorado Tech's
acquisition of Huron University in December 1996 terminated that institution's
eligibility until certification of Huron as additional locations of Colorado
Tech, which occurred in April 1997. Huron's operating income and cash flow was
also not materially impacted by its period of ineligibility.
Generally, when a change in control does occur, the school's
certification by the DOE following the change in control is provisional.
Provisional certification may last no longer than three years. Provisional
certification differs from full certification in that a provisionally certified
school may be terminated from eligibility to participate in Title IV Programs
without the same opportunity for a hearing before an independent hearing officer
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and an appeal to the Secretary of Education afforded to a fully certified
school. Additionally, the DOE may impose additional conditions on a
provisionally certified institution's eligibility to continue participating in
Title IV Programs. As a result of the change in ownership resulting in a change
in control that occurred in connection with the acquisition of Sanford-Brown and
Colorado Tech, each of those schools is provisionally certified for
participation in Title IV Programs at this time. Huron, as a division of
Colorado Tech, now falls under Colorado Tech's provisional certification.
SEASONALITY
The Company experiences seasonality in its quarterly results of
operations as a result of changes in the level of student enrollments. New
enrollments in the Company's schools tend to be higher in the third and fourth
fiscal quarters because these quarters cover periods traditionally associated
with the beginning of school semesters. The Company expects that this seasonal
trend will continue. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
EMPLOYEES
At March 31, 1997, the Company had approximately 540 full-time and 375
part-time employees of whom 478 were faculty and 427 were administrative
personnel at the various schools. The remaining employees were employed by the
Company at its administrative offices.
ITEM 2. PROPERTIES
The Company and its subsidiaries lease all of their administrative and
campus facilities. The Company, along with UDS, maintains headquarters in Miami,
Florida, where combined they lease approximately 7,000 square feet of office
space. Sanford-Brown's administrative offices are located in St. Louis,
Missouri, where Sanford-Brown leases approximately 3,900 square feet. In
connection with the consolidation of certain administrative functions at the
Company's headquarters in Miami, Sanford-Brown expects to vacate this space in
the near term and relocate certain remaining administrative personnel to its Des
Peres campus. Colorado Tech maintains its administrative offices at its campus
in Colorado Springs, Colorado.
The Company's schools are operated from the following leased premises:
ADDRESS OF SCHOOL SCHOOL SIZE OF FACILITY
(IN SQUARE FEET)
- ------------------ ------------------------- -----------------
Huron, South Dakota Colorado Tech 229,859*
(d/b/a Huron University)
Colorado Springs, Colorado Colorado Tech 80,000
Denver, Colorado Colorado Tech 18,298
Sioux Falls, South Dakota Colorado Tech 10,100
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North Kansas City, Missouri Sanford-Brown 38,500
Des Peres, Missouri Sanford-Brown 28,474
Hazelwood, Missouri Sanford-Brown 26,592
St. Charles, Missouri Sanford-Brown 14,650
Granite City, Illinois Sanford-Brown 12,253
New York, New York UDS 14,500
Iselin, New Jersey UDS 11,360
Tampa, Florida UDS 10,263
Carle Place, New York UDS 9,866
Irving, Texas UDS 9,499
Jacksonville, Florida UDS 9,370
Trevose, Pennsylvania UDS 8,200
Atlanta, Georgia UDS 8,092
Elmsford, New York UDS 7,534
Bellaire, Texas UDS 7,424
Pittsburgh, Pennsylvania UDS 6,238
Pompano Beach, Florida UDS 5,600
Marlborough, Massachusetts UDS 3,577
Independence, Ohio UDS 3,505
Silver Spring, Maryland UDS 2,615
- ---------------
* The Huron, South Dakota campus of Colorado Tech consists of seven
buildings on approximately 15 acres.
The Company believes that all of its present facilities are suitable and
adequate for their current uses. The Company constantly monitors the suitability
of its campus facilities to anticipate where demand for its products will create
overcrowding or exceed capacity of existing facilities. In fiscal 1997, the
Company relocated its New York UDS school from a facility of approximately 3,000
square feet to a facility of approximately 15,000 square feet and relocated its
Kansas City Sanford- Brown school from approximately 16,700 square feet to a new
facility of approximately 38,500 square feet. In May 1997, UDS leased
approximately 11,500 square feet of space into which it intends to relocate its
Atlanta school in August 1977. Additionally, UDS is currently seeking to expand
or relocate its space in Pompano Beach and Colorado Tech is seeking to relocate
its Sioux Falls facility.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its business,
including but not limited to, claims involving students or graduates and routine
employment matters. While there can be no assurance as to the ultimate outcome
of any litigation involving the Company, management does not believe that any
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pending proceeding will result in a settlement or an adverse judgment that will
have a material adverse effect on the Company's financial condition or results
of operations. See "Safe Harbor Statement" appearing in Item 7 of this Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended March 31, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
A. MARKET INFORMATION
On May 1, 1995, the Company's common stock began trading on the American
Stock Exchange under the symbol WIX.(1) The following table sets forth the high
and low closing prices of the Company's common stock as reported by the
composite tape of the American Stock Exchange for each of the quarters
indicated.
1996(2)
-----------------
HIGH LOW
------ ------
Period from 5/1/95 through 6/30/95.......... $3.38 $2.75
Quarter Ended 9/30/95....................... 4.47 2.53
Quarter Ended 12/31/95...................... 3.69 2.75
Quarter Ended 3/31/96....................... 5.69 3.44
1997(2)
-------------------
HIGH LOW
------ -------
Quarter Ended 6/30/96....................... $14.25 $5.44
Quarter Ended 9/30/96....................... 9.88 6.88
Quarter ended 12/31/96...................... 8.56 5.37
Quarter ended 3/31/97....................... 6.69 4.31
- --------------------
(1) From April 1 through April 30, 1995, the Company's common stock was
traded on the over-the-counter market. As provided by the National
Quotation Bureau based upon quotations from the National Association of
Securities Dealers Automated Quotation System, the high and low bid
prices for the common stock for that period were $3.25 and $2.75,
respectively, and the high and the low asking prices were $3.50 and
$3.13, respectively. These quotes represent inter-dealer prices,
without retail mark-up, mark-down, or commissions, and do not
necessarily represent actual transactions.
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<PAGE>
(2) Adjusted to give effect to the two-for-one stock split effected as of
May 13, 1996.
As of the close of business on June 17, 1997, there were approximately
203 record holders of the Company's common stock.
The Company has not paid dividends on its common stock and does not
contemplate paying dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)(1)(2)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues ................................... $ 46,993 $ 39,838 $ 19,332 $ 13,221 $ 10,781
(Loss) income from operations .............. (3,245) 951 288 539 414
(Loss) income from continuing operations ... (4,363) (101) (147) 353 (166)
Net (loss) income .......................... (4,363) (101) (147) 353 (331)
(Loss) income from continuing operations
per share (3) ............................ (.38) (.01) (.02) .04 (.02)
Dividends .................................. None None None None None
Balance Sheet Data
Total assets ............................... $ 48,017 $ 35,323 $ 31,600 $ 12,967 $ 11,616
Long-term debt and capital lease
obligations, less current portion ........ 11,109 11,494 9,467 699 577
Stockholders' equity ....................... 16,107 7,385 7,256 5,718 4,876
--------
<FN>
- ------------------
(1) Figures have been restated to reflect the acquisition of Colorado Tech
in March 1996 which was accounted for under the pooling of interests
method of accounting. Figures also reflect the acquisitions of
Sanford-Brown on December 21, 1994 and Huron University on December 30,
1996 which were accounted for as purchases.
(2) All references to per share amounts have been adjusted to give
retroactive effect to the two-for-one stock split effective on May 13,
1996.
(3) The 1,021,612 shares issued in connection with the Sanford-Brown
acquisition that remained in escrow at March 31, 1996 to be disbursed
to the seller or returned to the Company upon the occurrence or
failure to occur of certain events relating to the regulation of
Sanford- Brown were not considered outstanding for purposes of
computing the net loss per share for fiscal 1995 and 1996 as their
effect was anti-dilutive. Due to the substantial satisfaction of such
contingencies in fiscal 1997, these shares have been disbursed to the
seller and are considered outstanding for purposes of computing the
net loss per share for fiscal 1997.
</FN>
</TABLE>
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See Consolidated Financial Statements, Item 8 of this Report, for
supplementary financial information of the Company.
ITEM 7. 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 and the notes thereto
appearing elsewhere in this report and in conjunction with the "Safe Harbor
Statement" appearing at the end of this Item 7 in that certain statements made
in this Item are qualified by the risk factors set forth in the Safe Harbor
Statement.
All prior period consolidated financial statements presented have been
restated to include the acquisition of Colorado Tech on March 29, 1996, which
was accounted for as a pooling of interests, as if the merger took place at the
beginning of such period. The financial statements of Colorado Tech have been
consolidated based on its calendar year end, December 31, for all periods prior
to fiscal 1997. The consolidated financial statements for fiscal 1997 have been
adjusted to conform Colorado Tech's year-end with that of the Company. In
addition, all references to the number of shares outstanding and per share
amounts have been restated to reflect the two-for-one stock split effected as of
May 13, 1996.
GENERAL
The Company is organized into a University Degree Division and an
Associate Degree Division through which its education programs are offered
through three wholly-owned subsidiaries. The University Degree Division offers
primarily doctorate, master's and bachelor's degrees through Colorado Tech and
its Huron University division. The Associate Degree Division offers associate
degrees and diplomas or certificates through Sanford-Brown and UDS. The revenues
generated from these subsidiaries primarily consist of tuition and fees paid by
students. The majority of students rely on funds received from Title IV Programs
to pay for a substantial portion of their tuition. Accordingly, a majority of
the Company's revenues are indirectly derived from Title IV Programs.
Historically, the Company's revenues have increased primarily as a
result of the expansion of program offerings and the opening or acquisition of
campuses. At UDS, the expansion of program offerings generated an increase in
its revenues from $7.3 million in fiscal 1995 to $20.3 million in fiscal 1997.
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<PAGE>
At Colorado Tech, the expansion of program offerings and the opening of a
campus in October 1996 generated an increase in revenues from $7.9 million
in fiscal 1995 to $10.7 million(excluding Huron University) in fiscal 1997.
On December 30, 1996, Colorado Tech acquired the South Dakota
operations and certain assets of Huron University. The acquisition was accounted
for using the purchase method of accounting. Huron University generated $1.1
million in net revenues and sustained $22,000 in operating losses for the three
months ended March 31, 1997. Huron University has two campuses with a total
enrollment of approximately 600 students.
Instruction and educational support consists primarily of costs related
to the educational activity of the Company's schools. Instruction and
educational support includes faculty compensation, administrative salaries for
departments that provide services directly to the students, occupancy costs,
costs of books sold, and depreciation and amortization of equipment costs and
leasehold improvements.
Selling and promotional expenses consist primarily of advertising
costs, production costs of marketing materials, and salaries and benefits of
personnel engaged in student recruitment, admissions, and promotional functions.
General and administrative expenses consist primarily of administrative
salaries and benefits, occupancy costs, depreciation, bad debt, amortization of
intangibles, and other related costs for departments that do not provide direct
services to students.
The Company intends to discontinue the operations of two of its UDS
schools during fiscal 1998 due to their historical operating losses and
management's assessment of their future prospects. Net revenues and operating
losses for the two schools were approximately $659,000 and $232,000,
respectively, in fiscal 1997.
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RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain
statement of operations data to net revenues for the periods indicated:
Year Ended March 31,
1997 1996 1995
------ ------ -------
Net revenues 100.0% 100.0% 100.0%
------ ------ ------
Costs and expenses:
Instruction and educational support 66.7 60.6 72.6
Selling and promotional 14.3 14.3 9.6
General and administrative 25.9 22.7 16.3
------ ------ -----
Total costs and expenses 106.9 97.6 98.5
------ ------ -----
(Loss) income from operations (6.9) 2.4 1.5
Other expenses:
Interest expense, net 1.9 3.0 1.6
Provision for writedown of
marketable securities 1.4 -- --
----- ------ ------
Loss before income tax
(benefit) provision (10.2) (0.6) (0.1)
Income tax (benefit) provision (0.9) (0.3) 0.7
------ ------ -----
Net loss (9.3)% (0.3)% (0.8)%
======= ======= ========
YEAR ENDED MARCH 31, 1997 COMPARED TO YEAR ENDED MARCH 31, 1996
Net revenues increased by $7.2 million or 18.0% to $47.0 million for
the year ended March 31, 1997 from $39.8 million for the year ended March
31, 1996. The increase was primarily due to an increase in average student
enrollment and tuition increases. Student enrollment increased 21.7% overall
with the University Degree Division experiencing a 29.7% increase and the
Associate Degree Division experiencing an 18.0% increase. Tuition increases
averaged three to five percent.
The increase in student enrollment in the University Degree Division
resulted in increased net revenues of $2.9 million or 32.2%. This increase was
primarily due to the introduction of additional business programs, the opening
of a Colorado Tech campus in October 1996 and the acquisition of Huron
University in December 1996.
The increase in student enrollment in the Associate Degree Division
resulted in increased net revenues of $4.3 million or 13.8%. The increased
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<PAGE>
enrollment was primarily in the cardiovascular and medical assisting
programs offered by UDS which were introduced during fiscal 1996. The increased
revenues derived from increased student enrollment at UDS were partially offset
by decreased revenues at Sanford-Brown. This decline in revenues resulted from a
decrease in the average monthly earning rate per student that occurred as a
result of the lengthening of the curriculum, a decrease in the frequency of
class starts and the negative effect of the change in the billing rates for
general education courses and core courses.
Instruction and educational support increased by $7.2 million or 29.8%
to $31.3 million in fiscal 1997 from $24.1 million in fiscal 1996. As a
percentage of net revenues, instruction and educational support expenses
increased to 66.7% in fiscal 1997 as compared to 60.6% in fiscal 1996. These
increases were primarily due to investments made during fiscal 1997 for the
purpose of enhancing the quality of the education being provided to students,
improving student satisfaction, and enhancing the management and staff at the
schools in order to strengthen the procedures and controls over regulatory
compliance. These investments primarily related to the upgrade of equipment and
the relocation of facilities, the addition of faculty, staff and management at
the schools and the implementation of new education programs. Such investments
resulted in an increase in salaries, occupancy costs, and depreciation expense.
Management believes that the benefits provided to the students from these
investments will support higher placement rates and higher retention rates which
should contribute to increased future enrollments. In addition, instruction and
educational support expenses increased in fiscal 1997 due to the related costs
incurred to support the opening of a Colorado Tech campus and the acquisition of
Huron University.
Selling and promotional expenses increased by $1.0 million or 17.5% to $6.7
million in fiscal 1997 from $5.7 million in fiscal 1996. As a percentage of net
revenues, selling and promotional expenses were stable at 14.3% in both fiscal
1997 and fiscal 1996. The increase in selling nd promotional expenses was
primarily due to increased marketing and advertising costs at the Associate
Degree Division for the programs offered at UDS and to an increase in selling
and promotional costs at the University Degree Division for the new Colorado
Tech campus and Huron University.
General and administrative expenses increased by $3.2 million or 34.9%
to $12.2 million in fiscal 1997 from $9.0 million in fiscal 1996. As a
percentage of revenues, general and administrative expenses increased to 25.9%
in fiscal 1997 from 22.7% in fiscal 1996. These increases were due primarily to
additional administrative costs and the amortization of start-up costs required
to support the increase in the number of campuses at the University Degree
Division, an increase in salaries and depreciation expense to support the
increase in student enrollment at the Associate Degree Division, and an increase
in bad debt expense at the Associate Degree Division due to an increase in
student enrollment and an increase in student receivable balances due to cash
collection delays resulting from staff turnover in certain of the schools. The
Company believes that such collection delays have been corrected.
Net interest expense decreased $317,000 due to a reduction in the
average outstanding debt balance and a reduction in interest rates.
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<PAGE>
The provision of $656,000 for the writedown of marketable securities
considered available- for-sale related to the recognition of a loss in the
fourth quarter of fiscal 1997 for the decline in the fair value of such
securities below their cost basis that was considered to be other than
temporary.
The Company recognized an income tax benefit of $409,000 in fiscal 1997
due to the recognition of deferred tax assets related to certain of the net
operating losses. The Company has valuation allowances of $1.7 million in
connection with deferred tax assets not recognized.
The Company reported a net loss of $4.4 million and a net loss of
$100,571 for the years ended March 31, 1997 and 1996, respectively. The increase
in the net loss for fiscal 1997 was primarily due to the investments made for
the addition of personnel, the upgrade of equipment and facilities, and the
opening and acquisition of new campuses.
YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1995
Net revenues increased by $20.5 million or 106.1% to $39.8 million in
fiscal 1996 from $19.3 million in fiscal 1995. The increase was primarily due to
an increase in average student enrollment and tuition price increases. Student
enrollment increased 38.2% overall with the Associate Degree Division
experiencing a 53.5% increase and the University Degree Division experiencing an
8.8% increase. Tuition increases averaged three to five percent.
The increase in net revenues of $19.5 million at the Associate Degree
Division was due to an increase of 142.9% in average student enrollment at UDS
and a full year of operations for Sanford-Brown in fiscal 1996 as compared to
approximately three months of operations from the date of acquisition, December
21, 1994, included in fiscal 1995. Sanford-Brown's revenues were $11.8 million
greater in the full fiscal 1996 than in the partial fiscal 1995. The increase in
student enrollment at UDS was primarily due to the introduction of the
cardiovascular technology and medical assisting programs which generated a $7.7
million increase in tuition revenues.
The University Degree Division had an 8.8% increase in average student
enrollment generating an increase in net revenues of $1.0 million due primarily
to the introduction of the doctorate programs in January 1995.
Instruction and educational support increased by $10.1 million or 71.9%
to $24.1 million in fiscal 1996 from $14.0 million in fiscal 1995. As a
percentage of net revenues, instruction and educational support expenses
decreased to 60.6% in fiscal 1996 as compared to 72.6% in fiscal 1995. The
increase in instructional and educational support was primarily due to an
increase in such costs of $9.6 million at the Associate Degree Division due to
the additional salaries and occupancy costs incurred to support the introduction
of new programs, the increase in student enrollment and the difference in the
period of operations reflected in fiscal 1996 and 1995 for Sanford-Brown. As a
percentage of net revenues, instruction and educational support expenses
decreased in fiscal 1996 due to the increase in salary and occupancy costs
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<PAGE>
incurred during fiscal 1995 in advance of the increased enrollment
resulting from the introduction of the cardiovascular technology and medical
assisting programs.
Selling and promotional expenses increased by $3.9 million or 209.0% to
$5.7 million in fiscal 1996 from $1.8 million in fiscal 1995. As a percentage of
net revenues, selling and promotional expenses increased to 14.3% in fiscal 1996
as compared to 9.6% in fiscal 1995. The increases were due to an increase in
advertising costs at the Associate Degree Division for the introduction of the
cardiovascular and medical assisting programs, an increase in advertising costs
at the University Degree Division for the introduction of the doctorate
programs, and the difference in the period of operations reflected in fiscal
1996 and 1995 for Sanford-Brown.
General and administrative expenses increased by $5.9 million or 186.6%
to $9.0 million in fiscal 1996 from $3.1 million in fiscal 1995 due primarily to
an increase of $4.8 million at the Associate Degree Division. As a percentage of
revenues, general and administrative expenses increased to 22.7% in fiscal 1996
as compared to 16.3% in fiscal 1995. This increase was due to the additional
administrative support for the increase in student enrollment at UDS and
consisted primarily of increases in salaries, taxes and benefits and the
increase in general and administrative expenses and bad debt at Sanford-Brown of
$2.2 million due primarily to the difference in the period of operations
reflected in fiscal 1996 and 1995. Bad debt expense at Sanford-Brown increased
from the prior year due to the amount of student balances that were not funded
under the Title IV Programs as a result of the length of time that elapsed
before Title IV eligibility was reinstated in connection with the acquisition
and its related change in ownership process. The lack of Title IV funding for
such students required a higher than normal level of reserve against those
receivables.
Net interest expense increased by $875,000 as a result of the debt
incurred in the Sanford- Brown acquisition and the working capital facility
being outstanding for a full year in 1996 as opposed to approximately three
months in fiscal 1995.
The Company recognized an income tax benefit of $136,000 in fiscal 1996
due to the reversal of valuation allowances and the recognition of deferred
tax assets related to net operating losses. In fiscal 1995, the Company had
an income tax provision of $122,000.
The Company reported a net loss of $100,571 and a net loss of $146,611
for the years ended March 31, 1996 and 1995, respectively.
SEASONALITY
The Company experiences seasonality in its quarterly results of
operations as a result of changes in the level of student enrollment. New
enrollment in the Company's schools tends to be higher in the third and fourth
fiscal quarters because these quarters cover periods traditionally associated
with the beginning of school semesters. Costs are generally not significantly
affected by the seasonal factors on a quarterly basis. Accordingly, quarterly
variations in net revenues will result in fluctuations in income from operations
on a quarterly basis.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at March 31, 1997, 1996 and 1995 were $3.9
million, $2.8 million and $1.8 million, respectively. The Company's working
capital totalled $5.7 million at March 31, 1997, compared to $4.8 million at
March 31, 1996 and $4.6 million at March 31, 1995. In accordance with Department
of Education regulations, the Company maintained $512,000, $363,000 and $346,000
in restricted cash at March 31, 1997, 1996 and 1995, respectively, as funds to
be available for student refunds.
Net cash of $2.2 million was used for operating activities in fiscal
1997, an increase in cash utilized of $4.4 million and $122,000 from fiscal 1996
and 1995, respectively. The increase in cash utilized for operating activities
in fiscal 1997 was primarily due to an increase in net losses of $4.3 million.
In fiscal 1996, the Company generated $2.2 million in cash from operating
activities due primarily to cash provided from operations of Sanford-Brown of
$3.0 million, an increase of $4.6 million from fiscal 1995.
Net cash of $3.9 million was used for investing activities in fiscal 1997,
an increase of $1.9 million from fiscal 1996 and a decrease of $1.7 million from
fiscal 1995. The increase in fiscal 1997 was due to an increase in capital
expenditures. The increase in capital expenditures was due primarily to the
purchase of computer equipment for the schools and leasehold improvements
incurred for the expansion and opening of school facilities. The decrease in
fiscal 1996 from fiscal 1995 was due to the net cash payment of $5.0 million in
fiscal 1995 for the acquisition of Sanford-Brown which was partially offset by
the increase in the cash utilized for capital expenditures in fiscal 1996 of
$1.2 million.
Net cash of $7.3 million was provided by financing activities in fiscal
1997, an increase of $6.5 million from fiscal 1996 and a decrease of $848,000
from fiscal 1995. The increase in fiscal 1997 from fiscal 1996 was primarily due
to a private placement of 1,000,000 shares of the Company's common stock to an
unaffiliated institutional investor for $6.5 million. The decrease in fiscal
1996 from 1995 was primarily due to the proceeds of $6.0 million received in
fiscal 1995 from the long-term loan obtained in connection with the
Sanford-Brown acquisition.
The Company has bank lines of credit of $2.0 million expiring in May
1998 and a revolver note maturing in April 1999 in the amount of $5.5 million.
At March 31, 1997, the Company had $7.5 million outstanding under these
facilities. The amounts borrowed under these facilities in fiscal 1997 were
primarily used for operations and capital expenditures. In May 1997, the
revolver note was increased from $5.5 million to $7.5 million. In addition, the
Company increased its term loan availability by $1.5 million in June 1997 in
anticipation of financing expected for capital expenditures at Huron University.
The Company's primary source of operating liquidity is the cash
received from payments of tuition and fees. Most students attending the
Company's schools receive some form of financial aid under Title IV Programs.
UDS, Sanford-Brown and Colorado Tech receive approximately 77%,
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<PAGE>
82% and 40% of their funding, respectively, from the Title IV Programs.
Disbursements under each program are subject to disallowance and repayment by
the schools. In fiscal 1995, the DOE conducted a Federal program review on
Sanford-Brown's Title IV activity for the award years 1992 through 1994. On
November 7, 1996, the DOE issued its program review reports which cited various
deficiencies in the administration of federal student financial aid programs at
Sanford-Brown. The Company has disputed some of the DOE's findings and is
currently working with the DOE to resolve all of the remaining issues. The asset
purchase agreement with respect to Sanford-Brown provides for the seller's
indemnification of the Company for any material liability that may result from
the program reviews and the seller has already deposited $500,000 with the
Company in recognition of that obligation.
As a result of the program reviews, the DOE placed Sanford-Brown on the
reimbursement method of payment for Federal Pell Grant and federal campus-based
programs. Under the reimbursement method, an institution must demonstrate
student eligibility for disbursement of financial aid prior to receiving payment
for those students from the DOE and may only make requests for payment on a
monthly basis. Management believes that although reimbursement for these
programs results in some delay in the receipt of funds, Sanford-Brown will
continue to generate sufficient cash flow to meet its operating requirements.
As of August 1, 1997, as a result of new DOE regulations (scheduled for
implementation on July 1, 1997, but delayed until August 1), if an institution
is on reimbursement for Pell and campus- based programs, then it will also be
required to obtain prior approval from the DOE before it may disburse and/or
certify a student's eligibility for an FFEL. Although management anticipates
that in connection with the final resolution of the Sanford-Brown program
reviews its FFEL participation will not be subject to this new requirement,
there can be no assurance that the program reviews will be resolved timely and
that the new requirement will not become applicable to Sanford-Brown. In the
event the Sanford-Brown Title IV Programs remain on reimbursement, and,
therefore, Sanford- Brown is required to obtain the approvals for FFEL loans
described above, this may have a material adverse effect on the cash flow of the
Company. In such an event, the Company anticipates that it will be able to
increase its financings if necessary; however, there can be no assurance that it
will be able to do so.
The Company believes that with its working capital, its cash flow from
operations, its increased working capital facilities and its increased
financings, it will have adequate resources to meet its anticipated operating
requirements for the foreseeable future, however, there can be no assurance that
this will be the case.
SAFE HARBOR STATEMENT
The preceding "Business," "Legal Proceedings" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
sections of this Report contain certain forward- looking statements within the
meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), and the
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<PAGE>
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. Statements in this Report containing the words
"estimate," "project," "anticipate," "expect," "intend," "believe" and similar
expressions may be deemed to create forward-looking statements which, if so
deemed, speak only as of the date the statement was made. The Company undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
The reader is cautioned that forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from historical results or those anticipated. Forward-looking statements
contained in this Report may relate to: (i) the Company's ability to capitalize
on perceived favorable demographic trends; (ii) the expansion of the Company's
business through the addition of new curricula or new locations, the elevation
of certain locations to degree- granting status or by acquisitions; (iii) the
ability of the Company to realize increased enrollments from investments in
infrastructure made over the past fiscal year; (iv) the Company's remedy of cash
collection delays resulting from staff turnover; (v) Sanford-Brown's ability to
fully resolve the program reviews, be removed from the reimbursement method of
payment for Pell Grants and campus-based loan programs and its ability to avoid
the effect of new regulations which may require that it obtain prior approval
from the DOE to certify eligibility for an FFEL; (vi) the reauthorization of the
HEA; (vii) the DOE's enforcement or interpretation of existing regulations
affecting the Company's operations; (vi) the seasonality of the Company's
results of operations; (viii) the outcome of legal proceedings involving the
Company; (ix) the discontinuance of certain operations; and (x) the sufficiency
of the Company's working capital, financings and cash flow from operating
activities for the Company's future operating and capital requirements.
The forward-looking statements are qualified by important factors that
could cause actual results to differ materially from those in the
forward-looking statements, including, without limitation, the following: (i)
the Company's plans, strategies, objectives, expectations and intentions are
subject to change at any time at the discretion of the Company; (ii) the ability
of the Company to gauge the educational needs of its customers and provide
curricula that satisfies customer demand; (iii) the level of demand for the
curricula offered by the Company; (iv) the ability of the Company to locate and
obtain favorable school sites, negotiate acceptable lease terms, and hire and
train employees; (v) management's ability to manage the Company's planned
internal growth; (vi) the ability of the Company to successfully integrate
acquired operations and to bring its newly-opened and newly-acquired campuses of
Colorado Tech to profitability; (vii) the effect of economic conditions in the
postsecondary education industry and in the nation as a whole; (viii) the
vagaries of the judicial process as it relates to the resolution of legal
proceedings involving the Company; (ix) the effect of competitive pressures from
other educational institutions; (x) the Company's ability to reduce staff
turnover and the attendant operating inefficiencies; (xi) the uncertainty
associated with the final resolution of program reviews and the application of
new regulations dependent thereon; (xii) the effect of government regulations
regarding education and accreditation standards, or the interpretation or
application thereof, including the level of government funding for, and the
Company's eligibility to participate in, student financial aid programs; and
(xiii) the role of the DOE's, Congress' and the public's perception of
for-profit education as it relates to changes in the HEA in connection with the
reauthorization or the interpretation or enforcement of existing regulations.
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<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Regulation
S-X are included in this Form 10-K commencing on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is a list of the names, ages, positions held, and
business experience during the past five years of the persons serving as
directors and executive officers of the Company as of June 17, 1997. Each
director holds office until the next annual meeting of shareholders or until his
successor is elected and qualified. Officers serve at the discretion of the
Board of Directors.
DIRECTORS
JACK R. BORSTING, PH.D. Dr. Borsting, age 68, has been a director of the
Company since 1994. Dr. Borsting is the E. Morgan Stanley Professor of Business
Administration at the University of Southern California and Director of its
Center for Telecommunication Management. From 1988 to 1994, Dr. Borsting was
Dean of the University of Southern California School of Business Administration,
and from 1983 to 1988, he was Dean of the University of Miami School of Business
Administration. Dr. Borsting, a former Assistant Secretary of Defense
(Comptroller), is a director of Northrop Grumman Corporation (aerospace), TRO
Learning, Inc. (proprietary education) and Bristol Technology (point-of-sale
software and service). Dr. Borsting is a trustee of the Institute for Defense
Analysis, the Rose Hill Foundation and the Los Angeles Orthopedic Hospital
Foundation.
NEIL FLANZRAICH. Mr. Flanzraich, age 53, has been a director of the Company
since March 1997. Mr. Flanzraich has been a Shareholder and Chairman of the Life
Sciences Legal Practice Group of Heller Ehrman White & McAuliffe, Palo Alto,
California, since 1995. From 1981 to 1994, Mr. Flanzraich was Senior Vice
President, General Counsel and member of the Corporate Executive Committee of
Syntex Corporation, an international pharmaceutical company that was acquired by
Roche Holdings Ltd. Mr. Flanzraich serves as Chairman of the Board of North
American Vaccine, Inc. (vaccines).
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<PAGE>
PHILLIP FROST, M.D. Dr. Frost, age 60, has been a director of the Company
since April 1992 and Chairman of the Board of Directors since November 1992. Dr.
Frost has been Chairman of the Board of Directors and Chief Executive Officer of
IVAX Corporation (pharmaceuticals) since 1987. Dr. Frost served as President of
IVAX from 1991 until 1995. Dr. Frost was Chairman of the Board of Directors of
Key Pharmaceuticals, Inc. from 1972 to 1986. Dr. Frost is Vice Chairman of the
Board of Directors of North American Vaccine, Inc., Vice Chairman of the Board
of Directors of Continucare Corporation (managed health care), Vice Chairman of
the Board of Directors of Pan Am Corporation (airline), and a director of
Northrop Grumman Corp. and American Exploration Company (oil and gas exploration
and production). He is a trustee of the University of Miami and a member of the
Board of Governors of the American Stock Exchange.
PETER S. KNIGHT. Mr. Knight, age 46, has been a director of the Company
since 1994. Mr. Knight is a partner in the law firm of Wunder, Knight, Levine,
Thelen & Forscey, in Washington, D.C. In 1996, Mr. Knight took a leave of
absence from his firm to serve as President Clinton's Campaign Manager for
Clinton/Gore '96. From 1989 to 1991, Mr. Knight was General Counsel and
Secretary of Medicis Pharmaceutical Corporation. From 1977 to 1989, Mr. Knight
served as the Chief of Staff to Congressman, and later Senator, Al Gore. Mr.
Knight is a director of COMSAT Corp. (an international satellite services and
digital networking company), Medicis Pharmaceutical Corporation (a
pharmaceutical company specializing in dermatology), and the Schroder Series
Trust (a mutual fund company).
RICHARD M. KRASNO, PH.D. Dr. Krasno, age 55, has been a director of the
Company since August 1996. Since 1983, Dr. Krasno has been President and Chief
Executive Officer of the Institute of International Education (private
not-for-profit education organization), New York City, New York. He served as
its Executive Vice President and Chief Operating Officer from 1981 to 1983. Dr.
Krasno was Deputy Assistant Secretary of Education with the U.S. Department of
Education from 1980 to 1981.
LOIS F. LIPSETT, PH.D. Dr. Lipsett, age 63, has been a director of the
Company since 1996. Dr. Lipsett is the President of Health Education Associates,
Washington, D.C. Since 1995, Dr. Lipsett has served as a consultant to several
companies, including the Robert Wood Johnson Foundation. Dr. Lipsett was Vice
President, Scientific and Medical Affairs, American Diabetes Association from
1992 to 1995. Prior to 1992, Dr. Lipsett founded, and was Director of, the
National Diabetes Information Clearinghouse and also was Director for several
training and career development programs at the National Institutes of Health.
RICHARD C. PFENNIGER, JR. Mr. Pfenniger, age 41, has been Chief Executive
Officer and Vice Chairman of the Company since March 1997 and a director of the
Company since 1992. Mr. Pfenniger was Chief Operating Officer of IVAX
Corporation from May 1994 to March 1997. He served as Senior Vice
President--Legal Affairs and General Counsel of IVAX from 1989 to May 1994, and
as Secretary from 1990 to 1994. Prior to joining IVAX, Mr. Pfenniger was engaged
in private law practice. Mr. Pfenniger is a director of NaPro BioTherapeutics,
Inc. (biopharmaceutical research and development), North American Vaccine, Inc.
and Pan Am Corporation.
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<PAGE>
PERCY A. PIERRE, PH.D. Dr. Pierre, age 58, has been a director of the
Company since January 1997. Dr. Pierre has been Professor of Electrical
Engineering at the College of Engineering of Michigan State University since
1995. Prior to 1995, he was Vice President for Research and Graduate Studies, as
well as Professor of Electrical Engineering at Michigan State University from
1990 to 1995; President of Prairie View A & M University from 1983 to 1989;
Assistant Secretary of the Army for Research, Development and Acquisition,
Department of the U.S. Army, from 1977 to 1981; and Dean of the School of
Engineering at Howard University from 1971 to 1977. Dr. Pierre serves as a
director of CMS Energy Corp. (diversified energy company) and a director of Old
Kent Financial Corporation (bank holding company).
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
RANDY S. PROTO. Mr. Proto, age 39, has been President of the Company since
1994. In March 1997, Mr. Proto also assumed the duties of Chief Operating
Officer. For seven years prior thereto, Mr. Proto was Chief Executive Officer
and had ownership interests in 11 proprietary schools in four states. For eight
years prior thereto, Mr. Proto was employed by Computer Processing Institute.
Among the positions he held at that institution were Vice President and School
Director, Director of Admissions and Marketing, Director of Finance and
Financial Aid, Director of Placement and Director of Education.
DAVID D. O'DONNELL. Mr. O'Donnell, age 55, has been President and Chairman
of the Board of Colorado Tech since 1986. In 1997, Mr. O'Donnell also became
Chancellor of Colorado Tech in Sioux Falls and Huron University in Huron, South
Dakota.
FERNANDO L. FERNANDEZ. Mr. Fernandez, age 36, has served as Vice
President--Finance, Treasurer and Chief Financial Officer of the Company since
1996. Prior to joining the Company, Mr. Fernandez, a certified public
accountant, served as Chief Financial Officer of Frost-Nevada Limited
Partnership from 1991 to 1996. Previously, Mr. Fernandez served as Audit Manager
for Coopers & Lybrand in Miami.
RICHARD B. SALZMAN. Mr. Salzman, age 36, has served as Vice
President--Legal Affairs and General Counsel and Secretary of the Company since
1996. For approximately ten years prior to joining the Company, Mr. Salzman was
engaged in private law practice in Miami, Florida, primarily with the firm of
Homer & Bonner, P.A.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and 10% shareholders to
file initial reports of ownership and reports of changes in ownership of the
Company's common stock and other equity securities with the Securities and
Exchange Commission and the American Stock Exchange. Directors, executive
officers and 10% shareholders are required to furnish the Company with copies of
all Section 16(a) forms they file. Based on a review of the copies of such
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<PAGE>
reports furnished to the Company and written representations from the
Company's directors and executive officers that no other reports were required,
the Company believes that during fiscal 1997 the Company's directors, executive
officers and 10% shareholders complied with all Section 16(a) filing
requirements applicable to them, except that Brett Combs (former President of
Sanford-Brown) and David O'Donnell each filed one late report with respect to
changes in their beneficial ownership of shares of the Company's common stock.
ITEM 11. EXECUTIVE COMPENSATION
The following table contains certain information regarding aggregate
compensation paid or accrued by the Company during fiscal 1997 to the Chief
Executive Officer of the Company and to each of the four most highly compensated
executive officers other than the Chief Executive Officer.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION
-------------------------------------- --------------- -------------------
NAME AND YEAR ENDED
PRINCIPAL POSITION MARCH 31, SALARY BONUS STOCK OPTIONS
- ---------------------------- ---------- -------- --------- --------------- --------------------
($) ($) (#)(1) ($)
<S> <C> <C> <C> <C> <C>
Richard C. Pfenniger, Jr.(2) 1997 17,187 0 300,000(3) 0
CHIEF EXECUTIVE OFFICER .... 1996 -- -- --(3) --
1995 -- -- --(3) --
Randy S. Proto(4) .......... 1997 150,000 0 0 10,000(5)
PRESIDENT AND CHIEF ........ 1996 150,000 0 0 0
OPERATING OFFICER .......... 1995 43,269 0 550,000 0
David D. O'Donnell(6) ...... 1997 145,325 10,000 0 31,031(7)
PRESIDENT - COLORADO ....... 1996 -- -- 150,000 --
TECHNICAL UNIVERSITY ....... 1995 -- -- -- --
Fernando L. Fernandez(8) ... 1997 120,000 0 0 0
VICE PRESIDENT - FINANCE, .. 1996 11,846 0 130,000 0
CFO AND TREASURER .......... 1995 -- -- 20,000 0
Richard B. Salzman(9) ...... 1997 120,000 0 0 0
VICE PRESIDENT - LEGAL ..... 1996 10,000 0 100,000 0
AFFAIRS AND GENERAL COUNSEL 1995 -- -- -- --
<FN>
- ---------------
(1) All share amounts have been adjusted for a two-for-one stock split effected
as of May 13, 1996.
(2) Mr. Pfenniger's employment with the Company commenced in March 1997 and his
salary is $275,000 annually. Mr. Pfenniger has served as a director of the
Company since 1992.
<PAGE>
(3) Excludes options to purchase 7,500 shares granted to Mr. Pfenniger in
fiscal 1997 automatically pursuant to the Company's 1996 Stock Option
Plan in connection with his services as a director of the Company. Mr.
Pfenniger was also automatically granted options to purchase 10,000
shares in fiscal 1996 and options to purchase 10,000 shares in fiscal
1995 in connection with his services as a director.
(4) Mr. Proto's employment with the Company commenced in November 1994.
(5) The additional compensation set forth for Mr. Proto represents taxable
relocation expenses incurred by Mr. Proto in connection with relocation of
the Company's headquarters from New Jersey to Florida.
(6) The Company entered into an employment agreement with Mr. O'Donnell on
March 29, 1996 in connection with the acquisition of Colorado Tech.
The agreement is for a three-year term ending March 28 , 1999 and
provides for an annual salary of $145,000 for Mr. O'Donnell's services as
President of Colorado Tech.
(7) The additional compensation for Mr. O'Donnell consists of employee
benefits in the approximate amount of $3,200, automobile allowance in
the amount of $7,000 and the remainder as compensation for Mr.
O'Donnell's personal guarantee of certain indebtedness of Colorado
Technical University.
(8) Mr. Fernandez' employment with the Company commenced in February 1996.
(9) Mr. Salzman's employment with the Company commenced in March 1996.
</FN>
</TABLE>
The following table sets forth information concerning stock option
grants made during 1997 to the executive officers named in the "Summary
Compensation Table."
<TABLE>
<CAPTION>
STOCK OPTION GRANTS DURING THE YEAR ENDED
MARCH 31, 1997
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE APPRECIATION
NAME AND OPTIONS GRANTED TO EXERCISE EXPIRATION FOR OPTION TERM
PRINCIPAL POSITION GRANTED EMPLOYEES PRICE DATE 5% 10%
- ------------------ ------- ------------- ----------- ------------- -------- ------
(#) % $ $ $
<S> <C> <C> <C> <C>
Richard C. Pfenniger, Jr. 300,000(1) 40% $5.25 03/02/04 642,000 1,494,000
CHIEF EXECUTIVE OFFICER
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<PAGE>
<FN>
- --------------------
(1) Excludes options to purchase 7,500 shares granted to Mr. Pfenniger
automatically pursuant to the Company's 1996 Stock Option Plan in
connection with his services as a director of the Company. These
options were granted on October 14, 1996 at an exercise price of $8.625
and have a term of seven years.
</FN>
</TABLE>
The following table sets forth information concerning stock option
exercises during fiscal 1997 by each of the executive officers named in the
"Summary Compensation Table" above and the fiscal year-end value of unexercised
options held by each such executive officer.
<TABLE>
<CAPTION>
STOCK OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
--------------------------------- -------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------- -------------- ----------- -------------
(#)(1) (#)(1) ($)(1) ($)(1)(2)
<S> <C> <C> <C> <C>
Richard C. Pfenniger, Jr. 97,500 300,000 216,850 0
CHIEF EXECUTIVE OFFICER
Randy Proto 265,000 285,000 828,125 890,625
PRESIDENT AND CHIEF
OPERATING OFFICER
David D. O'Donnell 50,000 100,000 0 0
PRESIDENT - COLORADO TECH
Fernando L. Fernandez 90,000 90,000 153,300 133,650
VICE PRESIDENT - FINANCE,
CHIEF FINANCIAL OFFICER
AND TREASURER
Richard B. Salzman 25,000 75,000 14,062 42,187
VICE PRESIDENT - LEGAL
AFFAIRS AND GENERAL COUNSEL
<FN>
- --------------------
(1) All share amounts have been adjusted for a two-for-one stock split
effected as of May 13, 1996.
(2) The value of unexercised in-the-money options represents the number of
options held at year-end 1997 multiplied by the difference between the
exercise price and $5.25, the closing price of the Company's common
stock at March 31, 1997.
</FN>
</TABLE>
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<PAGE>
DIRECTOR COMPENSATION
Each director who is not employed by the Company receives $4,800 per year
for his service as a director, $1,000 for each Board of Directors meeting
personally attended, and is reimbursed for expenses incurred in attending board
and committee meetings. Pursuant to the Company's 1996 Stock Option Plan,
non-employee directors are granted automatically each year, on the first
business day following the Company's annual meeting of shareholders,
non-qualified options to purchase 7,500 shares (37,500 to the Chairman of the
Board) of the Company's common stock at an exercise price equal to the fair
market value of the common stock on the date of the grant, and having a term of
seven years. In fiscal 1997, pursuant to that provision, options at an exercise
price of $8.625 per share were automatically granted to Dr. Frost (37,500
shares), and to Mr. Pfenniger, Dr. Borsting, Mr. Knight, Dr. Lipsett and Dr.
Krasno (7,500 shares each).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, the following directors served on the Compensation and
Stock Option Committee of the Board of Directors: Dr. Frost, Mr. Isaac Kaye, Mr.
Pfenniger, Dr. Borsting, and Dr. Krasno. No person serving as a member of the
Committee during fiscal 1997 was an executive officer of the Company at the time
of service on the Committee, and no interlocking relationships exist between
such persons and any director or executive officer of the Company. Mr. Kaye
resigned as a director of the Company effective July 1, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SECURITY HOLDERS
The following table sets forth certain information as of June 17, 1997
concerning stock ownership of all persons known by the Company to own
beneficially in excess of five percent of the Company's common stock. Unless
otherwise indicated, all shares are beneficially owned and the sole investment
and voting power is held by each person set forth herein.
NAME AND ADDRESS OF NUMBER PERCENT
BENEFICIAL HOLDER OF SHARES(1) OF CLASS
- ---------------------- -------------- ---------
Frost-Nevada, 5,421,528(2) 36.0%
Limited Partnership
3500 Lakeside Court
Suite 200
Reno, Nevada 89509
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<PAGE>
TRAL & CO 1,000,000 7.9%
The Travelers Indemnity Company
One Tower Square
Hartford, Connecticut 06183-1051
David D. O'Donnell 884,956(3) 7.0%
Colorado Technical University
4435 N. Chestnut Street
Colorado Springs, Colorado 80907
The Marilyn O. Sullivan 649,285 5.1%
Family Trust
P.O. Box 7399-151
Breckenridge, Colorado 80424
- --------------------
(1) All share amounts have been adjusted for a two-for-one stock split of
the Company's common stock effected as of May 13, 1996.
(2) Includes 237,500 shares which may be acquired pursuant to stock options
held by Dr. Frost exercisable within 60 days of June 17, 1997 and
2,150,000 shares which may be acquired pursuant to stock purchase
warrants held by Frost-Nevada, Limited Partnership (of which Dr. Frost
is the sole limited partner and sole shareholder of Frost-Nevada
Corporation, the general partner), exercisable within 60 days of June
17, 1997. Exercise of these warrants and options are subject to the
restrictions of the New Jersey Shareholders Protection Act. Dr. Frost
is the Chairman of the Board of Directors of the Company.
(3) Includes 50,000 shares which may be acquired pursuant to stock options
held by Mr. O'Donnell within 60 days of June 17, 1997 and 834,956
shares held in trust by Mr. O'Donnell for various family members.
STOCK OWNERSHIP BY MANAGEMENT
The following table sets forth certain information as of June 17, 1997
concerning the number of shares of common stock beneficially owned by each
director, each executive officer named above in the "Summary Compensation Table"
and by all directors and executive officers as a group. Unless otherwise
indicated, all shares are owned directly by the person indicated who holds sole
voting and investment power.
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<PAGE>
NAME AND ADDRESS OF SHARES BENEFICIALLY PERCENT
BENEFICIAL HOLDER OWNED(1)(2) OF CLASS
- ------------------------------------ --------------------- --------
Jack R. Borsting, Ph.D. 29,100(3) *
University of Southern California
School of Business
Administration, DCC-217
Los Angeles, California 90089-0871
Neil Flanzraich 0 N/A
Heller Ehrman White & McAuliffe
525 University Avenue
Palo Alto, California 94301-1900
Phillip Frost, M.D. 5,421,528(4) 36.0%
IVAX Corp.
4400 Biscayne Boulevard
Miami, Florida 33137
Peter S. Knight 27,500(3) *
1615 L. Street, N.W., Suite 650
Washington, D.C. 20036
Richard M. Krasno, Ph.D. 7,500(3) *
Institute of International Education
809 United Nations Plaza
New York, New York 10017-3580
Lois F. Lipsett, Ph.D. 7,700(3) *
3724 Jenifer Street, N.W.
Washington, D.C. 20015
Richard C. Pfenniger, Jr. 100,000(3) *
4400 Biscayne Boulevard, 6th Floor
Miami, Florida 33137
Percy A. Pierre, Ph.D. 0 N/A
Michigan State University
College of Engineering
357 Engineering Building
East Lansing, Michigan 48824-1226
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<PAGE>
Randy S. Proto 267,200(3) 2.06%
4400 Biscayne Boulevard, 6th Floor
Miami, Florida 33137
David D. O'Donnell 884,956(5) 6.95%
Colorado Technical University
4435 N. Chestnut Street
Colorado Springs, Colorado 80907
Fernando L. Fernandez 90,000(3) *
4400 Biscayne Boulevard, 6th Floor
Miami, Florida 33137
Richard B. Salzman 25,000(3) *
4400 Biscayne Boulevard, 6th Floor
Miami, Florida 33137
All directors and executive officers
as a group (12 persons) 6,860,484(6) 43.8%
- ---------------------
* Represents beneficial ownership of less than one percent.
(1) All share amounts have been adjusted for a two-for-one stock split of
the Company's common stock effected as of May 13, 1996.
(2) For purposes of this table, beneficial ownership is computed pursuant
to Rule 13d-3 under the Securities Exchange Act of 1934; the inclusion
of shares as beneficially owned should not be construed as an admission
that such shares are beneficially owned for purposes of Section 16 of
the Securities Exchange Act of 1934.
3) Includes shares which may be acquired pursuant to stock options
exercisable within 60 days of June 17, 1997 as follows: Dr. Borsting
(27,500); Mr. Knight (27,500); Dr. Krasno (7,500); Dr. Lipsett
(7,500); Mr. Pfenniger (97,500); Mr. Proto (265,000); Mr. Fernandez
(90,000); and Mr. Salzman (25,000).
(4) Includes 2,150,000 shares which may be acquired pursuant to stock
purchase warrants held by Frost-Nevada, Limited Partnership (of which
Dr. Frost is the sole limited partner and sole shareholder of
Frost-Nevada Corporation, the general partner), exercisable within 60
days of June 17, 1997 and 237,500 shares which may be acquired pursuant
to stock options held by Dr. Frost exercisable within 60 days of June
17, 1997. Exercise of these warrants and options are subject to the
restrictions of the New Jersey Shareholders Protection Act.
-39-
<PAGE>
(5) Includes 50,000 shares which may be acquired pursuant to stock options
exercisable within 60 days of June 17, 1997, and 834,956 shares held in
trust by Mr. O'Donnell for various family members.
(6) Includes shares described in footnotes (2) through (5) as beneficially
owned.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company currently occupies administrative offices in Miami, Florida
which are owned by IVAX Corporation. The lease between the Company and IVAX
Corporation provides for an annual rental of $103,999. The Chairman of the Board
of the Company is also the Chairman of the Board and a principal shareholder of
IVAX Corporation.
In April 1995, Career Master, a company 40% owned by Randy S. Proto,
entered into an agreement with Ultrasound Diagnostic School pursuant to which
Career Master would implement at Ultrasound Diagnostic School its system of
organizing and operating job placement departments for use at the Ultrasound
Diagnostic School teaching facilities. In addition to paying a small fee for the
service, Ultrasound Diagnostic School agreed to purchase, over a two-year
period, approximately $160,000 in text books and related materials from Career
Master to be resold to Ultrasound Diagnostic School students. In connection with
the transaction, options to purchase 20,000 shares (10,000 shares before giving
effect to the two-for-one stock split effected as of May 13, 1996) were granted
to David Royka, Vice President of Career Services for the Associate Degree
Division and a principal of Career Master. In fiscal 1997, Ultrasound Diagnostic
School purchased $78,866.65 in textbooks from Career Master pursuant to this
agreement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements are filed as a part of
this report:
Report of Independent Certified Public Accountants
Consolidated Balance Sheet
Consolidated Statements of Operations
Consolidated Statements of Changes in Stockholders' Equity
-40-
<PAGE>
Consolidated Statements of Cash Flow
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
All of the financial statement schedules have been omitted because of
the absence of the conditions under which they are required or because the
required information is included in the consolidated financial statements or the
notes thereto.
(a)(3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------- --------------- ----------------------------------------
<S> <C> <C>
3.1 Certificate of Incorporation, Incorporated by reference to Whitman's
as amended Form 8-K/A-1 dated April 11, 1996.
3.2 By-Laws, as amended Filed herewith.
10.1 Registration Rights Agreement Incorporated by reference to Whitman's
dated as of April 6, 1992 Report on Form 8-K dated April 6, 1992.
10.2 Amended and Restated 1986 Directors Incorporated by reference to Whitman's
and Consultants Stock Option Plan Registration Statement on Form S-8
filed September 9, 1992.
10.3 1992 Incentive Stock Option Plan Incorporated by reference to Whitman's
Proxy Statement for the Annual Meeting
of Shareholders held on November 19,
1992.
10.4 Whitman Education Group, Inc. Filed herewith.
1996 Stock Option Plan, as amended
10.5 Asset Purchase Agreement, dated Incorporated by reference to Whitman's
November 30, 1994 among Whitman Report on Form 8-K dated
Medical Corp., Whitman Acquisition November 30, 1994.
Corporation, Sanford-Brown College,
Inc., James L. Combs*
-41-
<PAGE>
10.6 Escrow Agreement dated Incorporated by reference to Whitman's
December 21, 1994, among Whitman Report on Form 8-K dated
Acquisition Corporation, Sanford-Brown December 21, 1994.
College, Inc., and Midlantic Bank, N.A.,
as Escrow Agent
10.7 Amendment No. 1 to Asset Purchase Filed herewith.
Agreement and Escrow Agreement
among Sanford Brown College, Inc.
(f/k/a Whitman Acquisition Corp.),
James L. Combs, as successor-in-
interest to Sanford Brown College, Inc.,
a Missouri corporation and Midlantic
Bank, N.A., as Escrow Agent
10.8 Non-Competition Agreement dated Incorporated by reference to Whitman's
December 21, 1994 among Whitman Report on Form 8-K dated
Acquisition Corporation, Sanford Brown December 21, 1994.
College, Inc., James L. Combs
10.9 Form of Stock Purchase Warrant to purchase Incorporated by reference to Whitman's
575,000 shares of common stock to be Report on Form 8-K dated
issued by Whitman Medical Corp. in favor December 21, 1994.
of Frost-Nevada, Limited Partnership
10.10 Agreement and Plan of Merger Incorporated by reference to Whitman's
dated September 12, 1995 among Form 8-K/A-1 dated April 11, 1996.
Whitman Education Group, Inc.,
Whitman Medical Acquisition Corp.
and M.D.J.B., Inc. *
10.11 First Amendment to Agreement and Incorporated by reference to Whitman's
Plan of Merger dated December 13, Form 8-K/A-1 dated April 11, 1996.
1995 among Whitman Education Group,
Inc., Whitman Medical Acquisition
Corp. and M.D.J.B., Inc.
10.12 Form of Amendment to Credit Agreement Incorporated by reference to Whitman's
Agreement dated February 26, 1996 among Report on Form 8-K dated February 26,
Bank of America Illinois, Whitman Medical 1996.
Corp. and Phillip Frost
-42-
<PAGE>
10.13 Form of Term Note dated February 26, Incorporated by reference to Whitman's
1996 by Whitman Medical Corp. in favor Report on Form 8-K dated February 26,
of Bank of America Illinois 1996.
10.14 Form of Revolver Note dated February 26, Incorporated by reference to Whitman's
1996 by Whitman Medical Corp. in favor Report on Form 8-K dated February 26,
of Bank of America Illinois 1996.
10.15 Stock Purchase Warrant to purchase 650,000 Incorporated by reference to Whitman's
shares of common stock issued by Whitman Report on Form 8-K dated February 26,
Medical Corp. in favor of Phillip Frost 1996.
10.16 Employment Agreement dated as of Incorporated by reference to Whitman's
March 29, 1996 by and between M.D.J.B., Report on Form 8-K/A-1 dated
Inc. and David O'Donnell April 11, 1996.
10.17 Credit Agreement dated as of April 11, Incorporated by reference to Whitman's
1996 among Barnett Bank of South Florida, Report on Form 10-Q for the quarter
N.A., Whitman Education Group, Inc. and ended June 30, 1996.
Phillip Frost, M.D.
10.18 Form of Term Note dated April 11, 1996 Incorporated by reference to Whitman's
by Whitman Education Group, Inc. in Report on Form 10-Q for the quarter
favor of Barnett Bank of South Florida, N.A. ended June 30, 1996.
10.19 Form of Revolver Note dated April 11, Incorporated by reference to Whitman's
1996 by Whitman Education Group, Inc. Report on Form 10-Q for the quarter
in favor of Barnett Bank of South Florida, ended June 30, 1996.
N.A.
10.20 Second Amendment to Credit Agreement Incorporated by reference to Whitman's
dated October 31, 1996 among Barnett Report on Form 10-Q for the quarter
Bank, N.A., Whitman Education ended September 30, 1996.
Group, Inc. and Phillip Frost, M.D.
10.21 Form of Revolver Note dated October 31, Incorporated by reference to Whitman's
1996 by Whitman Education Group, Inc. Report on Form 10-Q for the quarter
in favor of Barnett Bank, N.A. ended September 30, 1996.
-43-
<PAGE>
10.22 Form of Amended, Restated and Incorporated by reference to Whitman's
Consolidated Renewal Revolver Note Report on Form 10-Q for the quarter
dated October 31, 1996 by Whitman ended September 30, 1996.
Education Group, Inc. in favor of Barnett
Bank, N.A.
10.23 Form of Third Amendment to Credit Filed herewith.
Agreement dated May 19, 1997 among
Barnett Bank, N.A., Whitman Education
Group, Inc. and Phillip Frost, M.D.
10.24 Form of Revolver Note dated May 19, Filed herewith.
1997 by Whitman Education Group, Inc.
in favor of Barnett Bank, N.A.
10.25 Form of Restated and Consolidated Filed herewith.
Renewal Revolver Note dated May 19,
1997 by Whitman Education Group, Inc.
in favor of Barnett Bank, N.A.
10.26 Form of Promissory Note dated Filed herewith.
September 25, 1996 by Sanford Brown
College, Inc. in favor of Bank One,
Colorado, N.A.
10.27 Business Loan Agreement dated Filed herewith.
September 25, 1996 by Sanford Brown
College, Inc. and Bank One, Colorado,
N.A.
10.28 Commercial Security Agreement dated Filed herewith.
September 25, 1996 between Sanford
Brown College, Inc. and Bank One,
Colorado, N.A.
10.29 Loan Agreement dated August 5, 1996 Filed herewith.
between Colorado Technical University
and Bank One, Colorado, N.A.
10.30 Form of promissory note and Schedule Filed herewith.
of Promissory Notes by Colorado
Technical University, Inc. in favor of
Bank One, Colorado, N.A.
-44-
<PAGE>
10.31 Form of commercial security agreement Filed herewith.
and Schedule of Commercial Security
Agreements between Colorado Technical
University, Inc. and Bank One,
Colorado, N.A.
10.32 First Amendment to Loan Agreement Filed herewith.
dated December 27, 1996 between
Bank One, Colorado, N.A. and Colorado
Technical University, Inc.
10.33 Commercial Guaranty by M.D.J.B., Inc. Filed herewith.
in favor of Bank One, Colorado, N.A.
10.34 Second Amendment to Loan Agreement Filed herewith.
dated February 24, 1997 between Bank
One, Colorado, N.A. and Colorado Technical
University, Inc.
10.35 Third Amendment to Loan Agreement Filed herewith.
dated June 13, 1997 between Bank One,
Colorado, N.A. and Colorado Technical
University, Inc.
10.36 Commercial Guaranty by Whitman Filed herewith
Education Group, Inc. in favor of
Bank One, Colorado, N.A.
10.37 Promissory Note dated June 13, 1997 Filed herewith.
by Colorado Technical University, Inc.
in favor of The Pueblo Bank and Trust
Company
10.38 Form of Commercial Guaranty given Filed herewith.
by Whitman Education Group, Inc. and
M.D.J.B., Inc. in favor of The Pueblo
Bank and Trust Company
10.39 Commercial Security Agreement dated Filed herewith.
June 13, 1997 between Colorado
Technical University, Inc. and The Pueblo
Bank and Trust Company
-45-
<PAGE>
10.40 Stock Purchase Agreement dated Filed herewith.
October 15, 1996 by and between
Whitman Education Group, Inc. and
The Travelers Indemnity Company
10.41 Form of Registration Rights Agreement Filed herewith.
among Whitman Education Group, Inc.
and The Travelers Indemnity Company
10.42 Form of Asset Purchase Agreement dated Incorporated by reference to Whitman's
December 30, 1996 among Colorado Report on Form 10-Q for the quarter
Technical University, Inc., Lansdowne ended December 31, 1996.
University, Ltd., EIEA America, Inc.,
Eastern International Educational
Association and Dr. Chikara Higashi.*
11 Statement re computation of per Filed herewith.
share earnings
21 Subsidiaries Incorporated by reference to Whitman's
Report on Form 10-K for the year
ended March 31, 1996.
23.1 Consent of Ernst & Young LLP Filed herewith.
23.2 Consent of Stockman Kast Ryan Filed herewith.
& Scruggs, P.C.
27 Financial Data Schedule Filed herewith.
<FN>
- ----------------------
* Certain exhibits and schedules to this document have not been filed. The
Registrant agrees to furnish a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request.
</FN>
</TABLE>
(b) Whitman filed a Current Report on Form 8-K dated January 27,
1997 reporting that on December 31, 1996, Colorado Technical University
completed the acquisition of Huron University. The Form 8-K was amended by Form
8-K/A on February 28, 1997 to include the following financial statements and pro
forma financial information with respect to Lansdowne University, Ltd. d/b/a
Huron University, United States Branches: (i) audited balance sheets as of May
31, 1996 and 1995 and the related statements of operations, stockholders' equity
and cash flows for each of the three years ended May 31, 1996; (ii) Huron
University unaudited balance sheet and
-46-
<PAGE>
stockholders' equity as of December 30, 1996 and the related statements of
operations and cash flows for the seven months ended December 30, 1996 and 1995;
and (iii) Whitman Education Group, Inc. and Huron University unaudited pro forma
condensed combined statements of operations for the year ended March 31, 1996
and the nine months ended December 31, 1996.
-47-
<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.
BY: /S/ RICHARD C. PFENNIGER, JR.
--------------------------------------------
RICHARD C. PFENNIGER, JR.
CHIEF EXECUTIVE OFFICER AND
VICE CHAIRMAN OF THE BOARD OF DIRECTORS
DATED: JUNE 30, 1997
-48-
<PAGE>
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant in
the capacities and on the dates indicated.
SIGNATURES TITLE Date
- ------------------------------- -------------------------- ---------
/s/ PHILLIP FROST Chairman of the Board June 30, 1997
- -------------------------------
Phillip Frost, M.D.
/s/ RICHARD C. PFENNIGER, JR. Vice Chairman of the Board June 30, 1997
- ------------------------------- and Chief Executive Officer
Richard C. Pfenniger, Jr.
/s/ FERNANDO L. FERNANDEZ Chief Financial Officer June 30, 1997
- ------------------------------- (Principal Financial and
Fernando L. Fernandez Accounting Officer)
/s/ JACK R. BORSTING Director June 30, 1997
- -------------------------------
Jack R. Borsting, Ph.D.
/s/ PETER S. KNIGHT Director June 30, 1997
- -------------------------------
Peter S. Knight
/s/ LOIS F. LIPSETT Director June 30, 1997
- -------------------------------
Lois F. Lipsett, Ph.D.
/s/ RICHARD M. KRASNO Director June 30, 1997
- -------------------------------
Richard M. Krasno, Ph.D.
/s/ PERCY A. PIERRE Director June 30, 1997
- -------------------------------
Percy A. Pierre, Ph.D.
/s/ NEIL FLANZRAICH Director June 30, 1997
- -------------------------------
Neil Flanzraich
-49-
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
CONTENTS
PAGE
Report of Independent Certified Public Accountants................ F-2
Consolidated Balance Sheets....................................... F-3
Consolidated Statements of Operations............................. F-4
Consolidated Statements of Changes in Stockholders' Equity........ F-5
Consolidated Statements of Cash Flows............................. F-6
Notes to Consolidated Financial Statements........................ F-8
F-1
<PAGE>
Report of Independent Certified Public Accountants
The Board of Directors and Stockholders
Whitman Education Group, Inc.
We have audited the accompanying consolidated balance sheets of Whitman
Education Group, Inc. and subsidiaries as of March 31, 1997 and 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended March 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the 1996 and 1995 financial
statements of M.D.J.B., Inc., a wholly-owned subsidiary, which statements
reflect total assets constituting 15% in 1996, and total revenues constituting
22% in 1996 and 40% in 1995 of the related consolidated totals. Those statements
were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for M.D.J.B., Inc., is based
solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits, and for 1996 and 1995 the report of other
auditors, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Whitman Education
Group, Inc. and subsidiaries at March 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1997, in conformity with generally accepted
accounting principles.
/s/ [ERNST & YOUNG LLP]
=======================================
ERNST & YOUNG LLP
Miami, Florida
June 6, 1997
F-2
<PAGE>
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................................................... $ 3,853,932 $ 2,762,141
Restricted cash.............................................................. 511,927 363,314
Accounts receivable, less allowance for doubtful accounts
of $2,821,261 in 1997 and $1,314,631 in 1996 ............................. 18,159,383 15,619,237
Inventories.................................................................. 1,084,124 795,350
Deferred income taxes........................................................ 853,267 511,401
Other current assets......................................................... 1,072,511 805,137
-------------- ---------------
Total current assets......................................................... 25,535,144 20,856,580
Property and equipment, net.................................................. 10,062,815 7,017,181
Marketable securities........................................................ 296,250 776,250
Deferred costs, net of accumulated amortization
of $1,410,039 in 1997 and $1,043,703 in 1996 ............................. 93,567 553,929
Deposits and other assets, net of accumulated amortization
of $272,078 in 1997 and $110,664 in 1996................................. 1,497,495 1,025,633
Goodwill, net................................................................ 10,516,165 2,529,693
Restricted cash -escrow...................................................... 16,058 2,563,999
----------------- ---------------
$ 48,017,494 $ 35,323,265
============= ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable............................................................. $ 2,390,283 $ 1,549,494
Accrued expenses............................................................. 2,873,923 1,537,216
Income taxes payable......................................................... 34,816 348,851
Current portion of capitalized lease obligations............................. 1,040,403 919,050
Current portion of long-term debt............................................ 540,565 --
Deferred tuition revenue..................................................... 12,999,348 11,705,521
-------------- --------------
Total current liabilities.................................................... 19,879,338 16,060,132
Other liabilities............................................................ 921,859 383,813
Capitalized lease obligations................................................ 2,013,125 1,994,035
Long-term debt............................................................... 9,096,017 9,500,000
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, authorized 100,000,000 shares, issued and
outstanding 12,677,582 shares in 1997 and 10,311,782 shares in 1996,
excluding shares held in escrow in 1996................................ 20,584,014 7,590,793
Additional paid-in capital................................................ 671,536 616,500
Retained earnings (accumulated deficit)................................... (4,139,122) 62,040
Treasury stock, 239,694 shares in 1997 and 232,714 shares in 1996 ........ (1,009,273) (774,773)
Net unrealized loss on noncurrent marketable securities................... -- (109,275)
-------------- ---------------
Total stockholders' equity................................................... 16,107,155 7,385,285
-------------- ---------------
$ 48,017,494 $ 35,323,265
============== ===============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net revenues........................................... $46,992,954 $39,837,949 $19,331,602
Costs and Expenses:
Instructional and educational support............... 31,349,524 24,150,421 14,046,044
Selling and promotion............................... 6,708,430 5,708,361 1,847,526
General and administrative.......................... 12,179,958 9,028,607 3,149,741
---------------- -------------- -------------
Total costs and expenses............................... 50,237,912 38,887,389 19,043,311
(Loss) income from operations.......................... (3,244,958) 950,560 288,291
Other expenses:
Interest expense, net............................. 870,990 1,187,604 312,730
Realization of loss on
marketable securities........................... 656,250 -- --
---------------- -------------- -------------
Loss before income taxes provision.................... (4,772,198) (237,044) (24,439)
Income tax (benefit) provision........................ (408,841) (136,473) 122,172
---------------- -------------- -------------
Net loss ............................................. $(4,363,357) $ (100,571) $(146,611)
================ ============== =============
Loss per share of common stock........................ $ (0.38) $ (0.01) $ (0.02)
================ ============== =============
Average number of common stock and common stock
equivalent shares outstanding, excluding common
stock shares held in escrow in 1996 and 1995....... 11,404,862 10,235,956 9,273,816
================ ============= =============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED MARCH 31, 1997, 1996 AND 1995
NET
UNREALIZED
(LOSS)
GAIN ON
COMMON ADDITIONAL RETAINED NONCURRENT
SHARES COMMON PAID-IN EARNINGS TREASURY MARKETABLE
OUTSTANDING STOCK CAPITAL (DEFICIT) STOCK SECURITIES TOTAL
----------- ---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994 9,201,942 $6,041,461 $ -- $ 309,222 $(430,500) $(202,500) $5,717,683
Shares issued for exercise
of stock options and warrants 810,960 1,002,942 -- -- -- -- 1,002,942
Shares issued in acquisition 196,464 500,000 -- -- -- -- 500,000
Value of warrants issued
for loan guarantee -- -- 280,500 -- -- -- 280,500
Shares repurchased and cancelled -- (98,626) -- -- -- -- (98,626)
Net loss -- -- -- (146,611) -- -- (146,611)
----------- ---------- ---------- ----------- ---------- ---------- -----------
Balance at March 31, 1995 10,209,366 7,445,777 280,500 162,611 (430,500) (202,500) 7,255,888
Shares issued for exercise
of options 218,382 426,121 -- -- -- -- 426,121
Shares repurchased in connection
with exercise of options (115,966) -- -- -- (344,273) -- (344,273)
Value of warrants issued
for loan guarantee -- -- 336,000 -- -- -- 336,000
Shares repurchased and cancelled -- (306,000) -- -- -- -- (306,000)
Shares issued for cash -- 24,895 -- -- -- -- 24,895
Net unrealized gain on non-current
marketable securities -- -- -- -- -- 93,225 93,225
Net loss -- -- -- (100,571) -- -- (100,571)
----------- ----------- --------- ------------ ---------- ---------- ------------
Balance at March 31, 1996 10,311,782 7,590,793 616,500 62,040 (774,773) (109,275) 7,385,285
Shares issued for exercise of options 351,168 881,476 -- -- -- -- 881,476
Value of stock options issued for
services rendered -- -- 55,036 -- -- -- 55,036
Shares issued, previously escrowed
in connection with purchase of SBC 1,021,612 5,632,126 -- -- -- -- 5,632,126
Shares repurchased in connection with
exercise of options (46,980) -- -- -- (437,500) -- (437,500)
Shares issued in connection with
purchase of DFAS 40,000 -- -- -- 203,000 -- 203,000
Shares issued in connection with a
private placement 1,000,000 6,479,619 -- -- -- -- 6,479,619
Realization of loss on
marketable securities -- -- -- -- -- 109,275 109,275
Net income of Colorado Tech for
the three months ended March 31, 1996 -- -- -- 162,195 -- -- 162,195
Net loss -- -- -- (4,363,357) -- -- (4,363,357)
----------- ----------- --------- ------------- ---------- ---------- ------------
Balance at March 31, 1997 12,677,582 $20,584,014 $671,536 $(4,139,122) $(1,009,273) $ -- $16,107,155
=========== =========== ========= ============ ============ ========== ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ............................................. $ (4,363,357) $ (100,571) $ (146,611)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization ...................... 2,772,520 1,930,116 1,058,971
Bad debt expense ................................... 3,245,314 1,835,736 893,043
Deferred tax (benefit) provision ................... (408,841) (482,917) 32,456
Loss on sale of equipment .......................... -- 21,828 9,338
Realization of loss on marketable securities........ 656,250 -- --
Changes in operating assets and liabilities, net of
effects from purchase of SBC and Huron:
Restricted cash ................................ (169,481) (17,288) (346,026)
Accounts receivable ............................ (4,911,368) (1,488,120) (6,410,532)
Inventories .................................... (199,634) (269,811) (220,665)
Other current assets ........................... (449,264) 208,402 (174,540)
Deferred costs ................................. (98,047) (4,878) (191,792)
Deposits and other assets ...................... 15,086 (172,592) (90,377)
Accounts payable ............................... 416,411 97,113 187,189
Accrued expenses ............................... 1,359,655 477,102 32,120
Income taxes payable ........................... (163,980) 190,701 17,272
Deferred tuition revenue ....................... 243,393 6,252 3,226,597
Other .......................................... (156,254) (24,427) 34,041
------------- ------------ ------------
Net cash (used in) provided by operating activities (2,211,597) 2,206,646 (2,089,516)
------------- ------------ ------------
Cash flows from investing activities:
Acquisition of Sanford-Brown College ................. -- -- (2,590,110)
Payments into escrow for acquisition of
Sanford-Brown College .............................. (61,267) (163,999) (2,400,000)
Purchase of property and equipment ................... (3,870,181) (1,882,873) (682,224)
Proceeds from sale of equipment ...................... -- 24,048 45,700
------------- ------------ ------------
Net cash used in investing activities ................ (3,931,448) (2,022,824) (5,626,634)
------------- ------------ ------------
Cash flows from financing activities:
Proceeds from long-term bank loan .................... -- -- 6,000,000
Proceeds from revolving line of credit
and long-term borrowings ........................... 32,868,173 7,390,000 2,428,621
Principal payments on revolving line of credit,
long-term borrowings and other liability ........... (32,731,592) (5,623,533) (842,000)
Principal payments on capitalized lease obligations .. (1,010,601) (776,172) (392,985)
Proceeds from exercise of options and warrants ....... 443,976 81,848 1,002,942
Proceeds from sale of common stock ................... 6,479,619 24,895 --
Repurchase of common stock ........................... -- (153,000) (98,626)
Principal payments on note to former stockholder ..... -- (153,000) --
Proceeds from Huron acquisition ...................... 1,200,683 -- --
------------ ------------ ------------
Net cash provided by financing activities ............ 7,250,258 791,038 8,097,952
------------ ------------ ------------
Increase in cash and cash equivalents ................ 1,107,213 974,860 381,802
Cash and cash equivalents at beginning of year ....... 2,762,141 1,787,281 1,405,479
CTU activity for the three-months ended March 31, 1996 (15,422) -- --
------------ ------------ ------------
Cash and cash equivalents at end of year ............. $ 3,853,932 $ 2,762,141 $ 1,787,281
============ ============ ============
</TABLE>
Continued on the following page.
F-6
<PAGE>
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS --(CONTINUED)
YEAR ENDED MARCH 31,
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Supplemental disclosures of noncash financing
and investing activities:
Long-term maintenance contract financed
through leasing company ............................. -- $ 621,000 --
============= ============ ==========
Equipment acquired under capital leases ............... $ 1,181,153 $ 1,157,133 $1,782,960
============= ============ ==========
Note issued in connection with repurchase of
common stock ....................................... -- $ 153,000 --
============= ============ ==========
Assets acquired in Huron acquisition .................. $ 1,467,220 -- --
------------- ============ ==========
Liabilities assumed in Huron acquisition .............. $ 2,667,903 -- --
------------- ============ ==========
Release of restricted cash previously in escrow for SBC
acquisition ....................................... $ 2,400,000 -- --
------------- ============ ==========
Treasury stock issued for purchase of DFAS ............ $ 203,000 -- --
============= ============ ==========
Value of stock options issued for services rendered ... $ 55,036 -- --
============= ============ ==========
Stock issued in connection with acquisition of SBC .... $ 5,632,126 -- $ 500,000
============= ============ ==========
Supplemental disclosures of cash flow information:
Interest paid ......................................... $ 877,494 $ 984,992 $ 324,375
============= ============ ==========
Income taxes paid ..................................... $ 211,479 $ 148,405 $ 141,955
============= ============ ==========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Whitman Education Group, Inc. and Subsidiaries' ("Whitman" or the
"Company") primary business is the operation of degree and non-degree granting
proprietary schools devoted to career training primarily in the medical,
technical, and business fields. The Company's operations are conducted through
its three wholly-owned subsidiaries: Ultrasound Technical Services, Inc.
("UDS"), Sanford Brown College, Inc. ("SBC") and M.D.J.B., Inc., the parent
corporation of Colorado Tech University ("CTU"). The revenues generated from
these subsidiaries primarily consist of tuition and fees paid by students. The
majority of students rely on funds received from federal financial aid programs
under Title IV of the Higher Education Act of 1965 to pay for a substantial
portion of their tuition.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Whitman
Education Group, Inc. and its subsidiaries, all of which are wholly-owned. All
significant intercompany balances and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid short-term investments with an
original maturity of three months or less to be cash equivalents.
RESTRICTED CASH
Restricted cash represents 25% of the Company's Title IV program
refunds made in the previous fiscal year, as required by the United States
Department of Education ("DOE"). Such funds are held in separate bank accounts
and other short-term investments.
REVENUES, ACCOUNTS RECEIVABLE AND DEFERRED TUITION REVENUE
Upon enrollment, the Company bills the student for the full contract
amount of the course, the academic year, or the academic term, as applicable,
resulting in the recording of an accounts receivable and a corresponding
deferred tuition revenue liability. The deferred tuition revenue liability is
reduced and recognized into income over the term of the relevant period being
attended by the student.
F-8
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
INVENTORY
Inventory consists primarily of books, uniforms and supplies and is
valued at the lower of cost or market using the FIFO (first-in, first-out)
method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, less accumulated
depreciation. Expenditures for maintenance and repairs which do not add to the
value of the related assets or materially extend their original lives are
expensed as incurred.
Depreciation of property and equipment is computed principally by the
straight-line method over the estimated useful lives of the assets ranging from
one to ten years. Leasehold improvements are amortized over the term of the
related leases, which approximates the estimated useful lives.
DEFERRED COSTS
Deferred costs consist primarily of costs associated with the opening
of new school locations, the expansion of facilities to accommodate new programs
and the development of new curriculum at existing locations. Prior to January
1996, such costs had been amortized on a straight-line basis over thirty-six
months.
Effective January 1, 1996, the Company changed the amortization period
of deferred costs from a 36 month period to a 12 month period. The change in
estimate was accounted for on a prospective basis and increased amortization
expense in the fourth quarter ended March 31, 1996 by approximately $16,000 and
increased amortization expense in fiscal year 1997 by approximately $129,000.
Had this change in accounting estimate been implemented in prior periods, the
estimated effect on amortization expense for the year ended March 31, 1996 and
March 31, 1995 would have approximated an increase of $2,000 and a decrease of
$94,000, respectively.
GOODWILL
The Company amortizes the goodwill associated with acquisitions using
the straight-line method, principally over a forty-year period. The
realizability of goodwill and other intangibles is evaluated periodically as
events or circumstances indicate a possible inability to recover their carrying
amount. Such evaluation is based on various analyses, including cash flow and
profitability projections that incorporate, as applicable, the impact on
existing Company businesses. The analyses involve significant management
judgment to evaluate the capacity of an acquired business to perform
F-9
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
within projections. As of March 31, 1997 and 1996, accumulated amortization was
$306,965 and $184,951, respectively.
LOSS PER COMMON SHARE
Loss per common share is computed by dividing net loss by the weighted
average number of common shares outstanding during each period. The effect of
escrowed shares, outstanding stock options and warrants is not included because
it would be antidilutive.
ADVERTISING
Advertising expense which is included in selling and promotion amounted
to approximately $3,223,000, $2,628,000 and $1,045,000 for 1997, 1996 and 1995,
respectively.
In December 1993, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
93-7 (SOP), "Reporting on Advertising Costs." The SOP generally requires
advertising costs to be expensed as incurred. Adoption of the SOP in fiscal year
1996, resulted in a charge of $90,000, which is included in advertising expense
described above, related to the amortization of the prepaid marketing balance at
March 31, 1995 for CTU. Prior to adopting the SOP, CTU's marketing costs were
deferred and amortized to expense in the subsequent quarter.
INCOME TAXES
Deferred income tax assets and liabilities are determined based on the
differences between the financial statements and income tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the
current year's presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
F-10
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
In fiscal 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 121," Accounting for the Impairment
of Long-Lived Assets." SFAS No. 121 requires impairment losses to be recorded on
long-lived assets when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. The effect of adopting SFAS No. 121 was not material.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 encourages, but does not require, companies
to record compensation plans at fair value. The Company has chosen, in
accordance with provisions of SFAS 123, to apply Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
related interpretations treatment for its stock plan. Under APB 25, because the
exercise price of the Company's employee stock options are less than the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued a new
accounting pronouncement, SFAS No. 128, "Earnings per Share," which will change
the current method of computing earnings per share. The new standard requires
presentation of "basic earnings per share" and "diluted earnings per share"
amounts, as defined. SFAS No. 128 will be effective for the Company's quarter
ending December 31, 1997, and, upon adoption, all prior-period earnings per
share data presented shall be restated to conform with the provisions of the new
pronouncement. Application earlier than the Company's quarter ending December
31, 1997 is not permitted. The restated basic and diluted earnings or loss per
share to be reported upon adoption of SFAS No. 128 will not differ from amounts
reported under existing accounting rules for all periods reported by the Company
through March 31, 1997.
F-11
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. ACQUISITIONS
HURON UNIVERSITY
On December 30, 1996 CTU acquired the South Dakota operations and
certain assets at two campuses of Huron University. The purchase price consisted
of $2.25 million of which approximately $1.95 million was paid in cash (of which
$200,000 was placed in escrow for post-closing adjustments), acquisition costs
of $150,000 and the assumption of $1.4 million of net liabilities. In addition,
the Company assigned the right to purchase the Huron real property to a third
party, Huron Education, Inc. ("HEI"), a South Dakota not-for-profit
organization, in exchange for $3.9 million and simultaneously leased the real
property from HEI upon the satisfaction of $757,000 in existing mortgages and
after placing $500,000 in escrow to be used for the satisfaction of assumed cash
obligations of Huron University. In connection with this transaction, the
community of Huron, South Dakota, through HEI paid to the Company $527,000
(which is included in the $3.9 million received from HEI) as an inducement for
the Company to acquire the operations of Huron University. This inducement has
been accounted for as a deferred credit and will be amortized over the lease
period of nine years. These transactions resulted in a net purchase price of
$1,500,000 (comprised of the receipt of cash totalling $1,200,000 and the
assumption of current liabilities totalling $2,700,000) which was allocated to
current assets totalling $1,500,000. The purchase price allocation is based on
preliminary data.
The acquisition was accounted for using the purchase method of
accounting and, accordingly, the net liabilities acquired are included in the
Company's balance sheets as of March 31, 1997 and operations have been included
in the Company's operations beginning on January 1, 1997.
The following unaudited pro forma information combines the results of
operations of Whitman and Huron University for the fiscal year ended March 31,
1997 and 1996 as if the transaction had occurred at April 1, 1996 and 1995,
respectively, after giving effect to certain adjustments including additional
rent expense and reductions in interest and depreciation expense. This pro forma
information does not purport to be indicative of the results that actually would
have occurred if the acquisition had been effective on the dates indicated or
which may be obtained in the future (amounts are in thousands, except per share
amounts).
1997 1996
-------- -------
Net revenues.............. $ 49,727 $ 45,670
Net loss ................. (5,029) (949)
Loss per common share..... (0.44) (0.09)
Huron University operated as a regionally accredited degree granting
institution with campuses in Huron and Sioux Falls, South Dakota, enrolling
approximately 600 students primarily
F-12
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. ACQUISITIONS - (CONTINUED)
in management, health sciences, general studies and other programs. Huron
University confers degrees at the associate's, bachelor's and master's levels.
Effective December 30, 1996, CTU entered into a lease with HEI which
provides for a nine year term with an option to renew for an additional six year
term (See Note 11). The lease also provides CTU with an option to purchase the
property at any time during the lease term.
Huron was a participating institution under one or more of the student
financial assistance programs of Title IV of the Higher Education Act of 1965,
as amended ("Title IV Programs"). The Title IV Programs are administered by the
United States Department of Education ("DOE"). The sale of the assets described
above terminated Huron University's access to the Title IV Program funds until
its certification as additional locations of CTU which occurred in April of
1997. The previous owner of Huron University has established a $300,000 letter
of credit for the benefit of DOE and CTU for any Title IV liabilities relating
to periods prior to December 30, 1996.
COLORADO TECHNICAL UNIVERSITY
On March 29, 1996, the Company completed the merger with CTU, a
regionally accredited degree granting institution. CTU currently operates four
campuses, two in Colorado and two in South Dakota, and has approximately 2,400
students enrolled primarily in computer science, engineering and management
programs. CTU confers degrees at the associate's, bachelor's, master's and
doctoral levels.
In connection with the merger, the Company issued 2,499,870 shares of
its common stock in exchange for all of the issued and outstanding stock of CTU.
The merger was accounted for using the pooling of interests method of accounting
and, accordingly, the Company's consolidated financial statements have been
restated to include the accounts and operations of CTU for all periods prior to
the merger. Prior to the merger, CTU had reported its financial results on a
calendar year basis. The consolidated financial statements for the year ended
March 31, 1997 have been adjusted to conform CTU's year end with that of the
Company. The effect arising from the exclusion of net income of of $162,195 for
the three month period ended March 31, 1996 in the accompanying consolidated
statements of operations and cash flows for the year ended March 31, 1997, is
presented in the accompanying consolidated statement of changes in stockholders'
equity as an adjustment to retained earnings for the change in fiscal year of
CTU. The consolidated financial statements for all periods prior to fiscal 1997
have not been restated for the change in fiscal year of CTU. 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 CTU on a calendar year
F-13
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. ACQUISITIONS - (CONTINUED)
basis. If the consolidated financial statements for the year ended March 31,
1996 had been adjusted to conform CTU's year end with that of the Company, the
net effect would have resulted in an increase in net revenues of approximately
$152,000 and an increase in net loss of $55,000.
Combined and separate results of the merged entities, Whitman and CTU, are
presented in the following table (unaudited):
YEAR ENDED MARCH 31,
1996 1995
----------- -----------
Total revenues
Whitman................ $30,910,437 $11,464,080
CTU.................... 8,927,512 7,867,522
----------- -----------
Combined............... $39,837,949 $19,331,602
----------- -----------
Net (loss) income
Whitman................ $ (398,146) $ (354,979)
CTU.................... 297,575 208,368
------------ -----------
Combined............... $ (100,571) $ (146,611)
============ ===========
(Loss) income per share
Whitman................ $ (0.04) $ (0.04)
CTU.................... 0.03 0.02
------------ -----------
Combined............... $ (0.01) $ (0.02)
============ ===========
In connection with the merger, approximately $560,000 of costs and
expenses were incurred and were charged to administrative expenses in the fourth
quarter of 1996. Merger and acquisition expenses include legal, accounting and
other costs of consolidating.
SANFORD-BROWN COLLEGE
On December 21, 1994, the Company completed the purchase of SBC, a
privately held proprietary business and allied healthcare college. SBC was
acquired for $3.5 million cash and $500,000 (196,564 shares) in common stock and
contingent consideration of $2.4 million in cash and 1,021,612 shares of common
stock held in escrow. In the fourth quarter of fiscal 1997, the conditions for
the release of the cash and common stock held in escrow were satisfied.
Accordingly, the Company released the funds and common stock held in escrow to
the seller of SBC, resulting
F-14
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. ACQUISITIONS - (CONTINUED)
in an increase in goodwill and equity of approximately $8.0 million and $1.9
million, respectively, in the fourth quarter of fiscal 1997.
The acquisition of SBC has been accounted for as a purchase, and the
net assets and results of operations are included in the Company's consolidated
financial statements since the date of acquisition. The purchase price has been
allocated to the assets and liabilities of SBC based on their relative fair
market value which approximated their net book value. The purchase price and
expenses associated with the acquisition exceeded the fair value of SBC's net
assets by approximately $10.6 million which has been assigned to goodwill. In
connection with the acquisition, the Company acquired assets with a fair market
value of approximately $6.3 million and assumed liabilities of approximately
$4.6 million.
The following table summarizes, on an unaudited pro forma basis, the
combined results of operation of the Company and its subsidiaries assuming the
acquisition of SBC, described above, occurred at the beginning of fiscal 1995:
Net revenues............ $30,312,125
Income before taxes..... 584,424
Net income.............. 324,254
Net income per share.... .03
3. ACCOUNTS RECEIVABLE
A summary of activity for the allowance for doubtful accounts is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year ....... $ 1,314,631 $ 1,011,808 $ 150,250
Net activity of CTU for the three
months ended March 31, 1996 ...... 20,099 -- --
Acquisition of Huron ............... 40,000 -- --
Acquisition of SBC ................. -- -- 943,999
Charged to expense ................. 3,245,314 1,835,736 892,983
Accounts charged-off during the year (1,798,783) (1,532,913) (975,424)
----------- ----------- -----------
Balance at end of year ............. $ 2,821,261 $ 1,314,631 $ 1,011,808
=========== =========== ===========
</TABLE>
During the fourth quarter of fiscal year 1997, $1,333,000 was charged
to expense.
F-15
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
MARCH 31,
1997 1996
----------- ----------
Equipment........................................ $ 9,657,690 $ 7,013,501
Leasehold improvements........................... 3,263,828 2,021,854
Furniture and fixtures........................... 1,964,677 1,247,927
Other............................................ 1,353,705 979,068
----------- -----------
16,239,900 11,262,350
Less accumulated depreciation and amortization... (6,177,085) (4,245,169)
------------ -----------
$10,062,815 $ 7,017,181
=========== ===========
5. MARKETABLE SECURITIES
The Company's marketable equity securities, which are considered
available-for-sale, have been classified as non-current as it is the Company's
intention to hold such securities for the foreseeable future. During the fourth
quarter of fiscal 1997, the Company determined that the marketable securities
should be written down as a result of an other than temporary decline in value.
The total writedown in the fourth quarter of fiscal 1997 of $656,250 includes
$176,250 ($109,275 net of income taxes) which was previously reported as an
unrealized loss on noncurrent marketable securities in the Company's March
31,1996 stockholders' equity.
Noncurrent marketable securities--IVAX Common Stock, 30,000 shares:
MARCH 31,
-----------------------
1997 1996
-------- --------
Cost...................... $952,500 $952,500
Gross unrealized loss..... -- (176,250)
Realized loss............. (656,250) --
--------- --------
Estimated fair value...... $296,250 $776,250
======== ========
F-16
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. INCOME TAXES
The components of the income tax (benefit) provision are as follows:
YEAR ENDED MARCH 31,
-----------------------------------
1997 1996 1995
---------- ---------- --------
Current........... $ -- $ 346,444 $ 89,716
Deferred.......... (408,841) (482,917) 32,456
--------- --------- -------
Total............. $(408,841) $(136,473) $122,172
========== ========== ========
The differences between the federal statutory income tax rate and the
effective income tax rate are summarized below:
YEAR ENDED MARCH 31,
----------------------------
1997 1996 1995
-------- ------- -------
Statutory tax rate ............. (34.0)% (34.0)% (34.0)%
State income taxes, net ........ (4.5) 4.0 4.0
Permanent differences .......... 0.9 22.7 128.3
Change in valuation allowance .. 35.9 (54.4) 328.6
Other, net ..................... (6.9) (3.1) 4.2
Results of separate MDJB filings -- 7.2 68.9
------ ------ ------
Effective tax rate ............. (8.6)% (57.6)% 500.0%
====== ======= ======
F-17
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. INCOME TAXES - (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's net deferred income taxes are as follows:
MARCH 31,
--------------------------
1997 1996
----------- -----------
Deferred tax assets:
Accrued expenses ......................... $ 321,000 $ 45,000
Reserves and allowances .................. 748,000 190,000
Tax credits .............................. 39,000 34,000
Net operating loss carryforwards ......... 1,463,000 310,000
Unrealized depreciation in equity security 266,000 67,000
Other (net) .............................. 47,000 --
----------- -----------
Total deferred tax assets ..................... 2,884,000 646,000
Valuation allowance ........................... (1,714,000) --
----------- -----------
Total deferred tax assets` .................... 1,170,000 646,000
Deferred tax liabilities:
Prepaid expenses ......................... (22,000) (44,000)
Depreciation and amortization ............ (295,000) (91,000)
----------- -----------
Total deferred tax liabilities ................ (317,000) (135,000)
------------ -----------
Total net deferred taxes ...................... $ 853,000 $511,000
============ ===========
SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a $1,714,000 valuation allowance at March 31, 1997 is necessary
to reduce the deferred tax assets to the amount that will more likely than not
be realized. The change in the valuation allowance for the current year is
$1,714,000. At March 31, 1997, the Company has available net operating loss
carryforwards of $3,789,000 expiring in the years 2010 through 2012.
F-18
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Term note due April 14, 1999, (as amended on February 26, 1996,
see Note 10) with interest at prime less 1/2%, 7.75%
at March 31, 1996 ............................................... $ -- $6,000,000
$2.5 million revolving credit facility expiring October 15,
1997, (as amended on February 26, 1996, see Note 10)
with interest at prime less 1/2%, 7.75% at
March 31, 1996 (terminated on October 31, 1996).................... -- 2,500,000
$5.5 million revolving credit facility expiring April 14, 1999
with interest at the lower of prime less 1.25% or LIBOR
plus 1.50%, 7.25% at March 31, 1997 ............................. 5,500,000 --
$2.0 million revolving credit facility expiring May 30,
1998, with interest at prime (floor of 6% and ceiling of
11%), 8.5% at March 31, 1997 and at prime plus 1%,
9.25% at March 31, 1996 ......................................... 2,000,000 1,000,000
Notes payable in monthly installments through 2002, interest
rates ranging from 8.875% to 9% ................................. 1,210,161 --
Note payable in monthly installments due January 1, 2000,
with interest at 9% ............................................. 926,421 --
---------- -----------
Total .............................................................. 9,636,582 9,500,000
Less current portion ............................................... (540,565) --
---------- ----------
$9,096,017 $9,500,000
========== ==========
</TABLE>
F-19
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. DEBT - (CONTINUED)
In October 1996, the Company made a $3.0 million principal reduction to its
$6.0 million term note. The remaining $3.0 million balance was replaced by a
$3.0 million revolving credit facility, which was then combined with the
Company's $2.5 million revolving credit facility into a $5.5 million revolving
credit facility which matures on April 14, 1999.
The note payable of $1.2 million and the $2.0 million revolving credit
facility are secured by the accounts receivable, inventory and furniture and
equipment of CTU and by a life insurance policy on the President of CTU. The
$2.0 million credit facility also requires the Company to maintain certain
minimum financial ratios, all of which have been met at March 31, 1997.
The revolving credit facility of $5.5 million is guaranteed by the Chairman
of the Board of the Company. On May 21, 1997, the $5.5 million revolving credit
facility was increased from $5.5 million to $7.5 million under the same terms
and conditions.
On June 13, 1997, the Company entered into a $1.5 million loan agreement
with a new lender. Under the terms of this agreement, the Company is required to
draw down the $1.5 million or on before December 12, 1997 and shall pay interest
only through July 1998 and thereafter pay monthly principal and interest
installments through June 2002 at prime plus 1.25%.
On June 4, 1997, the remaining balance of the $926,421 note payable was
refinanced with the former owner of SBC, and is payable in monthly installments
of interest of $9,000 bearing interest at 12% secured by equipment. The
principal balance and all unpaid interest is due on June 3, 1998.
Aggregate maturities of long-term debt at March 31, 1997 are as
follows:
FISCAL YEAR
1998......... $ 540,565
1999......... 2,992,143
2000......... 6,017,783
2001......... 43,760
2002......... 42,331
-----------
$ 9,636,582
===========
8. CAPITALIZED LEASE OBLIGATIONS
The Company leases equipment under several lease agreements which are
accounted for as capitalized leases. The assets and liabilities under capital
leases are recorded at the lower of the net present value of the minimum lease
payments or the fair value of the asset. The assets are amortized over the
related lease term.
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<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. CAPITALIZED LEASE OBLIGATIONS - (CONTINUED)
During 1997 and 1996, the Company entered into leases totaling
approximately $1,181,000 and $1,250,000, respectively, in connection with the
purchase of equipment . The amortization of leased assets of $740,809 and
$225,866 for the year ended March 31, 1997 and 1996, respectively, is included
in depreciation. The following is a summary of assets held under capital leases
which are included in property and equipment at March 31:
1997 1996
----------- ----------
Equipment.......................... $ 4,685,243 $3,844,881
Furniture and fixtures............. 66,971 66,971
Automobiles........................ 21,789 76,667
Leasehold improvements............. -- 58,453
----------- ---------
4,774,003 4,046,972
Less accumulated amortization...... (1,659,732) (733,144)
----------- ---------
$ 3,114,271 $3,313,828
=========== ==========
Amortization of leased assets is included in depreciation.
Future minimum lease payments under capital leases are as follows:
YEAR ENDED MARCH 31:
1998............................................. $1,310,933
1999............................................. 1,016,288
2000............................................. 807,219
2001............................................. 295,595
2002............................................. 223,154
----------
Total minimum lease payments..................... 3,653,189
Less amount representing interest (8%-12%)....... (599,661)
Less amount classified as current................ (1,040,403)
------------
$2,013,125
============
F-21
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) retirement savings plan covering all employees
that meet certain eligibility requirements. Eligible participating employees may
elect to contribute up to a maximum amount of tax deferred contribution allowed
by the Internal Revenue Code. The Company matches a portion of such
contributions up to a maximum percentage of the employee's compensation. The
Company's contributions to the plan were approximately $97,000, $85,000 and
$14,000 for the years ended March 31, 1997, 1996 and 1995, respectively.
10. STOCK OPTION PLANS AND WARRANTS
The Company has adopted stock option plans under which employees,
directors and consultants of the Company may be issued options covering up to
3,367,000 shares of common stock. Options are granted at the fair market value
of the stock at the date of the grant, with vesting ranging up to five years. A
summary of stock option activity related to the Company's stock option plans is
as follows:
WEIGHTED
AVERAGE EXERCISE NUMBER
PRICE PER SHARE OF SHARES
---------------- ---------
Outstanding March 31, 1994........... $2.78 1,110,000
Granted.............................. 2.34 754,100
Exercised............................ 2.37 (40,000)
Cancelled............................ 2.46 (67,500)
----------
Outstanding March 31, 1995........... 2.62 1,756,600
Granted.............................. 3.46 600,000
Exercised............................ 1.95 (218,382)
Cancelled............................ 2.24 (54,818)
----------
Outstanding March 31, 1996........... 2.94 2,083,400
Granted.............................. 5.83 993,750
Exercised............................ 2.51 (351,466)
Cancelled............................ 3.67 (98,584)
-----------
Outstanding March 31, 1997........... 4.07 2,627,100
===========
F-22
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. STOCK OPTION PLANS AND WARRANTS - (CONTINUED)
As required by FAS 123, pro forma information regarding net income and
earnings per share has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
options pricing model with the following weighted-average assumptions for 1997
and 1996, respectively: risk-free rates of 6.4% and 6.1%; no dividend yields for
both; volatility factors of the expected market price of the Company's common
stock of 0.773 and 0.723 for both; and a weighted-average expected life of the
option of 9.1 years for both. The weighted-average fair value of the stock
options for the years 1997 and 1996 were $4.12 and $3.09, respectively.
The Black-Scholes options valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, the
existing models, in management's opinion, do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
fiscal 1997 and 1996 pro forma information follows:
1997 1996
------------ ----------
Net loss $(5,198,899) $(156,226)
Loss per common and common
equivalent share $ (0.46) $ (0.02)
The 1997 pro forma effect on net income is not necessarily
representative of the effect in future years because it does not take into
consideration pro forma compensation expense related to grants made prior to
1996.
The exercise price of options outstanding for fiscal years 1997 and
1996 ranged as follows:
NUMBER WEIGHTED AVERAGE REMAINING
EXERCISE PRICE OF OPTIONS CONTRACTUAL LIFE (YEARS)
$2.84 - $4.26 485,000 8.61
$4.27 - $6.39 971,750 9.65
$6.40 - $8.63 137,000 9.51
F-23
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. STOCK OPTION PLANS AND WARRANTS - (CONTINUED)
Stock options totalling 1,155,766 and 1,162,668 were exercisable at the end
of fiscal 1997 and 1996, respectively. Common stock reserved for issuance under
the stock option plans and outstanding warrants aggregate 6,608,843 shares.
The Company has 2,150,000 warrants outstanding at an average exercise price
of $3.81 maturing between January 2000 and February 2001.
11. LEASE COMMITMENTS
The Company leases classroom and office space under operating leases in
various buildings where the schools are located. Certain of the Company's
operating leases contain rent escalation clauses. Future minimum annual rental
commitments under noncancellable operating leases are as follows:
YEAR ENDED MARCH 31,
- --------------------
1998................................. $ 3,768,455
1999................................. 3,722,051
2000................................. 3,558,602
2001................................. 2,961,143
2002................................. 2,139,095
Thereafter........................... 7,651,011
-----------
Total minimum lease payments........ $23,800,357
===========
Rent expense during fiscal 1997, 1996 and 1995 was $3,765,952,
$3,017,036 and $1,604,891, respectively.
12. RELATED PARTY TRANSACTIONS
The Seller of SBC is the beneficial owner of three buildings occupied
by SBC under lease agreements. In the fiscal years ended March 31, 1997 and
1996, the Company's SBC subsidiary paid the Seller rent totalling $432,000 and
$429,000, respectively.
In April 1995, the Company entered into an agreement with another
company 40% owned by the Company's president. In addition to paying a fee for
services, the Company agreed to purchase textbooks and materials totaling
$160,000 over a two-year period. These textbooks and materials will be resold to
the Company's students. In the fiscal years ended March 31, 1997 and 1996, the
Company purchased $78,900 and $66,600 in textbooks from that entity.
In February 1996, the Company moved its headquarters to Miami, Florida.
The Company occupies office space in a building owned by the IVAX Corporation. A
director and shareholder of the Company is also Chairman of IVAX Corporation. In
fiscal 1997, the Company incurred rent expense in the amount of $125,000, which
is included in accrued expenses in the consolidated balance sheet at March 31,
1997.
F-24
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES
In fiscal 1997 the Company entered into financing agreements to acquire
capital equipment totaling $1,738,000. In fiscal 1997, $847,000 of capital
equipment was financed under these agreements and are included under capitalized
lease obligations. The Company has $361,000 of letters of credit outstanding at
March 31, 1997.
The schools and colleges operated by the Company participate in various
student financial aid programs. These programs are subject to respective
periodic review by the United States Department of Education. Disbursements
under each program are subject to disallowance and repayment by the schools. In
fiscal 1995, the DOE conducted a Federal program review on SBC's Title IV
activity for the award years 1992 through 1994. On November 7, 1996, the DOE
issued its program review reports which cited various deficiencies in the
administration of federal student financial aid programs at SBC. The Company has
disputed some of the DOE's findings and is currently working with the DOE to
resolve all of the remaining issues. The asset purchase agreement with SBC
provides for the seller's indemnification of the Company for any material
liability that may result from the program reviews and the seller has deposited
$500,000 with the Company in recognition of that obligation. It is the Company's
belief that the program review liability will not materially exceed $500,000.
The Company is a party to routine litigation incidental to its business,
including but not limited to, claims involving students or graduates and routine
employment matters. While there can be no assurance as to the ultimate outcome
of any litigation involving the Company, management does not believe that any
pending proceeding will result in a settlement or an adverse judgment that will
have a material adverse effect on the Company's financial condition or results
of operations.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
notes payable and accounts payable and accrued expense approximate fair value
because of their short duration to maturity. The carrying amounts of revolving
credit facilities approximate fair value because the interest rate is tied to a
quoted variable index.
F-25
EXHIBIT 3.2
BYLAWS
OF
WHITMAN REINCORPORATION, INC.
a Florida corporation
ARTICLE I
Meetings of Shareholders
Section 1. Annual Meetings. The annual meeting of the shareholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held at the date and time designated
by the board of directors.
Section 2. Special Meetings. Special meetings of the shareholders shall
be called upon the written request of the chairman, the chief executive officer
or the board of directors by action at a meeting, a majority of directors acting
without a meeting, or (as provided by the Articles of Incorporation)
shareholders holding at least 50% of the Corporation's stock entitled to vote at
the meeting. The written request for the special meeting shall specify the
purpose or purposes of the meeting. Only business within the purposes described
in the notice required by Section 4 of this Article may be conducted at the
special meeting.
Section 3. Place of Meetings. Meetings of the shareholders will be held at
the principal place of business of the Corporation or at such other place,
within or outside of Florida, as is designated by the board of directors.
Section 4. Notice of Meetings. A written notice of each meeting of
shareholders, signed by the secretary or the persons authorized to call the
meeting, shall be mailed to each shareholder entitled to vote at the meeting at
the address as it appears on the records of the Corporation, not less than 10
nor more than 60 days before the date set for the meeting. The notice shall
state the time and place the meeting is to be held, and, if the notice relates
to a special meeting, shall also state the purposes for which the meeting is
called. The record date for determining shareholders entitled to notice of and
to vote at the meeting will be the date fixed by board of directors. A notice of
meeting shall be sufficient for the meeting and any adjournment of the meeting.
Any shareholder may waive notice of a meeting before, at or after the meeting.
Section 5. Quorum. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum for the transaction
of business at a meeting of shareholders. A majority of shareholders represented
in person or by proxy at a meeting of shareholders, even if less than a quorum,
may adjourn the meeting form time to time and place to place without further
notice until a quorum is present.
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<PAGE>
Section 6. Shareholder Voting. If a quorum is present at a meeting of
shareholders, the action on a matter is approved if the votes cast in favor of
the action exceed the votes cast opposing the action, except as otherwise
provided in Section 2 of Article II, the articles of incorporation or applicable
law. Each outstanding share shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders.
Section 7. Record Date. The board of directors may fix a record date
for any lawful purpose, including, without limiting the generality of the
foregoing, the determination of shareholders entitled to (1) receive notice of
or to vote at any meeting of shareholders or any adjournment thereof or to
express consent to corporate action in writing without a meeting, (2) receive
payment of any dividend or other distribution or allotment of any rights, or (3)
take any other action. The record date shall not be more than 70 days preceding
the date of such meeting, the date fixed for the payment of any dividend or
distribution, or the action requiring a determination of shareholders.
Section 8. Proxies. A shareholder entitled to vote at any meeting of
shareholders or any adjournment thereof (or another entitled to vote on behalf
of the shareholder as a matter of law) may vote in person or by proxy executed
in writing and signed by the shareholder or his attorney-in-fact. The
appointment of proxy will be effective when received by the Corporation's
secretary or other officer or agent authorized to tabulate votes. No proxy shall
be valid more than 11 months after the date of its execution unless a longer
term is expressly stated in the proxy.
Section 9. Conduct of Business Without Meeting by Shareholders. Any
action of the shareholders may be taken without a meeting if written consents,
setting forth the action taken, are signed by at least a majority of shares
entitled to vote and are delivered to the Corporation's secretary, or other
officer or agent of the Corporation having custody of the Corporation's books
within 60 days after the date that the earliest written consent was delivered.
Within 10 days after obtaining an authorization of an action by written consent,
notice shall be given to those shareholders who have not consented in writing or
who are not entitled to vote on the action. The notice shall fairly summarize
the material features of the authorized action. If the action creates
dissenters' rights, the notice shall contain a clear statement of the right of
dissenting shareholders to be paid the fair value of their shares upon
compliance with and as provided for by the Florida Business Corporation Act. The
written consents shall be filed with the records of the meetings of
shareholders.
Section 10. Notice of Nomination of Directors. Nominations for election
to the Board of Directors of the corporation at a meeting of shareholders may be
made by the Board of Directors or by any shareholder of the corporation entitled
to vote for the election of directors at such meeting who complies with the
notice procedures set forth in this Section 10. Such nominations, other than
those made by or on behalf of the Board of Directors, may be made only if notice
in writing is personally delivered to, or mailed by first class United States
mail, postage prepaid, and received by, the secretary not less than 60 days nor
more than 90 days prior to such meeting; provided, however, that if less than 70
days' notice or prior public disclosure of the date of the meeting is given to
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<PAGE>
shareholders, such nomination shall have been mailed by first class United
States mail, postage prepaid, and received by, or personally delivered to, the
secretary not later than the close of business on the tenth (10th) day following
the day on which notice of the date of the meeting was mailed or such public
disclosure was made, whichever occurs first. Such notice shall set forth (a) as
to each proposed nominee (i) the name, age, business address and, if known,
residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares, if any, of stock of
the corporation that are beneficially owned by each such nominee and (iv) any
other information concerning the nominee that must be disclosed in proxy
solicitations pursuant to the proxy rules of the Securities and Exchange
Commission if such person had been nominated, or was intended to be nominated,
by the Board of Directors (including such person's written consent to be named
as a nominee and to serve as a director if elected); and (b) as to the
shareholder giving the notice (i) the name and address, as it appears on the
corporation's books, of such shareholder, (ii) a representation that such
shareholder is a holder of record of shares of stock of the corporation entitled
to vote at the meeting and the class and number of shares of the corporation
which are beneficially owned by such shareholder, (iii) a representation that
such shareholder intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice and (iv) a description of
all arrangements or understandings between such shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by such shareholder. The
corporation also may require any proposed nominee to furnish such other
information as may reasonably be required by the corporation to determine the
eligibility of such proposed nominee to serve as a director of the corporation.
The chairman of the meeting may, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting,
and that the defective nomination shall be disregarded.
Section 11. Notice of Business at Annual Meetings. At an annual meeting
of the shareholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors or (b
) otherwise properly brought before the meeting by or at the direction of the
Board of Directors or (c) otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before an annual meeting by a
shareholder, if such business relates to the election of directors of the
corporation, the procedures in Section 10 of this Article I must be complied
with. If such business relates to any other matter, the shareholder must have
given timely notice thereof in writing to the secretary. To be timely, a
shareholder's notice must be personally delivered to, or mailed by first class
United States mail, postage prepaid, and received by, the secretary not less
than 60 days nor more than 90 days prior to such meeting; provided, however,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given to shareholders, such notice, to be timely, must have been
mailed by first class United States mail, postage prepaid, and received by, or
personally delivered to, the secretary not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the
meeting was mailed or such public disclosure was made, whichever occurs first. A
shareholder's notice to the secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (i) a brief description
of the
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<PAGE>
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the corporation's books, of the shareholder proposing such
business, (iii) a representation that the shareholder is a holder of record of
shares of stock of the corporation entitled to vote at the meting and the class
and number of shares of the corporation which are beneficially owned by the
shareholder and (iv) any material interest of the shareholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this Section 11 and except that any shareholder proposal which complies
with Rule 14a-8 of the proxy rules (or any successor provision) promulgated
under the Securities Exchange Act of 1934, as amended, as is to be included in
the corporation's proxy statement for an annual meeting of shareholders shall be
deemed to comply with the requirements of this Section 11. The chairman of the
meeting may, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance with the
provisions of this Section 11, and if he should so determine, he shall so
declare to the meeting and the business not properly brought before the meeting
shall be disregarded.
ARTICLE II
Directors
Section 1. Number of Directors. The board of directors of the
Corporation shall consist of not less than one person, the exact number to be
determined from time to time by resolution adopted by the affirmative vote of a
majority of all directors of the Corporation then holding office at any special
or regular meeting. Any such resolution increasing or decreasing the number of
directors shall have the effect of creating or eliminating a vacancy or
vacancies, as the case may be, provided that no such resolution shall reduce the
number of directors below the number then holding office.
Section 2. Election of Directors and Chairman and Vice Chairman of the
Board. Directors shall be elected at the annual meeting of shareholders, but
when the annual meeting is not held or directors are not elected thereat, they
may be elected at a special meeting called and held for that purpose. Directors
shall be elected by a plurality of the votes cast by the share entitled to vote
in the election at a meeting at which a quorum is present. At the time of
election, a director must be at least 18 years of age, but need not be a
shareholder of the Corporation. The board of directors may elect from their
members a chairman and a vice chairman of the board. The chairman of the board,
if one be elected, shall preside at all meetings of the board of directors and
meetings of the shareholders and shall have such other powers and duties as may
be prescribed by the board of directors. The vice chairman, if any be elected,
shall have such powers and duties as may from time to time be assigned to him by
the board of directors or the chairman, and in the absence of the chairman,
shall preside at all meetings of the board of directors.
-4-
<PAGE>
Section 3. Term of Office. Each director shall hold office until the
annual meeting next succeeding his election and until his successor is elected
and qualified, or until his earlier resignation, removal from office or death.
Section 4. Removal. Any director or the entire board of directors may
be removed, with or without cause, at a meeting of shareholders, provided the
notice of the meeting states that one of the purposes of the meeting is the
removal of the director. A director may be removed only if the number of votes
cast to remove him exceeds the number of votes cast against removal.
Section 5. Vacancies. Any vacancy occurring in the board of directors,
including a vacancy created by an increase in the number of directors, may be
filled by the shareholders or by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the board of directors. A
director elected to fill a vacancy shall hold office only until the next
election of directors by the shareholders. If there are no remaining directors,
the vacancy shall be filled by the shareholders.
Section 6. Quorum and Transaction of Business. A majority of the number
of directors fixed pursuant to these bylaws shall constitute a quorum for the
transaction for business, except that a majority of the directors in office
shall constitute a quorum for filling a vacancy on the board. Whenever less than
a quorum is present at the time and place appointed for any meeting of the
board, a majority of those present may adjourn the meeting form time to time and
place to place, until a quorum shall be present. The act of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors.
Section 7. Annual Meeting. Annual meetings of the board of directors
shall be held immediately following annual meetings of the shareholders or as
soon thereafter as is practicable. If no annual meeting of the shareholders is
held, or if directors are not elected thereat, then the annual meeting of the
board of directors shall be held immediately following any special meeting of
the shareholders at which directors are elected, or as soon thereafter as is
practicable.
Section 8. Regular Meeting. Regular meetings of the board of directors
shall be held at such times and places, within or without the State of Florida,
as the board of directors may, by resolution, from time to time determine. The
secretary shall give notice of each such resolution to any director who was not
present at the time the resolution was adopted, but no further notice of such
regular meeting need be given.
Section 9. Special Meetings. Special meetings of the board of directors
may be called by the chairman, the vice-chairman, the chief executive officer,
the president or any two members of the board of directors, and shall be held at
such times and places, within or without the State of Florida, as may be
specified in such call.
Section 10. Notice of Annual or Special Meetings. Notice of the time and
place of each annual or special meeting shall be given to each director by the
secretary or by the person or persons
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<PAGE>
calling such meeting. Such notice need not specify the purpose or purposes of
the meeting and may be given in any manner or method and at such time so that
the director receiving it may have reasonable opportunity to attend the meeting.
Such notice shall, in all events, be deemed to have been properly and duly given
if mailed at least 48 hours prior to the meeting and directed to the residence
of each director as shown in the secretary's records. The giving of notice shall
be deemed to have been waived by any director who shall attend and participate
in such meeting and may be waived, in writing, by any director either before or
after such meeting.
Section 11. Compensation. The directors, as such, shall be entitled to
receive such reasonable compensation for their services as may be fixed from
time to time by resolution of the board of directors. In addition, the directors
may be reimbursed for expenses of attending meetings of the board of directors
and committees thereof. Nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the executive committee or of any standing or
special committee of the board of directors may by resolution of the board be
allowed such compensation for their services as the board of directors may deem
reasonable and additional compensation may be allowed to directors for special
services rendered.
Section 12. Action Without a Meeting. Any action required to be taken
at a meeting of the board of directors (or a committee of the board of
directors), and any action which may be taken at a meeting of the board of
directors (or a committee of the board of directors) may be taken without a
meeting if a consent in writing, setting forth the action to be taken and signed
by all of the directors (or members of the committee), is filed in the minutes
of the proceedings of the board of directors. The action taken shall be deemed
effective when the last director signs the consent, unless the consent specifies
otherwise.
ARTICLE III
Committees
Section 1. Executive Committee. The board of directors may from time to
time, by resolution passed by a majority of the whole board, create an executive
committee of three or more directors, the members of which shall be elected by
the board of directors to serve at the pleasure of the board. If the board of
directors does not designate a chairman of the executive committee, the
executive committee shall elect a chairman from its own number. Except as
otherwise provided herein and in the resolution creating an executive committee,
such committee shall, during the intervals between the meetings of the board of
directors, possess and may exercise all of the powers of the board of directors
in the management of the business and affairs of the Corporation, other than
that of filling vacancies among the directors or in any committee of the
directors and except as provided by law. The executive committee shall keep full
records and accounts of its proceedings and transactions. All action by the
executive committee shall be reported to the board of directors at its meeting
next succeeding such action and shall be subject to control, revision and
alteration by the board of directors, provided that no rights of third persons
shall be prejudicially affected thereby.
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<PAGE>
Vacancies in the executive committee shall be filled by the directors, and the
directors may appoint one or more directors as alternate members of the
committee who may take the place of any absent member or members at any meeting.
Section 2. Meetings of Executive Committee. Subject to the provisions
of these bylaws, the executive committee shall fix its own rules of procedure
and shall meet as provided by such rules or by resolutions of the board of
directors, and it shall also meet at the call of the chief executive officer,
the chairman of the executive committee or any two members of the committee.
Unless otherwise provided by such rules or by such resolutions, the provisions
of Section 10 of the Article II relating to the notice required to be given for
meetings of the board of directors shall also apply to meetings of the executive
committee. A majority of the executive committee shall be necessary to
constitute a quorum.
Section 3. Other Committees. The board of directors may by resolution
provide for such other standing or special committees as it deems desirable, and
discontinue the same at its pleasure. Each such committee shall have such powers
and perform such duties, not inconsistent with law, as may be delegated to it by
the board of directors. The provisions of Section 1 and Section 2 of this
Article shall govern the appointment and action of such committee so far as
consistent, unless otherwise provided by the board of directors. Vacancies in
such committees shall be filled by the board of directors or as the board of
directors may provide.
ARTICLE IV
Officers
Section 1. General Provisions. The board of directors shall elect a
senior executive officer who shall hold the office of chief executive officer or
president or both, a senior financial officer who shall serve as a vice
president and who may also serve as treasurer, a secretary and such number of
vice presidents, if any, as the board may from time to time determine. The board
of directors may from time to time create such other offices and appoint such
other officers, subordinate officers and assistant officers as it may determine.
Any two of such offices, other than those of president and vice president, may
be held by the same person, but no officer shall execute, acknowledge or verify
an instrument in more than one capacity.
Section 2. Term of Office. The officers of the Corporation shall hold
office at the pleasure of the board of directors, and, unless sooner removed by
the board of directors, until successors are chosen and qualified. The board of
directors may remove any officer at any time, with or without cause. A vacancy
in any office, however created, shall be filled by the board of directors.
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ARTICLE V
Duties of Officers
Section 1. Chief Executive Officer, President and Chief Operating Officer.
(A) The chief executive officer shall be the senior officer of the
corporation and, subject to the control of the board of directors, shall
exercise supervision over the management of the business of the Corporation. In
the absence of the chairman of the board, he shall preside at meetings of the
shareholders. He shall have authority to sign all certificates for shares and
all deeds, mortgages, bonds, agreement, notices, and other instruments requiring
his signature; and shall have all the powers and duties prescribed by the
Florida Business Corporation Act and such others as the board of directors may
from time to time assign to him. In the event a president is not appointed, the
chief executive officer shall also have the duties set forth in Section 1(B)
below.
(B) The president shall exercise supervision over the business of the
Corporation and over its several officers, subject, however, to the oversight of
the chief executive officer, if one be elected. In the absence of the chairman
of the board and the chief executive officer, he shall preside at meetings of
the shareholders. He shall have authority to sign all certificates for shares
and all deeds, mortgages, bonds, agreements, notices, and other instruments
requiring his signature; and shall have all the powers and duties prescribed by
the Florida Business Corporation Act and such others as the board of directors
may from time to time assign to him.
(C) The chief operating officer, if one be elected, shall exercise
supervision over the business of the Corporation and over its several officers,
subject, however, to the oversight of the chief executive officer and the
president. In the absence of the chairman of the board, chief executive officer
and president, he shall preside at meetings of the shareholders. He shall have
authority to sign all deeds, mortgages, bonds, agreements, notices, and other
instruments requiring his signature; and shall have all the powers and duties
prescribed by the Florida Business Corporation Act and such others as the board
of directors may from time to time assign to him.
Section 3. Vice President. The vice presidents shall have such powers
and duties as may from time to time be assigned to them by the board of
directors, the chief executive officer or the president. At the request of the
chief executive officer or the president, or in the case of their absence or
disability, the vice president designated by the president (or in the absence of
such designation, the vice president designated by the board) shall perform all
the duties of the president and, when so acting, shall have all the power of the
president. The authority of vice president to sign in the name of the
Corporation certificates for shares and deeds, mortgages, bonds, agreements,
notices and other instruments shall be coordinate with like authority of the
chief executive officer and the president.
Section 4. Secretary. The secretary shall, keep minutes of all the
proceedings of the shareholders and the board of directors and shall make proper
record of the same, which shall be attested by him; shall have authority to
execute and deliver certificates as to any of such proceedings
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and any other records of the Corporation; shall have authority to sign all
certificates for shares and all deeds, mortgages, bonds, agreements, notes and
other instruments to be executed by the Corporation which require his signature;
shall give notice of meetings of shareholders and directors; shall produce on
request at each meeting of shareholders a certified list of shareholders
arranged in alphabetical order; shall keep such books and records as may be
required by law or by the board of directors; and, in general, shall perform all
duties incident to the office of secretary and such other duties as may from
time to time be assigned to him by the board of directors, the chief executive
officer or the president.
Section 5. Treasurer. The treasurer shall have general supervision of
all finances of the Corporation; he shall be in charge of all money, bills,
notes, deeds, leases, mortgages and similar property belonging to the
Corporation, and shall do with the same as may from time to time be required by
the board of directors. He shall cause to be kept adequate and correct accounts
of the business transactions of the Corporation, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses, stated capital and
shares, together with such other accounts as may be required; and he shall have
such other powers and duties as may from time to time be assigned to him by the
board of directors, the chief executive officer or the president.
Section 6. Assistant and Subordinate Officers. The board of directors
may elect such assistant and subordinate officers as it may deem desirable. Each
such officer shall hold office at the pleasure of the board of directors and
perform such duties as the board of directors or the chief executive officer or
the president may prescribe. The board of directors may, from time to time,
authorize any officer to appoint and remove subordinate officers, to prescribe
their authority and duties, and to fix their compensation.
Section 7. Duties of Officers May be Delegated. In the absence of any
officer of the Corporation, or for any other reason the board of directors may
deem sufficient, the board of directors may delegate, for the time being, the
powers or duties, or any of them, of such officers to any other officer or to
any director.
Section 8. Resignations and Removals. Any officer may resign at any
time by delivering his resignation in writing to the chairman of the board, if
any, the chief executive officer, or the secretary or to a meeting of the board
of directors. Such resignation shall be effective upon receipt unless specified
to be effective at some other time, and without in either case the necessity of
its being accepted unless the resignation shall so state. The board of directors
may at any time remove any officer either with or without cause. The board of
directors may at any time terminate or modify the authority of any agent. No
officer resigning and (except where a right to receive compensation shall be
expressly provided in a duly authorized written agreement with the Corporation)
no officer removed shall have any right to any compensation as such officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise; unless, in the case of a resignation, the directors, or, in the
case of removal, the body acting on the removal, shall in their or its
discretion provide for compensation.
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ARTICLE VI
Indemnification
The Corporation shall indemnify its officers and directors, and any
former officer or director, to the full extent permitted by law.
ARTICLE VII
Certificates for Shares
Section 1. Form and Execution. Certificates for shares, certifying the
number of fully-paid shares owned, shall be issued to each shareholder in such
form as shall be approved by the board of directors. Such certificates shall be
signed by the chairman or vice-chairman of the board of directors or the chief
executive officer, the president or a vice president and by the secretary or an
assistant secretary or the treasurer or an assistant treasurer; provided,
however, that if such certificates are countersigned by a transfer agent and/or
registrar, the signatures of any of said officers and the seal of the
Corporation upon such certificates may be facsimiles, engraved, stamped or
printed. If any officer or officers who shall have signed, or whose facsimile
signature shall have been used, printed or stamped on any certificate or
certificates for shares, shall cease to be such officer or officers, because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates, if
authenticated by the endorsement thereon of the signature of a transfer agent or
registrar, shall nevertheless be conclusively deemed to have been adopted by the
Corporation by the use and delivery thereof and shall be as effective in all
respects as though signed by a duly elected, qualified and authorized officer or
officers, and as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be an officer or officers of the Corporation.
Section 2. Registration of Transfer. Any certificate for Shares of the
Corporation shall be transferable in person or by attorney upon the surrender
thereof to the Corporation or any transfer agent therefor (for the class of
shares represented by the certificate surrendered) properly endorsed for
transfer and accompanied by such assurances as the Corporation or such transfer
agent may require as to the genuineness and effectiveness of each necessary
endorsement.
Section 3. Lost, Destroyed or Stolen Certificates. A new share
certificate or certificates may be issued in place of any certificate
theretofore issued by the Corporation which is alleged to have been lost,
destroyed or wrongfully taken upon (1) the execution and delivery to the
Corporation by the person claiming the certificate to have been lost, destroyed
or wrongfully taken of an affidavit of the fact, specifying whether or not, at
the time of such alleged loss, destruction or taking, the certificate was
endorsed, and (2) the furnishing to the Corporation an indemnity and other
assurances satisfactory to the Corporation and to all transfer agents and
registrars of the class of shares represented by the certificate against any and
all losses, damages, costs, expenses or liabilities
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to which they or any of them may be subjected by reason of the issue and
delivery of such new certificate or certificates or in respect of the original
certificate.
Section 4. Registered Shareholders. A person in whose name shares are
of record on the books of the Corporation shall conclusively be deemed the
unqualified owner and holder thereof for all purposes and to have capacity to
exercise all rights of ownership. Neither the Corporation nor any transfer agent
of the Corporation shall be bound to recognize any equitable interest in or
claim to such shares on the part of any other person, whether disclosed upon
such certificate or otherwise, nor shall they be obliged to see to the execution
of any trust or obligation.
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall commence on such date in each
year as shall be fixed from time to time by the board of directors.
ARTICLE IX
Seal
The board of directors may provide a suitable seal containing the name
of the Corporation. If deemed advisable by the board of directors, duplicate
seals may be provided and kept for the purposes of the Corporation.
ARTICLE X
Corporate Records; Shareholders'
Inspection Rights; Financial Information
Section 1. Corporate Records.
(A) The Corporation shall keep as permanent records minutes of all meetings
of its shareholders and board of directors, a record of all actions taken by the
shareholders or board of directors without a meeting, and a record of all
actions taken by a committee of the board of directors on behalf of the
Corporation.
(B) The Corporation shall maintain accurate accounting records and a record
of its shareholders in a form that permits preparation of a list of the names
and addresses of all shareholders in alphabetical order by class of shares
showing the number and series of shares held by each.
(C) The Corporation shall keep a copy of: its articles or restated articles
of incorporation and all amendments to them currently in effect; these bylaws or
restated bylaws and all amendments currently in effect; resolutions adopted by
the board of directors creating one or more classes or series of shares and
fixing their relative rights, preferences and limitations, if shares
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issued pursuant to those resolutions are outstanding; the minutes of all
shareholders' meetings and records of all actions taken by shareholders without
a meeting for the past three years; written communications to all shareholders
generally or all shareholders of a class or series within the past three years,
including the financial statements furnished for the last three years; a list of
names and business street address of its current directors and officers; and its
most recent annual report delivered to the Department of State.
(D) The Corporation shall maintain its records in written form or in
another form capable of conversion into written form within a reasonable time.
Section 2. Shareholders' Inspection Rights. A shareholder is entitled
to inspect and copy, during regular business hours at the Corporation's
principal officer, any of the corporate records described in Section 1(C) of
this Article if the shareholder gives the Corporation written notice of the
demand at least five business days before the date on which he wishes to inspect
and copy the records.
A shareholder is entitled to inspect and copy, during regular business
hours at a reasonable location specified by the Corporation, any of the
following records of the Corporation if the shareholder gives the Corporation
written notice of his demand at least five business days before the date on
which he wishes to inspect and copy provided: (1) the demand is made in good
faith and for a purpose reasonably related to such person's interest as a
shareholder; (2) the shareholder describes with reasonable particularity the
purpose and the records he desires to inspect; and (3) the records are directly
connected with the purpose: (a) excerpts from minutes of any meeting of the
board of directors, records of any action of a committee of the board of
directors while acting in place of the board of behalf of the Corporation,
minutes of any meeting of the shareholders, and records of action taken by the
shareholders or board without a meeting (to the extent not subject to inspection
under the preceding paragraph); (b) accounting records; (c) the record of
shareholders; and (d) any other books and records of the Corporation.
The Corporation may deny any demand for inspection if the demand was made
for an improper purpose, or if the demanding shareholder has within the two
years preceding his demand, sold or offered for sale any list of shareholders of
the Corporation or of any other corporation, has aided or abetted any person in
procuring any list of shareholders for that purpose, or has improperly used any
information secured through any prior examination of the records of the
Corporation or any other corporation.
Section 3. Financial Statements of Shareholders. Unless modified by
resolution of the shareholders, within 120 days after the close of each fiscal
year, the Corporation shall furnish its shareholders with annual financial
statements which may be consolidated or combined statements of the Corporation
and one or more of its subsidiaries, as appropriate, that include a balance
sheet as of the end of the fiscal year, an income statement for that year, and a
statement of cash flows for that year. If financial statements are prepared for
the Corporation on the basis of generally accepted accounting principles, the
annual financial statements must also be prepared on that basis.
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If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
Corporation's accounting records stating his reasonable belief whether the
statements were prepared on the basis of generally accepted accounting
principles and, if not, describing the basis of preparation and describing any
respects in which the statements were not prepared on a basis of accounting
consistent with the statements prepared for the preceding year.
The Corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year or within such
additional time thereafter as is reasonably necessary to enable the Corporation
to prepare its financial statements if, for reasons beyond the Corporation's
control, it is unable to prepare its financial statements within the prescribed
period. Thereafter, on written request from a shareholder who was not mailed the
statements, the Corporation shall mail him the latest annual financial
statements.
Section 4. Other Reports to Shareholders. If the Corporation
indemnifies or advances expenses to any director, officer, employee or agent
otherwise than by court order or action by the shareholders or by an insurance
carrier pursuant to insurance maintained by the Corporation, the Corporation
shall report the indemnification or advance in writing to the shareholders with
or before the notice of the next annual shareholders' meeting, or prior to the
meeting if the indemnification or advance occurs after the giving of the notice
but prior to the time the annual meeting is held. This report shall include a
statement specifying the persons paid, the amounts paid, and the nature and
status at the time of such payment of the litigation or threatened litigation.
If the Corporation issues or authorities the issuance of shares for
promises to render services in the future, the Corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the Corporation, with or before the notice of the next
shareholders' meeting.
ARTICLE XI
Amendments
These bylaws may be altered, amended or repealed, and new bylaws
adopted, by the board of directors or shareholders.
I certify that the foregoing bylaws are the bylaws of Whitman
Reincorporation, Inc., a Florida corporation, as of June 13, 1997.
/S/RICHARD B. SALZMAN
Richard B. Salzman, Secretary
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EXHIBIT 10.4
WHITMAN EDUCATION GROUP, INC.
1996 STOCK OPTION PLAN
1. PURPOSES.
The purposes of this 1996 Stock Option Plan (the "Plan") are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees of the Company
or its Subsidiaries as well as other individuals who perform services for the
Company or its Subsidiaries, and to promote the success of the Company's
business. Options granted hereunder may be either Incentive Stock Options or
Non-Qualified Stock Options, at the discretion of the Committee and as reflected
in the terms of the written option agreement.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the common stock, no par value per share, of the
Company.
"Company" shall mean Whitman Education Group, Inc., a New Jersey
corporation.
"Committee" shall mean the committee appointed by the Board of Directors in
accordance with Section 4(a) of the Plan.
"Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Service as an Employee
shall not be considered interrupted for purposes of the Plan, in the case of
sick leave, military leave, or any other bona fide leave of absence approved by
the Committee.
"Disabled" or "Disability" shall mean a physical or mental disability as
defined in Section 22(e)(3) of the Code.
"Employee" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary. The payment of a director's
fee by the Company shall not be sufficient to constitute the recipient an
"employee" of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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"Incentive Stock Option" shall mean a stock option intended to qualify as
an "incentive stock option" within the meaning of Section 422 of the Code.
"Non-Qualified Stock Option" shall mean a stock option not intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Code.
"Option" shall mean a stock option granted pursuant to the Plan.
"Optioned Stock" shall mean the Common Stock subject to an Option.
"Optionee" shall mean the recipient of an Option.
"Parent" shall mean a "parent corporation" of the Company, whether now or
hereafter existing, as defined in Section 424(e) of the Code.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act or any successor rule.
"Share" shall mean a share of Common Stock, as adjusted in accordance with
Section 13 of the Plan.
"Subsidiary" shall mean a "subsidiary corporation" of the Company, whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK.
Subject to the provisions of Section 13 of the Plan, the maximum aggregate
number of Shares which may be issued under the Plan is 1,500,000. If an Option
should expire or become unexercisable for any reason without having been
exercised in full, the unpurchased Shares which were subject thereto shall,
unless the Plan shall have been terminated, become available for further grant
under the Plan.
4. ADMINISTRATION.
(a) Committee. The Plan at all times shall be administered by a Committee
appointed by the Company's Board of Directors. The Committee shall consist of
not less than two members of the Board of Directors, each of whom is a
"non-employee director" as defined in Rule 16b-3 and an "outside director" as
defined for purposes of Section 162(m) of the Code.
(b) Powers of the Committee. Subject to the provisions of the Plan, the
Committee shall have the authority, in its discretion: (i) to grant Incentive
Stock Options or Non- Qualified Stock Options; (ii) to determine the fair market
value of the Common Stock; (iii) to determine the exercise price per Share of
Options to be granted; (iv) to determine the persons to whom, and the time or
times at which, Options shall be granted and the number of Shares to be
represented by each Option; (v) to determine the vesting schedule of Options to
be granted; (vi) to prescribe, amend and rescind rules and regulations relating
to the Plan; (vii) to determine the terms and provisions of each Option granted
under the Plan (which need not be identical); (viii) to accelerate the exercise
date of any Option; (ix) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted by the Committee; (x) subject to the provisions of the Plan and subject
to such additional limitations and restrictions as the Committee may impose, to
delegate to specific members of management or to a committee of management
personnel the authority to determine: (a) the persons to whom, and the time and
times at which, Options shall be granted and the number of Shares to be
represented by each Option; (b) the vesting schedule of Options; (c) the term of
Options, and (d) other terms and conditions of any Options; provided that the
Committee shall not have the authority to delegate such matters with respect to
awards to be granted to any person subject to Section 16 of the Exchange Act or
any "covered employee" under Section 162(m) of the Code; and (xi) to interpret
the Plan and make all other determinations deemed necessary or advisable for the
administration of the Plan. The Committee may require the voluntary surrender of
all or any portion of any Option granted under the Plan as a condition precedent
to a grant of a new Option to such Optionee. Subject to the provisions of the
Plan, such new Option shall be exercisable at the price, during the period and
on such other terms and conditions as are specified by the Committee at the time
the new Option is granted. Upon surrender, the Options surrendered shall be
unexercisable and the Shares previously subject to such Options shall be
available for the grant of other Options.
(c) Effect of the Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Optionees.
5. ELIGIBILITY.
Incentive Stock Options may be granted only to Employees. Non-Qualified
Stock Options may be granted to Employees, non-Employee directors (in accordance
with the provisions of Section 8 of the Plan), independent contractors and
agents. Any person who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options. Subject to the provisions
of Section 15 of the Plan, the maximum number of Shares with respect to which
Options may be granted under the Plan to any Employee in any calendar year is 1
% of the authorized and outstanding Shares of Common Stock on the date of
adoption of the Plan.
6. DOLLAR LIMITATION.
Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of stock for which Incentive Stock Options (under
all stock option plans of the
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Company and of any Parent or Subsidiary) are exercisable for the first time by
an Employee during any calendar year exceeds $100,000, such Options shall be
treated as Non-Qualified Stock Options. For purposes of this limitation, (a) the
fair market value of stock is determined as of the time the Option is granted;
(b) the limitation is applied by taking into account Options in the order in
which they were granted, and (c) Incentive Stock Options granted before 1987 are
not to be taken into account.
7. RIGHTS OF OPTIONEES.
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment by the Company, nor shall it interfere in any way
with his right or the Company's right to terminate his employment at any time.
8. AUTOMATIC GRANT OF OPTION TO NON-EMPLOYEE DIRECTORS.
Subject to Section 3 of the Plan, each person who is a
non-Employee director of the Company on the first business day following any
annual meeting of shareholders of the Company and who is not a common law
employee of the Company or of any Subsidiary shall automatically receive on such
date an Option to acquire 7,500 Shares and the person who is serving as the
Chairman of the Board of Directors on such day following any annual meeting and
who is not a common law employee of the Company or any Subsidiary shall
automatically be granted options to acquire 37,500 Shares, as adjusted in
accordance with Section 15 of the Plan. The exercise price for the Shares to be
issued pursuant to Options granted under this Section 8 shall be as set forth in
Section 11(a)(ii) of the Plan. The Options granted pursuant to this Section 8
shall have a term of ten years from the date of grant. The foregoing formula may
not be amended more than once every six months other than to comport with
changes in the Code, the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. Non-Employee directors shall have the right,
if they so wish, to decline receipt of any Options to be granted under this
Section 8.
9. TERM OF PLAN.
The Plan shall become effective upon its adoption by the Board of Directors
of the Company; provided that, if the Plan is not approved by the shareholders
of the Company in accordance with Section 20 of the Plan within 12 months after
the date of adoption by the Board of Directors, the Plan and any Options granted
thereunder shall terminate and become null and void. The Plan shall continue in
effect until July 25, 2006 unless sooner terminated in accordance with Section
17 of the Plan.
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10. TERM OF OPTION.
The term of each Option shall be ten years from the date of grant thereof
or, except for Options granted pursuant to Section 8 of the Plan, such shorter
term as may be determined by the Committee. However, in the case of an Incentive
Stock Option granted to an Employee who, immediately before the Incentive Stock
Option is granted, owns stock representing more than 10% of the voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five years from the date of grant thereof or
such shorter time as may be determined by the Committee.
11. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price of the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Committee, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option: (A) granted to an Employee
who, immediately before the grant of such Incentive Stock Option, owns stock
representing more than 10% of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the fair market value per Share on the date of grant; and (B)
granted to any other Employee, the per share exercise price shall be no less
than the fair market value per Share on the date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share exercise
price shall be no less than the fair market value per Share on the date of grant
and, with respect to Options granted to non-Employee directors as provided in
Section 8 of the Plan, shall be equal to the fair market value per Share on the
date of the grant.
(b) Notwithstanding Section 11(a) of the Plan, in the event the Company
substitutes an Option for a stock option issued by another corporation in
connection with a corporate transaction, such as a merger, consolidation,
acquisition of property or stock, separation (including a spin-off or other
distribution of stock or property), reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the
Code) or partial or complete liquidation involving the Company and such other
corporation, the exercise price of such substituted Option shall be as
determined by the Committee in its discretion (subject to the provisions of
Section 424(a) of the Code in the case of a stock option that was intended to
qualify as an "incentive stock option") to preserve, on a per share basis
immediately after such corporate transaction, the same ratio of fair market
value per option share to exercise price per share which existed immediately
prior to such corporate transaction under the option issued by such other
corporation.
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(c) The fair market value per Share shall be determined by the
Committee in its discretion; provided, however, that if the Common Stock is
listed on a stock exchange, the fair market value per Share shall be the closing
price on such exchange on the date of grant of the Option, as reported in the
Wall Street Journal.
(d) The consideration to be paid for the Shares to be issued
upon exercise of an Option shall consist of cash or check in an amount equal to
the aggregate exercise price of the Shares as to which said Option shall be
exercised or such other consideration as the Committee shall determine. Payment
may also be made, in the discretion of the Committee, by delivery (including by
facsimile) to the Company or its designated agent of an executed irrevocable
option exercise form together with irrevocable instructions to a broker-dealer
designated by the Company to sell (or margin) a sufficient portion of the Shares
and deliver the sale (or margin loan) proceeds directly to the Company to pay
for the exercise price; provided that Optionees subject to Section 16 of the
Exchange Act shall not be entitled to make payment by such method until either
the holders of a majority of the outstanding shares of the Company entitled to
vote have approved an amendment to the Plan permitting payment by such method or
counsel to the Company has advised the Committee that such approval is not
required by Rule 16b-3. For purposes of this Section 11(d), the exercise date of
such Option shall be the date on which such documents have been delivered to the
Company or its designated agent.
12. EXERCISE OF OPTION.
(a) Procedure for Exercise. Any Option granted hereunder shall
be exercisable at such times and under such conditions as determined by the
Committee, including performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of the Plan. An Option may
not be exercised for a fraction of a Share. An Option shall be deemed to be
exercised when written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may, as authorized by
the Committee, consist of any consideration and method of payment allowable
under Section 11(d) of the Plan.
(b) Rights as a Shareholder. Until the issuance, which in no
event (except as provided in Section 18 of the Plan) will be delayed more than
30 days from the date of the exercise of the Option, of the stock certificate
evidencing such Shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in the
Plan. Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
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13. TERMINATION OF EMPLOYMENT.
(a) Termination of Status as an Employee. If an Employee
ceases to be in Continuous Status as an Employee, other than (i) by reason of
retirement or (ii) as a result of a termination by the Company for deliberate,
willful or gross misconduct, any Option held by such Employee shall be
exercisable within twelve (12) months after the date he ceases to be in
Continuous Status as an Employee (or such shorter or longer time as may be
determined by the Committee) to the extent the Employee was entitled to exercise
such Option as of the date of his termination of employment.
(b) Retirement of Optionee. If any Employee ceases to be in
Continuous Status as an Employee by reason of such Employee's retirement, any
Option held by such Employee shall be exercisable within 36 months after the
date he ceases to be in Continuous Status as an Employee to the extent that he
was entitled to exercise such Option as of the date of his retirement. For
purposes of the Plan, "retirement" means termination of services as an Employee
at or after age 65 other than as a result of deliberate, willful or gross
misconduct.
(c) Death or Disability of Optionee. Subject to the provisions
of the Plan, any Option held by an Optionee at the time of his death may be
exercised subsequently by the legal representative of the Optionee's estate or
by the person or persons who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent the Optionee was entitled to
exercise such Option as of the date of his death. In the event of the death or
disability of an Optionee during the time period specified in Section 13(a) or
13(b), as applicable, the Option may be exercised, at any time within three
months following the date of his death or disability, by the Optionee, or, in
the case of death, by the legal representative of the Optionee's estate or by a
person or persons who acquired the right to exercise the option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise such
Option as of the date of his death or disability.
(d) Termination for Misconduct. If any Employee ceases to be
in Continuous Status as an Employee as a result of a termination by the Company
for deliberate, willful or gross misconduct, any Option held by such Employee
shall terminate immediately and automatically on the date of his termination as
an Employee unless otherwise determined by the Committee.
(e) Expiration of Options. None of the events described above
in this Section 13 shall extend the period of exercisability of the Option
beyond the expiration date thereof. To the extent that an Optionee was not
entitled to exercise an Option on the date he ceased to be in Continuous Status
as an Employee or the date of the Optionee's death, or if he does not exercise
such Option (which he was entitled to exercise) within the time period specified
in this Section 13, the Option shall terminate and become null and void.
Notwithstanding the provisions of Section 13(a), 13(b) or 13(d) of the Plan, no
Options shall be exercisable after an Optionee ceases to be in Continuous Status
as an Employee in the event the Optionee shall have during the time period in
which his Options are exercisable, engaged in deliberate action which, as
determined by the
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<PAGE>
Committee, causes substantial harm to the interests of the Company or
constitutes a breach of any obligation of the Optionee to the Company. In such
event, the Optionee shall forfeit all rights to any unexercised Option as of the
date of such deliberate action.
14. NON-TRANSFERABILITY OF OPTIONS.
An Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent and distribution or, in the case of a Non-Qualified Stock Option,
pursuant to a qualified domestic relations order as defined in the Code or Title
I of the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder, and, except with respect to a qualified domestic relations
order as aforesaid, may be exercised, during the lifetime of the Optionee, only
by the Optionee.
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION;
CHANGE IN CONTROL; DISSOLUTION.
(a) Subject to any required action by the shareholders of the
Company, each of (i) the number of shares of Common Stock covered by each
outstanding Option, (ii) the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, (iii) the price per share of Common Stock covered by each such
outstanding Option, (iv) the number of shares of Common Stock to be granted to
non-Employee directors pursuant to Section 8 of the Plan, and (v) the maximum
number of Shares with respect to which Options may be granted to any Employee,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split or the payment of a
stock dividend with respect to the Common Stock or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that (a) each such
adjustment with respect to an Incentive Stock Option shall comply with the rules
of Section 424(a) of the Code (or any successor provision) and (b) in no event
shall any adjustment be made which would render any Incentive Stock Option
granted hereunder other than an "incentive stock option" as defined in Section
422 of the Code; and provided further, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
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<PAGE>
(b) If: (1) any person (as defined for purposes of Section
13(d) and 14(d) of the Exchange Act, but excluding the Company and any of its
wholly-owned subsidiaries) acquires direct or indirect ownership of 50% or more
of the combined voting power of the then outstanding securities of the Company
as a result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise; or (2) the shareholders of the Company
approve (i) any consolidation or merger of the Company in which the Company is
not the surviving corporation (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of the surviving corporation immediately after the
merger), or (ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company to an entity which is not a wholly-owned subsidiary of the
Company, then the exercisability of each Option outstanding under the Plan shall
be automatically accelerated so that each such Option shall, immediately prior
to the specified effective date of any of the foregoing transactions, become
fully exercisable with respect to the total number of Shares subject to such
Option and may be exercisable for all or any portion of such Shares. Upon the
consummation of any of such transaction, all outstanding Options under the Plan
shall, to the extent not previously exercised, either be assumed by the
successor corporation or parent thereof or be replaced with a comparable option
to purchase shares of the capital stock of the successor corporation or parent
thereof.
(c) In the event of the proposed dissolution or liquidation of
the Company, all outstanding Options will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee.
16. TIME FOR GRANTING OPTIONS.
The date of grant of an Option shall be the date on which the
Committee makes the determination granting such Option or such later date as the
Committee may specify. Notice of the determination shall be given to each
Employee to whom an Option is so granted within a reasonable time after the date
of such grant.
17. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Subject to the limitations set forth in Section 8 of the
Plan, the Committee may terminate or amend the Plan from time to time in such
respects as the Committee may deem advisable; provided that, the following
revisions or amendments shall require approval of the Company's shareholders in
accordance with Section 20 of the Plan: (i) any increase in the number of Shares
subject to the Plan, other than in connection with an adjustment under Section
15 of the Plan; (ii) any change in the designation of the class of persons
eligible to be granted Options; (iii) any material increase in the benefits
accruing to participants under the Plan; or (iv) any increase in the maximum
number of Shares with respect to which Options may be granted to any Employee.
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<PAGE>
(b) Effect of Amendment or Termination. No amendment or
termination or modification of the Plan shall in any manner affect any Option
theretofore granted without the consent of the Optionee, except that the
Committee may amend or modify the Plan in a manner that does affect Options
theretofore granted upon a finding by the Committee that such amendment or
modification is in the best interest of shareholders or Optionees.
18. CONDITIONS UPON ISSUANCE OF SHARES.
Shares shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the advice of counsel for the Company with respect
to such compliance. As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
19. OPTION AGREEMENTS.
Options shall be evidenced by written option agreements in
such form as the Committee shall approve. Such agreements shall contain such
provisions, including, without limitation, restrictions upon the exercise of the
option, as the Committee shall determine.
20. SHAREHOLDER APPROVAL.
The effectiveness of the Plan shall be subject to approval by
the shareholders of the Company, in a separate vote, within twelve months after
the date the Plan is adopted. The approval of such shareholders of the Company
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder, and shall be
obtained, at a duly held shareholders' meeting, by the affirmative vote of the
holders of a majority of the outstanding shares of the Company present or
represented and entitled to vote thereon.
21. INDEMNIFICATION OF COMMITTEE MEMBERS.
In addition to such other rights of indemnification as they
may have as Directors, the members of the Committee shall be indemnified by the
Company against the reasonable expenses, including attorneys' fees actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them
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<PAGE>
may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
to the extent required by and in the manner provided by the Articles of
Incorporation or Bylaws of the Company), or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member did not act in good faith and in a manner he reasonably
believed to be in and not opposed to the best interests of the Company; provided
that within 60 days after institution of any such action, suit or proceeding a
Committee member shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
22. OTHER COMPENSATION PLANS.
The adoption of the Plan shall not affect any other stock
option or incentive or other compensation plans in effect for the Company or any
Subsidiary, nor shall the Plan preclude the Company from establishing any other
forms of incentive or other compensation for employees and directors of the
Company or any Subsidiary.
23. HEADINGS.
Headings of Articles and Sections hereof are inserted for
convenience and reference; they constitute no part of the Plan.
24. WITHHOLDING.
The Company and any Subsidiary may, to the extent permitted by
law, deduct from any payments or transfers of any kind due to an Optionee the
amount of any federal, state, local or foreign taxes required by any
governmental regulatory authority to be withheld or otherwise deducted with
respect to the Options or the Optioned Stock.
25. GOVERNING LAW.
The Plan, the Options granted hereunder and all related
matters shall be governed by, and construed and enforced in accordance with, the
laws of the State of New Jersey.
26. COMPLIANCE WITH RULE 16b-3.
It is the intent of the Company that this plan comply in all
respects to Rule 16b-3, as amended (or any successor rule), in connection with
any Option granted to a person who is subject
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<PAGE>
to Section 16 of the Exchange Act. Accordingly, any provision of this Plan or
any Option agreement that does not comply with the requirements of Rule 16b-3
(or any successor rule) as then applicable to any such person shall be construed
or deemed amended to the extent necessary to conform to such requirements,
except that such automatic amendment shall not apply to any other participant in
the Plan who is not (at the time of such application) subject to Section 16 of
the Exchange Act. Any action taken by the Committee pursuant to the Plan that
does not comply with the requirements of Rule 16b-3 (or any successor rule)
shall be null and void.
27. RESERVATION OF SHARES
The Company shall, during the term of the Plan and any Option
granted hereunder, reserve and keep available a number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
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EXHIBIT 10.7
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT AND ESCROW AGREEMENT
THIS AGREEMENT is made and entered into as of the /y day of February,
1997, by and between Sanford Brown College, Inc., a Delaware Corporation (f/k/a
Whitman Acquisition Corporation) ("Buyer"), James L. Combs, individually and as
successor-in-interest to SBC Liquidating, Inc. ("SBC") f/k/a Sanford Brown
College, Inc., a Missouri Corporation ("Seller"), Whitman Education Group, Inc.
(f/k/a Whitman Medical Corp.) ("Whitman") and Midlantic Bank, N.A., a division
of PNC Bank ("Escrow Agent").
W I T N E S S E T H
WHEREAS, Seller, Buyer, James L. Combs and Whitman entered into that
certain Asset Purchase Agreement dated November 28, 1994 (the "Purchase
Agreement") with respect to the purchase and sale of certain assets and the
assumption of certain liabilities of
Seller;
WHEREAS, as required pursuant to the Purchase Agreement, Buyer, SBC and
Escrow Agent entered into an Escrow Agreement, dated December 21, 1994 pursuant
to which the purchase price prescribed by the Purchase Agreement was to be held,
invested and ultimately disbursed by the Escrow Agent (the "Escrow Agent");
WHEREAS, pursuant to the Purchase Agreement, Seller has repurchased
certain accounts receivable from Buyer by delivery of a Promissory Note in the
original principal amount of $195,000.00 (the "Seller's Note"); and
WHEREAS, the parties now desire to amend certain provisions of the
Purchase Agreement and the Escrow Agreement as provided herein.
NOW, THEREFORE, for and in consideration of the mutual covenants set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Recitals. The above recitals are true and correct and are incorporated
herein by this reference.
2. Capitalized Terms. Capitalized terms used but not defined herein have
the same meaning ascribed to said terms in the Purchase Agreement and the Escrow
Agreement.
3. Disbursement of Escrow Fund. The parties hereto acknowledge and agree
that as of the date of this Agreement, the Escrow Fund maintained by the Escrow
Agent pursuant to the Escrow Agreement contains approximately $6,500,000 in the
Missouri Subescrow and 521,512 shares of Whitman Education Group, Inc. common
stock, no par value per share (the "Shares") in the Granite City Subescrow.
3.1 Upon full execution of this Agreement, Seller and Buyer shall execute
the joint
<PAGE>
instruction letter attached as Exhibit "A" which shall serve to authorize and
direct the Escrow Agent promptly to (a) disburse all of the funds held in the
Missouri Subescrow, as follows: (i) to Buyer $643,327, of which $143,327 shall
be deemed disbursed on behalf of Seller in full payment and satisfaction of
Seller's Note, and $500,000 of which to be received, held and disbursed by Buyer
in accordance with the terms of Section 3.2 below, and (ii) the full remaining
balance to Seller; and (b) from the Granite City Subescrow disburse 260,756
Shares to Seller. Upon receipt of said funds by Buyer, Buyer shall deliver to
Seller the Seller's Note appropriately marked paid in full.
3.2 The $500,000 of the Missouri Subescrow remitted to Buyer pursuant
to Section 3.1(a)(i) above shall be utilized by Buyer solely for payment of
liabilities (the "Program Review Liabilities") assessed in connection with those
certain program reviews (Reference Numbers 19952070024, 199520711869) initiated
by the United States Department of Education (the "Department") with respect to
Seller's operation of Sanford- Brown College prior to the sale of assets to
Buyer under the Purchase Agreement (the "Program Reviews"), for which Buyer and
Seller have jointly retained counsel. Subject to the agreement of the parties
with respect to Seller's participation in the resolution of said reviews, and
after payment of the Program Review Liabilities by Buyer, any balance of the
$500,000 remaining shall be remitted to Seller and any further monies necessary
to pay the Program Review Liabilities shall be promptly paid by Seller to Buyer.
The $500,000 shall accrue interest at the annual rate of interest earned by the
Missouri Subescrow during the month of December, 1996, which interest shall be
paid by Buyer and credited to Seller until the disbursement of the $500,000.
3.3 The remaining 260,756 Shares of the Granite City Subescrow shall
remain in escrow and be disbursed upon the joint written instruction of Seller
and an authorized officer of Buyer as provided in this Section 3.3. Buyer and
Seller acknowledge that on or about January 8, 1997 Buyer received notice from
the Department that the official cohort default rate for the Sanford Brown
College in Granite City was 41.3% for 1993 (the "1993 Granite City Rate") and
the official cohort default rate for 1994 was 22.0% (the "1994 Granite City
Rate") and that the Department has notified Buyer that unless a timely appeal is
filed, the Department will initiate an action to limit, suspend or terminate (an
"L,S&T Action") Granite City's participation in Title IV student loan programs.
Buyer hereby agrees to use its best efforts to file and prosecute said appeal.
(i) In the event said appeal is finally determined in favor of Buyer and the
1993 Granite City Rate is revised to less than 40%, or, if, prior to the
issuance of the official 1995 cohort default rate for the Granite City campus
(the "1995 Granite City Rate") no L,S&T Action is taken against Sanford-Brown
College, then Buyer and Seller shall jointly instruct the Escrow Agent to remit
all of the Shares to Seller. (ii) If, after appeal (a) the 1993 Granite City
Rate remains 40% or above; (b) prior to the issuance of the 1995 Granite City
Rate the Department initiates a termination action against Sanford-Brown College
or initiates a limitation or suspension action to limit or suspend Sanford-Brown
College's participation in federal Title IV programs for a period of six months
or more; and (c) Buyer uses its best efforts to contest the termination,
suspension or limitation action, as the case may be, but notwithstanding such
efforts, the Department prevails in said termination, suspension or limitation
action, the Buyer and Seller shall jointly instruct the Escrow Agent to remit
all of the Shares to Buyer. (iii) If, after appeal (a) the 1993 Granite City
Rate remains 40% or above; (b) prior to the issuance of the 1995 Granite City
Rate the Department initiates a limitation or suspension action against
Sanford-Brown College to limit or suspend Sanford-Brown College's participation
in federal Title IV programs for a period of less than
<PAGE>
six months; and (c) Buyer uses its best efforts to contest the limitation or
suspension action, as the case may be, but notwithstanding such efforts, the
Department prevails in said limitation or suspension action, the Buyer and
Seller shall jointly instruct the Escrow Agent to remit to Buyer that number of
Shares equal to the number of months the limitation or suspension remains in
effect times 43,459 and to remit the remaining Shares to Seller.
If as a result of an L,S&T Action, Buyer becomes entitled to
receive some or all of the 260,756 Shares, Buyer acknowledges that such Shares
shall be received by it as liquidated and stipulated damages and its sole remedy
for any breach by Seller of the Purchase Agreement or the Escrow Agreement
relating to the 1993 Granite City Rate.
4. Seller's Indemnification. Except as otherwise specifically provided
herein, this Agreement is not intended to enlarge or to diminish the rights of
the parties pursuant to the Purchase Agreement or the Escrow Agreement,
including specifically the parties' respective rights to indemnification.
5. Unilateral Chance of the 1994 Official Cohort Default Rate; Appeal of
1993 Official Cohort Default Rate.
5.1 Buyer shall prosecute the previously filed appeal of the
1993 official cohort default rate for the Sanford-Brown Missouri campuses in an
attempt to have such rate reduced below 25%. Notwithstanding the partial or
complete disbursement of the Escrow Fund provided herein, in the event the
Department unilaterally amends the official 1994 cohort default rate for the
Sanford-Brown Missouri campuses (the "1994 Missouri Rate") to a default rate of
25% or higher, and thereafter, despite Buyer's efforts in prosecuting available
appeals to reduce the amended rates for 1993 and 1994 to less than 25%, the
appeals are adversely determined and the Missouri campuses are, as a result
thereof, declared ineligible for participation in federal Title IV programs,
nothing contained herein shall restrict or limit any party from pursuing or
advocating its rights under the Purchase Agreement or the Escrow Agreement, and
except as may be specifically provided in this Amendment No. 1, no actions taken
pursuant to this Amendment shall be construed to modify, interpret or as
evidence of a party's intent with respect to the language of those agreements.
Buyer shall not, directly or indirectly, initiate or encourage the Department to
review the 1994 Missouri Rate.
5.2 Notwithstanding the partial or complete disbursement of
the Granite City Subescrow provided herein, in the event the Department
unilaterally amends the 1994 Granite City Rate to a default rate of 25% or
higher, and thereafter, despite Buyer's efforts in prosecuting available appeals
to reduce the amended rate to less than 25%, the appeals are adversely
determined and the Granite City campus is declared ineligible for participation
in federal Title IV programs, nothing contained herein shall restrict or limit
any party from pursuing or advocating its rights under the Purchase Agreement or
the Escrow Agreement. Buyer shall not, directly or indirectly, initiate or
encourage the Department to review the 1994 Granite City Rate.
6. Taxes. Seller acknowledges and agrees that to the extent any portion of
the Escrow Fund disbursed to it under this Amendment (which shall include the
$143,327 disbursed on Seller's behalf directly to Buyer in satisfaction of the
Seller's Note) includes interest earned, Seller shall report all of such
interest to the Internal Revenue Service and
<PAGE>
timely pay any income or other taxes due thereon. Buyer represents that it has
not and will not report any interest income from the Escrow Account on its tax
returns unless required to do so by the Internal Revenue Service. Seller agrees
to indemnify Buyer for the amount of any taxes assessed against and paid by
Buyer as a result of the Escrow Fund having been maintained under Buyer's
Federal Employer Identification Number prior to disbursement; provided, however,
that Seller's indemnity under this Section 6 shall survive execution of this
Amendment only for so long as Seller shall have the right to seek a refund of
any tax that may have already been paid by Seller with respect to the same funds
on which Buyer has been taxed and for which indemnification is sought hereunder.
7. Survival: Conflict. All terms and provisions of the Purchase Agreement
and the Escrow Agreement not specifically amended hereby shall remain in full
force and effect in accordance with the terms and provisions thereof. Except as
otherwise provided herein, in the event of any conflict between the terms and
provisions of this Agreement and the respective terms and provisions of either
the Purchase Agreement or the Escrow Agreement, the terms and provisions of this
Agreement shall govern.
8. Lease Agreement. Notwithstanding the terms and provisions of this
Amendment, that certain Lease Agreement, dated December 21, 1994, by and between
Whitman and James Combs, trustee shall remain in full force and effect, in its
entirety, in accordance with the terms and provisions thereof.
9. Headings. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute the same agreement.
11. Facsimile Signatures. This Agreement and any document or schedule
required hereby may be signed by facsimile signature which shall be considered
legally binding for all purposes.
12. Interpretation. This Agreement shall be governed by and construed and
enforced in accordance with the laws of New Jersey without regard to conflicts
of laws principles. No provision of this Amendment shall be interpreted for or
against any party solely because that party or that party's representative
drafted such provision.
IN WITNESS WHEREOF, the parties hereto have caused their signatures to
be affixed to this Agreement as of the date first above written.
SANFORD BROWN COLLEGE, INC.
(f/k/a Whitman Acquisition Corporation)
By: /S/ RANDY S. PROTO
============================================
RANDY S. PROTO
JAMES L. COMBS, individually and as
successor-in-interest to SBC
LIQUIDATING, INC. f/k/a Sanford Brown
College, Inc.
/S/ JAMES L. COMBS
============================================
MIDLANTIC BANK, N.A., a division of PC BANK
/S/ BENNETT A. GROO
=============================================
BENNETT A. GROO, TRUST OFFICER
WHITMAN EDUCATION GROUP, INC.
(f/k/a Whitman Medical Corp.)
=============================================
/S/ RANDY S. PROTO
RANDY S. PROTO, PRESIDENT
<PAGE>
EXHIBIT 10.23
THIRD AMENDMENT
TO CREDIT AGREEMENT
This Third Amendment To Credit Agreement (the "Amendment")is entered into
this 19TH day of May, 1997, by and among BARNETT BANK, N.A., a national banking
corporation ("Bank"); WHITMAN EDUCATION GROUP, INC., f/k/a Whitman Medical
Corp., a New Jersey corporation ("Borrower" or "You"); and PHILLIP FROST, M.D.,
an individual, (hereinafter referred to as the "Guarantor").
WHEREAS, the parties hereto entered into a Credit Agreement dated April 11,
1996, as amended by amendment dated August 14th, 1996, and as further amended by
amendment dated October 31, 1996 (collectively the "Credit Agreement"), pursuant
to which the Bank provided to You a Term Loan in the principal amount of
$6,000,000.00 to refinance existing obligations and a Revolving Loan in the
principal amount of $5,500,000.00 to finance working capital and for general
corporate purposes; and
WHEREAS, the parties hereto wish to amend certain provisions of the Credit
Agreement effective as of May 19, 1997;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Any capitalized terms not defined herein shall have the same meaning as
given those terms in the Credit Agreement.
2. Section 1. of the Credit Agreement, DEFINITIONS AND ACCOUNTING MATTERS,
is hereby amended as follows:
"REVOLVER NOTE" shall mean that certain Amended, Restated and Consolidated
Renewal Revolver Note from the Borrower to the Bank in the principal amount of
$7,500,000.00, which renews and consolidates a Revolver Note dated April 11,
1996 in the principal amount of $2,500,000.00, a Revolver Note dated October 31,
1996 in the principal amount of $3,000,000.00 and a Revolver Note of even date
herewith in the principal amount of $2,000,000.
3. Section 2.1(b) of the Credit Agreement, REVOLVING LOAN, is hereby
amended in its entirety and shall read as follows:
(i) PRINCIPAL. $7,500,000.00, which shall be evidenced by a promissory note
in like amount in substantially the form attached to this Agreement (the
"Amended and Restated Revolver Note").
(ii) INTEREST. Interest shall accrue on the Revolving Loan from the date of
the first advance until repayment
1
<PAGE>
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 125 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 $7,500,000.00 until
April 14, 1999.
(iv) Repayment. The Borrower agrees to pay the principal indebtedness
evidenced by and outstanding under the Revolver Note in full on or before April
14, 1999.
4. Section 6.2 of the Credit Agreement, Certificate of Compliance,is hereby
amended and shall read as follows:
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 $5.00
per share and (ii) the term "net worth" shall mean assets less direct and
contingent liabilities.
2
<PAGE>
5. Section 6.4(b) of the Credit Agreement, Minimum Marketable Securities,
is hereby amended and shall read as follows:
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 $5.00 per share and bonds (rated A or better by Standard
& Poor's).
6. Except as otherwise provided herein, all other terms and conditions of
the Credit Agreement are hereby restated, affirmed and incorporated by reference
in their entirety.
7. This Amendment shall be governed by and interpreted in accordance with
the laws of the State of Florida.
8. This Amendment may be executed by one or more of the parties to this
Amendment in any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
9. In consideration of the amendment to the Credit Agreement contemplated
hereby, Borrower shall pay the reasonable fees and expenses of Coll Davidson
Carter Smith Salter & Barkett, P.A., Florida counsel to the Bank, incurred in
connection with the preparation of this Amendment, contemporaneously with the
execution thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by the proper and duly authorized officers as of the
day and year first above written.
BANK:
BARNETT BANK, 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 hereby acknowledges and agrees that the Continuing Unlimited
Guarantee, dated April 23, 1996, executed by Guarantor for the benefit of Bank,
extends to the Credit Agreement, as amended hereby, and all indebtedness now or
hereafter outstanding under the Amended, Restated and Consolidated Renewal
Revolver Note dated May 19, 1997.
GUARANTOR:
/S/ PHILLIP FROST
====================================
PHILLIP FROST, M.D.
4
EXHIBIT 10.24
REVOLVER NOTE
$2,000,000.00 May 19, 1997
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, N.A.
a national banking corporation ("Lender") (successor by merger and name
change to Barnett Bank of South Florida, N.A.), the principal sum of
TWO MILLION DOLLARS
and the Borrower further promises to pay to the Lender interest monthly, on
the 30th day of each month, 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. 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 executed pursuant to, and is entitled to the benefits of,
that certain Credit Agreement, dated as of April 11, 1996, as amended by
amendment dated August 14, 1996, as further amended by amendment dated October
31, 1996, and as amended by amendment of even date herewith (collectively, the
"Credit Agreement") 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 $2,000,000.00.
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.
1
<PAGE>
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, dated April 11, 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.
2
<PAGE>
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 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 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: /S/ Randy S. Proto
======================================
RANDY S. PROTO
Title: PRESIDENT
4
EXHIBIT 10.25
AMENDED, RESTATED AND CONSOLIDATED
RENEWAL REVOLVER NOTE
$7,500,000.00 May 19, 1997
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, N.A.
a national banking corporation ("Lender") (successor by merger and name change
to Barnett Bank of South Florida, N.A.), the principal sum of
SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
and the Borrower further promises to pay to the Lender interest monthly, on the
30th day of each month, 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. 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, as amended by amendment dated August 14, 1996, as further amended by
amendment dated October 31, 1996, and as amended by amendment of even date
herewith (collectively, the "Credit Agreement") 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
$7,500,000.00.
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.
1
<PAGE>
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, dated April 11, 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.
2
<PAGE>
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 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. This note amends, restates, consolidates and renews (a)
that Revolver Note dated April 11, 1996, in the principal amount of
$2,500,000.00, executed by Borrower to the order of Barnett Bank of South
Florida, N.A., (b) that Revolver Note dated October 31, 1996, in the principal
amount of $3,000,000.00, executed by Borrower to the order of Lender,
3
<PAGE>
and (c) that certain Revolver Note of even date herewith in the principal amount
of $2,000,000, executed by Borrower to the order of Lender.
12. 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:/S/ RANDY S. PROTO
=======================================
RANDY S. PROTO
Title: PRESIDENT
4
<PAGE>
EXHIBIT 10.26
PROMISSORY NOTE
Borrower: Sanford Brown College, Inc., Lender: Bank One, Colorado, N.A.
a Delaware corporation Colorado Springs Business Banking
1655 Des Peres Rd., Ste. 150 30 East Pikes Peak Avenue
St. Louis, MO 63131 Colorado Springs, CO 80903
- -------------------------------------------------------------------------------
Principal Amount: $1,000,000.00 Initial Rate: 9.00%
Date of Note: September 25, 1996
PROMISE TO PAY. SANFORD BROWN COLLEGE, INC., A DELAWARE CORPORATION ("Borrower")
promises to pay to BANK ONE, COLORADO, N.A. ("Lender"), or order, in lawful
money of the United States of America, the principal amount of One Million &
00/100 Dollars ($1,000,000.00) or so much as may be outstanding, together with
interest at the rate of 9.000% per annum on the unpaid outstanding principal
balance of each advance. Interest shall be calculated from the date of each
advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in accordance with the following payment
schedule:
3 CONSECUTIVE MONTHLY INTEREST PAYMENTS, BEGINNING NOVEMBER 01, 1996,
WITH INTEREST CALCULATED ON THE UNPAID PRINCIPAL BALANCES AT AN INTEREST
RATE OF 9.000% PER ANNUM; AND 36 CONSECUTIVE MONTHLY PRINCIPAL AND INTEREST
PAYMENTS OF $31,851.62 EACH, BEGINNING FEBRUARY 01, 1997, WITH INTEREST
CALCULATED ON THE UNPAID PRINCIPAL BALANCES AT AN INTEREST RATE OF 9.000%
PER ANNUM. BORROWER'S FINAL PAYMENT OF $31,851.62 WILL BE DUE ON JANUARY
01, 2000. THIS ESTIMATED FINAL PAYMENT IS BASED ON THE ASSUMPTION THAT ALL
PAYMENTS WILL BE MADE EXACTLY AS SCHEDULED, THE ACTUAL FINAL PAYMENT WILL
BE FOR ALL PRINCIPAL AND ACCRUED INTEREST NOT YET PAID, TOGETHER WITH ANY
OTHER UNPAID AMOUNTS UNDER THIS NOTE.
Interest on this Note is computed on a 365/360 simple interest basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Note, Borrower understands that Lender is entitled to a
minimum interest charge of $25.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.
<PAGE>
09-25-1996
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired. (i) Lender
in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the interest rate
on this Note to 25.000% per annum, and (b) add any unpaid accrued interest to
principal and such sum will bear interest therefrom until paid at the rate
provided in this Note (including any increased rate). The interest rate will not
exceed the maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower also
will pay Lender that amount. This includes, subject to any limits under
applicable law, Lender's attorneys' fees and Lender's legal expenses whether or
not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated postjudgment collection services.
If not prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Colorado. It there is a lawsuit,
Borrower agrees upon Lender's request to submit to the Jurisdiction of the
courts of EL PASO County, the State of Colorado. Lender and Borrower hereby
waive the right to any jury trial in any action, proceeding, or counterclaim
brought by either Lender or Borrower against the other. This Note shall be
governed by and construed in accordance with the laws of the State of Colorado.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
<PAGE>
09-25-1996
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note, as well as directions for payment from
Borrower's accounts, may be requested orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. The following party or parties are authorized to request
advances under the line of credit until Lender receives from Borrower at
Lender's address shown above written notice of revocation of their authority:
BRETT S. COMBS, PRESIDENT; and RICHARD H. SIEMSEN, CHIEF FINANCIAL OFFICER AND
ASSISTANT SECRETARY. Borrower agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this Note or
by Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor ceases
doing business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this note or
any other loan with Lender; (d) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by lender; or (e) Lender in
good faith deems itself insecure under this Note or any other agreement between
Lender and Borrower.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF
A COMPLETED COPY OF THE NOTE.
BORROWER:
SANFORD BROWN COLLEGE, INC., A DELAWARE CORPORATION
By: /S/ BRETT S. COMBS
====================================================================
BRETT S. COMBS, PRESIDENT
By: /S/ RICHARD H. SIEMSEN
====================================================================
RICHARD H. SIEMSEN, CHIEF FINANCIAL OFFICER AND ASSISTANT SECRETARY
EXHIBIT 10.27
BUSINESS LOAN AGREEMENT
BORROWER:SANFORD BROWN COLLEGE, INC., LENDER: BANK ONE, COLORADO, N.A.
A DELAWARE CORPORATION COLORADO SPRINGS BUSINESS BANKING
1655 DES PERES RD., STE. 150 30 EAST PIKES PEAK AVENUE
ST. LOUIS, MO 63131 COLORADO SPRINGS, CO 80903
- -------------------------------------------------------------------------------
THIS BUSINESS LOAN AGREEMENT between SANFORD BROWN COLLEGE, INC., A DELAWARE
CORPORATION ('"Borrower") and BANK ONE, COLORADO, N.A. ("Lender") is made and
executed on the following terms and conditions. Borrower has received prior
commercial loans from Lender or has applied to Lender for a commercial loan or
loans and other financial accommodations, including those which may be described
on any exhibit or schedule attached to this Agreement. All such loans and
financial accommodations, together with all future loans and financial
accommodations from Lender to Borrower, are referred to in this Agreement
Individually as the "Loan" and collectively as the "Loans." Borrower understands
and agrees that: (a) in granting, renewing, or extending any Loan, Lender is
relying upon Borrower's representations, warranties, and agreements, as set
forth in this Agreement; (b) the granting, renewing, or extending of any Loan by
Lender at all times shall be subject to Lender's sole judgment and discretion;
and (c) all such Loans shall be and shall remain subject to the following terms
and conditions of this Agreement.
TERM. This Agreement shall be effective as of September 25, 1996, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Business Loan Agreement from
time to time.
BORROWER. The word "Borrower" means SANFORD BROWN COLLEGE, INC., A DELAWARE
CORPORATION. The word "Borrower" also includes, as applicable, all subsidiaries
and affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
COLLATERAL. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted now
or in the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.
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09-25-1996 BUSINESS LOAN AGREEMENT Page 2 (Continued)
ERISA. The word "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"EVENTS OF DEFAULT."
GRANTOR. The word "Grantor" means and includes without limitation each and all
of the persons or entities granting a Security Interest in any Collateral for
the Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation each and
all of the guarantors, sureties, and accommodation parties in connection with
any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without limitation all
Loans, together with all other obligations, debts and liabilities of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower, or any one or more of them; whether now or hereafter existing,
voluntary or involuntary, due or not due, absolute or contingent, liquidated or
unliquidated; whether Borrower may be liable individually or jointly with
others; whether Borrower may be obligated as a guarantor, surety, or otherwise;
whether recovery upon such Indebtedness may be or hereafter may become barred by
any statute of limitations; and whether such Indebtedness may be or hereafter
may become otherwise unenforceable.
LENDER. The word "Lender" means BANK ONE, COLORADO, N.A., its successors and
assigns.
LOAN. The word "Loan" or "Loans" means and includes without limitation any and
all commercial loans and financial accommodations from Lender to Borrower,
whether now or hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations described herein or
described on any exhibit or schedule attached to this Agreement from time to
time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note or
notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith; (c) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (d) purchase money liens or purchase money
security interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (e) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
<PAGE>
09-25-96
SECURITY AGREEMENT. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA" means Superfund Amendments and Reauthorization Act of 1986
as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory to Lender
the following documents for the Loan: (a) the Note, (b) Security Agreements
granting to lender security interests in the Collateral, (c) Financing
Statements perfecting Lender's Security Interests; (d) evidence of insurance as
required below; and (e) any other documents required under this Agreement or by
Lender or its counsel, including without limitation any guaranties described
below.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents,
and such other authorizations and other documents and instruments as Lender or
its counsel, in their sole discretion, may require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in
this Agreement, in the Related Documents, and in any document or certificate
delivered to Lender under this Agreement are true and correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Delaware and is
validly existing and in good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own its properties and to
transact
<PAGE>
09-25-1996
the businesses in which it is presently engaged or presently proposes to engage.
Borrower also is duly qualified as a foreign corporation and is in good standing
in all states in which the failure to so qualify would have a material adverse
effect on its businesses or financial condition.
AUTHORIZATION. The execution, delivery, and performance of this Agreement and
all Related Documents by Borrower, to the extent to be executed, delivered or
performed by Borrower, have been duly authorized by all necessary action by
Borrower; do not require the consent or approval of any other person, regulatory
authority or governmental body; and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other instrument
binding upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to Lender
truly and completely disclosed Borrower's financial condition as of the date of
the statement, and there has been no material adverse change in Borrower's
financial condition subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material contingent obligations
except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously disclosed
in Borrower's financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrower's properties free
and clear of all Security Interests, and has not executed any security documents
or financing statements relating to such properties. All of Borrower's
properties are titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least the last five (5)
years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and acknowledged by Lender in writing,
Borrower represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation, manufacture,
storage, treatment, disposal, release or threatened release of any hazardous
waste or substance by any person on, under, about or from any of the properties.
(b) Borrower has no knowledge of, or reason to believe that there has been (i)
any use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on, under, about or from
the properties by any prior owners or occupants of any of the properties, or
(ii) any actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent
or other authorized user of any of the properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste or
substance on, under, about or from any of the properties; and any such activity
shall be conducted in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above. Borrower authorizes Lender and its
agents to enter upon the properties to make such inspections and tests as Lender
may deem appropriate to determine compliance of the properties with this
<PAGE>
09-25-1996
section of the Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be construed to
create any responsibility or liability on the part of Lender to Borrower or to
any other person. The representations and warranties contained herein are based
on Borrower's due diligence in investigating the properties for hazardous waste
and hazardous substances. Borrower hereby (a) releases and waives any future
claims against Lender for indemnity or contribution in the event Borrower
becomes liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to Borrower's ownership
or interest in the properties, whether or not the same was or should have been
known to Borrower. The provisions of this section of the Agreement, including
the obligation to indemnify, shall survive the payment of the Indebtedness and
the termination or expiration of this Agreement and shall not be affected by
Lender's acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower's financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and
Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements directly or
indirectly securing repayment of Borrower's Loan and Note and all of the Related
Documents are binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance with
their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT, PLANS. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor Prohibited
Transaction (as defined in ERISA) has occurred with respect to any such plan,
(ii) Borrower has not withdrawn from any such plan or initiated steps to do so,
(iii) no steps have been taken to terminate any such plan, and (iv) there are no
unfunded liabilities other than those previously disclosed to Lender in writing.
<PAGE>
09-25-1996
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business, or
Borrower's chief executive office, if Borrower has more than one place of
business, is located at 1655 DES PERES RD., STE. 150, ST. LOUIS, MO 63131.
Unless Borrower has designated otherwise in writing this location is also the
office or offices where Borrower keeps its records concerning the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith furnished
by Borrower to Lender for the purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all information hereafter
furnished by or on behalf of Borrower to Lender will be, true and accurate in
every material respect on the date as of which such information is dated or
certified; and none of such information is or will be incomplete by omitting to
state any material fact necessary to make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees that
Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower. Borrower
further agrees that the foregoing representations and warranties shall be
continuing in nature and shall remain in full force and effect until such time
as Borrower's Indebtedness shall be paid in full, or until this Agreement shall
be terminated in the manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of any
guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with generally
accepted accounting principles, applied on a consistent basis, and permit Lender
to examine and audit Borrower's books and records at all reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no event
later than one hundred twenty (120) days after the end of each fiscal year,
Borrower's balance sheet and income statement for the year ended, audited by a
certified public accountant satisfactory to Lender, and, as soon as available,
but in no event later than forty five (45) days after the end of each fiscal
quarter, Borrower's balance sheet and profit and loss statement for the period
ended, prepared and certified as correct to the best knowledge and belief by
borrower's chief financial officer or other officer or person acceptable to
Lender. All financial reports required to be provided under this Agreement shall
be prepared in accordance with generally accepted accounting principles applied
on a consistent basis, and certified by Borrower as being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as Lender may request
from time to time.
<PAGE>
09-25-1996
INSURANCE. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrower's
properties and operations, in form, amounts, coverage and with insurance
companies reasonably acceptable to Lender. Borrower, upon request of Lender,
will deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to lender, including stipulations that coverage
will not be cancelled or diminished without at least ten (10) days' prior
written notice to Lender. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired in
any way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or is offered
a security interest for the Loans, Borrower will provide Lender with such loss
payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties
insured; (e) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (f) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.
GUARANTIES. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, on Lender's forms, and in the
amounts and by the guarantors named below:
Guarantors Amounts
WHITMAN EDUCATION GROUP, INC., Unlimited
A NEW JERSEY CORPORATION
COLORADO TECHNICAL UNIVERSITY, INC. Unlimited
OTHER AGREEMENTS. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business operations,
unless specifically consented to the contrary by Lender in writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (a) the legality of the same shall be
contested in good faith by appropriate proceedings, and (b) Borrower shall have
established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with generally
accepted accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies, liens and
claims and will authorize the appropriate governmental official to deliver to
Lender at any time a written statement of any assessments, taxes, charges,
levies, liens and claims against Borrower's properties, income, or profits.
<PAGE>
09-25-1996
PERFORMANCE. Perform and comply with all terms, conditions, and provisions set
forth in this Agreement and in the Related Documents in a timely manner, and
promptly notify Lender if Borrower learns of the occurrence of any event which
constitutes an Event of Default under this Agreement or under any of the Related
Documents.
OPERATIONS. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee benefit
plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
quarterly with a certificate executed by borrower's chief financial officer, or
other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and correct
as of the date of the certificate, no Event of Default exists under this
Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects with
all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure the Loans and to perfect all Security
Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
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09-25-1996
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal course
of business and indebtedness to Lender contemplated by this Agreement, create,
incur or assume indebtedness for borrowed money, including capital leases, (b)
except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets, or
(c) sell with recourse any of Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock (other than dividends payable in its stock), provided, however
that notwithstanding the foregoing, but only so long as no Event of Default has
occurred and is continuing or would result from the payment of dividends, if
Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue
Code of 1986, as amended), Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the shareholders
to pay income taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership of shares
of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding
shares or alter or amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise or
entity, or (c) incur any obligation as surety or guarantor other than in the
ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good faith deems itself insecure, even
though no Event of Default shall have occurred.
ADDITIONAL LOAN AGREEMENT PROVISIONS. COLORADO TECHNICAL UNIVERSITY, INC. SHALL
PROVIDE ANNUAL AUDITED STATEMENTS IN FORM AND CONTENT SATISFACTORY TO BANK,
WITHIN 120 DAYS OF YEAR-END.
WHITMAN EDUCATION GROUP, INC. SHALL PROVIDE QUARTERLY STATEMENTS IN FORM AND
CONTENT SATISFACTORY TO BANK, WITHIN 45 DAYS OF QUARTER-END, AND ANNUAL AUDITED
STATEMENTS IN FORM AND CONTENT SATISFACTORY TO BANK, WITHIN 120 DAYS OF
YEAR-END. FORMS 10-Q AND 10-K WILL BE ACCEPTABLE.
BORROWER SHALL MAINTAIN A CURRENT RATIO OF 1.0, TESTED ANNUALLY.
BORROWER SHALL MAINTAIN A MINIMUM TANGIBLE NET WORTH OF $3,400,000, TESTED
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09-25-1996
QUARTERLY, TO BE REPORTED ON QUARTERLY STATEMENT OF COMPLIANCE WITHIN 45 DAYS OF
QUARTER END.
MINIMUM DEBT COVERAGE RATIO OF 1.5X, DEFINED AS NET INCOME PLUS DEPRECIATION AND
AMORTIZATION DIVIDED BY CURRENT MATURITIES OF LONG TERM DEBT PLUS INTEREST
EXPENSE, TESTED ANNUALLY.
BORROWER SHALL REPORT NO LOSSES ON AN ANNUAL BASIS.
TRANSFERS OF A SHORT-TERM NATURE ARE TO BE ALLOWED FROM SANFORD BROWN COLLEGE,
INC. TO WHITMAN EDUCATION GROUP INC. THESE TRANSFERS ARE TO BE DEFINED AS
PAYMENTS USED FOR SHORT-TERM WORKING CAPITAL NEEDS, AND ARE NOT TO BE USED FOR
CAPITAL INVESTMENTS. BORROWER SHALL PROVIDE MONTHLY, IN THOSE MONTHS WHERE AN
INTERCOMPANY BALANCE IS OUTSTANDING, A STATEMENT REFLECTING THE BALANCE
OUTSTANDING, AND THAT IT IS SHORT-TERM IN NATURE.
LOAN ADVANCES TO BE ALLOWED AT 100% OF COST SO LONG AS AN OVERALL LOAN BALANCE
TO COLLATERAL PLEDGED IS LESS THAN OR EQUAL TO 80%.
BORROWER SHALL MAINTAIN ITS ACCREDITATION AND MAINTAIN RELATED FINANCIAL
PERFORMANCE RATIOS AS MAY BE REQUIRED.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due on the
Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to perform
when due any other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents, or failure of Borrower to comply
with or to perform any other term, obligation, covenant or condition contained
in any other agreement between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
<PAGE>
09-25-1996
FALSE STATEMENTS. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Borrower or any Grantor under this Agreement or the
Related Documents is false or misleading in any material respect at the time
made or furnished, or becomes false or misleading at any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and for
any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower, any creditor of any Grantor against
any collateral securing the Indebtedness, or by any governmental agency. This
includes a garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
INSECURITY. Lender, in good faith, deems itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
<PAGE>
09-25-1996
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF COLORADO. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF EL PASO COUNTY,
THE STATE OF COLORADO. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR
BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower under this
Agreement shall be joint and several, and all references to Borrower shall mean
each and every Borrower. This means that each of the Borrowers signing below is
responsible for all obligations in this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale or
transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy it may have with respect to such matters Borrower
additionally waives any and all notices of sale of participation interests, as
well as all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loans and will have
all the rights granted under the participation agreement or agreements governing
the sale of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or against
any purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower's obligation under the
Loans irrespective of the failure or insolvency of any holder of any interest in
the Loans. Borrower further agrees that the purchaser of any such participation
interests may enforce its interests irrespective of any personal claims or
defenses that Borrower may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's expenses,
including without limitation attorneys' fees, incurred in connection with the
separation, execution, enforcement, modification and collection of this
Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorneys' fees for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums provided
by law.
NOTICES. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimile, and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid, addressed to
<PAGE>
09-25-1996
the party to whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of the notice
is to change the party's address. To the extent permitted by applicable law, if
there is more than one Borrower, notice to any Borrower will constitute notice
to all Borrowers. For notice purposes, Borrower will keep Lender informed at all
times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provisions of this
agreement to be invalid or unenforceable as to any person or circumstances such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deems to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower" as used herein
shall include all subsidiaries and affiliates of Borrower. Notwithstanding the
foregoing however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or other financial accommodation to any
subsidiary or affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on behalf
of Borrower shall bind its successors and assigns and shall inure to the benefit
of Lender, its successors and assigns. Borrower shall not, however, have the
right to assign its rights under this Agreement or any interest therein, without
the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by Borrower
to Lender under this Agreement shall be considered to have been relied upon by
Lender and will survive the making of the Loan and delivery to Lender of the
Related Documents, regardless of any investigation made by Lender or on Lender's
behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender's rights or of any obligations of Borrower or of any
Grantor as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
SEPTEMBER 25,1996.
<PAGE>
09-25-1996
BORROWER:
SANFORD BROWN COLLEGE, INC., A DELAWARE CORPORATION
By: /S/ BRETT S. COMBS
=====================================================
BRETT S. COMBS, PRESIDENT
By: /S/ RICHARD H. SIEMSEN
====================================================
RICHARD H. SIEMSEN, CHIEF FINANCIAL OFFICER AND
ASSISTANT SECRETARY
LENDER:
BANK ONE, COLORADO, N.A.
By :/S/
====================================================
AUTHORIZED OFFICER
<PAGE>
EXHIBIT 10.28
COMMERCIAL SECURITY AGREEMENT
BORROWER: SANFORD BROWN COLLEGE, INC., LENDER: BANK ONE, COLORADO, N.A.
A DELAWARE CORPORATION COLORADO SPRINGS BUSINESS BANKING
1655 DES PERES RD., STE. 150 30 EAST PIKES PEAK AVENUE
ST. LOUIS, MO 63131 COLORADO SPRINGS, CO 80903
- -------------------------------------------------------------------------------
THIS COMMERCIAL SECURITY AGREEMENT is entered into between SANFORD BROWN
COLLEGE, INC., A DELAWARE CORPORATION (referred to below as "Grantor"); and BANK
ONE, COLORADO, N.A. (referred to below as "Lender"). For valuable consideration,
Grantor grants to Lender a Security Interest in the Collateral to secure the
Indebtedness and agrees that Lender shall have the rights stated in this
Agreement with respect to the Collateral, in addition to all other rights which
Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Security
Agreement from time to time.
COLLATERAL. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
ALL EQUIPMENT
In addition, the word "Collateral" includes all the following, whether now owned
or hereafter acquired, whether now existing or hereafter arising, and wherever
located:
(a) All attachments, accessions, accessories, tools, parts, supplies, increases,
and additions to and all replacements of and substitutions for any property
described above.
(b) All products and produce of any of the property described in this Collateral
section.
(c) All accounts, general intangibles, instruments, rents, monies, payments, and
all other rights, arising out of a sale, lease, or other disposition of any of
the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale, destruction,
loss, or other disposition of any of the property described in this Collateral
section.
(e) All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantor's right, title,
and interest in and to all computer software required to utilize, create,
maintain, and process any such records or data on electronic media.
<PAGE>
09-25-1996
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"Events of Default."
GRANTOR. The word "Grantor" means SANFORD BROWN COLLEGE, INC., A DELAWARE
CORPORATION, its successors and assigns.
GUARANTOR. The word "Guarantor" means and includes without limitation each and
all of the guarantors, sureties, and accommodation parties in connection with
the Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the
Note, including all principal and interest, together with all other indebtedness
and costs and expenses for which Grantor is responsible under this Agreement or
under any of the Related Documents. In addition, the word "Indebtedness"
includes all other obligations, debts and liabilities, plus interest thereon, of
Grantor, or any one or more of them, to Lender, as well as all claims by Lender
against Grantor, or any one or more of them, whether existing now or later;
whether they are voluntary or involuntary, due or not due, direct or indirect,
absolute or contingent, liquidated or unliquidated; whether Grantor may be
liable individually or jointly with others; whether Grantor may be obligated as
guarantor, surety, accommodation party or otherwise; whether recovery upon such
indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may become
otherwise unenforceable.
LENDER. The word "Lender" means BANK ONE, COLORADO, N.A., its successors and
assigns.
NOTE. The word "Note" means the note or credit agreement dated September 25,
1996, in the principal amount of $1,000,000.00 from SANFORD BROWN COLLEGE, INC.,
A DELAWARE CORPORATION to Lender, together with all renewals of, extensions of,
modifications of, refinancing of, consolidations of and substitutions for the
note or credit agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security
interest in and hereby assigns, conveys, delivers, pledges, and transfers all of
Grantor's right, title and interest in and to Grantor's accounts with Lender
(whether checking, savings, or some other account), including all accounts held
jointly with someone else and all accounts Grantor may open in the future,
excluding, however, all IRA and Keogh accounts, and all trust accounts for which
the grant of a security interest would be prohibited by law. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
PERFECTION TO SECURITY INTEREST. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to perfect
and continue Lender's security interest in the Collateral. Upon request of
Lender, Grantor will deliver to Lender any and all of the documents evidencing
or constituting the Collateral, and Grantor will note Lender's interest upon any
and all chattel paper if not delivered to Lender for possession by Lender.
Grantor hereby appoints Lender as its irrevocable attorney-in- fact for the
purpose of executing any documents necessary to perfect or to continue the
security interest granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security interest
in the Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of Grantor.
This is a continuing Security Agreement and will continue in effect even though
all or any part of the Indebtedness is paid in full and even though for a period
of time Grantor may not be indebted to Lender.
NO VIOLATION. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, the Collateral is enforceable in
accordance with its terms, is genuine, and complies with applicable laws
concerning form, content and manner of preparation and execution, and all
persons appearing to obligated on the Collateral have authority and capacity to
contract and are in fact obligated as they appear to be on the Collateral.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Except in the ordinary course of its
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of
Colorado, without the prior written consent of Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral. Grantor shall
not pledge, mortgage, encumber or otherwise permit the Collateral to be subject
to any lien, security interest, encumbrance, or charge, other than the security
interest provided for in this Agreement, without the prior written consent of
Lender. This includes security interests even if junior in right to the security
interests granted under this Agreement. Unless waived by Lender, all proceeds
from any disposition of the Collateral (for whatever reason) shall be held in
trust for Lender and shall not be commingled with any other funds; provided
however, this requirement shall not constitute consent by Lender to any sale or
other disposition. Upon receipt, Grantor shall immediately deliver any such
proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
COLLATERAL SCHEDULES AND LOCATIONS. Insofar as the Collateral consists of
equipment, Grantor shall deliver to Lender, as often as Lender shall require,
such lists, descriptions, and designations of such Collateral as Lender may
require to identify the nature, extent, and location of such Collateral. Such
information shall be submitted for Grantor and each of its subsidiaries or
related companies.
<PAGE>
09-25-1996
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral. Lender
and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever located.
Grantor shall immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any Collateral; of any request
for credit or adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting the Collateral
or the value or the amount of the Collateral.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other charges
that could accrue as a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the contest
proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities, now
or hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral. Grantor may contest in good faith any such law, ordinance
or regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral, in Lender's
opinion, is not jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral never
has been, and never will be so long as this Agreement remains a lien on the
Collateral, used for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., or other applicable state or Federal laws, rules,
or regulations adopted pursuant to any of the foregoing. The terms "hazardous
waste" and "hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for hazardous wastes and substances.
Grantor hereby (a) releases and waives any future claims against Lender for
indemnity or contribution in the event Grantor becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify shall survive the
payment of the Indebtedness and the satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will
<PAGE>
09-25-1996
deliver to Lender from time to time the policies or certificates of insurance in
form satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days' prior written notice to
Lender and not including any disclaimer of the insurer's liability for failure
to give such a notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any way by
any act, omission or default of Grantor or any other person. In connection with
all policies covering assets in which Lender holds or is offered a security
interest, Grantor will provide Lender with such loss payable or other
endorsements as Lender may require. In no event shall the insurance be in an
amount less than the amount agreed upon in the Agreement to Provide Insurance.
If Grantor at any time fails to obtain or maintain any insurance as required
under this Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deems appropriate, including if it so chooses "single
interest insurance," which will cover only Lender's interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce,
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid. If fifteen (15) days before payment is
due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (a) the name of the insurer; (b)
the risks insured; (c) the amount of the policy; (d) the property insured; (e)
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (f) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of the
tangible personal property and beneficial use of all the Collateral and may use
it in any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's security interest in such Collateral. If
Lender at any time has possession of any Collateral, whether before or
<PAGE>
09-25-1996
after an Event of Default, Lender shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral if Lender takes such
action for that purpose as Grantor shall request or as Lender, in Lender's sole
discretion, shall deem appropriate under the circumstances, but failure to honor
any request by Grantor shall not of itself be deemed to be a failure to exercise
reasonable care. Lender shall not be required to take any steps necessary to
preserve any rights in the collateral against prior parties, nor to protect,
preserve or maintain any security interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due on the
indebtedness.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or in any other agreement between Lender and Grantor.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Grantor under this Agreement, the Note or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any time
and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.
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09-25-1996
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
the Collateral or any other collateral securing the Indebtedness. This includes
a garnishment of any of Grantor's deposit accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or such Guarantor dies or becomes
incompetent.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Colorado Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness, including
any prepayment penalty which Grantor would be required to pay, immediately due
and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of Grantor
to take possession of and remove the Collateral. If the Collateral contains
other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in its own name or that
of Grantor. Lender may sell the Collateral at public auction or private sale.
Unless the Collateral threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Lender will give Grantor reasonable
notice of the time after which any private sale or any other intended
disposition of the Collateral is to be made. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days before the
time of the sale or disposition. All expenses relating to the disposition of the
Collateral, including without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall become a part of
the Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall have
the following rights and remedies regarding the appointment of a receiver: (a)
Lender may have a receiver appointed as a matter of right, (b) the receiver may
be an employee of Lender and may serve without bond, and (c) all fees of the
receiver and his or her attorney shall become part of the Indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid. The receiver may be appointed by a court
of competent jurisdiction upon ex parte application and without notice, notice
being expressly waived.
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09-25-1996
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in its discretion transfer any Collateral into its own
name or that of its nominee and receive the payments, rents, income, and
revenues therefrom and hold the same as security for the Indebtedness or apply
it to payment of the Indebtedness in such order of preference as Lender may
determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or similar
property, Lender may demand, collect, receipt for, settle, compromise, adjust,
sue for, foreclose, or realize on the Collateral as Lender may determine,
whether or not Indebtedness or Collateral is then due. For these purposes,
Lender may, on behalf of and in the name of Grantor, receive, open and dispose
of mail addressed to Grantor; change any address to which mail and payments are
to be sent; and endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is a sale of
accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at law, in equity, or
otherwise.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced by
this Agreement or the Related Documents or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation of
Grantor under this Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of Colorado. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of EL PASO County,
State of Colorado. Lender and Grantor hereby waive the right to any jury trial
in any action, proceeding, or counterclaim brought by either Lender or Grantor
against the other. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including attorneys' fees and Lender's legal expenses,
incurred in connection with the enforcement of this Agreement. Lender may pay
someone else to help enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's attorneys'
fees and legal expenses whether or not there is a lawsuit, including attorneys"
fees and legal expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
postjudgment collection services. Grantor also shall pay all court costs and
such additional fees as may be directed by the court.
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09-25-1996
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret to define the provisions
of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Grantor under
this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each of the Borrowers
signing below is responsible for all obligations in this Agreement.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile, and shall be effective when
actually delivered or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address shown
above . Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the purpose
of the notice is to change the party's address. To the extent permitted by
applicable law, if there is more than one Grantor, notice to any Grantor will
constitute notice to all Grantors. For notice purposes, Grantor will keep Lender
informed at all times of Grantor's current address(es).
POWER OF ATTORNEY. Grantor hereby appointed Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing and
payable from the Collateral; (b) execute, sign and endorse any and all claims,
instruments, receipts, checks, drafts or warrants issued in payment for the
Collateral; (c) to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Grantor, to execute and deliver its
release and settlement for the claim; and (d) to file any claim or claims or to
take any action or institute or take part in any proceedings, either in its own
name or in the name of Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable. This power is given a security for the
Indebtedness, and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Lender.
SEVERABILITY. If a court of competent jurisdiction finds any provisions of
this Agreement to be invalid or unenforceable as to any person or circumstance,
such finding shall not render that provision invalid or unenforceable as to any
other persons or circumstances. If feasible, any such offending provision shall
be deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on transfer
of the Collateral, this Agreement shall be binding upon and inure to the benefit
of the parties, their successors and assigns.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's
<PAGE>
09-25-1996
obligations as to any future transactions. Whenever the consent of Lender
is required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
SEPTEMBER 25,1996.
GRANTOR:
SANFORD BROWN COLLEGE, INC., A DELAWARE CORPORATION
By: /S/ BRETT S. COMBS
===================================================
BRETT S. COMBS, PRESIDENT
By: /S/ RICHARD H. SIEMSEN
===================================================
RICHARD H. SIEMSEN, CHIEF FINANCIAL OFFICER AND
ASSISTANT SECRETARY
EXHIBIT 10.29
LOAN AGREEMENT
BORROWER:COLORADO TECHNICAL UNIVERSITY, INC. LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION COLORADO SPRINGS BUSINESS BANKING
4435 N. CHESNUT ST. 30 EAST PIKES PEAK AVENUE
COLORADO SPRINGS, CO 80907 COLORADO SPRINGS, CO 80903
- -------------------------------------------------------------------------------
THIS LOAN AGREEMENT between COLORADO TECHNICAL UNIVERSITY, INC., A COLORADO
CORPORATION ("Borrower") and BANK ONE COLORADO, N.A. ("Lender") is made and
executed on the following terms and conditions. Borrower has received prior
commercial loans from Lender or has applied to Lender for a commercial loan or
loans and other financial accommodations, including those which may be described
on any exhibit or schedule attached to this Agreement. All such loans and
financial accommodations, together with all future loans and financial
accommodations from Lender to Borrower, are referred to in this Agreement
individually as the "Loan" and collectively as the "Loans." Borrower understands
and agrees that: (a) in granting, renewing, or extending any Loan, Lender is
relying upon Borrower's representations, warranties, and agreements, as set
forth in this Agreement; (b) the granting, renewing, or extending of any Loan by
Lender at all times shall be subject to Lender's sole judgment and discretion;
and (c) all such Loans shall be and shall remain subject to the following terms
and conditions of this Agreement.
TERM. This Agreement shall be effective as of August 2, 1996, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Loan Agreement, as this Loan
Agreement may be amended or modified from time to time, together with all
exhibits and schedules attached to this Loan Agreement from time to time.
ACCOUNT. The word "Account" means a trade account, account receivable, or other
right to payment for goods sold or services rendered owing to Borrower (or to a
third party grantor acceptable to Lender).
ACCOUNT DEBTOR. The words "Account Debtor" mean the person or entity
obligated upon an Account.
ADVANCE. The word "Advance" means a disbursement of Loan funds under this
Agreement.
BORROWER. The word "Borrower" means COLORADO TECHNICAL UNIVERSITY, INC., A
COLORADO CORPORATION. The word "Borrower" also includes, as applicable, all
subsidiaries and affiliates of Borrower as provided below in the paragraph
titled "Subsidiaries and Affiliates."
BORROWING BASE. The words "Borrowing Base" mean, as determined by Lender from
time to time, the lesser of (a) $1,300,000.00; or (b) 80.000% of the aggregate
amount of Eligible Accounts.
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08-05-96
BUSINESS DAY. The words "Business Day" mean a day on which commercial banks
are open for business in the State of Colorado.
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
COLLATERAL. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted now
or in the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise. The word "Collateral. includes without limitation
all collateral described below in the section titled "COLLATERAL."
DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ELIGIBLE ACCOUNTS. The words "Eligible Accounts" mean, at any time, all of
Borrowers Accounts which contain selling terms and conditions acceptable to
Lender. The net amount of any Eligible Account against which Borrower may borrow
shall exclude all returns, discounts, credits, and offsets of any nature. Unless
otherwise agreed to by Lender in writing, Eligible Accounts do not include:
(a) Accounts with respect to which the Account Debtor is an officer, an employee
or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary of, or
affiliated with or related to Borrower or its shareholders, officers, or
directors.
(c) Accounts with respect to which goods are placed on consignment, guaranteed
sale, or other terms by reason of which the payment by the Account Debtor may be
conditional.
(d) Accounts with respect to which Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the Account Debtor to
Borrower.
(e) Accounts which are subject to dispute, counterclaim, or setoff.
(f) Accounts with respect to which the goods have not been shipped or delivered,
or the services have not been rendered, to the Account Debtor.
(g) Accounts with respect to which Lender, in its sole discretion, deems the
credit worthiness or financial condition of the Account Debtor to be
unsatisfactory.
(h) Accounts of any Account Debtor who has filed or has had filed against it a
petition in bankruptcy or an application for relief under any provision of any
state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has
had appointed a trustee, custodian, or receiver for the assets of such Account
Debtor; or who has made an assignment for the benefit of creditors or has become
insolvent or fails generally to pay its debts(including its payrolls) as such
debts become due.
08-05-96
(i) Accounts with respect to which the Account Debtor is the United States
government or any department or agency of the United States.
(j) Accounts which have not been paid in full within 90 from the invoice date.
ERISA. The word "ERISA" means the Employee Retiremen Income Security Act of
1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"EVENTS OF DEFAULT."
EXPIRATION DATE. The words "Expiration Date" mean the date of termination
of Lender's commitment to lend under this Agreement.
GRANTOR. The word "Grantor" means and includes without limitation each and all
of the persons or entities granting a Security Interest in any Collateral for
the Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in connection
with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without limitation all
Loans, together with all other obligations, debts and liabilities of Borrower to
Lender, or any one or more of them, as well as all claims by lender against
borrower, or any one or more of them; whether now or hereafter existing,
voluntary or involuntary, due or not due, absolute or contingent, liquidated or
unliquidated; whether borrower may be liable individually or jointly with
others; whether Borrower may be obligated as a guarantor, surety, or otherwise;
whether recovery upon such Indebtedness may be or hereafter may become barred by
any statute of limitations; and whether such Indebtedness may be or hereafter
may become otherwise unenforceable.
LENDER. The word " Lender" means Bank One, Colorado, N.A., its successors
and assigns.
LINE OF CREDIT. The words "Line of Credit" mean the credit facility
described in the Section titled "LINE OF CREDIT" below.
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
LOAN. The word "Loan" or "Loans" means and includes without limitation any and
all commercial loans and financial accommodations from Lender to Borrower,
whether now or hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations described herein or
described on any exhibit or schedule attached to this Agreement form time to
time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note or
notes therefor.
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08-05-96
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender, (b) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith; (c) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (d) purchase money liens or purchase money
security interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (e) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA. means the Superfund Amendments and Reauthorization Act of
1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinate Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement to
indebtedness owed by Borrower to Lender in form and substance acceptable to
Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's total assets
excluding all intangible assets (i.e., goodwill, trademarks, patents,
copyrights, organizational expenses, and similar intangible items, but including
leaseholds and leasehold improvements) less total Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current assets,
excluding prepaid expenses, less Borrower's current liabilities.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make any Advance to
or for the account of Borrower under this Agreement is subject to the following
conditions precedent, with all documents, instruments, opinions, reports, and
other items required under this Agreement to be in form and substance
satisfactory to Lender
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08-05-96
(a) Lender shall have received evidence that this Agreement and all Related
Documents have been duly authorized, executed, and delivered by Borrower to
Lender.
(b) Lender shall have received such opinions of counsel, supplemental opinions,
and documents as Lender may request.
(c) The security interests in the Collateral shall have been duly authorized,
created, and perfected with first lien priority and shall be in full force and
effect.
(d) All guaranties required by Lender for the Line of Credit shall have been
executed by each Guarantor, delivered to Lender, and be in full force and
effect.
(e) Lender, at its option and for its sole benefit, shall have conducted an
audit of Borrower's Accounts, books, records, and operations, and Lender shall
be satisfied as to their condition.
(f) Borrower shall have paid to Lender all fees, costs, and expenses specified
in this Agreement and the Related Documents as are then due and payable.
(g) There shall not exist at the time of any Advance a condition which would
constitute an Event of Default under this Agreement, and Borrower shall have
delivered to Lender the compliance certificate called for in the paragraph below
titled "Compliance Certificate.
MAKING LOAN ADVANCES. Advances under the Line of Credit may be requested orally
by authorized persons. Lender may, but need not, require that all oral requests
be confirmed in writing. Each Advance shall be conclusively deemed to have been
made at the request of and for the benefit of Borrower (a) when credited to any
deposit account of Borrower maintained with Lender or (b) when advanced in
accordance with the instructions of an authorized person. Lender, at its option,
may set a cutoff time, after which all requests for Advances will be treated as
having been requested on the next succeeding Business Day.
MANDATORY LOAN REPAYMENTS. If at any time the aggregate principal amount of the
outstanding Advances shall exceed the applicable Borrowing Base, Borrower,
immediately upon written or oral notice from Lender, shall pay to Lender an
amount equal to the difference between the outstanding principal balance of the
Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to
Lender in full the aggregate unpaid principal amount of all Advances then
outstanding and all accrued unpaid interest, together with all other applicable
fees, costs and charges, if any, not yet paid.
LOAN ACCOUNT. Lender shall maintain on its books a record of account in which
Lender shall make entries for each Advance and such other debits and credits as
shall be appropriate in connection with the credit facility. Lender shall
provide Borrower with periodic statements of Borrower's account, which
statements shall be considered to be correct and conclusively binding on
Borrower unless Borrower notifies Lender to the contrary within thirty (30) days
after Borrower's receipt of any such statement which Borrower deems to be
incorrect.
COLLATERAL. To secure payment of the Line of Credit and performance of all
other Loans, obligations and duties owed by Borrower to Lender Borrower (and
others, if required) shall grant to Lender Security Interests
<PAGE>
08-05-96
in such property and assets as Lender may require (the "Collateral"), including
without limitation Borrower's present and future accounts and general
intangibles. Lender's Security Interests in the Collateral shall be continuing
liens and shall include the proceeds and products of the Collateral, including
without limitation the proceeds of any insurance. With respect to the
Collateral, Borrower agrees and represents and warrants to Lender:
PERFECTION OF SECURITY INTERESTS. Borrower agrees to execute such financing
statements and to take whatever other actions are requested by Lender to perfect
and continue Lender's Security Interests in the Collateral. Upon request of
Lender, Borrower will deliver to Lender any and all of the documents evidencing
or constituting the Collateral, and Borrower will note Lender's interest upon
any and all chattel paper if not delivered to Lender for possession by Lender.
Contemporaneous with the execution of this Agreement, Borrower will execute one
or more UCC financing statements and any similar statements as may be required
by applicable law, and will file such financing statements and all such similar
statements in the appropriate location or locations. Borrower hereby appoints
Lender as its irrevocable attorney-in-fact for the purpose of executing any
documents necessary to perfect or to continue any Security Interest. Lender may
at any time, and without further authorization from Borrower, file a carbon,
photograph, facsimile, or other reproduction of any financing statement for use
as a financing statement. Borrower will reimburse Lender for all expenses for
the perfection, termination, and the continuation of the perfection of Lender's
security interest in the Collateral. Borrower promptly will notify Lender of any
change in Borrower's name including any change to the assumed business names of
Borrower. Borrower also promptly will notify Lender of any change in Borrower's
Social Security Number or Employer Identification Number. Borrower further
agrees to notify Lender in writing prior to any change in address or location of
Borrower's principal governance office or should Borrower merge or consolidated
with any other entity.
COLLATERAL SCHEDULES. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender a schedule of Accounts
and Eligible Accounts, in form and substance satisfactory to the Lender.
Thereafter and at such frequency as Lender shall require, Borrower shall execute
and deliver to Lender such supplemental schedules of Eligible Accounts and such
other matters and information relating to Borrower's accounts a Lender may
request.
REPRESENTATIONS AND WARRANTIES CONCERNING ACCOUNTS.With respect to the Accounts,
Borrower represents and warrants to Lender: (a) each Account represented by
Borrower to be an Eligible account for purposes of thus Agreement conforms to
the requirements of the definition of an Eligible Account; (b) All Account
information listed on schedules delivered to Lender will be true and correct,
subject to immaterial variance; and (c) Lender, its assigns, or agents shall
have the right at any time and at borrower's expense to inspect, examine, and
audit Borrower's records and to confirm with account debtors the accuracy of
such Accounts.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Colorado and is
validly existing and in good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own its properties and to
transact the businesses in which it is presently engaged or presently proposes
to engage. Borrower also is duly qualified as a foreign corporation and is in
goodstanding in all states in which the failure to so qualify would have a
material adverse effect on its businesses or financial condition.
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08-05-96
AUTHORIZATION. The execution, delivery, and performance of this Agreement and
all Related Documents by Borrower, to the extent to be executed, delivered or
performed by Borrower, have been duty authorized by all necessary action by
Borrower; do not require the consent or approval of any other person, regulatory
authority or governmental body; and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its articles of
incorporation or organization, u bylaws, or any agreement or other instrument
binding upon Borrower or (b) any law governmental regulation, court decree, or
order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to Lender
truly and completely disclosed Borrowers financial condition as of the date of
the statement, and there has been no material adverse change in Borrowers
financial condition subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material contingent obligations
except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
PROPERTIES. Except for Permitted Liens, Borrower owns and has good title to all
of Borrower's properties free and clear of all Security Interests and has not
executed any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal name,
and Borrower has not used, or filed a financing statement under, any other name
for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal, "release," and "threatened release," as used in this Agreement, shall
have the same meanings as set forth in the "CERCLA," SARA, the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and acknowledged by Lender in writing,
Borrower represents and warrants that: (a) During the period of Borrowers
ownership of the properties, there has been no use, generation, manufacture,
storage treatment, disposal, release or threatened release of any hazardous
waste or substance by any person on, under, about or from any of the properties.
(b) Borrower has no knowledge of, or reason to believe that there has been (i)
any use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on, under, about or from
the properties by any prior owners or occupants of any of the properties, or
(ii) any actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent
or other authorized user of any of the properties shall use, generate,
manufacture, store, treat dispose of, or release any hazardous waste or
substance on, under, about or from any of the properties; and any such activity
shall be conducted in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above. Borrower authorizes Lender and its
agents to enter upon the properties to make such inspections and tests as Lender
may deem appropriate to determine compliance of the properties with this section
of the Agreement. Any inspections or tests made by Lender shall be at Borrowers
expense and for Lenders purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any other
person. The representations and warranties contained herein are based on
Borrower's due diligence in investigating the properties for hazardous waste and
hazardous substances. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower becomes
liable for cleanup w other costs under any such laws, and (b) agrees to
indemnify and
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08-05-96
hold harmless Lender against any and all claims, losses, liabilities, damages,
penalties, and expenses which Lender may directly or indirectly sustain or
suffer resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal, release w
threatened release occurring prior to Borrowers ownership or interest in the
properties, whether or not the same was or should have been known to Borrower.
The provisions of this section of the Agreement, including the obligation to
indemnify, shall survive the payment of the Indebtedness and the termination or
expiration of this Agreement and shall not be affected by Lenders acquisition of
any interest in any of the properties, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrowers financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and
Note, that would be prior or that may in any way be superior to Lenders Security
Interests and rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements directly or
indirectly securing repayment of Borrower's Loan and Note and all of the Related
Documents are binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance with
their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may have
any liability complies in all material respects with all applicable requirements
of law and regulations, and (i) no Reportable Event nor Prohibited Transaction
(as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower
has not withdrawn from any such plan or initiated steps to do so, (iii) no steps
have been taken to terminate any such plan, and (iv) there are no unfunded
liabilities other than those previously disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business, or
Borrower's chief executive office, if Borrower has more than one place of
business, is located at 4435 N. CHESNUT ST, COLORADO SPRINGS, CO 80907. Unless
Borrower has designated otherwise in writing this location is also the office or
offices where Borrower keeps its records concerning the Collateral.
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08-05-96
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Borrower to Lender will be, true and
accurate in every material respect on the date as of which such information is
dated or certified; and none of such information is or will be incomplete by
omitting to state any material fact necessary to make such information not
misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees that
Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower. Borrower
further agrees that the foregoing representations and warranties shall be
continuing in nature and shall remain in full force and effect until such time
as Borrower's Indebtedness shall be paid in full, or until this Agreement shall
be terminated in the manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that,
while this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of any
Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with generally
accepted accounting principles, applied on a consistent basis, and permit Lender
to examine and audit Borrower's books and records at all reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no event
later than one hundred twenty (120) days after the end of each fiscal year,
Borrower's balance sheet and income statement for the year ended, audited by a
certified public accountant satisfactory to Lender, and, as soon as available,
but in no event later than thirty (30) days after the end of each month,
Borrower's balance sheet and profit and loss statement for the period ended,
prepared and certified as correct to the best knowledge and belief by Borrower's
chief financial officer or other officer or person acceptable to Lender. All
financial reports required to be provided under this Agreement shall be prepared
in accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as Lender may request
from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and ratios:
TANGIBLE NET WORTH. Maintain a minimum tangible Net Worth of not less than
$1,750,000.00. Except as provided above, all computations made to determine
compliance with the requirements contained in this paragraph shall be made in
accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
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08-05-96
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that coverages
will not be cancelled or diminished without at least ten (10) days' prior
written notice to Lender. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired in
any way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or is offered
a security interest for the Loans, Borrower will provide Lender with such loss
payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy (d) the properties
insured, (e) the then current properly values on the basis of which insurance
has been obtained, and the manner of determining those values; and (f) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.
LIFE INSURANCE. As soon as practical, obtain and maintain life insurance in form
and with insurance companies reasonably acceptable to Lender on the following
individual in the amount indicated below and, at Lender's option, cause such
insurance coverage to be pledged, made payable to, or assigned to Lender on
Lender's forms. Lender, at its discretion, may apply the proceeds of any
insurance policy to the unpaid balances of any Indebtedness:
Name of Insured Amount
DAVID D. O'DONNELL $500,000.00
GUARANTIES. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, on Lender's forms, and in the amount
and by the guarantor named below:
Guarantor Amount
M.DJB., INC., A DELAWARE CORPORATION Unlimited
OTHER AGREEMENTS. Comply with all terms and conditions of all other agreements,
whether now or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (a) the legality of the same shall be
contested in good faith by appropriate proceedings, and (b) Borrower shall have
established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with generally
accepted accounting
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08-05-96
practices. Borrower, upon demand of Lender, will furnish to Lender evidence of
payment of the assessments, taxes, charges, levies, liens and claims and will
authorize the appropriate government official to deliver to Lender at any time a
written statement of any assessments, taxes, charges, levies, liens and claims
against Borrower's properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions set
forth in this Agreement and in the Related Documents in a timely manner, and
promptly notify Lender If Borrower learns of the occurrence of any event which
constitutes an Event of Default under this Agreement or under any of the Related
Documents.
OPERATIONS. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee benefit
plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
monthly with a certificate executed by Borrower's chief financial officer, or
other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and correct
as of the date of the certificate and further certifying that, as of the date of
the certificate, no Event of Default exits under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects
with all environmental protection federal, state and local laws statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure the Loans and to perfect all Security
Interests.
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08-05-96
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal course
of business and indebtedness to Lender contemplated by this Agreement, create,
incur or assume indebtedness for borrowed money, including capital leases,
except as indicated in attached "Exhibit A"; (b) except as allowed as a
Permitted Lien, sell, transfer, mortgage, assign, pledge, lease, grant a
security interest in, or encumber any of Borrower's assets, or (c) sell with
recourse any of Borrower's accounts, except to Lender. Borrower may sell up to
$20,000 in fixed assets in the normal course of business.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock (other than dividends payable in its stock), provided, however
that notwithstanding the foregoing, but only so long as no Event of Default has
occurred and is continuing or would result from the payment of dividends, if
borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue
Code of 1986, as amended), Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the shareholders
to pay income taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their status as
shareholders of a Subchapter Corporation because of their ownership of shares of
stock of Borrower.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise or
entity, or (c) incur any obligation as surety or guarantor other than in the
ordinary course of business without prior written consent of Lender.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender.
EXHIBIT "A". An exhibit, titled "EXHIBIT A", is attached to this Agreement and
by this reference is made a part of this Agreement just as if all the
provisions, terms and conditions of the Exhibit had been fully set forth in this
Agreement.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation alt accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable taw, to charge or setoff all sums owing on the indebtedness against
any and all such accounts.
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08-05-96
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due
on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to perform
when due any other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents, or failure of Borrower lo comply
with or to perform any other term, obligation, covenant or condition contained
in any other agreement between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person that
may materially affect any of Borrower's property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Borrower or any Grantor under this Agreement or the
Related Documents is false or misleading in any material respect at the time
made or furnished, or becomes false or misleading at any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and for
any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help repossession or any other
method, by any creditor of Borrower, any creditor of any Grantor against any
collateral securing the Indebtedness, or by any governmental agency. This
includes a garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to
any Guarantor of any of the indebtedness or any Guarantor dies or revokes or
disputes the validity of, or liability under, any Guaranty of the Indebtedness.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
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08-05-96
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances w disbursements). and, at Lenders option, all indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "insolvency" subsection above, such acceleration shall be automatic and
not optional In addition, Lender shall have all the rights and remedies provided
in the Related Documents or available at law, in equity, or otherwise. Except as
may be prohibited by applicable law, all of Lender's rights and remedies shall
be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy, and
an election to make expenditures or to take action to perform an obligation of
Borrower or of any Grants shall not affect Lender's right to declare a default
and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender tn the State of Colorado. It there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of EL PASO County,
the State of Colorado. Lender and Borrower hereby waive the right to any jury
trial. In any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other. This Agreement shall be governed by and construed in
accordance with the taws of the State of Colorado.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale or
transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever to any one or more purchasers, or
potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation interests, as
well as all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loans and will have
all the rights granted under the participation agreement or agreements governing
the sale of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or against
any purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower's obligation under the
Loans irrespective of the failure or insolvency of any holden of any interest in
the Loans.
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08-05-96
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lenders
expenses, including without limitation attorneys' fees, incurred in connection
with the preparation, execution, enforcement, modification and collection of
this Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorneys' fees for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated postjudgment collection services.
Borrower also will pay any court costs, in addition to all other sums provided
by law.
NOTICES. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimile, and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid, addressed to
the party to whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of the notice
is to change the party's address. To the extent permitted by applicable law, if
there is more than one Borrower, notice to any Borrower will constitute notice
to all Borrowers. For notice purposes, Borrower will keep Lender informed at all
times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower" as used herein
shall include all subsidiaries and affiliates of Borrower. Notwithstanding the
foregoing, however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or other financial accommodation to any
subsidiary or affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on behalf
of Borrower shall bind its successors and assigns and shall inure to the benefit
of Lender, its successors and assigns. Borrower shall not, whoever, have the
right to assign its rights under this Agreement or any interest therein, without
the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by borrower
to Lender under this Agreement shall be considered to have been relied upon by
lender and will survive the making of the Loan and delivery to Lender of the
Related Documents, regardless of any investigation made by Lender or on Lender's
behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender s right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing
<PAGE>
08-05-96
between Lender and Borrower, or between Lender and any Grantor, shall constitute
a waiver of any of Lender's rights or of any obligations of Borrower or of any
Grantor as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
AUGUST 5, 1996.
BORROWER:
COLORADO TECHNICAL UNIVERSITY, INC., A COLORADO CORPORATION
By: /s/ DAVID D. O'DONNELL
============================================================
DAVID D. O'DONNELL, PRESIDENT AND CHAIRMAN OF THE BOARD
LENDER:
BANK ONE, COLORADO, N.A.
By: /S/ NANETTE STRANSBURGER
===========================================================
AUTHORIZED OFFICER
<PAGE>
8-05-96
EXHIBIT "A"
References in the shaded area are for Lender's use only and do not, limit the
applicability of this document to any particular loan or item.
BORROWER:COLORADO TECHNICAL UNIVERSITY, INC. LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION COLORADO SPRINGS BUSINESS BANKING
4435 N. CHESNUT ST. 30 EAST PIKES PEAK AVENUE
COLORADO SPRINGS, CO 80907 COLORADO SPRINGS, CO 80903
- -------------------------------------------------------------------------------
This EXHIBIT "A" is attached to and by this reference is made a part of each
Business Loan Agreement or Negative Pledge Agreement, dated August 5, 1996, and
executed in connection with a loan or other financial accommodations between
Bank One, Colorado, N.A. and Colorado Technical University, Inc., a Colorado
corporation.
BORROWER SHALL PROVIDE MONTHLY ACCOUNTS RECEIVABLE AGINGS AND MONTHLY BORROWING
BASE REPORTS WITHIN 30 DAYS OF MONTH-END.
M.D.J.B., INC. SHALL PROVIDE ANNUAL AUDITED STATEMENTS IN FORM AND CONTENT
SATISFACTORY TO BANK, WITHIN 120 DAYS OF YEAR-END.
WHITMAN EDUCATION GROUP, INC. SHALL PROVIDE QUARTERLY STATEMENTS IN FORM AND
CONTENT SATISFACTORY TO BANK, WITHIN 60 DAYS OF QUARTER-END, AND ANNUAL AUDITED
STATEMENTS IN FORM AND CONTENT SATISFACTORY TO BANK, WITHIN 120 DAYS OF
YEAR-END. FORM 10-Q AND 10-K WILL BE ACCEPTABLE.
BORROWER SHALL MAINTAIN A MINIMUM ACID TEST RATIO OF 1.0 TO 1.0 , TESTED
ANNUALLY, MIRRORING DEPARTMENT OF EDUCATION REQUIREMENT.
NO INCREASE IN DEBT/LEASES GRATER THAN $75,000.00 OUTSIDE OF CREDIT FACILITIES
PROVIDED FOR IN THIS LETTER, OTHER THAN IN THE NORMAL COURSE OF BUSINESS,
WITHOUT PRIOR WRITTEN APPROVAL OF BANK.
MINIMUM DEBT COVERAGE RATIO OF 1.5 TIMES. DEBT COVERAGE RATIO SHALL BE DEFINED
AS NET INCOME PLUS DEPRECIATION DIVIDED BY CURRENT MATURITIES OF LONG TERM DEBT
PLUS INTEREST EXPENSE TESTED QUARTERLY WITHIN 30 DAYS OF MONTH- END.
CHANGE IN CONTROL/OWNERSHIP OF WHITMAN EDUCATION GROUP, INC. SHALL PROVIDE
THE BANK THE OPTION TO CALL AND/OR RENEGOTIATE THE LOANS TO COLORADO
TECHNICAL UNIVERSITY, INC. IN ADDITION, BORROWER SHALL HAVE NO SIGNIFICANT
CHANGES IN MANAGEMENT WITHOUT PRIOR WRITTEN CONSENT OF BANK. "SIGNIFICANT
<PAGE>
08-05-96
CHANGES IN MANAGEMENT" SHALL MEAN WITH RESPECT TO DAVID D. O'DONNELL AND
DAVID OXENHANDLER.
BORROWING BASE: THE OUTSTANDING PRINCIPAL AMOUNTS OF THE LINE OF CREDIT SHALL BE
LIMITED TO THE LESSER OF ONE MILLION THREE HUNDRED THOUSAND DOLLARS OR THE SUM
OF THE FOLLOWING: 80% OF TOTAL TRADE RECEIVABLES LESS THAN NINETY DAYS PAST DUE.
SUCH CALCULATION SHALL BE SUBMITTED TO LENDER WITH THE ABOVE MENTIONED REPORTS
MONTHLY, AND SHALL BE CALLED A BORROWING BASE CERTIFICATE.
BORROWER SHALL MAINTAIN ITS ACCREDITATION BY THE NORTH CENTRAL ASSOCIATION OF
COLLEGES AND SCHOOLS COMMISSION.
NO DIVIDENDS BY M.D.J,B., INC. WITHOUT PRIOR WRITTEN PERMISSION OF BANK.
PAYMENT OF UP TO 35% OF M.D.J.B., INC. INCOME BEFORE TAX TO WHITMAN EDUCATION
GROUP, INC. ALLOWED FOR PAYMENT OF TAXES.
THE LINE OF CREDIT SHALL HAVE A ZERO (0) PRINCIPAL BALANCE FOR THIRTY (30)
CONSECUTIVE DAYS DURING THE TERM OF THE LOAN.
THE LINE OF CREDIT MAY BE CANCELLED AT THE SOLE DISCRETION OF LENDER IF THERE
ARE ANY FILINGS OR ANY LITIGATION WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT ON
BORROWER.
THIS EXHIBIT "A" IS EXECUTED ON AUGUST 5, 1996.
By: /s/ DAVID D. O'DONNELL
=========================================================
DAVID D. O'DONNELL, PRESIDENT AND CHAIRMAN OF THE BOARD
LENDER:
BANK ONE, COLORADO, N.A.
By: /S/ NANETTE STRANSBURGER
=========================================================
AUTHORIZED OFFICER
<PAGE>
EXHIBIT 10.30 - SCHEDULE
SCHEDULE OF PROMISSORY NOTES
MADE BY COLORADO TECHNICAL UNIVERSITY, INC.
IN FAVOR OF BANK ONE, COLORADO, N.A.
<TABLE>
<CAPTION>
Date Principal Amount Interest Rate Payment Terms
<S> <C> <C> <C>
08/05/96 $435,000 9.00% (i) Six monthly interest payments; (ii)
34 monthly principal and interest
payments of $9,053.94; and (iii) a final
payment of $214,469.81 in January
2000
08/05/96 $600,000 8.875% (i) Six monthly interest payments; (ii)
34 monthly principal and interest
payments of $19,072; and (iii) a final
payment of $38,001 in January 2000
08/05/96 $1,300,000 (Revolver) Variable at Lender's Due in full on May 30, 1998
prime, initially 8.25%
12/26/96 $2,000,000 Variable at Lender's Due in full on May 30, 1998
(Increasing the prime, initially 8.25%
$1,300,000 Revolver)
02/20/97 $200,000 8.875% 60 payments of $4,145 through
February 15, 2002
</TABLE>
EXHIBIT 10.30
FORM OF
PROMISSORY NOTE
BORROWER: COLORADO TECHNICAL UNIVERSITY, INC. LENDER:BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION COLORADO SPRINGS BUSINESS BANKING
4435 N. CHESNUT ST. 30 EAST PIKES PEAK AVENUE
COLORADO SPRINGS, CO 80907 COLORADO SPRINGS, CO 80903
- -------------------------------------------------------------------------------
Principal Amount:$-------- Initial Rate:-----% Date of Note: -------, 199--
PROMISE TO PAY. COLORADO TECHNICAL UNIVERSITY, INC., A COLORADO CORPORATION
("Borrower") promises to pay to BANK ONE, COLORADO, N.A. ("Lender"), or order,
in lawful money of the United States of America, the principal amount of
- -------------------- ($-------------) or so much as may be outstanding, together
with interest on the unpaid outstanding principal balance of each advance.
Interest shall be calculated from the date of each advance until repayment of
each advance. The interest rate will not increase above 11.000%.
PAYMENT. Borrower will pay this loan in --------------------------------------
Interest on this Note is computed on a 365/360 simple interest basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the LENDER'S DAILY PRIME RATE
(the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS ANNOUNCED BY THE
LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY GIVEN TIME, THE LENDER
MAY MAKE LOANS, AT, ABOVE, OR BELOW ITS PRIME RATE. Lender will tell Borrower
the current Index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will not
occur more often than each day. The Index currently is 8.250% per annum. The
interest rate to be applied to the unpaid principal balance of this Note will be
at a rate equal to the Index, adjusted if necessary for the minimum and maximum
rate limitations described below, resulting in an initial rate of 8.250% per
annum. Notwithstanding any other provision of this Note, the variable interest
rate or rates provided for in this Note will be subject to the following minimum
and maximum rates. NOTICE: Under no circumstances will the interest rate on this
Note be less than 6.000% per annum or more than (except for any higher default
rate shown below) the lesser of 11.000% per annum or the maximum rate allowed by
applicable law.
<PAGE>
FORM OF PROMISSORY NOTE
(Continued)
REPAYMENT. MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and other
prepaid finance charges are earned fully as of the date of the loan and will not
be subject to refund upon early payment (whether voluntary or as a result of
default), except as otherwise required by law. In any event, even upon full
prepayment of this Note, Borrower understands that Lender is entitled to a
minimum interest charge of $25.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(9) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, Lender believes the
prospect of payment or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 25.000% per annum, and (b) add any unpaid accrued
interest to principal and such sum will bear interest therefrom until paid at
the rate provided in this Note (including any increased rate). The interest rate
will not exceed the maximum rate permitted by applicable law. Lender may hire or
pay someone else to help collect this Note if Borrower does not pay. Borrower
also will pay Lender that amount. This includes, subject to any limits under
applicable law, Lender's attorneys' fees and Lender's legal expenses whether or
not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection services.
If not prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Colorado. It there is a lawsuit,
Borrower agrees Upon Lender's request to submit to the jurisdiction of the
courts of EL PASO County, the State of Colorado. Lender and Borrower hereby
waive the right to any jury trial in any action, proceeding, or counterclaim
brought by either Lender or Borrower against the other. This Note shall be
governed by and construed in accordance with the laws of the State of Colorado.
<PAGE>
FORM OF PROMISSORY NOTE
(Continued)
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. The following party or
parties are authorized to request advances under the line of credit until Lender
receives from Borrower at Lender's address shown above written notice of
revocation of their authority: DAVID D. O'DONNELL, CHAIRMAN OF THE BOARD &
PRESIDENT. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
Borrower's accounts with Lender. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (e) Lender in good faith
deems itself insecure under this Note or any other agreement between Lender and
Borrower.
EXHIBIT "A". An exhibit, titled "EXHIBIT "A" is attached to this Note and by
this reference is made a part of this Note just a if all the provisions, terms
and conditions of the Exhibit had been fully set forth in this Note.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, wive
presentment demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
releases any party or guarantor or collateral; or impair, fail to realize upon
or perfect Lender's security interest in the collateral; and take any other
action deemed necessary by Lender without the consent of or notice to anyone.
All such parties also agree that Lender my modify this loan without the consent
or notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
<PAGE>
FORM OF PROMISSORY NOTE
(Continued)
BORROWER:
COLORADO TECHNICAL UNIVERSITY, INC., A COLORADO CORPORATION
By: /s/ DAVID D. O'DONNELL
===========================================================
DAVID D. O'DONNELL, PRESIDENT AND CHAIRMAN OF THE BOARD
<PAGE>
EXHIBIT "A"
BORROWER: COLORADO TECHNICAL UNIVERSITY, INC. LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION COLORADO SPRINGS BUSINESS BANKING
4435 N. CHESNUT ST. 30 EAST PIKES PEAK AVENUE
COLORADO SPRINGS, CO 80907 COLORADO SPRINGS, CO 80903
- ------------------------------------------------------------------------------
This EXHIBIT A is attached to and by this reference is made a part of each
Promissory Note or Credit Agreement, dated December 26,1996, and executed in
connection with a loan or other financial accommodations between BANK ONE,
COLORADO, N.A. and COLORADO TECHNICAL UNIVERSITY, INC., A COLORADO CORPORATION.
IF ANY DEFAULT, OTHER THAN A DEFAULT IN PAYMENT, IS CURABLE AND IF BORROWER HAS
NOT BEEN GIVEN A NOTICE OF A BREACH OF THE SAME PROVISION OF THIS NOTE WITHIN
THE PRECEDING TWELVE (12) MONTHS, IT MAY BE CURED (AND NO EVENT OF DEFAULT WILL
HAVE OCCURRED) IF BORROWER, AFTER RECEIVING WRITTEN NOTICE FROM LENDER DEMANDING
CURE OF SUCH DEFAULT: (A) CURES THE DEFAULT WITHIN FIFTEEN (15) DAYS; OR (B) IF
THE CURE REQUIRES MORE THAN FIFTEEN (15) DAYS, IMMEDIATELY INITIATES STEPS WHICH
LENDER DEEMS IN LENDERS SOLE DISCRETION TO BE SUFFICIENT TO CURE THE DEFAULT AND
THEREAFTER CONTINUES AND COMPLETES ALL REASONABLE AND NECESSARY STEPS SUFFICIENT
TO PRODUCE COMPLIANCE AS SOON AS REASONABLY PRACTICAL.
THIS EXHIBIT A IS EXECUTED ON DECEMBER 26,1996.
COLORADO TECHNICAL UNIVERSITY, INC., A COLORADO CORPORATION
By: /s/ DAVID D. O'DONNELL
=======================================================
DAVID D. O'DONNELL, PRESIDENT AND CHAIRMAN OF THE BOARD
LENDER:
BANK ONE, COLORADO, FLA.
By: /s/
======================================================
AUTHORIZED OFFICER
EXHIBIT 10.31 - SCHEDULE
SCHEDULE OF COMMERCIAL SECURITY AGREEMENTS
BY AND BETWEEN
COLORADO TECHNICAL UNIVERSITY, INC. AND BANK ONE, COLORADO, N.A.
LOAN AMOUNT
DATE SECURED COLLATERAL
========= ============= ===============================================
08/05/96 $435,000 Accounts, chattel paper, general intangibles,
inventory, equipment and fixtures and leasehold
improvements of the Colorado Technical
University Denver campus
08/05/96 $600,000 Accounts, chattel paper, general intangibles,
inventory, equipment and fixtures and leasehold
improvements of the Colorado Technical University
Denver campus
08/05/96 $1,300,000 Inventory, chattel paper, accounts, equipment
and general intangibles
12/26/96 $2,000,000 Inventory, chattel paper, accounts, equipment
(increasing and general intangibles
$1,300,000 loan)
02/20/97 $200,000 Equipment, vehicle
<PAGE>
EXHIBIT 10.31
FORM OF
COMMERCIAL SECURITY AGREEMENT
BORROWER:COLORADO TECHNICAL UNIVERSITY, INC. LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION COLORADO SPRINGS BUSINESS BANKING
4435 N. CHESNUT ST. 30 EAST PIKES PEAK AVENUE
COLORADO SPRINGS, CO 80907 COLORADO SPRINGS, CO 80903
- -------------------------------------------------------------------------------
THIS COMMERCIAL SECURITY AGREEMENT is entered into between COLORADO TECHNICAL
UNIVERSITY, INC., A COLORADO CORPORATION (referred to below as Grantor ); and
BANK ONE, COLORADO, N.A. (referred to below as Lender ). For valuable
consideration, Grantor grants to Lender a security interest in the Collateral to
secure the Indebtedness and agrees that Lender shall have the rights stated in
this Agreement with respect to the Collateral, in addition to all other rights
which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word Agreement means this Commercial Security Agreement, as this
Commercial Security Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Security
Agreement from time to time.
COLLATERAL. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
All inventory, chattel paper, accounts, equipment and general Intangibles
In addition, the word Collateral includes all the following, whether now owned
or hereafter acquired, whether now existing or hereafter arising, and wherever
located:
(a) All attachments, accessions, accessories, tools, parts, supplies, increases,
and additions to and all replacements of and substitutions for any property
described above.
(b) All products and produce of any of the property described in this Collateral
section.
(c) All accounts, general intangibles, instruments, rents, monies, payments, and
all other rights, arising out of a sale, lease, or other disposition of any of
the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale, destruction,
loss, or other disposition of any of The property described in this Collateral
section.
(e) All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantor's right, title,
and interest in and to all computer software required to utilize, create,
maintain, and process any such records or data on electronic media.
<PAGE>
FORM OF COMMERCIAL SECURITY AGREEMENT
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
Events of Default.
GRANTOR. The word Grantor means COLORADO TECHNICAL UNIVERSITY, INC., A COLORADO
CORPORATION, its successors and assigns.
GUARANTOR. The word Guarantor means and includes without limitation each and all
of the guarantors, sureties, and accommodation parties in connection with the
indebtedness.
INDEBTEDNESS. The word indebtedness means the indebtedness evidenced by the
Note, including all principal and interest, together with all other indebtedness
and costs and expenses for which Grantor is responsible under this Agreement or
under any of the Related Documents. In addition, the word Indebtedness includes
all other obligations, debts and liabilities, plus interest thereon, of Grantor,
or any one or more of them, to Lender, as well as all claims by Lender against
Grantor, or any one or more of them, whether existing now or later; whether they
are voluntary or involuntary, due or not due, direct or indirect, absolute or
contingent, liquidated or unliquidated; whether Grantor may be liable
individually or jointly with others; whether Grantor may be obligated as
guarantor, surety, accommodation party or otherwise; whether recovery upon such
indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may become
otherwise unenforceable.
LENDER. The word Lender means BANK ONE, COLORADO, N.A., its successors and
assigns.
NOTE. The word Note means the note or credit agreement dated December 26, 1996,
in the principal amount of $2,000,000.00 from COLORADO TECHNICAL UNIVERSITY,
INC., A COLORADO CORPORATION to Lender, together with all renewals of,
extensions of, modifications of, refinancing of, consolidations of and
substitutions for the note or credit agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and ali other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security
interest in and hereby assigns, conveys, delivers, pledges, and transfers all of
Grantor's right, title and interest in and to Grantor s accounts with Lender
(whether checking, savings, or some other account), including all accounts held
jointly with someone else and all accounts Grantor may open in the future,
excluding, however, all IRA and Keogh accounts, and all trust accounts for which
the grant of a security interest would be prohibited by law. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to perfect
and continue Lender's security interest in the Collateral. Upon request of
Lender, Grantor will deliver to Lender any and all of the documents evidencing
<PAGE>
FORM OF COMMERCIAL SECURITY AGREEMENT
or constituting the Collateral, and Grantor will note Lender's interest upon any
and all chattel paper if not delivered to Lender for possession by Lender.
Grantor hereby appoints Lender as its irrevocable attorney-in-fact for the
purpose of executing any documents necessary to perfect or to continue the
security interest granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security interest
in the Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of Grantor.
This is a continuing Security Agreement and will continue in effect even though
all or any part of the Indebtedness is paid in full and even though for a period
of time Grantor may not be indebted to Lender.
NO VIOLATION. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, the Collateral is enforceable in
accordance with its terms, is genuine, and complies with applicable laws
concerning form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the Collateral. At
the time any account becomes subject to a security interest in favor of Lender,
the account shall be a good and valid account representing an undisputed, bona
fide indebtedness incurred by the account debtor, for merchandise held subject
to delivery instructions or theretofore shipped or delivered pursuant to a
contract of sale, or for services theretofore performed by Grantor with or for
the account debtor; there shall be no setoffs or counterclaims against any such
account; and no agreement under which any deduction or discounts may be claimed
shall have been made with the account debtor except those disclosed to Lender in
writing.
LOCATION OF THE COLLATERAL. Grantor, upon request of Lender, will deliver to
Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; (d) all
other properties where Collateral is or may be located. Except in the ordinary
course of its business, Grantor shall not remove the Collateral from its
existing locations without the prior written consent of Lender.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Except in the ordinary course of its
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of
Colorado, without the prior written consent of Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor
is not in default under this Agreement, Grantor may sell inventory, but only in
the ordinary course of its business and only to buyers who quality as a buyer in
the ordinary course of business.
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FORM OF COMMERCIAL SECURITY AGREEMENT
A sale in the ordinary course of Grantor's business does not include a transfer
in partial or total satisfaction of a debt or any bulk sale. Grantor shall not
pledge, mortgage, encumber or otherwise permit the Collateral to be subject to
any lien, security interest, encumbrance, or charge, other than the security
interest provided for in this Agreement, without the prior written consent of
Lender. This includes security interests even if junior in right to the security
interests granted under this Agreement. Unless waived by Lender, all proceeds
from any disposition of the Collateral (for whatever reason) shall be held in
trust for Lender and shall not be commingled with any other funds; provided
however, this requirement shall not constitute consent by Lender to any sale or
other disposition. Upon receipt Grantor shall immediately deliver any such
proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles, Grantor
shall deliver to Lender schedules of such Collateral, including such information
as Lender may require, including without limitation names and addresses of
account debtors and agings of accounts and general intangibles. Insofar as the
Collateral consists of inventory and equipment, Grantor shall deliver to Lender,
as often as Lender shall require, such lists, descriptions, and designations of
such Collateral as Lender may require to identify the nature, extent, and
location of such Collateral. Such information shall be submitted for Grantor and
each of its subsidiaries or related companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral. Lender
and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever located.
Grantor shall immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any Collateral; of any request
for credit or adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting the Collateral
or the value or the amount of the Collateral.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other charges
that could accrue as a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the contest
proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities, now
or hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral. Grantor may contest in good faith any such law, ordinance
or regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral, in Lender's
opinion, is not jeopardized.
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FORM OF COMMERCIAL SECURITY AGREEMENT
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral never
has been, and never will be so long as this Agreement remains a lien on the
Collateral, used for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., or other applicable state or Federal laws, rules,
or regulations adopted pursuant to any of the foregoing. The terms "hazardous
waste" and "hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for hazardous wastes and substances.
Grantor hereby (a) releases and waives any future claims against Lender for
indemnity or contribution in the event Grantor becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify shall survive the
payment of the Indebtedness and the satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at least
ten (10) days' prior written notice to Lender and not including any disclaimer
of the insurer's liability for failure to give such a notice. Each insurance
policy also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Grantor or any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require. If
Grantor at any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such insurance
as Lender deems appropriate, including if it so chooses "single interest
insurance," which will cover only Lender's interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
ot repair or restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness and shall pay the balance to Grantor. Any proceeds which
have not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral shall
be used to prepay the Indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with Lender reserves
for payment of
<PAGE>
FORM OF COMMERCIAL SECURITY AGREEMENT
insurance premiums, which reserves shall be created by monthly payments from
Grantor of a sum estimated by Lender to be sufficient to produce, at least
fifteen (15) days before the premium due date. amounts at least equal to the
insurance premiums to be paid. If fifteen (15) days before payment is due, the
reserve funds are insufficient, Grantor shall upon demand pay any deficiency to
Lender. The reserve funds shall be held by Lender as a general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by payment of
the insurance premiums required to be paid by Grantor a they become due. Lender
does not hold the reserve funds in trust for Grantor, and Lender is not the
agent of Grantor for payment of the insurance premiums required to be paid by
Grantor. The responsibility for the payment of premiums shall remain Grantor's
sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (a) the name of the insurer; (b)
the risks insured; (c) the amount of the policy; (d) the property insured; (e)
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (f) the expiration date of the policy. In
addition, Grantor shall upon request by lender (however not more than annually)
have an independent appraiser satisfactory to Lender determine, as applicable,
the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible person, property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any right sin the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amount required to be discharged
or paid by Grantor under this Agreement, including without limitation all taxes,
liens, security interests, encumbrances, and other claims, at any time levied or
place don the Collateral. Lender also may (but shall not be obligated to) pay
all costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses shall become a
part of the Indebtedness and, at Lender's option, will (a) be payable on demand,
(b) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (i) the term of any
applicable insurance policy or (ii) the remaining term of the Note, or (c) be
treated as a balloon payment which will be due and payable at the Note's
maturity. This Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon the occurrence of an Event of Default.
<PAGE>
FORM OF COMMERCIAL SECURITY AGREEMENT
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due on the
Indebtedness.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or on any of the
Related Documents or in any other agreement between Lender and Grantor.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Grantor under this Agreement, the Note or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any time
and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
the Collateral or any other collateral, securing the Indebtedness. This includes
a garnishment of any of Grantor's deposit accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Colorado Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness, including
any prepayment penalty which Grantor would be required to pay, immediately due
and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may
<PAGE>
FORM OF COMMERCIAL SECURITY AGREEMENT
require Grantor to assemble the Collateral and make it available to Lender at a
place to be designated by Lender. Lender also shall have full power to enter
upon the property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in its own name or that
of Grantor. Lender may sell the Collateral at public auction or private sale.
Unless the Collateral threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Lender will give Grantor reasonable
notice of the time after which any private sale or any other intended
disposition of the Collateral is to be made. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days before the
time of the sale or disposition. All expenses relating to the disposition of the
Collateral, including without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall become a part of
the Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall have
the following rights and remedies regarding the appointment of a receiver: (a)
Lender may have a receiver appointed as a matter of right, (b) the receiver may
be an employee of Lender and may serve without bond, and (c) all fees of the
receiver and his or her attorney shall become part of the Indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid. The receiver may be appointed by a court
of competent jurisdiction upon ex parte application and without notice, notice
being expressly waived.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in its discretion transfer any Collateral into its own
name or that of its nominee and receive the payments, rents, income, and
revenues therefrom and hold the same as security for the Indebtedness or apply
it to payment of the Indebtedness in such order of preference as Lender may
determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or similar
property, Lender may demand, collect, receipt for, settle, compromise, adjust,
sue for, foreclose, or realize on the Collateral as Lender may determine,
whether or not Indebtedness or Collateral is then due. For these purposes,
Lender may, on behalf of and in the name of Grantor, receive, open and dispose
of mail addressed to Grantor; change any address to which mail and payments are
to be sent; and endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to Lender.
OBTAIN DEFICIENCY. It Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even it the transaction described in this subsection is a sale of
accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at law, in equity, or
otherwise.
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FORM OF COMMERCIAL SECURITY AGREEMENT
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced by
this Agreement or the Related Documents or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation of
Grantor under this Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of Colorado. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of the State of
Colorado. Lender and Grantor hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Grantor against
the other. This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado.
ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including attorneys' fees and Lender's legal expenses,
incurred in connection with the enforcement of this Agreement. Lender may pay
someone else to help enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's attorneys'
fees and legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
postjudgment collection services. Grantor also shall pay all court costs and
such additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
NOTICES. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimile, and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, addressed to the party to whom
the notice is to be given at the address shown above. Any party may change its
address for notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change the
party's address. To the extent permitted by applicable law, it there is more
than one Grantor, notice to any Grantor will constitute notice to all Grantors.
For notice purposes, Grantor will keep Lender informed at all times of Grantor's
current address(es).
POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following (a) to demand, collect, receive, receipt for, sue and recover all sums
of money or other property which may now or hereafter become due, owing or
payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment for
the Collateral; (c) to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Grantor, to execute and deliver its
release and settlement for the claim; and (d) to file any claim or claims or to
take any action or institute or take part in any proceedings, either in its own
<PAGE>
FORM OF COMMERCIAL SECURITY AGREEMENT
name or in the name of Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable. This power is given as security for the
Indebtedness, and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Lender.
SEVERABILITY. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. It feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, it the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on transfer of
the Collateral, this Agreement shall be binding upon and inure to the benefit of
the parties, their successors and assigns.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER 26,
1996.
GRANTOR:
COLORADO TECHNICAL UNIVERSITY, INC., A COLORADO CORPORATION
By: /S/ DAVID D. O'DONNELL
===========================================================
DAVID D. O'DONNELL, PRESIDENT & CHAIRMAN OF THE BOARD
EXHIBIT 10.32
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT to the Loan Agreement, ("Amendment") dated August
2, 1997, is by and between Bank One Colorado NA ("Lender"), and Colorado
Technical University, Inc., A Colorado Corporation ("Borrower").
RECITALS
NOW, THEREFORE, in consideration of the Loan and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower agrees to the following Amendment:
The Colorado Technical University, Inc., line of credit has been
increased from $1,300,000.00 to $2,000,000.00. All other terms and conditions
shall remain the same.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of this 27th day of December, 1996.
BORROWER: GUARANTOR:
Colorado Technical University, Inc., MDJB, Inc.
A Colorado Corporation A Delaware Corporation
By: /S/ DAVID D. O'DONNELL By: /S/ DAVID D. O'DONNELL
==================================== ========================================
David D. O'Donnell, President David D. O'Donnell, President
and Chairman of the Board
LENDER:
Bank One Colorado, N.A.
By: /S/ NANETTE B. STRASBURGER
====================================
Nanette B. Strasburger
Vice President
EXHIBIT 10.33
COMMERCIAL GUARANTY
BORROWER: COLORADO TECHNICAL UNIVERSITY, INC. LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION COORADO SPRINGS BUSINESS BANKING
4435 N. CHESNUT ST. 30 EAST PIKES PEAK AVENUE
COLORADO SPRINGS, CO 80907 COLORADO SPRINGS, CO 80903
GUARANTOR: M.D.J.B., INC., A DELAWARE CORPORATION
4435 N. CHESTNUT ST.
COLORADO SPRINGS, CO 80907
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AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited.
CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, M.D.J.B.,
INC., A DELAWARE CORPORATION ("Guarantor)) absolutely and unconditionally
guarantees and promises to pay to BANK ONE, COLORADO, N.A. ("Lender") or its
order, in legal tender of the United States of America, the Indebtedness (as
that term is defined below) of COLORADO TECHNICAL UNIVERSITY, INC., A COLORADO
CORPORATION ("Borrower") to Lender on the terms and conditions set forth in this
Guaranty. Under this Guaranty, the liability of Guarantor is unlimited and the
obligations of Guarantor are continuing.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
BORROWER. The word "Borrower" means COLORADO TECHNICAL UNIVERSITY, INC., A
COLORADO CORPORATION.
GUARANTOR. The word "Guarantor" means M.D.J.B., INC., A DELAWARE CORPORATION.
GUARANTY. The word "Guaranty" means this Guaranty made by Guarantor for the
benefit of Lender dated December 26, 1996.
INDEBTEDNESS. The word "Indebtedness" is used in its most comprehensive sense
and means and includes any and all of Borrower's liabilities, obligations,
debts, and indebtedness to Lender, now existing or hereinafter incurred or
created, including, without limitation, all loans, advances, interest, costs,
debts, overdraft indebtedness, credit card indebtedness, lease obligations,
other obligations, and liabilities of Borrower, or any of them, and any present
or future judgments against Borrower, or any of them; and whether any such
Indebtedness is voluntarily or involuntarily incurred, due or not due, absolute
or contingent, liquidated or unliquidated, determined or undetermined; whether
Borrower may be liable individually or jointly with others, or primarily or
secondarily, or as guarantor or surety; whether recovery on the Indebtedness may
be or may become barred or unenforceable against Borrower for any reason
whatsoever; and whether the Indebtedness arises from transactions which may be
voidable on account of infancy, insanity, ultra vires, or otherwise.
LENDER. The word "Lender" means BANK ONE, COLORADO, N.A., its successors and
assigns.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
<PAGE>
12-26-1996
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
be unlimited.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and
continuous for so long as this Guaranty remains in force. Guarantor intends to
guarantee at all times the performance and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of all Indebtedness.
Accordingly, no payments made upon the Indebtedness will discharge or diminish
the continuing liability of Guarantor in connection with any remaining portions
of the Indebtedness or any of the Indebtedness which subsequently arises or is
thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be mailed to Lender, by certified mail, at the address
of Lender listed above or such other place as Lender may designate in writing.
Written revocation of this Guaranty will apply only to advances or new
Indebtedness created after actual receipt by Lender of Guarantor's written
revocation. For this purpose and without limitation, the term "new Indebtedness"
does not include Indebtedness which at the time of notice of revocation is
contingent, unliquidated undetermined or not due and which later becomes
absolute, liquidated, determined or due. This Guaranty will continue to bind
Guarantor for all indebtedness incurred by Borrower or committed by Lender prior
to receipt of Guarantor's written notice of revocation, including any
extensions, renewals, substitutions or modifications of the Indebtedness. All
renewals, extensions, substitutions, and modifications of the Indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty and,
specifically will not be considered to be new Indebtedness. This Guaranty shall
bind the estate of Guarantor as to Indebtedness created both before and after
the death or incapacity of Guarantor, regardless of Lender's actual notice of
Guarantor's death. Subject to the foregoing, Guarantor's executor or
administrator or other legal representative may terminate this Guaranty in the
same manner in which Guarantor might have terminated it and with the same
effect. Release of any other guarantor or termination of any other guaranty of
the Indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors shall
not affect the liability of any remaining Guarantors under this Guaranty. It is
anticipated that fluctuations may occur in the aggregate amount of Indebtedness
covered by this Guaranty, and it is specifically acknowledged and agreed by
Guarantor that reductions in the amount of Indebtedness, even to zero dollars
($0.00), prior to written revocation of this Guaranty by Guarantor shall not
constitute a termination of this Guaranty. This Guaranty is binding upon
Guarantor and Guarantor's heirs, successors and assigns so long as any of the
guaranteed Indebtedness remains unpaid and even though the Indebtedness
guaranteed may from time to time be zero dollars ($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, without notice or demand and without lessening
Guarantor's liability under this Guaranty, from time to time: (a) prior to
revocation as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to Borrower, or
otherwise to extend additional credit to Borrower; (b) to alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of the Indebtedness or any part of the Indebtedness,
including increases and decreases of the rate of interest on the Indebtedness;
extensions may be repeated and may be for longer than the original loan term;
(c) to take and hold security for the payment of this Guaranty or the
<PAGE>
12-26-1996
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (d) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (e) to determine how, when and what application
of payments and credits shall be made on the Indebtedness; (f) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participation in all or any part of the
Indebtedness; and (h) to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (e) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest therein; (f) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the dates the financial information is provided; (g) no material adverse
change has occurred in Guarantor's financial condition since the date of the
most recent financial statements provided to Lender and no event has occurred
which may materially adversely affect Guarantor's financial condition; (h) no
litigation, claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against Guarantor is pending or threatened;
(i) Lender has made no representation to Guarantor as to the credit worthiness
of Borrower; and (j) Guarantor has established adequate means of obtaining from
Borrower on continuing basis information regarding Borrower's financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor's risks
under this Guaranty, and Guarantor further agrees that, absent a request for
information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending more or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any collateral held by
Lender from Borrower, any other guarantor, or any other person; (e) to give
notice of the terms, time, and place of any public or private sale of personal
property security held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (f) to pursue any other
remedy within Lender's power; or (g) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.
Guarantor also waives any and all rights or defenses arising by reason of (a)
any "one action" or "anti-deficiency" law or any other law which may prevent
Lender from bringing any action, including a claim for
<PAGE>
12-26-1996
deficiency, against Guarantor, before or after Lender's commencement or
completion of any foreclosure action, either judicially or by exercise of a
power of sale; (b) any election of remedies by Lender which destroys or
otherwise adversely affects Guarantor's subrogation rights or Guarantor's rights
to proceed against Borrower for reimbursement, including without limitation, any
loss of rights Guarantor may suffer by reason of any law limiting, qualifying,
or discharging the Indebtedness; (c) any disability or other defense of
Borrower, of any other guarantor, or of any other person, or by reason of the
cessation of Borrower's liability from any cause whatsoever, other than payment
in full in legal tender, of the Indebtedness; (d) any right to claim discharge
of the Indebtedness on the basis of unjustified impairment of any collateral for
the Indebtedness; (e) any statute of limitations, if at any time any action or
suit brought by Lender against Guarantor is commenced there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable statute
of limitations; or (f) any defenses given to guarantors at law or in equity
other than actual payment and performance of the Indebtedness. If payment is
made by Borrower, whether voluntarily or otherwise, or by any third party, on
the Indebtedness and thereafter Lender is forced to remit the amount of that
payment to Borrower's trustee in bankruptcy or to any similar person under any
federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of enforcement of this
Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender by
law, Lender shall have, with respect to Guarantor's obligations to Lender under
this Guaranty and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Guarantor hereby
assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's
right, title and interest in and to, all deposits, moneys, securities and other
property of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding however all IRA, Keogh, and trust accounts. Every such security
interest and right of setoff may be exercised without demand upon or notice to
Guarantor. No security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any neglect to exercise
such right of setoff or to enforce such security interest or by any delay in so
doing. Every right of setoff and security interest shall continue in full force
and effect until such right of setoff or security interest is specifically
waived or released by an instrument in writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
<PAGE>
12-26-96
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
AMENDMENTS. This Guaranty, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Guaranty. No alteration of or amendment to this Guaranty shall be effective
unless given in writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment.
APPLICABLE LAW. This Guaranty has been delivered to Lender and accepted by
Lender in the State of Colorado. If there is a lawsuit, Guarantor agrees upon
Lender's request to submit to the jurisdiction of the courts of EL PASO County,
State of Colorado. Lender and Guarantor hereby waive the right to any jury trial
in any action, proceeding, or counterclaim brought by either Lender or Guarantor
against the other. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Colorado.
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of Lender's
costs and expenses, including attorneys' fees and Lender's legal expenses,
incurred in connection with the enforcement of this Guaranty. Lender may pay
someone else to help enforce this Guaranty, and Guarantor shall pay the costs
and expenses of such enforcement. Costs and expenses include Lender's attorneys'
fees and legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Guarantor also shall pay all court costs and
such additional fees as may be directed by the court.
NOTICES. All notices required to be given by either party to the other under
this Guaranty shall be in writing, may be sent by telefacsimile, and, except for
revocation notices by Guarantor, shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier, or when deposited
in the United States mail, first class postage prepaid, addressed to the party
to whom the notice is to be given at the address shown above or to such other
addresses as either party may designate to the other in writing. All revocation
notices by Guarantor shall be in writing and shall be effective only upon
delivery to Lender as provided above in the section titled "DURATION OF
GUARANTY." If there is more than one Guarantor, notice to any Guarantor will
constitute notice to all Guarantors. For notice purposes, Guarantor agrees to
keep Lender informed at all times of Guarantor's current address.
INTERPRETATION. In all cases where there is more than one Borrower or Guarantor,
then all words used in this Guaranty in the singular shall be deemed to have
been used in the plural where the context and construction so require; and where
there is more than one Borrower named in this Guaranty or when this Guaranty is
executed by more than one Guarantor, the words "Borrower" and "Guarantor"
<PAGE>
12-26-96
respectively shall mean all and any one or more of them. The words "Guarantor,"
"Borrower," and "Lender" include their heirs, successors, assigns, and
transferees of each of them. Caption headings in this Guaranty are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Guaranty. If a court of competent jurisdiction finds any
provision of this guaranty to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances, and all provisions of
this guaranty in all other respects shall remain valid and enforceable. If any
one or more of borrower or Guarantor are corporations or partnerships, it is not
necessary for Lender to inquire into the powers of Borrower or Guarantor or of
the officers, directors, partners, or agents acting or purporting to act on
their behalf, and any Indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed under this Guaranty.
WAIVER. Lender shall not be deemed to have waived any rights under this Guaranty
unless such waiver is given in writing and signed by Lender. No delay or
omission on the part of Lender in exercising any right shall operate as a waiver
of such right or any other right. A waiver by Lender of a provision of this
Guaranty shall not prejudice or constitute a waiver of Lender's rights otherwise
to demand strict compliance with that provision or any other provision of this
Guaranty. No prior waiver by Lender, nor any course of dealing between Lender
and guarantor, shall constitute a waiver of any of Lender's rights or of any of
Guarantor's obligations as to any future transactions. Whenever the consent of
Lender is required under this guaranty, the granting of such consent by lender
in any instance shall not constitute continuing consent to subsequent instances
where such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED DECEMBER 26,1996.
GUARANTOR:
M.D.J.B., INC., A DELAWARE CORPORATION
By: /S/ DAVID D. O'DONNELL
=======================================
DAVID D. O'DONNELL, PRESIDENT
EXHIBIT 10.34
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT to the Loan Agreement, ("Amendment") dated August
2, 1997, is by and between Bank One Colorado NA ("Lender"), and Colorado
Technical University, Inc., A Colorado Corporation ("Borrower").
RECITALS
NOW, THEREFORE, in consideration of the Loan and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower agrees to the following Amendment:
An additional $200,000.00 loan for the purchase of equipment and
vehicles dated February 20, 1997, has been made. All other terms and conditions
shall remain the same.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of this 24th day of February, 1997.
BORROWER: GUARANTOR:
Colorado Technical University, Inc., MDJB, Inc.
A Colorado Corporation A Delaware Corporation
By: /S/ DAVID D. O'DONNELL By: /S/ DAVID D. O'DONNELL
====================================== =====================================
David D. O'Donnell, President David D. O'Donnell, President
and Chairman of the Board
LENDER:
Bank One Colorado, N.A.
By: /S/ NANETTE B. STRASBURGER
======================================
Nanette B. Strasburger
Vice President
<PAGE>
EXHIBIT 10.35
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT to the Loan Agreement, ("Amendment"), dated August
2, 1997, is by and between Bank One Colorado NA ("Lender"), and Colorado
Technical University, Inc., A Colorado Corporation ("Borrower").
RECITALS
NOW THEREFORE, in consideration of the loan and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower agrees to the following Amendment.
- Minimum debt coverage ratio, as defined in Exhibit A, shall
be tested annually, within 30 days of fiscal year end.
(Previous requirement was to be tested quarterly, within 30
days of month end.).
- No increase in debt/leases greater than $75,000 shall be
amended to allow for the $1,500,000.00 loan from Pueblo
Bank and Trust, evidenced in documents dated June 4, 1997,
maturing June 6, 2002, attached as exhibits to this
Amendment.
- The annual audited statement requirement for MDJB, Inc.,
shall be amended to read annual statements in form and
content satisfactory to Lender, within 120 days of year
end.
- Addition of guaranty of Whitman Education Group, Inc.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of this 13 day of June, 1997.
BORROWER: GUARANTOR:
Colorado Technical University, Inc., MDJB, Inc.
A Colorado Corporation A Delaware Corporation
By: /S/ DAVID D. O'DONNELL By: /S/ DAVID D. O'DONNELL
==================================== ========================================
David D. O'Donnell, President David D. O'Donnell, President
and Chairman of the Board and Chairman of the Board
LENDER: GUARANTOR:
Bank One Colorado, N.A. Whitman Education Group, Inc.,
A New Jersey Corporation
By: /S/ NANETTE B. STRASBURGER By: /S/ RANDY S. PROTO
==================================== ========================================
Nanette B. Strasburger Randy S. Proto, President
Vice President
By: /S/ FERNANDO L. FERNANDEZ
========================================
Fernando L. Fernandez, VP-Finance,
CFO, and Treasurer
EXHIBIT 10.36
COMMERCIAL GUARANTY
BORROWER: COLORADO TECHNICAL UNIVERSITY, INC. LENDER: BANK ONE, COLORADO, N.A.
A COLORADO CORPORATION COLORADO SPRINGS BUSINESS BANKING
4435 N. CHESNUT ST. 30 EAST PIKES PEAK AVENUE
COLORADO SPRINGS, CO 80907 COLORADO SPRINGS, CO 80903
GUARANTOR:WHITMAN EDUCATION GROUP, INC.
4400 BISCAYNE BLVD.
MIAMI, FL 33137
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CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, WHITMAN
EDUCATION GROUP INC ("Guarantor") absolutely and unconditionally guarantees and
promises to pay to BANK ONE, COLORADO, N.A. ("Lender") or its order, in legal
tender of the United States of America, the Indebtedness (as that term is
defined below) of COLORADO TECHNICAL UNIVERSITY, INC ("Borrower") to Lender on
the terms and conditions set forth in this Guaranty. Under this Guaranty, the
liability of Guarantor is unlimited and the obligations of Guarantor are
continuing.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
BORROWER. The word "Borrower" means COLORADO TECHNICAL UNIVERSITY, INC.
GUARANTOR. The word "Guarantor" means WHITMAN EDUCATION GROUP INC.
GUARANTY. The word "Guaranty" means this Guaranty made by Guarantor for the
benefit of Lender dated June 13, 1997.
INDEBTEDNESS. The word "Indebtedness" means and includes any and all of
Borrower's liabilities, obligations, debts, and indebtedness to Lender, now
existing or hereinafter incurred or created, including, without limitation, all
loans, advances, interest, costs, debts, overdraft indebtedness, credit card
indebtedness, lease obligations, other obligations, and liabilities of Borrower,
or any of them, any present or future judgments against Borrower, or any of
them, and all renewals, extensions, modifications, substitutions and
rearrangements of the foregoing, and whether any such Indebtedness is
voluntarily or involuntarily incurred, due or not due, absolute or contingent,
direct or indirect, liquidated or unliquidated, determined or undetermined;
whether Borrower may be liable individually or jointly with others, or primarily
or secondarily, or as debtor, maker, comaker, drawer, endorser, guarantor or
surety; whether such Indebtedness arises by note, draft, acceptance, guaranty,
endorsement, letter of credit, assignment, overdraft, indemnity agreement or
otherwise, whether recovery on the Indebtedness may be or may become barred or
unenforceable against Borrower for any reason whatsoever, and whether the
Indebtedness arises from transactions which may be voidable on account of
infancy, insanity, ultra vires, or otherwise and no matter any exculpation of
Borrower.
LENDER. The word "Lender" means BANK ONE, COLORADO, N.A., its successors and
assigns.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
<PAGE>
6-13-1997
NATURE OF GUARANTY. This is a guaranty of payment and not of collection.
Guarantor's liability under this Guaranty shall be open and continuous for so
long as this Guaranty remains in force. Guarantor intends to guarantee at all
times the performance and prompt payment when due, whether at maturity or
earlier by reason of acceleration or otherwise, of all Indebtedness.
Accordingly, no payments made upon the Indebtedness will discharge or diminish
the continuing liability of Guarantor in connection with any remaining portions
of the Indebtedness or any of the Indebtedness which subsequently arises or is
thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be delivered to Lender at the address of Lender listed
above or such other place as Lender may designate in writing. This Guaranty may
be revoked only with respect to Indebtedness incurred or contracted by Borrower,
or acquired or committed to by Lender after the date on which written notice of
revocation is actually received by Lender. No notice of revocation hereof shall
be effective as to any Indebtedness: (a) existing at the date of receipt of such
notice; (b) incurred or contracted by Borrower, or acquired or committed to by
Lender, prior to receipt of such notice; (c) now existing or hereafter created
pursuant to or evidenced by a loan agreement or commitment in existence prior to
receipt of such notice under which Borrower is or may become obligated to
Lender; or (d) renewals, extensions, consolidations, substitutions, and
refinancing of the foregoing. Guarantor waives notice of revocation given by any
other guarantor of the Indebtedness. If Guarantor is an individual, this
Guaranty shall bind the estate of Guarantor as to Indebtedness created both
before and after the death or incapacity of Guarantor, regardless of Lender's
actual notice of Guarantor's death or incapacity. Subject to the foregoing,
Guarantor's executor or administrator or other legal representative may
terminate this Guaranty in the same manner in which Guarantor might have
terminated it and with the same effect. Guarantor shall be liable, jointly and
severally, with Borrower and any other guarantor of all or any part of the
Indebtedness and release of any other guarantor of the Indebtedness, or
termination or revocation of any other guaranty of the Indebtedness, shall not
affect the liability of Guarantor under this Guaranty. It is anticipated that
fluctuations may occur in the aggregate amount of Indebtedness covered by this
Guaranty, and it is specifically acknowledged and agreed by Guarantor that
reductions in the amount of Indebtedness, even to zero dollars ($0.00), shall
not constitute a termination of this Guaranty.
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, without notice or demand and without lessening
Guarantor's liability under this Guaranty, from time to time: (a) to make one or
more additional secured or unsecured loans to Borrower, to lease equipment or
other goods to Borrower or otherwise to extend additional credit to Borrower;
(b) to alter, compromise, renew, extend, accelerate, or otherwise change one or
more times the time for payment or other terms of the Indebtedness or any part
of the Indebtedness, including increases and decreases of the rate of interest
on the Indebtedness; extensions may be repeated and may be for longer than the
original loan term; (c) to take and hold security for the payment of this
Guaranty or the Indebtedness, and exchange, enforce, waive, fail or decide not
to perfect, and release any such security, with or without the substitution of
new collateral; (d) to release, substitute, agree not to sue, or deal with any
one or more of Borrower's sureties, endorsers, or other guarantors on any terms
or in any manner Lender may choose; (e) to determine how, when and what
application of payments and credits shall be made on the Indebtedness; (f) to
apply any proceeds it
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6-13-1997
receives as a result of the foreclosure or other realization on any collateral
for the Indebtedness to that portion, if any, of the Indebtedness not guaranteed
hereunder or to any other indebtedness secured by such collateral, as Lender in
its discretion may determine; (g) to sell, transfer, assign, or grant
participation in all or any part of the Indebtedness; and (h) to assign or
transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS, WARRANTIES, AND COVENANTS. Guarantor represents,
warrants and covenants to Lender that (a) no representations or agreements of
any kind have been made to Guarantor which would limit or qualify in any way the
terms of this Guaranty; (b) this Guaranty is executed at Borrower's request and
not at the request of Lender; (c) Guarantor has full power, right and authority
to enter into this Guaranty; (d) the provisions of this Guaranty do not conflict
with or result in a default under any agreement or other instrument binding upon
Guarantor and do not result in a violation of any law, regulation, court decree
or order applicable to Guarantor; (e) Guarantor has not and will not, without
the prior written consent of Lender, sell, lease, assign, encumber, hypothecate,
transfer, or otherwise dispose of allow substantially all of Guarantor's assets,
or any interest therein; (f) Lender has made no representation to Guarantor as
to the creditworthiness of Borrower; (g) Guarantor will provide to Lender
financial statements and other financial information regarding Guarantor as
Lender may request from time to time, in form and detail acceptable to Lender,
and all such financial information heretofore an hereafter provided to Lender is
and shall be true and correct in all material respects and fairly presents the
financial condition of Guarantor as of the dates hereof, and no material adverse
change has occurred in the financial condition of Borrower and has established
adequate means of obtaining from Borrower on a continuing basis information
regarding Borrower's future financial condition and is not relying on Lender to
provide such information to Guarantor; (i) as of the date hereof, and after
giving effect to this Guaranty, (1) Guarantor is and will be solvent, (2) the
fair saleable value of Guarantor's assets exceeds and will continue to exceed
Guarantor's liabilities (both fixed and contingent), (3) Guarantor is and will
continue to be able to pay Guarantor's debts as they mature, and (4) if
Guarantor is not an individual, Guarantor has and will continuer to have
sufficient capital to carry on its business and all businesses in which it is
about to engage; and (j) Guarantor has the power and authority to execute,
deliver and perform this Guaranty and the other Related Documents executed by
Guarantor. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor's risk
under this Guaranty, and Guarantor further agrees that Lender shall have no
obligation to disclose to Guarantor any information or documents acquired by
Lender in the course of its relationship with Borrower.
GUARANTOR'S WAIVERS. Guarantor waives any right to require Lender (a) to
continue lending money or to extend other credit to Borrower; (b) to make any
presentment, protest, demand, or notice of any kind, including notice of any
nonpayment of the Indebtedness or of any nonpayment related to any collateral,
or notice of ant action or nonaction on the party of Borrower, Lender, any
surety, endorser, or other guarantor in connection with the Indebtedness or in
connection with the creation of new or additional loans or obligations; (c) to
notify Guarantor of any change in the manner, place, time or terms of payment of
any of the Indebtedness (including, without limitation, any renewal, extension
or other modification of any of the Indebtedness); or (d) to notify Guarantor of
any change in the interest rate accruing on any of the Indebtedness (including,
without limitation, any periodic change in such interest rate that occurs
because such Indebtedness accrues interest at a variable rate which may
fluctuate from time to time). Should Lender seek to enforce the obligations of
Guarantor hereunder, Guarantor waives any right to require Lender to first (a)
resort for payment or to proceed directly or at once against any person,
including Borrower or any other guarantor of the Indebtedness; (b) to proceed
directly against, marshal!, enforce, or exhaust any collateral held by Lender
from Borrower, Guarantor, any other guarantor, or any other person; or (c) to
pursue any other remedy within Lender's power.
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6-13-97
Guarantor also waives any and all rights or defenses arising by reason of (a)
any election of remedies by Lender which destroys or otherwise adversely affects
Guarantor's subrogation rights or Guarantor's rights to proceed against Borrower
for reimbursement, including without limitation, any loss of rights Guarantor
may suffer by reason of any law limiting, qualifying, or discharging the
Indebtedness; (b) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment in full in legal tender,
of the Indebtedness; (c) any right to claim discharge of the Indebtedness on the
basis of unjustified impairment of any collateral for the Indebtedness; or (d)
any defenses given to guarantors at law or in equity other than actual payment
and performance of the Indebtedness. This Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
all or any part of the Indebtedness is rescinded or must otherwise be returned
by Lender upon the insolvency, bankruptcy or reorganization of Borrower,
Guarantor, any other guarantor of all or any part of the Indebtedness, or
otherwise, all as though such payment had not been made.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. Unless a lien would be prohibited by law or would
render a nontaxable account taxable, Guarantor hereby grants Lender a
contractual possessory security interest in and hereby assigns, conveys,
delivers, pledges and transfers all of Guarantor's right, title, and interest in
and to Guarantor's accounts with Lender (whether checking, savings, or any other
account), including all accounts held jointly with someone else and all accounts
Guarantor may open in the future. Guarantor authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all Indebtedness against any
and all such accounts.
ACTIONS AGAINST AND PAYMENTS BY GUARANTOR. In the event of a default in the
payment or performance of all or any part of the Indebtedness when such
Indebtedness becomes due, whether by its terms, by acceleration or otherwise,
Guarantor shall, without notice or demand, promptly pay the amount due thereon
by Guarantor to Lender, in lawful money of the United States. The exercise by
Lender of any right or remedy under this Guaranty or under any other agreement
or instrument, at law, in equity or otherwise, shall not preclude concurrent or
subsequent exercise of any other right or remedy. Whenever Guarantor pays any
sum which is or may become due under this Guaranty, written notice must be
delivered to Lender contemporaneously with such payment. In the absence of such
notice to Lender by Guarantor, any sum received by Lender on account of the
Indebtedness shall be conclusively deemed paid by Borrower.
MISCELLANEOUS PROVISIONS:
AMENDMENTS. This Guaranty, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Guaranty and supersedes all prior written and oral agreements and
understandings, if any, regarding same. No alteration of or amendment to this
Guaranty shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
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6-13-97
APPLICABLE LAW. This Guaranty has been delivered to Lender and is performable in
EL PASO County, Colorado. Courts within the State of Colorado have jurisdiction
over any dispute arising under or pertaining to this Guaranty and venue for such
dispute shall be in EL PASO County, Colorado. THIS GUARANTY SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO AND
APPLICABLE FEDERAL LAWS.
JURY WAIVER. THE UNDERSIGNED AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT
OR OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED AND LENDER ARISING OUT OF OR IN
ANY WAY RELATED TO THIS DOCUMENT OR ANY OTHER RELATED DOCUMENT. THIS PROVISION
IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR
IN THE OTHER RELATED DOCUMENTS.
ARBITRATION. Lender and Guarantor agree that upon the written demand of either
party, whether made before or after the institution of any legal proceedings,
but prior to the rendering of any judgment in that proceeding, all disputes,
claims and controversies between them, whether individual, joint, or class in
nature, arising from this Guaranty, any Related Document or otherwise, including
without limitation contract disputes and tort claims, shall be arbitrated
pursuant to the Commercial Rules of the American Arbitration Association. Any
arbitration proceeding held pursuant to this arbitration provision shall be
conducted in the city nearest the Guarantor's address having an AAA regional
office, or at any other place selected by mutual agreement of the parties. No
act to take or dispose of any collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
arbitration provision shall not limit the right of either party during any
dispute, claim or controversy to seek, use, and employ ancillary, provisional or
preliminary rights and/or remedies, judicial or otherwise, for the purposes of
realizing upon, preserving, protecting, foreclosing upon or proceeding under
forcible entry and detainer for possession of, any real or personal property,
and any such action shall not be deemed an election of remedies. This includes,
without limitation, obtaining injunctive relief or a temporary restraining
order, invoking a power of sale under any deed of trust or mortgage, obtaining a
writ of attachment or imposition of a receivership, or exercising any rights
relating to personal property, including taking or disposing of such property
with or without judicial process pursuant to Article 9 of the Uniform Commercial
Code. Any disputes claims, or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right or remedy, concerning any
collateral, including any claim to rescind, reform, or otherwise modify any
agreement relating to the collateral, shall also be arbitrated; provided however
that no arbitrator shall have the right or the power to enjoin or restrain any
act of either party. Judgment upon any award rendered by any arbitrator may be
entered in any court having jurisdiction. Nothing in this arbitration provision
shall preclude either party from seeking equitable relief from a court of
competent jurisdiction. The statute of limitations, estoppel, waiver, laches and
similar doctrines which would otherwise be applicable in an action brought by a
party shall be applicable in any arbitration proceeding, and the commencement of
an arbitration proceeding shall be deemed the commencement of any action for
these purpose. The Federal Arbitration Act (Title 9 of the United States Code)
shall apply to the construction, interpretation, and enforcement of this
arbitration provision.
COSTS AND EXPENSES. Guarantor shall also pay on demand by Lender all costs and
expenses, including, without limitation, all reasonable attorneys' fees,
incurred by Lender in connection with the enforcement and or collection of this
Guaranty and with the collection and/or sale of any collateral securing this
Guaranty. This covenant shall survive the payment of the Indebtedness.
<PAGE>
6-13-97
NOTICES. All notices required to be given by either party to the other under
this Guaranty shall be in writing and except for revocation notices by
Guarantor, shall be effective when actually delivered or when deposited with a
nationally recognized overnight courier, or when deposited in the United States
mail, first class postage prepaid, addressed to the party to whom the notice is
to be given at the address shown above or to such other addresses as either
party may designate to the other in writing. All revocation notices by Guarantor
shall be in writing and shall be effective only upon delivery to Lender as
provided above in the section titled "DURATION OF GUARANTY." For notice
purposes, Guarantor agrees to keep Lender informed at all times of Guarantor's
current address. In the event that Guarantor is entitled to receive any notice
under the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any collateral securing all or any
part of the Indebtedness or this Guaranty, reasonable notice shall be deemed
given when such notice is given pursuant to the terms of this Subjection ten
(10) days prior to the date any public sale, or after which any private sale, of
any such collateral is to be held.
INTERPRETATION. In all cases where there is more than one Borrower, then all
words used in this Guaranty in the singular shall be deemed to have been used in
the plural where the context and construction so require; and where there is
more than one borrower named in this Guaranty, the word "Borrower" shall mean
all and any one or more of them. This Guaranty is for the benefit of Lender, its
successors and assigns. This Guaranty is binding upon Guarantor and Guarantor's
heirs, executors, administrators, personal representatives and successors.
Caption headings in this Guaranty are fir convenience purposes only and are not
to be used to interpret or define the provisions of this Guaranty. If a court of
competent jurisdiction finds any provision of this guaranty to be invalid or
unenforceable as to any person or circumstance, such finding shall not render
that provision invalid or unenforceable a to any other persons or circumstances,
and all provisions of this Guaranty in all other respects shall remain valid and
enforceable. If any one or more of borrower or Guarantor are corporations or
partnership, it is not necessary for Lender to inquire into the powers of
Borrower or Guarantor or of the officers, directors, partner, or agents acting
or purporting to act on their behalf, and any Indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed under
this Guaranty.
WAIVER. Lender shall not be deemed to have waived any rights under this guaranty
unless such waiver is given in writing and signed by Lender, and then only in
the specific instance and for the purpose given. No delay or omission on the
part of Lender in exercising any right shall operate as a waiver of such right
or any other right. A waiver by Lender of a provision of this Guaranty shall not
prejudice or constitute a waiver of Lender's right to thereafter demand strict
compliance with that provision or any other provision of this guaranty. No prior
waiver by Lender, nor any course of dealing between Lender and Guarantor, shall
constitute a waiver of any Lender's rights or of any of Guarantor's obligations
as to any future transactions. Whenever the consent of Lender is required under
this Guaranty, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY". NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED JUNE 13,1997.
<PAGE>
6-13-97
GUARANTOR:
WHITMAN EDUCATION GROUP INC.
By:/S/ RANDY S. PROTO By: /S/ FERNANDO L. FERNANDEZ
================================= ====================================
RANDY S PROTO, PRESIDENT FERNANDO L FERNANDEZ, VICE PRESIDENT
EXHIBIT 10.37
PROMISSORY NOTE
BORROWER: COLORADO TECHNICAL UNIVERSITY, INC. LENDER:THE PUEBLO BANK AND
A COLORADO CORPORATION TRUST COMPANY CASCADE BRANCH
4435 N. CHESNUT ST. 101 N. CASCADE AVENUE,
COLORADO SPRINGS, CO 80907 CO. SPGS, CO 80903
MAILING ADDRESS: P.O. BOX 639
COLORADO SPRINGS, CO 80903
- -------------------------------------------------------------------------------
Principal Amount:$1,500,000.00 Initial Rate: 9.750% Date of Note: June 13, 1997
PROMISE TO PAY. COLORADO TECHNICAL UNIVERSITY INC A COLORADO CORPORATION
("Borrower") promises to pay to The Pueblo Bank and Trust Company ("Lender'), or
order, in lawful money of the United States of America, the principal amount of
One Million Five Hundred Thousand & 00/100 Dollars ($1,500,000.00) or so much as
may be outstanding, together with interest on the unpaid outstanding principal
balance of each advance. Interest shall be calculated from the date of each
advance until repayment of each advance.
PAYMENT. Subject to any payment changes resulting from changes in the index,
Borrower will pay this loan in accordance with the following payment schedule:
12 consecutive monthly interest payments, beginning July 13, 1997, with
interest calculated on the unpaid principal balances at an interest rate
of 1.250 percentage points over the Index described below; 47 consecutive
monthly principal and interest payments in the Initial amount of
$37,969.84 each, beginning July 13, 1998, with interest calculated on the
unpaid principal balances at an interest rate of 1.250 percentage points
over the Index described below; and 1 principal and interest payment in
the initial amount of $37,969.60 on June 13, 2002, with interest
calculated on the unpaid principal balances at an interest rate of 1.250
percentage points over the Index described below. This estimated final
payment is based on the assumption that all payments will be made exactly
as scheduled and that the Index does not change; the actual final payment
will be for all principal and accrued interest not yet paid, together
with any other unpaid amounts under this Note.
Interest on this Note is computed on a 365/360 simple interest basis; that is,
b! applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the PRIME RATE AS
PUBLISHED IN THE WALL STREET JOURNAL (the "Index"). The Index is not necessarily
the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower~s request. Borrower understands that Lender may make loans based on
other rates as well. The interest rate change will not occur more often
<PAGE>
06-13-97
than each THREE YEARS ON THE ANNIVERSARY DATE OF THE NOTE. The Index currently
is 8.500% per annum. The interest rate or rates to be applied to the unpaid
principal balance of this Note will be the rate or rates set forth above in the
"Payment" section. NOTICE: Under no circumstances will the interest rate on this
Note be more than the maximum rate allowed by applicable la`^s Whenever
increases occur in the interest rate, Lender, at its option, may do one or more
of the following: (a) increase Borrower's payments to ensure Borrower's loan
will pay off by its original final maturity date, (b) increase Borrower's
payments to cover accruing interest, (c) increase the number of Borrower's
payments, and (d) continue Borrower's payments at the same amount and increase
Borrower's final payment.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments under the payment schedule.
Rather, they will reduce the principal balance due and may result in Borrower
making fewer payments.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(e) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any guarantor dies or any of the other
events described in this default section occurs with respect to any guarantor of
this Note.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within twenty (20) days; or (b) if
the cure requires more than twenty (20) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 21.000% per
annum. The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount. This includes,
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including attorneys"
fees and legal expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided
<PAGE>
06-13-997
by law. This Note has been delivered to Lender and accepted by Lender in the
State of Colorado. If there is a lawsuit, Borrower agrees upon Lender~s request
to submit to the jurisdiction of the courts of EL Paso County, the State of
Colorado. This Note shall be governed by and construed in accordance with the
laws of the State of Colorado.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns. conveys, delivers, pledge and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
COLLATERAL. This Note is secured by This note is secured by, in addition to any
other collateral, Assignments of Rents and Leases dated June 13, 1997, to lender
for Colorado Technical University, Inc., Huron University and Sioux Falls
campus.
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note, as well as directions for payment from
Borrower's accounts, may be requested orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. Borrower agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this Note or
by Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor ceases
doing business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; or (d) Borrower has applied funds provided pursuant
to this Note for purposes other than those authorized by Lender.
FINANCIAL REQUIREMENT. We hereby agree to provide to The Pueblo Bank and Trust
Company annual audited Financial Statements for Colorado Technical University,
Inc. and related entities, along with notice of any material changes to the Bank
One loan relationship that would impact repayment on The Pueblo Bank and Trust
Company Loan.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
<PAGE>
06-13-97
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
COLORADO TECHNICAL UNIVERSITY INC A COLORADO CORPORATION
By: /S/ DAVID D. O'DONNELL
=========================================================
DAVID D. O'DONNELL, PRESIDENT
EXHIBIT 10.38
COMMERCIAL GUARANTY
BORROWER: COLORADO TECHNICAL UNIVERSITY, INC. LENDER:THE PUEBLO BANK AND TRUST
A COLORADO CORPORATION COMPANY CASCADE BRANCH
4435 N. CHESNUT ST. 101 N. CASCADE AVENUE,
COLORADO SPRINGS, CO 80907 CO. SPGS, CO 80903
MAILING ADDRESS: P.O. BOX 639
COLORADO SPRINGS, CO 80903
GUARANTOR: WHITMAN EDUCATION GROUP, INC.
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AMOUNT OF GUARANTY. This is a guaranty of payment of the Note, including without
limitation the principal Note amount of One Million Five Hundred Thousand &
00/100 Dollars (S1,500,000.00).
GUARANTY. For good and valuable consideration, Whitman Education Group, Inc.
("Guarantor") absolutely and unconditionally guarantees and promises to pay to
The Pueblo Bank and Trust Company ("Lender") or its order, in legal tender of
the United States of America, the Indebtedness (as that term is defined below)
of COLORADO TECHNICAL UNIVERSITY INC A COLORADO CORPORATION ("Borrower") to
Lender on the terms and conditions set forth in this Guaranty.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
BORROWER. The word "Borrower" means COLORADO TECHNICAL UNIVERSITY INC. A
COLORADO CORPORATION.
GUARANTOR. The word "Guarantor" means Whitman Education Group, Inc.
GUARANTY. The word "Guaranty"' means this Guaranty made by Guarantor for the
benefit of Lender dated June 13, 1997.
INDEBTEDNESS. The word "Indebtedness" means the Note, including (a) all
principal, (b) all interest, (c) all late charges, (d) all loan fees and loan
charges, and (e) all collection costs and expenses relating to the Note or to
any collateral for the Note. Collection costs and expenses include without
limitation all of Lender's attorneys' fees and Lender's legal expenses, whether
or not suit is instituted, and attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
LENDER. The word "Lender" means The Pueblo Bank and Trust Company, its
successors and assigns.
NOTE. The word "Note" means the promissory note or credit agreement dated June
13, 1997, in the original principal amount of $1,500,000.00 from Borrower to
Lender, together with all renewals of, extensions of, modifications of,
refinancing of, consolidations of, and substitutions for the promissory note or
agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all
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FORM OF COMMERCIAL GUARANTY
promissory notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the amount of the Indebtedness described above, plus
all costs and expenses of (a) enforcement of this Guaranty and (b) collection
and sale of any collateral securing this Guaranty.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all guaranties
shall be cumulative. This Guaranty shall not (unless specifically provided below
to the contrary) affect or invalidate any such other guaranties. The liability
of Guarantor will be the aggregate liability of Guarantor under the terms of
this Guaranty and any such other unterminated guaranties.
NATURE OF GUARANTY. Guarantor intends to guarantee at all times the performance
and prompt payment when due, whether at maturity or earlier by reason of
acceleration or otherwise, of all Indebtedness within the limits set forth in
the preceding section of this Guaranty.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness shall have
been fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. Release of any other
guarantor or termination of any other guaranty of the Indebtedness shall not
affect the liability of Guarantor under this Guaranty. A revocation received by
Lender from any one or more Guarantors shall not affect the liability of any
remaining Guarantors under this Guaranty.
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice
or demand and without lessening Guarantor's liability under this Guaranty, from
time to time: (a) to make one or more additional secured or unsecured loans to
Borrower, to lease equipment or other goods to Borrower, or otherwise to extend
additional credit to Borrower, (b) to alter, compromise, renew, extend,
accelerate, or otherwise change one or more times the time for payment or other
terms of the Indebtedness or any part of the Indebtedness, including increases
and decreases of the rate of interest on the Indebtedness; extensions may be
repeated and may be for longer than the original loan term; (c) to take and hold
security for the payment of this Guaranty or the Indebtedness, and exchange,
enforce, waive, subordinate, fait or decide not to perfect, and release any such
security, with or without the substitution of new collateral; (d) to release,
substitute, agree not to sue, or cleat with any one or more of Borrower's
sureties, endorsers, or other guarantors on any terms or in any manner Lender
may choose; (e) to determine how, when and what application of payments and
credits shall be made on the Indebtedness; (f) to apply such security and direct
the order or manner of sale thereof, including without limitation, any
nonjudicial sale permitted by the terms of the controlling security agreement or
deed of trust, as Lender in its discretion may determine; (g) to sell, transfer,
assign, or grant participation i all or any party to the indebtedness; and (h)
to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the
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FORM OF COMMERCIAL GUARANTY
provisions of this Guaranty do not conflict with or result in a default under
any agreement or other instrument binding upon Guarantor and do not result in a
violation of any law, regulation, court decree or order applicable to Guarantor;
(e) Guarantor has not and will not, without the prior written consent of Lender,
sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of
all or substantially all of Guarantor's assets, or any interest therein; (f)
upon Lender's request, Guarantor will provide to Lender financial and credit
information in form acceptable to Lender, and all such financial information
which currently has been, and all future financial information which will be
provided to Lender is and will be true and correct in all material respects and
fairly present the financial condition of Guarantor as of the dates the
financial information is provided; (g) no material adverse change has occurred
in Guarantor's financial condition since the date of the most recent financial
statement provided to Lender and no event has occurred which may materially
adversely affect Guarantor's financial condition; (h) no limitation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (i) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (j)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition. Guarantor
agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral or notice of any action or nonaction on the
part of Borrower, Lender, any surety, endorser, or other guarantor in connection
with the Indebtedness or in connection with the creation of new or additional
loans or obligations; (c) to resort for payment or to proceed directly it at
once against any person, including Borrower or any other guarantor; (d) to
proceed directly against or exhaust any collateral held by Lender from Borrower,
any other guarantor, or any other person; (e) to give notice of the terms, time,
and place of any public or private sale of personal property security held by
Lender form Borrower or to comply with any other applicable provisions of the
Uniform Commercial Code; (f) to pursue any other remedy within Lender's power;
or (g) to commit any act or omission of any kind, or at any time, with respect
to any matter whatsoever.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. Section 547(b), or any
successor provision of the Federal Bankruptcy Guarantor also waives any and all
rights or defenses arising by reason of (a) any "one action" or
"anti-deficiency" law or any other law which may prevent Lender from bringing
any action, including a claim for deficiency, against Guarantor, before or after
Lender's commencement or completion of any foreclosure action, either judicially
or by exercise of a power of sale; (b) any election of remedies by Lender which
destroys or otherwise adversely affects Guarantor's subrogation rights or
Guarantor's rights to proceed against Borrower for reimbursement, including
without limitation, any loss of rights Guarantor may suffer by reason of any law
limiting, qualifying, or discharging the Indebtedness; (c) any disability or
other defense of Borrower, of any other guarantor, or of any other person, or by
reason of the cessation of Borrower's liability from any cause whatsoever, other
than payment in full in legal tender, of the Indebtedness; (d) any right to
claim discharge of the Indebtedness on the basis of unjustified impairment
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FORM OF COMMERCIAL GUARANTY
of any collateral for the Indebtedness; (e) any statute of limitations, if at
any time any action or suit brought by Lender against Guarantor is commenced
there is outstanding Indebtedness of Borrower to Lender which is not barred by
any applicable statute of limitations; or (f) any defenses given to guarantors
at law or in equity other than actual payment and performance of the
Indebtedness. If payment is made by Borrower, whether voluntarily or otherwise,
or by any third party, on the Indebtedness and thereafter Lender is forced to
remit the amount of that payment to Borrower's trustee in bankruptcy or to any
similar person under any federal or state bankruptcy law or law for the relief
of debtors, the Indebtedness shall be considered unpaid for the purpose of
enforcement of this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender by
law, Lender shall have, with respect to Guarantor's obligations to Lender under
this Guaranty and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Guarantor hereby
assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's
right, title and interest in and to, all deposits, moneys, securities and other
property of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding however all IRA, Keogh, and trust accounts. Every such security
interest and right of setoff may be exercised without demand upon or notice to
Guarantor. No security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any neglect to exercise
such right of setoff or to enforce such security interest or by any delay in so
doing. Every right of setoff and security interest shall continue in full force
and effect until such right of setoff or security interest is specifically
waived or released by an instrument in writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
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FORM OF COMMERCIAL GUARANTY
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
AMENDMENTS. This Guaranty, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Guaranty. No alteration of or amendment to this Guaranty shall be effective
unless given in writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment.
APPLICABLE LAW. This Guaranty has been delivered to Lender and accepted by
Lender in the State of Colorado. If there is a lawsuit, Guarantor agrees upon
Lender's request to submit to the jurisdiction of the courts of EL PASO County,
State of Colorado. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Colorado.
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of Lender's
costs and expenses, including attorneys' fees and Lender's legal expenses,
incurred in connection with the enforcement of this Guaranty. Lender may pay
someone else to help enforce this Guaranty, and Guarantor shall pay the costs
and expenses of such enforcement. Costs and expenses include Lender's attorneys'
fees and legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
postjudgment collection services. Guarantor also shall pay all court costs and
such additional fees as may be directed by the court.
NOTICES. All notices required to be given by either party to the other under
this Guaranty shall be in writing, may be sent by telefacsimile, and shall be
effective when actually delivered or when deposited with a nationally recognized
overnight courier, or when deposited in the United States mail, first class
postage prepaid, addressed to the party to whom the notice is to be given at the
address shown above or to such other addresses as either party may designate to
the other in writing. If there is more than one Guarantor, notice to any
Guarantor will constitute notice to all Guarantors. For notice purposes,
Guarantor agrees to keep Lender informed at all times of Guarantor's current
address.
INTERPRETATION. In all cases where there is more than one Borrower or Guarantor,
then all words used in this Guaranty in the singular shall be deemed to have
been used in the plural where the context and construction so require; and where
there is more than one Borrower named in this Guaranty or when this Guaranty is
executed by more than one Guarantor, the words "Borrower" and "Guarantor"
respectively shall mean all and any one or more of them. The words "Guarantor,"
"Borrower," and "Lender" include the heirs, successors, assigns, and transferees
of each of them. Caption headings in this Guaranty are for convenience purposes
only and are not to be used to interpret or define the provisions of this
Guaranty. If a court of competent jurisdiction finds any provision of this
Guaranty to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of Borrower or
Guarantor are corporations or partnerships, it is not necessary for Lender to
inquire into the powers of Borrower or Guarantor or of the officers, directors,
partners, or agents acting or purporting to act on their behalf, and any
Indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed under this Guaranty.
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FORM OF COMMERCIAL GUARANTY
WAIVER. Lender shall not be deemed to have waived any rights under this Guaranty
unless such waiver is given in writing and signed by Lender. No delay or
omission on the part of Lender in exercising any right shall operate as a waiver
of such right or any other right. A waiver by Lender of a provision of this
Guaranty shall not prejudice or constitute a waiver of Lender's right otherwise
to demand strict compliance with that provision or any other provision of this
Guaranty. No prior waiver by Lender, nor any course of dealing between Lender
and Guarantor, shall constitute a waiver of any of Lender's rights or of any of
Guarantor's obligations as to any future transactions. Whenever the consent of
Lender is required under this Guaranty, the granting of such consent by lender
in any instance shall not constitute continuing consent to subsequent instances
where such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED JUNE 13, 1997.
GUARANTOR:
By: RANDY S. PROTO
==========================
RANDY S. PROTO, PRESIDENT
COMMERCIAL GUARANTY
BORROWER: COLORADO TECHNICAL UNIVERSITY, INC. LENDER:THE PUEBLO BANK AND TRUST
A COLORADO CORPORATION COMPANY CASCADE BRANCH
4435 N. CHESNUT ST. 101 N. CASCADE AVENUE,
COLORADO SPRINGS, CO 80907 CO. SPGS, CO 80903
MAILING ADDRESS: P.O. BOX 639
COLORADO SPRINGS, CO 80903
GUARANTOR: M.D.J.B., INC.
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AMOUNT OF GUARANTY. This is a guaranty of payment of the Note, including without
limitation the principal Note amount of One Million Five Hundred Thousand &
00/100 Dollars (S1,500,000.00).
GUARANTY. For good and valuable consideration, M.D.J.B. INC ("Guarantor")
absolutely and unconditionally guarantees and promises to pay to The Pueblo Bank
and Trust Company ("Lender") or its order, in legal tender of the United States
of America, the Indebtedness (as that term is defined below) of COLORADO
TECHNICAL UNIVERSITY INC A COLORADO CORPORATION ("Borrower") to Lender on the
terms and conditions set forth in this Guaranty.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
BORROWER. The word "Borrower" means COLORADO TECHNICAL UNIVERSITY INC. A
COLORADO CORPORATION.
GUARANTOR. The word "Guarantor" means M.D.J.B. INC.
GUARANTY. The word "Guaranty"' means this Guaranty made by Guarantor for the
benefit of Lender dated June 13, 1997.
INDEBTEDNESS. The word "Indebtedness" means the Note, including (a) all
principal, (b) all interest, (c) all late charges, (d) all loan fees and loan
charges, and (e) all collection costs and expenses relating to the Note or to
any collateral for the Note. Collection costs and expenses include without
limitation all of Lender's attorneys' fees and Lender's legal expenses, whether
or not suit is instituted, and attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
LENDER. The word "Lender" means The Pueblo Bank and Trust Company, its
successors and assigns.
NOTE. The word "Note" means the promissory note or credit agreement dated June
13, 1997, in the original principal amount of $1,500,000.00 from Borrower to
Lender, together with all renewals of, extensions of, modifications of,
refinancing of, consolidations of, and substitutions for the promissory note or
agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all
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FORM OF COMMERCIAL GUARANTY
promissory notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the amount of the Indebtedness described above, plus
all costs and expenses of (a) enforcement of this Guaranty and (b) collection
and sale of any collateral securing this Guaranty.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all guaranties
shall be cumulative. This Guaranty shall not (unless specifically provided below
to the contrary) affect or invalidate any such other guaranties. The liability
of Guarantor will be the aggregate liability of Guarantor under the terms of
this Guaranty and any such other unterminated guaranties.
NATURE OF GUARANTY. Guarantor intends to guarantee at all times the performance
and prompt payment when due, whether at maturity or earlier by reason of
acceleration or otherwise, of all Indebtedness within the limits set forth in
the preceding section of this Guaranty.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness shall have
been fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. Release of any other
guarantor or termination of any other guaranty of the Indebtedness shall not
affect the liability of Guarantor under this Guaranty. A revocation received by
Lender from any one or more Guarantors shall not affect the liability of any
remaining Guarantors under this Guaranty.
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice
or demand and without lessening Guarantor's liability under this Guaranty, from
time to time: (a) to make one or more additional secured or unsecured loans to
Borrower, to lease equipment or other goods to Borrower, or otherwise to extend
additional credit to Borrower, (b) to alter, compromise, renew, extend,
accelerate, or otherwise change one or more times the time for payment or other
terms of the Indebtedness or any part of the Indebtedness, including increases
and decreases of the rate of interest on the Indebtedness; extensions may be
repeated and may be for longer than the original loan term; (c) to take and hold
security for the payment of this Guaranty or the Indebtedness, and exchange,
enforce, waive, subordinate, fait or decide not to perfect, and release any such
security, with or without the substitution of new collateral; (d) to release,
substitute, agree not to sue, or cleat with any one or more of Borrower's
sureties, endorsers, or other guarantors on any terms or in any manner Lender
may choose; (e) to determine how, when and what application of payments and
credits shall be made on the Indebtedness; (f) to apply such security and direct
the order or manner of sale thereof, including without limitation, any
nonjudicial sale permitted by the terms of the controlling security agreement or
deed of trust, as Lender in its discretion may determine; (g) to sell, transfer,
assign, or grant participation i all or any party to the indebtedness; and (h)
to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Lender that (a) no representations or agreements of any kind have been made to
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the
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FORM OF COMMERCIAL GUARANTY
provisions of this Guaranty do not conflict with or result in a default under
any agreement or other instrument binding upon Guarantor and do not result in a
violation of any law, regulation, court decree or order applicable to Guarantor;
(e) Guarantor has not and will not, without the prior written consent of Lender,
sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of
all or substantially all of Guarantor's assets, or any interest therein; (f)
upon Lender's request, Guarantor will provide to Lender financial and credit
information in form acceptable to Lender, and all such financial information
which currently has been, and all future financial information which will be
provided to Lender is and will be true and correct in all material respects and
fairly present the financial condition of Guarantor as of the dates the
financial information is provided; (g) no material adverse change has occurred
in Guarantor's financial condition since the date of the most recent financial
statement provided to Lender and no event has occurred which may materially
adversely affect Guarantor's financial condition; (h) no limitation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (i) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and (j)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower's financial condition. Guarantor
agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor's risks under this
Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral or notice of any action or nonaction on the
part of Borrower, Lender, any surety, endorser, or other guarantor in connection
with the Indebtedness or in connection with the creation of new or additional
loans or obligations; (c) to resort for payment or to proceed directly it at
once against any person, including Borrower or any other guarantor; (d) to
proceed directly against or exhaust any collateral held by Lender from Borrower,
any other guarantor, or any other person; (e) to give notice of the terms, time,
and place of any public or private sale of personal property security held by
Lender form Borrower or to comply with any other applicable provisions of the
Uniform Commercial Code; (f) to pursue any other remedy within Lender's power;
or (g) to commit any act or omission of any kind, or at any time, with respect
to any matter whatsoever.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. Section 547(b), or any
successor provision of the Federal Bankruptcy Guarantor also waives any and all
rights or defenses arising by reason of (a) any "one action" or
"anti-deficiency" law or any other law which may prevent Lender from bringing
any action, including a claim for deficiency, against Guarantor, before or after
Lender's commencement or completion of any foreclosure action, either judicially
or by exercise of a power of sale; (b) any election of remedies by Lender which
destroys or otherwise adversely affects Guarantor's subrogation rights or
Guarantor's rights to proceed against Borrower for reimbursement, including
without limitation, any loss of rights Guarantor may suffer by reason of any law
limiting, qualifying, or discharging the Indebtedness; (c) any disability or
other defense of Borrower, of any other guarantor, or of any other person, or by
reason of the cessation of Borrower's liability from any cause whatsoever, other
than payment in full in legal tender, of the Indebtedness; (d) any right to
claim discharge of the Indebtedness on the basis of unjustified impairment
<PAGE>
FORM OF COMMERCIAL GUARANTY
of any collateral for the Indebtedness; (e) any statute of limitations, if at
any time any action or suit brought by Lender against Guarantor is commenced
there is outstanding Indebtedness of Borrower to Lender which is not barred by
any applicable statute of limitations; or (f) any defenses given to guarantors
at law or in equity other than actual payment and performance of the
Indebtedness. If payment is made by Borrower, whether voluntarily or otherwise,
or by any third party, on the Indebtedness and thereafter Lender is forced to
remit the amount of that payment to Borrower's trustee in bankruptcy or to any
similar person under any federal or state bankruptcy law or law for the relief
of debtors, the Indebtedness shall be considered unpaid for the purpose of
enforcement of this Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are reasonable and not contrary to public policy or law. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender by
law, Lender shall have, with respect to Guarantor's obligations to Lender under
this Guaranty and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Guarantor hereby
assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's
right, title and interest in and to, all deposits, moneys, securities and other
property of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding however all IRA, Keogh, and trust accounts. Every such security
interest and right of setoff may be exercised without demand upon or notice to
Guarantor. No security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any neglect to exercise
such right of setoff or to enforce such security interest or by any delay in so
doing. Every right of setoff and security interest shall continue in full force
and effect until such right of setoff or security interest is specifically
waived or released by an instrument in writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
<PAGE>
FORM OF COMMERCIAL GUARANTY
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
AMENDMENTS. This Guaranty, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Guaranty. No alteration of or amendment to this Guaranty shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Guaranty has been delivered to Lender and accepted by
Lender in the State of Colorado. If there is a lawsuit, Guarantor agrees upon
Lender's request to submit to the jurisdiction of the courts of EL PASO County,
State of Colorado. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Colorado.
ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of Lender's
costs and expenses, including attorneys' fees and Lender's legal expenses,
incurred in connection with the enforcement of this Guaranty. Lender may pay
someone else to help enforce this Guaranty, and Guarantor shall pay the costs
and expenses of such enforcement. Costs and expenses include Lender's attorneys'
fees and legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
postjudgment collection services. Guarantor also shall pay all court costs and
such additional fees as may be directed by the court.
NOTICES. All notices required to be given by either party to the other under
this Guaranty shall be in writing, may be sent by telefacsimile, and shall be
effective when actually delivered or when deposited with a nationally recognized
overnight courier, or when deposited in the United States mail, first class
postage prepaid, addressed to the party to whom the notice is to be given at the
address shown above or to such other addresses as either party may designate to
the other in writing. If there is more than one Guarantor, notice to any
Guarantor will constitute notice to all Guarantors. For notice purposes,
Guarantor agrees to keep Lender informed at all times of Guarantor's current
address.
INTERPRETATION. In all cases where there is more than one Borrower or Guarantor,
then all words used in this Guaranty in the singular shall be deemed to have
been used in the plural where the context and construction so require; and where
there is more than one Borrower named in this Guaranty or when this Guaranty is
executed by more than one Guarantor, the words "Borrower" and "Guarantor"
respectively shall mean all and any one or more of them. The words "Guarantor,"
"Borrower," and "Lender" include the heirs, successors, assigns, and transferees
of each of them. Caption headings in this Guaranty are for convenience purposes
only and are not to be used to interpret or define the provisions of this
Guaranty. If a court of competent jurisdiction finds any provision of this
Guaranty to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of Borrower or
Guarantor are corporations or partnerships, it is not necessary for Lender to
inquire into the powers of Borrower or Guarantor or of the officers, directors,
partners, or agents acting or purporting to act on their behalf, and any
Indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed under this Guaranty.
<PAGE>
FORM OF COMMERCIAL GUARANTY
WAIVER. Lender shall not be deemed to have waived any rights under this Guaranty
unless such waiver is given in writing and signed by Lender. No delay or
omission on the part of Lender in exercising any right shall operate as a waiver
of such right or any other right. A waiver by Lender of a provision of this
Guaranty shall not prejudice or constitute a waiver of Lender's right otherwise
to demand strict compliance with that provision or any other provision of this
Guaranty. No prior waiver by Lender, nor any course of dealing between Lender
and Guarantor, shall constitute a waiver of any of Lender's rights or of any of
Guarantor's obligations as to any future transactions. Whenever the consent of
Lender is required under this Guaranty, the granting of such consent by lender
in any instance shall not constitute continuing consent to subsequent instances
where such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED JUNE 13, 1997.
GUARANTOR:
M.D.J.B., INC.
By: /S/ DAVID D. O'DONNELL
===============================
DAVID D. O'DONNELL
EXHIBIT 10.39
COMMERCIAL SECURITY AGREEMENT
BORROWER: COLORADO TECHNICAL UNIVERSITY, INC. LENDER: THE PUEBLO BANK AND TRUST
A COLORADO CORPORATION COMPANY CASCADE BRANCH
4435 N. CHESNUT ST. 101 N. CASCADE AVENUE,
COLORADO SPRINGS, CO 80907 CO. SPGS, CO 80903
MAILING ADDRESS: P.O. BOX 639
COLORADO SPRINGS, CO 80903
- -------------------------------------------------------------------------------
THIS COMMERCIAL SECURITY AGREEMENT is entered into between COLORADO TECHNICAL
UNIVERSITY INC., A COLORADO CORPORATION (referred to below as "Grantor"); and
The Pueblo Bank and Trust Company (referred to below as "Lender"). For valuable
consideration, Grantor grants to Lender a security interest in the Collateral to
secure the Indebtedness and agrees that Lender shall have the rights stated in
this Agreement with respect to the Collateral, in addition to all other rights
which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Security
Agreement from time to time.
COLLATERAL. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
All equipment, together with the following specifically described property:
TO INCLUDE ALL FURNITURE AND EQUIPMENT
In addition, the word "Collateral" includes all the following, whether now owned
or hereafter acquired, whether now existing or hereafter arising, and wherever
located:
(a) All attachments, accessions, accessories, tools, parts, supplies, increases,
and additions to and all replacements of and substitutions for any property
described above.
(b) All products and produce of any of the property described in this
Collateral section.
<PAGE>
06-13-1997 COMMERCIAL SECURITY AGREEMENT
(Continued)
(c) All accounts, general intangibles, instruments, rents, monies, payments, and
all other rights, arising out of a sale, lease, or other disposition of any of
the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale, destruction,
loss, or other disposition of any of the property described in this Collateral
section.
(e) All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantor's right, title,
and interest in and to all computer software required to utilize, create,
maintain, and process any such records or data on electronic media.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"Events of Default."
GRANTOR. The word "Grantor" means COLORADO TECHNICAL UNIVERSITY INC., A COLORADO
CORPORATION, its successors and assigns.
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in connection
with the Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the
Note, including all principal and interest, together with all other indebtedness
and costs and expenses for which Grantor is responsible under this Agreement or
under any of the Related Documents.
LENDER. The word "Lender" means The Pueblo Bank and Trust Company, its
successors and assigns.
NOTE. The word "Note" means the note or credit agreement dated June 13, 1997, in
the principal amount of $1,500,000.00 from COLORADO TECHNICAL UNIVERSITY INC., A
COLORADO CORPORATION to Lender, together with all renewals of, extensions of,
modifications of, refinancing of, consolidations of and substitutions for the
note or credit agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security
interest in and hereby assigns, conveys, delivers, pledges, and transfers all of
Grantor's right, title and interest in and to Grantors accounts with Lender
(whether checking, savings, or some other account), including all accounts held
jointly with someone else and all accounts Grantor may open in the future,
excluding, however, all IRA and Keogh accounts, and all trust accounts for which
the grant of a security interest would be prohibited by law. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
<PAGE>
06-13-1997 COMMERCIAL SECURITY AGREEMENT
(Continued)
ORGANIZATION. Grantor is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Colorado.
AUTHORIZATION. The execution, delivery, and performance of this Agreement by
Grantor have been duly authorized by all necessary action by Grantor and do not
conflict with, result in a violation of, or constitute a default under (a) any
provision of its articles of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Grantor or (b) any law, governmental
regulation, court decree, or order applicable to Grantor.
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to perfect
and continue Lender's security interest in the Collateral. Upon request of
Lender, Grantor will deliver to Lender any and all of the documents evidencing
or constituting the Collateral, and Grantor will note Lender's interest upon any
and all chattel paper if not delivered to Lender for possession by Lender.
Grantor hereby appoints Lender as its irrevocable attorney-in-fact for the
purpose of executing any documents necessary to perfect or to continue the
security interest granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security interest
in the Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of Grantor.
NO VIOLATION. The execution and delivery of this agreement will not violate any
law or agreement governing Grantor or to which grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, the Collateral is enforceable in
accordance with its terms, is genuine, and complies with applicable laws
concerning form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the Collateral.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Except in the ordinary course of its
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of
Colorado, without the prior written consent of Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral. Grantor shall
not pledge, mortgage, encumber or otherwise permit the collateral to be subject
to any liens, security interest, encumbrance, charge, other than the security
interest provided for in this Agreement, without the prior written consent of
Lender. This includes security interests even if junior in right to the security
interests granted under this Agreement. Unless waived by Lender, all proceeds
from any disposition of the Collateral (for whatever reason) shall be held in
trust for Lender and shall not be commingled with any other funds; provided
however, this requirement shall not constitute consent by Lender to any sale or
other disposition. Upon receipt, Grantor shall immediately deliver any such
proceeds to Lender.
<PAGE>
06-13-1997 COMMERCIAL SECURITY AGREEMENT
(Continued)
TITLE. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
COLLATERAL SCHEDULES AND LOCATIONS. Insofar as the Collateral consists of
equipment, Grantor shall deliver to Lender, as often as Lender shall require,
such lists, descriptions, and designations of such Collateral as Lender may
require to identify the nature, extent, and location of such Collateral. Such
information shall be submitted for Grantor and each of its subsidiaries or
related companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral. Lender
and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever located.
Grantor shall immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any Collateral; of any request
for credit or adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting the Collateral
or the value or the amount of the Collateral.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other charges
that could accrue as a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the contest
proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in good
faith any such law, ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender's interest in the
Collateral, in Lender's opinion, is not jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien on
the Collateral, used for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act 42
U.S.C. Section 6901, et seq., or other applicable state or Federal laws, rules,
<PAGE>
06-13-1997 COMMERCIAL SECURITY AGREEMENT
(Continued)
or regulations adopted pursuant to any of the foregoing. The terms
"hazardous waste" and "hazardous substance" shall also include, without
limitation, petroleum and petroleum by-products or any fraction thereof and
asbestos. The representations and warranties contained herein are based on
Grantor's due diligence in investigating the Collateral for hazardous wastes and
substances. Grantor hereby (a) releases and waives any future claims against
Lender for indemnity or contribution in the event Grantor becomes liable for
cleanup or other costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims and losses resulting from a breach of
this provision of this Agreement. This obligation to indemnify shall survive the
payment of the Indebtedness and the satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverage and basis reasonably acceptable to Lender
and issued by a company or companies reasonably acceptable to Lender. Grantor,
upon request of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including stipulations
that coverage will not be cancelled or diminished without at least ten (10)
days' prior written notice to Lender and not including any disclaimer of the
insurer's liability for failure to give such a notice. Each insurance policy
also shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Grantor or
any other person. In connection with all policies covering assets in which
Lender holds or is offered a security interest, Grantor will provide Lender with
such loss payable or other endorsements as Lender may require. If Grantor at any
time fails to obtain or maintain any insurance as required under this Agreement,
Lender may (but shall not be obligated to) obtain such insurance as Lender deems
appropriate, including if it so chooses "single interest insurance," which will
cover only Lender's interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce,
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid. If fifteen (15) days before payment is
due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.
<PAGE>
06-13-1997 COMMERCIAL SECURITY AGREEMENT
(Continued)
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (a) the name of the insurer; (b)
the risks insured; (c) the amount of the policy; (d) the property insured; (e)
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (f) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of the
tangible personal property and beneficial use of all the Collateral and may use
it in any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's security interest in such Collateral. If
Lender at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action for
that purpose as Grantor shall request or as Lender, in Lender's sole discretion,
shall deem appropriate under the circumstances, but failure to honor any request
by Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be discharge
or paid by Grantor under this Agreement, including without limitation all taxes,
liens, security interests, encumbrances, and other claims, at any time levied or
placed on the Collateral. Lender also may (but shall not be obligated to) pay
all costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses shall become a
part of the Indebtedness and, at Lender's option, will (a) be payable on demand,
(b) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (b) the term of any
applicable insurance policy or (ii) the remaining term of the Note, or (c) be
treated as a balloon payment which will be due and payable at the Note's
maturity. This Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon the occurrence of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement.
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due on
the Indebtedness.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or in any other agreement between Lender and Grantor.
FALSE STATEMENTS. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Grantor under this Agreement, the Note or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished.
<PAGE>
06-13-1997 COMMERCIAL SECURITY AGREEMENT
(Continued)
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to crate a valid and perfected security interest or lien) at any time
and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
the Collateral or any other collateral securing the Indebtedness. This includes
a garnishment of any of Grantor's deposit accounts with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Grantor as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or such Guarantor dies or becomes
incompetent. Lender, at its option, may, but shall not be required to, permit
the Guarantor's estate to assume unconditionally the obligations arising under
the guaranty in a manner satisfactory to Lender, and, in doing so, cure the
Event of Default.
ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
condition.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is curable
and if Grantor has not been given a prior notice of a breach of the same
provision of this Agreement, it may be cured (and no Event of Default will have
occurred) if Grantor, after Lender sends written notice demanding cure of such
default, (a) cures the default within twenty (20) days; or (b), if the cure
requires more than twenty (20) days, immediately initiates steps which Lender
deems in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Colorado Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness, including
any prepayment penalty which Grantor would be required to pay, immediately due
and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of Grantor
to take possession of and remove the Collateral. If the Collateral contains
other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
<PAGE>
06-13-1997 COMMERCIAL SECURITY AGREEMENT
(Continued)
SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in its own name or that
of Grantor. Lender may sell the Collateral at public auction or private sale.
Unless the Collateral threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Lender will give Grantor reasonable
notice of the time after which any private sale or any other intended
disposition of the Collateral is to be made. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days before the
time of the sale or disposition. All expenses relating to the disposition of the
Collateral, including without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall become a part of
the Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall have
the following rights and remedies regarding the appointment of a receiver: (a)
Lender may have a receiver appointed as a matter of right, (b) the receiver may
be an employee of Lender and may serve without bond, and (c) all fees of the
receiver and his or her attorney shall become part of the Indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid. The receiver may be appointed by a court
of competent jurisdiction upon ex parte application and without notice, notice
being expressly waived.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in its discretion transfer any Collateral into its own
name or that of its nominee and receive the payments, rents, income, and
revenues therefrom and hold the same as security for the Indebtedness or apply
it to payment of the Indebtedness in such order of preference as Lender may
determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or similar
property, Lender may demand, collect, receipt for, settle, compromise, adjust,
sue for, foreclose, or realize on the Collateral as Lender may determine,
whether or not Indebtedness or Collateral is then due. For these purposes,
Lender may, on behalf of and in the name of Grantor, receive, open and dispose
of mail addressed to Grantor; change any address to which mail and payments are
to be sent; and endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is a sale of
accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at law, in equity, or
otherwise.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced by
this Agreement or the Related Documents or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation of
Grantor under this Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise its remedies.
<PAGE>
06-13-1997 COMMERCIAL SECURITY AGREEMENT
(Continued)
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of Colorado. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the courts of the State of
Colorado. This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado.
ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including attorneys' fees and Lender's legal expenses,
incurred in connection with the enforcement of this Agreement. Lender may pay
someone else to help enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's attorneys'
fees and legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
post- judgment collection services. Grantor also shall pay all court costs and
such additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
NOTICES. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimile, and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid, addressed to
the party to whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of the notice
is to change the party's address. To the extent permitted by applicable law, if
there is more than one Grantor, notice to any Grantor will constitute notice to
all Grantors. For notice purposes, Grantor will keep Lender informed at all
times of Grantor's current address(es).
POWER OF ATTORNEY. Grantor hereby appointed Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may ow or hereafter become due, owing or
payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks drafts or warrants issued in payment for
the Collateral; (c) to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Grantor, to execute and deliver its
release and settlement for the claim; and (d) to file any claim or claims or to
take any action or institute or take part in any proceedings, either in its own
name or in the name of Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable. This power is given as security for the
Indebtedness, and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Lender.
SEVERABILITY. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
<PAGE>
06-13-1997 COMMERCIAL SECURITY AGREEMENT
(Continued)
deemed to be modified to be within the limits of enforceability or validity
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on transfer of
the Collateral, this Agreement shall be binding upon and inure to the benefit of
the parties, their successors and assigns.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
JUNE 13,1997.
GRANTOR:
COLORADO TECHNICAL UNIVERSITY INC A COLORADO CORPORATION
By: /S/ DAVID D. O'DONNELL
========================================================
DAVID D O'DONNELL, PRESIDENT
LENDER:
THE PUEBLO BANK AND TRUST COMPANY
By:/S/
========================================================
AUTHORIZED OFFICER
EXHIBIT 10.40
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "'Agreement") is made and entered
into this 15th day of October, 1996, by and between Whitman Education Group,
Inc., a New Jersey corporation ("Whitman"), and The Travelers Indemnity Company,
a Connecticut corporation ("Travelers").
W I T N E S S E T H:
WHEREAS, Travelers desires to purchase, and Whitman desires to sell to
Travelers, an equity interest in Whitman;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, Whitman and Travelers agree as follows:
1. Certain Definitions. The following terms shall have the following
meanings unless the context otherwise requires:
(i) "AMEX" shall mean the American Stock Exchange.
(ii) "Commission" shall mean the Securities and Exchange Commission.
(iii)"Common Stock" shall mean the common stock, no par value, of Whitman.
(iv) "1933 Act" shall mean the Securities Act of 1933, as amended.
(v) "1934 Act" shall mean the Securities Exchange Act of 1934.
(vi) "Rule 144" shall mean Rule 144 of the Commission's General Rules and
Regulations under the 1933 Act, or any similar or substitute rule permitting the
sale of restricted securities that may hereafter be adopted by the Commission.
2. Purchase and Sale of the Common Stock. Subject to the terms and upon the
conditions of this Agreement, at the Closing (as defined below), Whitman will
sell and deliver to Travelers, and Travelers will purchase from Whitman,
1,000,000 shares (the "Shares") of Whitman's authorized but unissued Common
Stock for an aggregate purchase price of $6,500,000 (the "Purchase Price"). At
the Closing, Whitman will deliver to Travelers a certificate evidencing the
Shares, registered in the name of "TRAL & CO. ", and Travelers will make payment
of the Purchase Price by wire transfer to an account designated by Whitman. The
closing of the transactions contemplated by this Agreement (the "Closing") will
occur at the offices of Whitman in Miami, Florida at 10:00 a.m. on October 16,
1996, or such other time and date to be determined by the parties (the "Closing
Date"), which in no event shall be later than October 18, 1996. The Closing may,
by mutual agreement, also be conducted in escrow.
3. Representations and Warranties of Whitman. Whitman represents and
warrants to Travelers as follows:
(a) Corporate Organization. Whitman is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
(b) Capitalization. The authorized capital stock of Whitman consists of
100,000,000 shares of Common Stock, of which 11,896,676 shares are validly
issued and outstanding, fully-paid and nonassessable on the date hereof. In
addition, on the date hereof, 4,173,000 shares of Common Stock are subject to
issuance pursuant to presently existing options and warrants. There are no other
outstanding options, warrants, rights, convertible securities or exchange offers
providing for the issuance of Common Stock.
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<PAGE>
(c) Authorization. Whitman has full legal right, power and authority to
enter into perform this Agreement and the execution and delivery thereof by
Whitman and the consummation of the transactions contemplated hereby have been
duly authorized by all required corporate action of Whitman. This Agreement has
been duly executed and delivered on behalf of Whitman and constitutes a valid
and binding agreement of Whitman, enforceable against Whitman in accordance with
its terms.
(d) Shares Duly Issued. Upon the issuance of the Shares at the Closing and
upon receipt by Whitman of the Purchase Price from Travelers, the Shares will be
duly and validly issued, fully paid and nonassessable, and shall not be subject
to any restrictions on transfer other than those arising under applicable
federal and state securities laws.
(e) Approvals No governmental or other authorization, approval, order,
license, permit, franchise or consent, and no registration, declaration, notice
or filing by Whitman with any governmental authority (except as may be required
by AMEX and any reports required to be filed in the future under the 1934 Act)
is required in connection with the execution, delivery and performance of this
Agreement by Whitman.
(f) Absence of Conflicting Agreements, etc. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or By-laws
of Whitman or of any agreement or instrument to which Whitman is a party or by
which it is bound, or constitute a default under any of the foregoing or violate
any law, rule, regulation, judgment or decree by which Whitman is bound.
(g) Commission Reports. Whitman has heretofore furnished or made available
to Travelers true and complete copies of (i) each final prospectus and
definitive proxy statement filed by Whitman with the Commission since December
31, 1995, and (ii) each report filed by Whitman with the Commission pursuant to
the 1934 Act since December 31, 1995 (the "SEC Filings"). The financial
statements of Whitman and the related notes contained in Whitman's Annual Report
on Form 10-K for the fiscal year ended March 31, 1996 and its Quarterly Reports
on Form 10-Q for the quarter ended June 30, 1996 present fairly the financial
position of Whitman as of the dates indicated therein and the results of its
operations and cash flows for the periods therein specified. Such financial
statements (including the related notes) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified and are true, correct and complete in
all respects. Except as set forth in the financial statements or the SEC
Filings, Whitman has no material liabilities, contingent or otherwise, other
than (1) liabilities incurred in the ordinary course of business subsequent to
June 30, 1996 and (2) obligations under contracts and commitments incurred in
the ordinary course of business and not required under generally accepted
accounting principles to be reflected in the financial statements. The SEC
Filings complied in all material respects with the requirements of the 1933 Act
or the 1934 Act, as the case may be, as of their respective filing or effective
dates, and the information contained therein was true and correct in all
material respects as of the date or effective date of such documents and did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(h) Absence of Adverse Changes. Since March 31, 1996, Whitman has not
suffered any material adverse change in its financial condition, assets,
liabilities or business.
(i) Offering. Subject in part to the truth and accuracy of Travelers
representations set forth in Section 4 of this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the 1933 Act, and neither Whitman nor any
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<PAGE>
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
(j) Litigation. Except as disclosed in SEC Filings, there is no action,
suit, proceeding or investigation pending or, to the knowledge of Whitman,
currently threatened against Whitman that questions the validity of this
Agreement or any other agreement contemplated by this Agreement, or the right of
Whitman to enter into such agreements or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse change in the assets, condition, affairs
or prospects of Whitman, financially or otherwise, or any change in the current
equity ownership of Whitman. The foregoing includes, without limitation,
actions, suits, proceedings or investigations pending or threatened involving
the prior employment of any of Whitman's employees, their use in connection with
Whitman's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. Whitman is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality, which might result either individually or in the aggregate, in
any material adverse change in the assets, condition, affairs or prospects of
Whitman, financially or otherwise.
(k) Related-Party Transactions. To the knowledge of Whitman, no employee,
officer, director or stockholder of Whitman or member of his or her immediate
family (a "Related Party") is indebted to Whitman, which indebtedness, if not
paid, would have a material adverse change in the financial condition of
Whitman. Whitman is not indebted (or committed to make loans or extend or
guarantee credit) to any Related Party. To the knowledge of Whitman, except as
disclosed in SEC Filings, no Related Party has any direct or indirect ownership
interest in any firm or corporation with which Whitman is affiliated or with
which Whitman has a business relationship, or any firm or corporation that
competes with Whitman, except that employees, officers, directors or
stockholders of Whitman and members of their immediate families may own stock in
publicly traded companies that may compete with Whitman. To the knowledge of
Whitman, except as disclosed in SEC Filings, no Related Party is directly or
indirectly interested in any material contract with Whitman.
(l) Permits. Whitman has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects or financial condition of Whitman, and Whitman believes it
can obtain, without undue burden or expense, any similar authority for the
conduct of its business as planned to be conducted. Whitman is not in default in
any material respect under any of such franchises, permits, licenses, or other
similar authority, except for such defaults which would not materially and
adversely affect the business, properties, prospects or financial condition of
Whitman, either individually or in the aggregate.
(m) Disclosure. Whitman has fully provided Travelers with all the
information that Travelers has requested for deciding whether to purchase the
Shares and all information that Whitman believes is reasonably necessary to
enable Travelers to make such decision. Neither this Agreement, any other
agreement contemplated by this Agreement nor any other statements or
certificates made or delivered in connection herewith or therewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
(n) Tax Returns, Payments and Elections. Whitman has filed all tax returns
and reports as required by law. These returns are true and correct in all
material respects. Whitman has paid all taxes and other assessments due. The
provision for taxes of Whitman as shown in its financial statements is adequate
for taxes due or accrued as of the date thereof. Whitman has not elected,
pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to be
treated as a Subchapter S corporation or a collapsible corporation pursuant to
Section 1362(a) or Section 341(f) of the Code, nor has it made any other
elections pursuant to the Code (other than elections that relate solely to
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<PAGE>
methods of accounting, depreciation or amortization) that would have a material
effect on Whitman, its financial condition, its business as presently conducted
or proposed to be conducted or any of its properties or material assets. Since
January 1, 1993, Whitman has not had any tax deficiency proposed or assessed
against it and has not executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge. Since January 1,
1993, none of Whitman's federal income tax returns and none of its state income
or franchise tax or sales or use tax returns has been audited by governmental
authorities. Since the date of the financial statements, Whitman has made
adequate provisions on its books of account for all taxes, assessments and
governmental charges with respect to its business, properties and operations for
such period. Whitman has withheld or collected from each payment made to each of
its employees, the amount of all taxes (including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes) required to be withheld or collected therefrom, and has paid the
same to the proper tax- receiving officers or authorized depositories.
4. Representations and Warranties of Travelers. Travelers represents and
warrants to Whitman as follows:
(a) Corporate Organization. Travelers is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Connecticut, with the corporate power to own its properties and to conduct its
business as now conducted.
(b) Authorization. Travelers has full legal right, power and authority to
enter into and perform this Agreement, and the execution and delivery thereof by
Travelers and the consummation of the transactions contemplated hereby have been
duly authorized by all required corporate action. This Agreement has been duly
executed on behalf of Travelers and constitutes a valid and binding agreement of
Travelers, enforceable against Travelers in accordance with its terms.
(c) Approvals. No governmental or other authorization, approval, order,
license, permit, franchise or consent, and no registration, declaration, notice
of filing by Travelers with any governmental authority (except for reports
required to be filed in the future under the 1934 Act) is required in connection
with the execution, delivery and performance of this Agreement.
(d) Accredited Investor Status. Travelers is an "accredited investor" as
such term is defined in Rule 501 of Regulation D of the Commission.
(e) Purchase for Investment. Travelers represents that:
(i) the Shares to be issued hereunder will be acquired by Travelers
(through TRAL & CO. as its nominee) for Travelers own account for investment and
not with a view toward subdivision, resale, or redistribution thereof in a
manner prohibited under the 1933 Act and it does not presently have any reason
to anticipate any change in its circumstances or other particular occasion or
event which would cause it to sell the Shares; and further, it has no contract,
undertaking, agreement, understanding, or arrangements with any person to sell,
transfer, or pledge to any person any part or all of the Shares it will acquire
hereunder, or any interest therein, and has no present plans to enter into the
same;
(ii) it has adequate means of providing for its current business needs and
contingencies, it has no need now, and anticipates no need in the foreseeable
future, to sell the Shares it will acquire hereunder, and it currently has
sufficient financial liquidity to afford a complete loss of its investment in
Whitman;
(iii) it has received and carefully reviewed the SEC Filings and any other
materials of Whitman relating to the terms and conditions of this investment
that it has requested or with which it has been provided by Whitman;
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<PAGE>
(iv) it has had an opportunity to ask questions of and receive answers from
the authorized representatives of Whitman, and any such questions have been
answered to its full satisfaction;
(v) it has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in
Whitman;
(vi) it is relying exclusively on its review of the SEC Filings and
representations and warranties set forth in this Agreement in connection with
the purchase of the Shares.
5. Offer, Sale or Transfer of Shares. None of the Shares shall be offered,
sold or transferred by Travelers unless either:
(a) Such offer, sale or transfer shall be made pursuant to an offering
registered under the 1933 Act; or
(b) Such offer, sale or transfer may be made pursuant to a transaction
which is exempt from the registration requirements of the 1933 Act; provided
that prior to any such transaction, Travelers shall have delivered to Whitman a
written legal opinion, in form and substance reasonably acceptable to Whitman,
prepared by counsel reasonably acceptable to Whitman, that such transaction is
exempt from the registration requirements of the 1933 Act.
6. Legends and Stop Transfer Orders. Travelers acknowledges and agrees:
(a) To the placement on each certificate representing the Shares of
substantially the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. These Shares
have been acquired for investment and may not be sold or
offered for sale and no transfer of them will be made by
Whitman Education Group, Inc. or its transfer agent in the
absence of such registration or an opinion of counsel
satisfactory to Whitman Education Group, Inc. that such
registration is not required. "
(b) To the entry of stop transfer orders with the transfer agent (or
agents) and the registrar (or registrars) of Whitman's securities against the
transfer of legended securities held by Travelers except in compliance with the
requirements of this Agreement.
7. Registration Rights Agreement. At the Closing, Whitman and Travelers
shall enter into a Registration Rights Agreement in the form of Exhibit A to
this Agreement (the "Registration Rights Agreement").
8. Conditions to Closing.
(a) The obligation of Travelers to consummate the transactions contemplated
by this Agreement are subject to the fulfillment and satisfaction of each and
every one of the following conditions on or prior to the Closing, any or all
which may be waived in whole or in part by Travelers:
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<PAGE>
(i) the representations and warranties of Whitman contained in this
Agreement shall be true and correct in all material respects as of the date when
made and shall be deemed to be made again at and as of the Closing Date and
shall be true at and as of such time in all material respects.
(ii) Whitman shall have performed and complied, in all material respects,
with all agreements and conditions required by this Agreement to be performed
and complied with by it prior to or on the Closing Date.
(iii) No material adverse change in the financial condition, operations or
activities of Whitman shall have occurred.
(iv) Whitman shall have executed and delivered the Registration Rights
Agreement.
(v) Whitman shall have delivered a stock certificate in the name of TRAL &
CO. evidencing the Shares.
(vi) Whitman shall have delivered an opinion of its counsel with respect to
the transactions contemplated by this Agreement in such form as shall be
reasonably requested by Travelers.
(vii) Travelers shall have received such other opinions, certifications and
documents from Whitman as Travelers may reasonably request.
(b) The obligation of Whitman to consummate the transactions contemplated
by this Agreement are subject to the fulfillment and satisfaction of each and
every one of the following conditions on or prior to the Closing, any or all of
which may be waived, in whole or in part by Whitman:
(i) The representations and warranties of Travelers contained in this
Agreement shall be true and correct in all material respects when made and shall
be deemed to be made again at and as of the Closing Date and shall be true at
and as of such time in all material respects.
(ii) Travelers shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by
Travelers prior to or on the Closing Date.
(iii) Travelers shall have executed and delivered the Registration Rights
Agreement.
(iv) Travelers shall have delivered the Purchase Price for the Shares.
(v) Whitman shall have received such other opinions, certificates and
documents from Travelers as Whitman may reasonably request.
9. Termination.
(a) This Agreement may be terminated at any time on or prior to the
Closing:
(i) by mutual consent of Whitman and Travelers; or
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<PAGE>
(ii) at the election of Travelers if: (act) Whitman has breached or failed
to perform or comply with any of its representations, warranties, covenants or
obligations under this Agreement, or (bb) any of the conditions and proceedings
set forth in Section 8(a) is not satisfied as and when required by this
Agreement, or (cc) the Closing has not been consummated by October 18, 1996; or
(iii) at the election of Whitman, if: (act) Travelers has breached or
failed to perform or comply with any of its representations, warranties,
covenants and obligations under this Agreement, or (bb) any of the conditions
and proceedings set forth in Section 8(b) is not satisfied as and when required
by this Agreement or (cc) if the Closing has not been consummated by October 18,
1996.
(b) Written notice of any termination pursuant to this Section 9 shall be
given by the party electing termination of this Agreement to the other party and
such notice shall state the reason for the termination. Upon the termination of
this Agreement prior to the consummation of the Closing in accordance with the
terms hereof, this Agreement shall become null and void and have no effect, and
none of the parties shall have any liability to the other except that:
(i) if Whitman refuses to close, or otherwise breaches any of its
representations, warranties and covenants hereunder, then Travelers shall have
the right to pursue any and all remedies available at law and equity and enforce
its rights under this Agreement, including the remedy of specific performance;
and
(ii) if Travelers refuses to close, or otherwise breaches any of its
representations, warranties or covenants under this Agreement, then Whitman
shall have the right to pursue any and all remedies available at law and equity
and enforce its rights under this Agreement.
10. Miscellaneous.
(a) Expenses. Except as provided above, each party hereto shall pay its own
expenses incurred in connection with this Agreement.
(b) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by and against the successors and
assigns of the parties hereto, provided that, neither party may validly assign
its rights or obligations under this Agreement without the prior written consent
of the other party.
(c) Survival of Representations, Warranties and Agreements. All
representations and warranties made herein shall survive the execution and
delivery of this Agreement, the issuance of the Shares pursuant hereto and
Travelers' payment therefor for a period of one (1) year. All covenants and
agreements made herein shall survive the execution and delivery of this
Agreement, the issuance of the Shares pursuant hereto and Travelers' payment
therefor without limitation.
(d) Brokers and Finders.
Neither Travelers nor Whitman has engaged or otherwise dealt with any
person or entity in any manner as might give rise to a claim against the other
party hereto for any commission, fee or payment of any kind to any broker,
finder or other agent and each party hereto shall indemnify the other against
any such claim or expenses associated therewith, including attorneys' fees.
(e) Amendments. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
-7-
<PAGE>
(f) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if given) by delivery, by mail (registered or
certified mail, postage prepaid, return receipt requested) to the respective
parties as follows:
If to Whitman: Whitman Education Group, Inc.
4400 Biscayne Boulevard, 6th Floor
Miami, Florida 33137
Attention: Richard B. Salzman
Vice President -
Legal Affairs and General Counsel
If to Travelers: The Travelers Indemnity Company
One Tower Square
Hartford, Connecticut 06183-1051
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
(h) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
(i) Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
(j) Interpretation. No provision of this Agreement shall be interpreted for
or against any party solely because that party or its legal representative
drafted such provision.
IN WITNESS WHEREOF, Whitman Education Group, Inc. and The Travelers
Indemnity Company have caused this Agreement to be duly executed as of the day
and year first above written.
WHITMAN EDUCATION GROUP, INC.
By: /S/ RANDY S. PROTO
=========================================
RANDY S. PROTO, PRESIDENT
THE TRAVELERS INDEMNITY COMPANY
By: /S/ JORDAN M. STITZER
=========================================
JORDAN M. STITZER, VICE PRESIDENT
-8-
EXHIBIT 10.41
REGISTRATION RIGHTS AGREEMENT
Whitman Education Group, Inc., a New Jersey corporation (the
"Company"), and The Travelers Indemnity Company, a Connecticut corporation (the
"Holder"), covenant and agree as follows:
1. Definitions: For purposes of this Agreement:
a. The term "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Act"), and the declaration or ordering of effectiveness of such registration
statement or document.
b. The term "Registrable Securities" means (i) the 1,000,000
shares of common stock, no par value, of the Company (the "Common Stock") issued
to Holder on the date hereof, pursuant to a Stock Purchase Agreement dated
October , 1996 (the "Stock Purchase Agreement"), and (ii) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of, such
Common Stock.
c. The term "Holder" means The Travelers Indemnity Company and
its successors or permitted assignees in accordance with Section 12 hereof.
d. The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission ("SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
e. As used herein, "Term" means a period of two (2) years
following the date hereof.
2. Request for Registration.
a. If the Company shall receive at any time during the Term, a
written request (a "Registration Demand") from the Holders of a majority of the
Registrable Securities then outstanding that the Company file a registration
statement under the Act covering the registration of at least ten percent (10%)
of the Registrable Securities, then the Company shall, within ten (10) days of
the receipt thereof, give written notice of such request to all Holders and
shall, subject to the limitations of subsection 2(b), effect as soon as
practicable, the registration under the Act of all Registrable Securities which
the Holders request to be registered in the Registration Demand. The Company is
obligated to effect only two (2) such registrations for all of the Holders as a
group during the Term.
b. If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Section 2 and the
Company shall include such information in the written notice referred to in
subsection 2(a). In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together
-1-
<PAGE>
with the Company as provided in subsection 4(e)) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder.
c. Notwithstanding the foregoing, if the Company shall furnish
to Holder a certificate signed by the President of the Company stating that in
the good faith judgment of management of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than sixty (60) days after receipt of the Registration
Demand; provided, however, that the Company may not exercise such right more
than one time during each 12-month period.
3. Company Registration. If at any time after the Restricted Period,
but before termination of the Term, the Company proposes to register (including
for this purpose a registration effected by the Company for shareholders other
than the Holders) any of its stock or other securities under the Act in
connection with the public offering of such securities solely for cash (other
than a registration relating either to the sale of securities to participants in
a Common stock option, stock purchase or similar plan or to an SEC Rule 145
transaction, or a registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give each Holder written notice of such registration.
Upon the written request of each Holder given within twenty (20) days after
mailing of such notice by the Company, the Company shall, subject to the
provisions of Section 8, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered;
provided, that in no event shall such Holders as a group request that the
Company include in any such registration less than ten percent (10%), or more
than fifty percent (50%), of the Registrable Securities.
4. Obligations of the Company. Whenever required under this Agreement
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
a. Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and keep such registration statement
effective for up to one hundred eighty (180) days; provided, however, that the
Company may suspend sales at any time under the registration statement
immediately upon notice to each Holder at the last known address of such Holder,
for a period or periods of time not to exceed in the aggregate 90 days during
any 12-month period, if there then exists material, non-public information
relating to the Company which, in the reasonable opinion of management would not
be appropriate for disclosure during that time.
b. Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
-2-
<PAGE>
c. Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order
to facilitate the disposition of RegistrableSecurities owned by such
Holders.
d. Use its best efforts to: (i) register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such United States jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such state or jurisdiction;
and (ii) list such securities on the American Stock Exchange ( or on such other
exchange where the Common Stock may then be traded).
e. In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Holder shall
also enter into and perform its obligations under such an agreement.
f. Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating to
Registrable Securities is required to be delivered under the Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
g. Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that Registrable Securities
are delivered to the underwriters for sale in connection with a registration
pursuant to this Agreement, if such securities are being sold through
underwriters, or, if such securities are not being sold through underwriters, on
the date that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to Holder, and (ii) a letter dated such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holder.
5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding himself, the Registrable
Securities held by him, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holder's
Registrable Securities.
6. Expenses of Demand Registration. The Company shall pay all expenses
incurred in connection with any registration, filing or qualification pursuant
to Section 2, including (without limitation), all registration, filing and
qualification fees, printers and accounting fees, fees and disbursements of
counsel for the Company; provided, however, that underwriting discounts and
commissions and the fees and disbursements of counsel for the Holders shall be
borne by the Holders.
7. Expenses of Company Registration. The Company shall pay all expenses
incurred in connection with any registration, filing or qualification of
Registrable Securities pursuant to Section 3 for each Holder, including (without
limitation) all registration, filing and qualification fees, and printers and
accounting fees relating or apportionable thereto; provided, however, that each
Holder shall pay the fees and disbursements of counsel for such Holder and
underwriting discounts and commissions relating to the Registrable Securities.
-3-
<PAGE>
8. Underwriting Requirements. In connection with any offering involving
an underwriting of shares being issued by the Company, the Company shall not be
required under Section 3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it, and then only in such
quantity as will not, in the opinion of the underwriters, jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by the Holders to be included in such offering
exceeds the amount of securities sold other than by the Company that the
underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities entitled to be included therein owned by each
selling shareholder or in such other proportions as shall mutually be agreed to
by such selling shareholders). For purposes of the preceding parenthetical
concerting apportionment, for any selling shareholder which is a Holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and shareholders of such Holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
shareholder," and any pro rata reduction with respect to such "selling
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder," as defined in this sentence.
9. Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any registration by the
Company as the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
10. Indemnification and Contribution. In the event any Registrable
Securities are included in a registration statement under this Agreement:
a. to the extent permitted by law, (1) the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or such
underwriter within the meaning of the Act or the Securities Exchange Act of
1934, as amended (the "1934 Act"), against any expenses, claims, damages or
liabilities (collectively "Losses"), to which they may become subject under the
Act, the 1934 Act or other federal or state law, insofar as such Losses arise
out of or are based upon any of the following statements, omissions or
violations (collectively, a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and (2) the Company will pay as incurred to such Holder and each
such underwriter and controlling person, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such Loss;
Provided, however, that the indemnity agreement contained in this subsection
10(a) shall not apply to amounts paid in settlement of any such Loss if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld) nor shall the Company be liable in any such case
for any such Loss to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon written information furnished expressly
for use in connection with such registration by any such Holder or any such
-4-
<PAGE>
underwriter or controlling person (net of any underwriting discounts and
commissions).
b. To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, and each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
shareholder selling securities in such registration statement and any
controlling person of any such underwriter or other shareholder, against any
Loss to which any of the foregoing persons may become subject, under the Act,
the 1934 Act or other federal or state law, insofar as such Loss arises out of
or is based upon any Violations, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon written information
furnished by Holder expressly for use in connection with such registration;
provided, however, that the indemnity agreement contained in this subsection
10(b) shall not apply to amounts paid in settlement of any such Loss if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; and further provided, that in no event shall any
indemnity under this subsection 10(b) exceed the proceeds from the offering
received by such Holder.
c. Promptly after receipt by an indemnified party under this
Section 10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to parties; provided, however, that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 10, but the omission so to deliver written
notice to the indemnifying party shall not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 10.
d. The obligations of the Company and the Holders under this
Section 10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Agreement, and otherwise.
e. If the indemnification provided for in this Section 10 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relative equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
-5-
<PAGE>
11. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holder the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in SEC Rule 144 at all times;
b. maintain registration of its Common Stock under Section 12
of the 1934 Act; and
c. file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act.
12. Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Agreement may be assigned by
a Holder to a transferee or assignee; provided the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; and provided further, that
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act.
13. Changes in Common Stock. If, and as often as, there is any change
in the Common Stock by way of stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.
14. Holders' Covenants. Each Holder understands and agrees as follows:
(a) Such Holder shall carefully review the information
concerning him contained in each registration statement and shall promptly
notify the Company if such information is not complete and accurate in all
respects, including having properly disclosed any position, office or other
material relationship within the past three years with the Company or its
affiliates;
(b) Such Holder shall sell his Common Stock only in the manner
set forth in the applicable registration statement;
(c) Such Holder shall comply with the anti-manipulation rules
under the Exchange Act in connection with purchases and sales of securities of
the Company during the time any registration statement remains effective;
(d) Such Holder shall only sell shares in a jurisdiction after
counsel for the Company has advised that such sale is permissible under the
applicable state securities or "Blue Sky" laws;
(e) Such Holder shall comply with all prospectus delivery
requirements;
(f) Such Holder shall promptly notify the Company of any and
all planned sales and completed sales of shares; and
(g) Such Holder shall suspend sales during the periods when
sales are to be suspended pursuant to Section 4(c) herein.
-6-
<PAGE>
15. Miscellaneous.
(a) All covenants and agreements contained in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and permitted assigns of the parties hereto.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid, to the address of such party
set forth in the Stock Purchase Agreement.
(c) This Agreement shall be governed by and construed in
accordance with the laws of Connecticut.
(d) Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and the Holders of a majority of the Registrable Securities then
outstanding. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder and any securities purchased under this
Agreement at the time outstanding (including securities into which such
securities, are convertible), each future holder of all such securities, and the
Company.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only in any manner affect or render illegal,
invalid or unenforceable any other provision of this Agreement, and this
Agreement shall be carried out as if any such illegal, invalid or unenforceable
provision were not contained herein.
(g) Neither the giving of any notice or the making of any
request hereunder shall impose an obligation on the Holder to sell any
securities.
ACCEPTED AND AGREED:
WHITMAN EDUCATION GROUP, INC. THE TRAVELERS INDEMNITY COMPANY
By: /S/ RANDY S. PROTO By: /S/ JORDAN M. STITZER
=============================== =======================================
RANDY S. PROTO, PRESIDENT JORDAN M. STITZER, VICE PRESIDENT
-7-
EXHIBIT 11
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER SHARE OF COMMON STOCK
FOR THE YEAR ENDED
MARCH 31, 1997 March 31, 1996
============== ==============
<S> <C> <C>
Primary:
Average shares outstanding ...................... 11,404,862 10,235,956
============ ============
Net loss ........................................ $ (4,363,357) $ (100,571)
Per share amount ................................ $ (0.38) $ (.01)
Fully diluted:
Average shares outstanding ................. 11,404,862 10,235,956
Net effect of stock options and warrants based on
the treasury stock method using average year
and year-end market prices, respectively ... 2,035,441 1,331,505
Sanford-Brown shares held in escrow ............. -- 1,021,612
------------ ------------
Total ........................................... 13,440,303 12,589,074
============ ============
Net loss ........................................ $ (4,363,357) $ (100,571)
Per share amount ................................ $ (0.32) $ (.01)
</TABLE>
Net loss per share of common stock for primary purposes is computed by
dividing the net 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 dilutive effect. Included as common stock equivalents for
the year ended March 31, 1996, for fully diluted purposes are 1,021,612 shares
issued in connection with the acquisition of Sanford-Brown College that remained
in escrow to be disbursed to the seller or returned to the Company upon the
occurrence of, or failure to achieve certain events.
<PAGE>
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER SHARE OF COMMON STOCK
FOR THE THREE MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
============== ==============
<S> <C> <C>
Primary:
Average shares outstanding ...................... 12,390,256 10,285,232
Net effect of dilutive stock options and warrants
based on the treasury stock method using the
average market price ......................... -- 916,292
Sanford-Brown shares held in escrow ............. -- 1,021,612
------------ -------------
Total ........................................... 12,390,256 12,223,136
============ =============
Net (loss) income ............................... $ (4,363,357)
$................................................ 982,683
Per share amount ................................ $ (0.35) $ 0.08
Fully diluted:
Average shares outstanding .................... 12,390,256 10,285,232
Net effect of stock options and warrants based on
the treasury stock method using average quarter
and quarter-end market prices ................. 1,445,433 1,331,505
Sanford-Brown shares held in escrow .............. -- 1,021,612
------------ -------------
Total ............................................ 13,835,689 12,638,349
============ ============
Net (loss) income ................................ $ (4,363,357) $ 982,683
Per share amount ................................. $ (0.32) $ 0.08
</TABLE>
Net (loss) income per share of common stock for primary purposes is
computed by dividing net (loss) income 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 dilutive affect. Included as common stock
equivalents for the three months ended March 31, 1996 for fully diluted proposes
are 1,021,612 shares issued in connection with the acquisition of Sanford-Brown
College that remained in escrow to be disbursed to the seller or returned to the
Company upon the occurrence of, or failure to achieve certain events.
EXHIBIT 23-1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement (Form
S-3 No. 33-64151) of Whitman Education Group, Inc. and the Registration
Statement (Form S-8 No. 333-16007) pertaining to the 1996 Stock Option Plan of
Whitman Education Group, Inc., and in the related Prospectuses, of our report
dated June 6, 1997, with respect to the consolidated financial statements of
Whitman Education Group, Inc. included in this Annual Report (Form 10-K) for the
year ended March 31, 1997.
/S/ ERNST & YOUNG LLP
================================
ERNST & YOUNG LLP
Miami, Florida
June 25, 1997
EXHIBIT 23.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference into the Registration Statement No.
33-64151 of Whitman Education Group, Inc. on Form S-3 and the Registration
Statement No. 333-16007 on Form S-8 and the related prospectuses, of our report
relating to the consolidated financial statements of M.D.J.B., Inc. and
Subsidiary, dated February 6, 1996 and March 29, 1996, referenced in this Annual
Report on Form 10-K of Whitman Education Group, Inc. for the year ended March
31, 1997.
/S/ STOCKMAN KAST RYAN SCRUGGS, P.C.
====================================
STOCKMAN KAST RYAN & SCRUGGS, P.C.
Colorado Springs, Colorado
June 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,365,859
<SECURITIES> 296,250
<RECEIVABLES> 20,980,644
<ALLOWANCES> (2,821,261)
<INVENTORY> 1,084,124
<CURRENT-ASSETS> 25,535,144
<PP&E> 16,239,900
<DEPRECIATION> (6,177,085)
<TOTAL-ASSETS> 48,017,494
<CURRENT-LIABILITIES> 19,879,338
<BONDS> 0
0
0
<COMMON> 20,584,014
<OTHER-SE> (4,476,859)
<TOTAL-LIABILITY-AND-EQUITY> 48,017,494
<SALES> 46,992,954
<TOTAL-REVENUES> 46,992,954
<CGS> 31,349,524
<TOTAL-COSTS> 50,237,912
<OTHER-EXPENSES> 656,250
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 870,990
<INCOME-PRETAX> (4,772,198)
<INCOME-TAX> (408,841)
<INCOME-CONTINUING> (4,363,357)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,363,357)
<EPS-PRIMARY> (0.38)
<EPS-DILUTED> (0.38)
</TABLE>
