<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM-10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 1995
--------------
Commission File Number: 1-1003
------
NOBEL EDUCATION DYNAMICS, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2465204
----------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1400 N. Providence Road, Suite 3055, Media, PA 19063
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(610)891-8200
-------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all report(s)
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 15,595,063 shares of Common
Stock outstanding at May 1, 1995.
<PAGE>
PART I
------
Financial Information
---------------------
Item 1 - Financial Statements
- -----------------------------
Consolidated balance sheets as of March 31, 1995 and December 31, 1994.
Consolidated statements of operations for the three months ended March 31, 1995
and 1994.
Consolidated cash flow statements for the three months ended March 31, 1995 and
1994.
Notes to Consolidated Financial Statements.
2
<PAGE>
NOBEL EDUCATION DYNAMICS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
----------------
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1995 1994
------------- -------------
<S> <C> <C>
Assets
- ------
Cash and cash equivalents $ 881,794 $ 853,886
Cash in escrow 500,000 -
Accounts receivable, less allowance for
doubtful accounts of $96,282 in both
1995 and 1994 606,312 614,640
Notes receivable 45,114 45,114
Prepaid expenses and other assets 1,054,273 806,020
------------ ------------
Total Current Assets 3,087,493 2,319,660
------------ ------------
Property and equipment, at cost 13,744,400 13,398,969
Accumulated depreciation (4,441,468) (4,216,505)
------------ ------------
9,302,932 9,182,464
Property and equipment held for sale 1,244,224 1,266,648
Cost in excess of net assets acquired 10,965,519 8,887,995
Deposits and other assets 1,249,194 1,066,926
Deferred tax asset 510,300 510,300
------------ ------------
Total Assets $ 26,359,662 $ 23,233,993
============ ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
Revolving Line of Credit (unused portion $400,000) $ - $ -
Current portion of long-term obligations 1,858,777 1,767,756
Current portion of capital lease
obligations 51,715 57,194
Accounts payable and other current liabilities 4,514,922 4,594,768
Reserve for restructuring 100,000 96,900
------------ ------------
Total Current Liabilities 6,525,414 6,516,618
------------ ------------
Long-term obligations 10,140,752 7,846,151
Capital lease obligations 359,943 371,543
Deferred gain on sale/leaseback 61,305 63,303
Minority interest in consolidated subsidiary 158,767 138,073
------------ ------------
Total Liabilities 17,246,181 14,935,688
------------ ------------
Commitments and Contingencies (Notes 3, 7,9, and
15 in 10-K)
Shareholders' Equity:
Preferred stock, $.001 par value; 10,000,000
shares authorized, 2,500,000 issued in 1995
and 2,484,320 issued in 1994 4,984 4,984
Common stock, $.001 par value,
50,000,000 shares authorized, issued
15,595,063 shares in 1995 and 15,445,063 in 1994 15,595 15,445
Additional paid-in capital 19,757,273 19,644,922
Accumulated deficit (10,664,371) (11,367,046)
------------ ------------
Total Shareholders' Equity 9,113,481 8,298,305
------------ ------------
Total Liabilities and Shareholders' Equity $ 26,359,662 $ 23,233,993
============ ============
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrants Annual Report on form 10-K are an integral part of these
consolidated financial statements.
3
<PAGE>
NOBEL EDUCATION DYNAMICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months ended March 31, 1995 and 1994
--------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Revenues $9,683,452 $8,289,247
---------- ----------
Operating Expenses 7,577,535 6,685,895
---------- ----------
School operating profit 2,105,917 1,603,352
General and administrative expenses 785,394 600,167
Interest expense 286,141 315,454
Other expense 10,323 4,178
Minority interest in profit
of consolidated subsidiary 20,694 22,496
---------- ----------
Income before income taxes 1,003,365 661,057
Income tax expense 251,000 18,000
---------- ----------
Net income $ 752,365 $ 643,057
========== ==========
Preferred stock dividends $ 49,686 $ 49,686
---------- ----------
Net income available to common
shareholders $ 702,679 $ 593,371
========== ==========
Primary earnings per share $ 0.05 $ 0.04
========== ==========
Fully diluted earnings per share $ 0.04 $ 0.03
========== ==========
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrants Annual Report on form 10-K are an integral part of these financial
statements.
4
<PAGE>
NOBEL EDUCATION DYNAMICS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1995 and 1994
--------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 752,365 $ 643,057
Adjustment to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization 293,004 256,110
Provision for losses on accounts receivable 14,465 9,635
Minority interest income and non-cash dividend 20,694 22,496
Amortization of deferred gain (1,998) (1,998)
Depreciation of closed centers 25,421 18,974
Changes in Assets and Liabilities Net
of Acquisitions:
Decrease (increase) in accounts and
notes receivable (6,137) (109,766)
Decrease in prepaid assets (248,253) 302,709
Decrease in other assets (182,268) 16,732
Decrease in accounts payable and
accrued expenses (79,846) (251,849)
Decrease in reserve for restructuring 3,100 (25,332)
---------- ----------
Total Adjustments (161,818) 237,711
Net Cash Provided by Operating Activities 590,547 880,768
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures (340,781) (268,915)
Payment for acquisition (568,250)
----------
Net Cash (Used In) Provided by
Investing Activities (909,031) (268,915)
Cash Flows from Financial Activities:
Repayment of long-term debt (199,340) (249,906)
Repayment of capital lease obligation (17,079) (14,579)
Payments of dividends on preferred stock (49,689) (49,686)
Proceeds from exercise of common stock options 112,500 -
Cash deposited in escrow for Keystone
transaction (500,000) -
Proceeds from Revolving Credit II 1,000,000 -
---------- ----------
Net Cash Used in Financing Activities 346,392 (314,171)
Net increase in cash and cash equivalents 27,908 297,682
Cash and cash equivalents at
the beginning of year 853,886 1,166,541
---------- ----------
Cash and cash equivalents at end
of the period $ 881,794 $1,464,223
========== ==========
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrants Annual Report form 10-K are an integral part of these consolidated
financial statements.
5
<PAGE>
NOBEL EDUCATION DYNAMICS, INC.
AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULES FOR
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1995 and 1994
--------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
Supplemental Disclosures of Cash
Flow Information
Cash paid during year for:
Interest $ 185,184 $ 317,514
---------- ---------
Income taxes $ - $ -
---------- ---------
Supplemental Schedules of Non-cash
Investing and Financing Activities:
Note payable to seller for $1,584,962 $
---------- ---------
Carefree acquisition
Assumption of net liabilities $ 156,853 $
---------- ---------
related to Carefree acquisition
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrants Annual Report on form 10-K are an integral part of these
consolidated financial statements.
6
<PAGE>
NOBEL EDUCATION DYNAMICS, INC.
Notes to Consolidated Interim Financial Statements
(Unaudited)
The financial statements have been prepared by the Registrant pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC") and, in
the opinion of management, include all adjustments, consisting of normal
recurring adjustments, necessary to present fairly the financial position and
results of operations. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such SEC rules
and regulations. It is suggested that these financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994.
Due to the inherent seasonal nature of the education and child care business,
annualization of amounts in these interim financial statements may not be
indicative of the actual operating results for the full year.
1. Earnings Per Share
------------------
The earnings per share is based on weighted average number of common and
common equivalent shares outstanding as follows:
3 months ended 3 months ended
March 31, 1995 March 31, 1994
-------------- --------------
Primary 15,749,288 16,112,452
Fully Diluted 21,407,544 19,034,012
2. Acquisition of Carefree Learning Centers, Inc.
----------------------------------------------
On March 10, 1995, the Company acquired from Carefree Learning Centers,
Inc. ("Carefree"), a subsidiary of Medical Service Association of
Pennsylvania, doing business as Pennsylvania Blue Shield ("Pennsylvania
Blue Shield"), Carefree's child day care business and operations, and
substantially all of its other assets, other than real estate, used in the
operation of Carefree's business.
The child care business purchased from Carefree, which generated revenues
of approximately $4,446,000 in 1994, consists of eight learning centers
currently in operation, and three learning centers currently under
construction or in the pre-development stage, all of which are located in
Pennsylvania. The Company intends to continue to operate the acquired
business under the Carefree Learning Centers name.
7
<PAGE>
The purchase price for the business and assets acquired from Carefree
consisted of (i) $500,000 in cash, (ii) a subordinated promissory note of
the Company in the principal amount of approximately $1,585,000, and (iii)
the assumption of certain other liabilities of Carefree in the amount of
approximately $365,000.
Concurrently with the acquisition of Carefree's business, the Company
entered into an Agreement of Sale (the "Agreement of Sale") with
Pennsylvania Blue Shield, pursuant to which the Company will acquire (i)
the land and buildings on which four of the five learning centers currently
in operation and acquired from Carefree are located, and (ii) the land and
buildings at which one of the child day care centers acquired from Carefree
is currently under construction (collectively, the "Real Estate"). At the
closing under the Agreement of Sale, the purchase price paid for the Real
Estate consists of (i) approximately $1,500,000 in cash, (ii) subordinated
promissory notes of the Company in the aggregate principal amount of
approximately $80,000, and (iii) the assumption by the Company of certain
other liabilities of the Pennsylvania Blue Shield subsidiary in the amount
of approximately $2,700,000. The Company closed the acquisition of the
Real Estate on May 1, 1995.
3. Contingencies
-------------
In February, 1993, Douglas E. Carneal, former Chief Operating Officer of
the Company, filed suit in the Court of Common Pleas for Chester County,
Pennsylvania against the Company, certain officers and directors, and other
persons arising out of a dispute over amounts which were paid to Mr.
Carneal following his termination from the Company. In that action, Mr.
Carneal claims that the Company is in breach of an agreement to cause a
loan which he obtained to purchase Company stock to be non-recourse. He
further claims that his termination payments were not made in accordance
with his employment contract, and that he is entitled to accrued but unpaid
vacation. Total compensatory damages sought approximate $800,000 and in
addition is seeking punitive damages and attorney fees. The Company filed
preliminary objections to Carneal's complaint, some of which were
sustained. The Chester County, Pennsylvania, Court of Common Pleas
dismissed several of the claims filed by Douglas Carneal against the
Company, allowing him to replead some of those claims. Carneal filed an
amended Complaint. After objections to the amended complaint were
dismissed, the Company filed an answer denying Mr. Carneal's claims and
filed a counterclaim against him seeking damages for his alleged
mismanagement of the Company. Mr. Carneal filed objections to that
counterclaim. A decision of the Court is pending.
8
<PAGE>
In December, 1994, the Company brought a separate action against Mr.
Carneal in the Court of Common Pleas for Chester County, Pennsylvania,
seeking damages for his mismanagement of the Company. Mr. Carneal removed
that action to the United States District Court for the Eastern District of
Pennsylvania and filed an answer and a counterclaim asserting the same
claims he had asserted in his earlier action in Chester County,
Pennsylvania. The Company had moved to dismiss much of Mr. Carneal's
counterclaim. In response to that motion, the Federal court dismissed
several of Mr. Carneal's claims. Discovery has begun concerning the claims
remaining in the case.
In May, 1993, Julie Sell and Michael Bright, former executives of the
Company, commenced a suit in the United States District Court for the
Eastern District of Pennsylvania alleging that the Company breached its
contractual duty to pay them salary increases, bonuses and severance pay
under the Company's Executive Severance Pay Plan. On September 15, 1994,
the United States District Court for the Eastern District of Pennsylvania
entered a judgment against the Company and in favor of Julie Sell and
Michael Bright in the combined amount of $406,000. The Company has
appealed this decision to the United States Court of Appeals for the Third
Circuit.
On February 24, 1995, Mr. F. E. Montgomery's, the Company's President and
Chief Operating Officer, employment terminated with the Company. In
conjunction with his separation, the Company agreed to pay Mr. Montgomery
1)his base pay for a period of eight months plus three weeks vacation pay
for 1995, 2)the payment of the 1994 performance bonus which is due based on
audited financials, 3)use of the Company vehicle for up to ninety days
after separation and 4)medical insurance for ninety days.
4. Subsequent Events
-----------------
Acquisition of Real Estate
--------------------------
On May 1, 1995, the Company completed the acquisition of the Real Estate
related to four of the five properties of the Carefree Centers as described
in Note 2 above. In conjunction with the acquisition, the Company entered
into a loan agreement with First Valley Bank for $2,697,900 for which the
proceeds were used to finance the purchase of the property. Interest on
the loan is prime plus one and one/fourth (1 1/4%), with monthly payments
of $9,069.76 in principal plus interest with the unpaid principal balance
maturing on April 1, 1998. Commitment fees paid related to the loan
totaled $55,575 and the bank has a mortgage lien and security interest in
the properties.
9
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and Results of Operations
-----------------------------------
Growth Activity
- ---------------
During the first quarter of 1995, the Company has taken several significant
steps toward its regrowth strategy with progress in several areas:
1. On March 10, 1995, the Company acquired the operations of Carefree
Learning Centers, Inc. (Carefree) from Pennsylvania Blue Shield.
Carefree includes eight schools currently operating and three under
development.
2. On April 21, 1995, the Company entered into an agreement with Legg
Mason Wood and Walker, Inc. in order to recapitalize the Company and
raise additional funds for growth through development and/or strategic
acquisitions.
3. During April of 1995, the Merryhill Divisions of Nobel went through
the accreditation process with the National Independent Private
Schools (NIPSA) and received a recommendation for full accreditation
of all preschools and schools. The accreditation is expected to be
finalized in the summer of 1995.
4. In April of 1995, the Company began the training and curriculum
development for Chesterbrook Academy School on the East Coast. The
Company plans to open new or convert existing Rocking Horse centers
into eleven Chesterbrook Academy School in the Fall of 1995.
5. On May 1, 1995, the Company completed the acquisition of part of the
Keystone Real Estate Company, a subsidiary of Blue Shield and acquired
four of the five properties related to the Carefree Learning Centers,
Inc. The purchase price included $1,500,000 in cash, the pay off of
mortgages and accrued interest totaling $2,666,789, a note to the
seller in the amount of $80,291, and the assumption of other
liabilities totaling approximately $40,000. The payoff of the
mortgages of $2,666,789 by Nobel was financed by First Valley Bank.
The Company plans to subsequently sell these properties and lease them
back. The Company has entered into an agreement with a potential
investor who is seeking funding for the properties.
10
<PAGE>
Results of Operations
- ---------------------
Three months ended March 31, 1995, compared to March 31, 1994.
- --------------------------------------------------------------
On March 31, 1995, the Company operated 76 schools and centers versus 69 schools
and centers as of March 31, 1994. The increase in the number of schools and
centers was the net result of the Company acquiring eight operating centers in
Pennsylvania, acquiring the operations of two schools, one in California and one
in North Carolina, opening one center, divesting three centers in the southeast
and not renewing the lease of one center in California.
REVENUES
--------
<TABLE>
<CAPTION>
3 months ended 3 months ended Increase
March 31, 1995 March 31, 1994 (Decrease)
-------------- --------------
<S> <C> <C> <C>
CORE OPERATIONS $8,778,479 $7,739,470 $1,039,009
NEW CENTERS\SCHOOLS 475,641 0 475,641
opened or
acquired in 1995 ---------- ---------- ----------
SUBTOTAL CORE 9,254,120 7,739,470 1,514,650
OPERATIONS
NON-CORE
DIVESTED IN 1994 174,491 (174,491)
NON-CORE CENTERS 429,332 375,286 54,046
---------- ---------- ----------
TOTAL NON-CORE 429,332 549,777 (120,445)
---------- ---------- ----------
TOTAL COMPANY $9,683,452 $8,289,247 $1,394,205
========== ========== ==========
</TABLE>
Revenues increased $1,394,205 or 16.8% from $8,289,247 for the first quarter of
1994 to $9,683,452 for the same period in 1995. Of the revenues in the Mid-
Atlantic region (Pennsylvania, New Jersey, Delaware, and Virginia), Maine, North
Carolina and California ("Core Operations") increased a total of $1,514,650 or
18.2%. Of the $1,514,650 increase in the core operations, $475,641 or 5.7% was
a result of the acquisition of the eight schools on March 10, 1995, the
acquisition of the school in North Carolina and the opening of a school in
California. The remaining increase of $1,039,009 or 12.5% was due to tuition
and enrollment increases.
The $1,514,650 increase in the Core operations was off set by a decrease of
($120,445) or 1.5% related primarily to the non-core centers divested in 1994.
11
<PAGE>
SCHOOL OPERATING PROFIT
CORE SCHOOL OPERATING COSTS
- ---------------------------
<TABLE>
<CAPTION>
3 months ended 3 months ended
March 31, 1995 % of March 31, 1994 % of
-------------- --------------
$ Revenues $ Revenues
--- -------- --- --------
CORE OPERATING COST $6,656,722 71.93% $6,104,694 78.88%
NEW SCHOOL OP COSTS $ 404,392 4.37% _________
----------
TOTAL CORE OPERATING $7,061,114 76.30% $6,104,694 78.88%
COSTS ========== ==========
CORE SCHOOL OP PROFIT $2,121,757 22.93% $1,634,776 21.12%
NEW SCHOOL OP PROFIT $ 71,249 0.77% $0 0.00%
---------- ----------
TOTAL CORE SCHOOL $2,193,006 23.70% $1,634,776 21.12%
OP PROFIT ========== ==========
<CAPTION>
NON-CORE CENTER OPERATING COSTS
- -------------------------------
<S> <C> <C> <C> <C>
TOTAL NON-CORE OP COSTS $ 432,704 101.35% $ 561,270 102.09%
========== ==========
TOTAL NON-CORE $ (5,764) -1.35% $ (11,493) -2.09%
OP PROFIT (LOSS) =========== ===========
OTHER LOSSES $ (81,325) -0.84% $ (19,931) -0.24%
=========== ==========
TOTAL OP PROFIT $2,105,917 21.75% $1,603,352 19.34%
========== ==========
</TABLE>
Total school operating profit increased $502,565 or 31% from $1,603,352 or
19.34% of revenues for the first quarter of 1994 to $2,105,917 or 21.7% of
revenues for the first quarter of 1995, primarily due to improved profitability
in the Core Centers. Total Core Operating profit increased $558,230 and margins
improved from 21.12% to 23.7%. The improvement was due to an increase in
revenues related to an increase in enrollment and tuition rates, improved
operating efficiencies and good performance of the new centers.
The non-core operating loss also decreased from $11,493 to $5,764 due to a
lesser number of non-core centers. As of March 31, 1995, there are only seven
centers in the non-core which are operating as compared to eleven in 1994 for
the same period. Other losses totaling $81,325 in the first quarter of 1995,
consist of a loss of $48,701 related to the Imagine catalog and $32,624 related
to costs associated with closed centers in the southeast as compared to a loss
of $19,931 in first quarter 1994, which was related primarily to the Imagine
catalog.
12
<PAGE>
Center operating profit margin increased from 19.3% for the first quarter ended
March 31, 1994, to 21.75% for the first quarter ended March 31, 1995. As
discussed above, margins improved primarily due to 1)increased enrollment and
tuition, 2)improved efficiencies and cost controls and 3)good performance from
the new centers.
General and administrative expenses increased $185,227 or 31% from $600,167 or
7.24% of revenues for the first quarter of 1994, to $785,394 or 8.11% of
revenues for the first quarter of 1995. This was due primarily to 1)an increase
in staffing related to corporate restructuring, (In August of 1994, Mr. Clegg
and Mr. Frock, formerly of JBS Investment Company, Inc., joined the Company as
full time employees relinquishing their operating duties at JBS.) 2)increased
legal fees and 3)costs relating to the Imagine catalog.
Interest expense decreased $29,313 or 9% from $315,454 or 3.8% of revenues to
$286,141 or 2.9% of revenues due primarily to lower debt levels. In August of
1994, the Company temporarily paid down $2.5 million of principal debt from the
proceeds of a private placement of preferred stock. On March 10, 1995, the
Company drew down $1 million on the Revolving Credit Loan II in connection with
the Carefree acquisition of which $500,000 was held in escrow. The Company drew
down the Revolving Credit Loan II an additional million dollars on May 1, 1995,
in connection with the acquisition of some of the Keystone Real Estate.
Other expense increased $6,145 or more than doubled from $4,178 in the first
quarter of 1994 to $10,323 in the first quarter of 1995. The increase in costs
is due to the loss of rent from the centers which the Company re-assumed from
previous lease purchase options.
In 1992, the Company changed its method of accounting for income taxes through
the adoption of SFAS 109. In 1992 and 1993, a valuation allowance of $3.7
million had been recorded. In the second quarter of 1994, the Company reduced
the valuation allowance and recognized $510,300 of the deferred tax asset
because the Company has had several years of net income. The recognition of the
deferred tax asset was based on the analysis of the last two years of positive
operating performed and projected taxable income for 1994 and 1995.
Because the Company recorded the deferred tax asset in 1994, the Company accrued
Federal taxes on income totaling $251,000 on profit for the three months ended
March 31, 1995. The Company plans to record the remainder of valuation
allowance as an asset totaling approximately $2.6 million in 1995, subject to
certain events occurring. Some of the events include 1)continuing positive
operating income and 2)recapitalizing of the Company debt with alternative
financing.
Pretax income for the first quarter of 1995 totaled $1,003,365 or 10.36% of net
revenues, an increase of $342,308 or 52% over the first quarter of 1994,
totaling $661,057 or 7.9% of revenues. The increase is due primarily to
improved center operating profit and decreased interest expense.
13
<PAGE>
Net income before dividends totaled $752,365 or 7.8% of revenues for the first
quarter of 1995, as compared to $643,057, or 7.8% of revenues. Even after
recording taxes of $251,000 in the first quarter of 1995, as compared to $18,000
in 1994, net income increased $109,308 or 17% primarily due to improved center
operating profit.
Dividends totaling $49,686 were paid on the Company's preferred stock during the
three months ended March 31, 1995, and 1994.
Liquidity and Capital Resources
- -------------------------------
During the first quarter of 1995, the Company continued its regrowth strategy.
On the operations level, the Company acquired the operations of Carefree
Learning Centers, Inc., consisting of eight operating learning centers and three
under construction or in various stages of development. This represents the
first significant acquisition of a multi-unit operation since the restructuring
of the Company. In the existing operations, pretax profit totaling $1,003,365
increased $342,308 or 52% from the prior year first quarter.
On the financing level, the Company entered an agreement with Legg Mason Wood
and Walker, Inc. to raise approximately $23 million in a combination, debt,
subordinated debt and preferred stock in order to recapitalize the Company.
Proceeds from the funds will be used to refinance existing principal debt
facilities which mature in 1998, totaling approximately $8,981,879, strategic
acquisitions, and new center and school development. The transaction is
expected to be completed during 1995.
The existing principal debt facilities consists of the Revolving Line of Credit
totaling $1,000,000 with an unused balance of $400,000, the Revolving Credit
Loan II with a principal balance at March 31, 1995, of $6,745,675, and Term Loan
I with a principal balance of $2,236,204, at March 31, 1995. Term Loan I has
scheduled principal payments of $55,555 per month plus interest. The Revolving
Credit Loan II has scheduled principal reductions of $600,000 on December 23,
1995, $600,000 on December 23, 1996, $1,100,000 on December 23, 1997 and
$2,150,000 on December 23, 1998. The total balance of remaining principal
matures on December 30, 1998. In 1994, in connection with the appeal of the
judgement with former officers described in Note 3, the Company was required to
post security with the court for payment of the judgment in the event the
judgment is not overturned on appeal. The Company posted the required security
by arranging for the issuance of a letter of credit by its bank in the amount of
$600,000 pursuant to a Fourth Amendment of the Loan Agreement, and the available
balance of the Company's Revolving Line of Credit was reduced to $400,000.
On May 1, 1995, the Company drew $1 million down on the Revolving Credit Loan II
in connection with the acquisition of four of the five properties related to the
Carefree Centers, Inc. The Company plans to ultimately sell the real estate to
an investor group and lease back the properties. The Company has entered into
an agreement with an investor group who is in the process of raising
14
<PAGE>
capital to purchase the real estate. However, there can be no assurance that the
transaction will take place.
On the education level, the Company is proceeding in developing the curriculum,
training the staff and standardizing the process of the Chesterbrook Academy
School on the East Coast. The Company plans to open eleven Chesterbrook Academy
School in 1995, through new school opening or the conversion of existing child
care centers. The cost of converting an existing child care center to a
Chesterbrook Academy is estimated to be approximately $30,000. The Company
intends to use cash from operations to convert the existing centers. The
conversion of all the Rocking Horse child care centers is planned to occur over
the next three years.
Total cash and cash equivalents decreased $582,429 from $1,464,223 for the three
months ended March 31, 1994, to $881,794 for the three months ended March 31,
1995. The decrease in cash was due to 1)payment of $568,250 for the Carefree
acquisition 2)a decrease in cash from operations due to prepaid rents and 3)an
increase in capital expenditure of $70,000 related to the increase in the number
of schools and centers in operation.
Net cash provided by operations decreased $290,221 or 33% due primarily to the
timing of prepaid rents.
The working capital deficit improved $759,037 or 18% from $4,196,958 at March
31, 1994, to $3,437,921 at March 31, 1995, due to 1) an increase in cash in
escrow of $500,000 and 2)an increase in prepaid expenses of $248,253 related to
prepaid rent. The cash in escrow totaling $500,000 is related to the closing of
the Real Estate transaction with Pennsylvania Blue Shield which occurred on May
1, 1995 as described in note 4.
The Company intends to continue its regrowth strategy and, as stated, is in the
process of recapitalizing with more flexible senior debt and significant growth
capital via additional equity and subordinated debt. The Company's strategy is
to continue to open new built to suit schools and to acquire appropriate
strategic schools and centers in its core growth area.
Typically, new centers and schools are funded by real estate developers.
However, the Company is pursuing raising additional capital and/or through a
single investor via a real estate partnership financing for the projects until
completion and then selling and leasing back the properties. The traditional
funding by real estate developers is a slow process and the Company is ready to
grow more aggressively; therefore, it is seeking alternative funding. The
construction projects are approximately $1 million each to build a school with
preopening costs totaling between $75,000 and $90,000 per school. Additionally,
the Company is also considering various strategic acquisitions. The
acquisitions, if any, will be financed principally through the proceeds of
alternative equity placements or subordinated debt.
15
<PAGE>
Part II
-------
Other Information
Item 1 - Legal Proceedings
- --------------------------
The Company previously reported legal proceedings instituted by certain former
officers of the Company. See Form 10-K, Part I - Item 3 for details.
In February, 1993, Douglas E. Carneal, former Chief Operating Officer of the
Company, filed suit in the Court of Common Pleas for Chester County,
Pennsylvania against the Company, certain officers and directors, and other
persons arising out of a dispute over amounts which were paid to Mr. Carneal
following his termination from the Company. In that action, Mr. Carneal
claims that the Company is in breach of an agreement to cause a loan which he
obtained to purchase Company stock to be non-recourse. He further claims that
his termination payments were not made in accordance with his employment
contract, and that he is entitled to accrued but unpaid vacation. Total
compensatory damages sought approximate $800,000 and in addition is seeking
punitive damages and attorney fees. The Company filed preliminary objections
to Carneal's complaint, some of which were sustained. The Chester County,
Pennsylvania, Court of Common Pleas dismissed several of the claims filed by
Douglas Carneal against the Company, allowing him to replead some of those
claims. Carneal filed an amended Complaint. After objections to the amended
complaint were dismissed, the Company filed an answer denying Mr. Carneal's
claims and filed a counterclaim against him seeking damages for his alleged
mismanagement of the Company. Mr. Carneal filed objections to that
counterclaim. A decision of the Court is pending.
In December, 1994, the Company brought a separate action against Mr. Carneal
in the Court of Common Pleas for Chester County, Pennsylvania, seeking damages
for his mismanagement of the Company. Mr. Carneal removed that action to the
United States District Court for the Eastern District of Pennsylvania and
filed an answer and a counterclaim asserting the same claims he had asserted
in his earlier action in Chester County, Pennsylvania. The Company had moved
to dismiss much of Mr. Carneal's counterclaim. In response to that motion,
the Federal court dismissed several of Mr. Carneal's claims. Discovery has
begun concerning the claims remaining in the case.
In May, 1993, Julie Sell and Michael Bright, former executives of the
Company, commenced a suit in the United States District Court for the Eastern
District of Pennsylvania alleging that the Company breached its contractual
duty to pay them salary increases, bonuses and severance pay under the
Company's Executive Severance Pay Plan. On September 15, 1994, the United
States District Court for the Eastern District of Pennsylvania entered a
judgment against the Company and in favor of Julie Sell and Michael Bright in
the combined amount of $406,000. The Company has appealed this decision to
the United States Court of Appeals for the Third Circuit.
16
<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.
NOBEL EDUCATION DYNAMICS, INC.
Dated: May 10, 1995 By: /s/ A.J. CLEGG
------------ -----------------------------------
A.J. Clegg
Chairman
Dated: May 10, 1995 By: /s/ YVONNE DeANGELO
------------ -----------------------------------
Yvonne DeAngelo
Controller
17
<PAGE>
Exhibit Number
(Referenced to
Item 601 of
Regulation S-K) Description of Exhibit
- --------------- ----------------------
4a First Valley Loan Agreement dated May 1, 1995.
11 Statement Re-computation of Per Share Earnings Per Share.
18
<PAGE>
EXHIBIT 4(a)
LOAN AGREEMENT
BY AND BETWEEN
BLUEGRASS REAL ESTATE COMPANY, INC.
AND
FIRST VALLEY BANK
DATED: MAY 1, 1995
<PAGE>
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT ("AGREEMENT") is made this 1st day of May, 1995 between
BLUEGRASS REAL ESTATE COMPANY, INC. ("BORROWER") and FIRST VALLEY BANK ("BANK").
BACKGROUND
----------
A. Borrower has requested that Bank extend to Borrower a certain credit
facility.
B. Bank is willing to extend that credit facility to Borrower subject
to the terms and conditions set forth below.
C. References to certain defined terms may be found in SECTION 13
----------
below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. THE LOAN; USE OF PROCEEDS.
-------------------------
1.1 THE LOAN. On even date herewith and subject to the provisions of
--------
SECTION 1.3 below, Bank will lend to Borrower and Borrower will borrow from Bank
- -----------
an aggregate amount up to Three Million Five Hundred Sixty-seven Thousand Three
Hundred Dollars ($3,567,300.00) (the "LOAN"). Borrower's obligation to repay
the Loan shall be evidenced by Borrower's Promissory Note of even date herewith
in the original principal amount of Three Million Five Hundred Sixty-seven
Thousand Three Hundred Dollars ($3,567,300.00) (the "NOTE"), which Note shall be
in the form of EXHIBIT "A" attached hereto with the blanks appropriately filled
-----------
in.
1.2 USE OF PROCEEDS. Borrower shall use the proceeds of the Loan to
---------------
finance the purchase of the Mortgaged Property (as defined below).
1.3 THE CHADDS FORD PROPERTY.
------------------------
(a) Notwithstanding anything contained in this Agreement to the
contrary, a portion of the Loan in an amount equal to Eight Hundred Sixty-nine
Thousand Four Hundred Dollars ($869,400.00) (the "CHADDS FORD PORTION") shall
not be advanced to Borrower unless and until the conditions set forth in this
SECTION 1.3(A) AND 1.3(B) below shall have been satisfied as determined
- -------------------------
by Bank in its sole discretion no later than June 30, 1995, unless otherwise
agreed to by Bank in writing in its sole discretion:
2
<PAGE>
(1) all construction of an 8000 square foot day care facility
on that certain 2.65 +/- acre parcel of real property located at Lot 7, west
side of Dickinson Drive, Chadds Ford Business Campus, Birmingham Township,
Delaware County, Pennsylvania (the "CHADDS FORD PROPERTY") shall have been
completed;
(2) all permits and approvals necessary for the operation of
the Chadds Ford Property shall have been finally issued and copies thereof
delivered to Bank; and
(3) Bank shall have made a final inspection of the Chadds Ford
Property. In the event the foregoing conditions are not satisfied on or before
June 30, 1995 (or such later date agreed to by Bank in writing in its sole
discretion), Bank shall be under no further obligation to advance the Chadds
Ford Portion.
(b) Contemporaneously with and as a further condition to the advance
of the Chadds Ford Portion, Borrower shall deliver to Bank the following, all in
form and content satisfactory to Bank:
(1) An Open-End Mortgage and Security Agreement granting to
Bank a first priority mortgage lien on the Chadds Ford Property;
(2) An Assignment of Rents and Leases with respect to the
Chadds Ford Property;
(3) A title insurance policy (or an endorsement to the then
existing policy for the balance of the Mortgaged Property) in the amount of the
Loan and issued by an insurer acceptable to Bank, insuring the lien of the
mortgage on the Chadds Ford Property in favor of Bank as a first priority lien
subject only to those exceptions as shall be approved by Bank;
(4) UCC-1 financing statements with respect to the Chadds Ford
Property;
(5) Evidence of hazard and liability insurance in an amount
and issued by an insurer acceptable to Bank, naming Bank as insured mortgagee
(pursuant to a standard mortgagee clause), loss payee (pursuant to a Lender's
loss payable clause) and additional insured;
(6) Evidence of compliance with all environmental requirements
of Bank with respect to the Chadds Ford Property; and
(7) An amendment to the Master Lease (as defined below) adding
the Chadds Ford Property as a portion of the demised premises, and providing for
rental for the Chadds Ford Property in accordance with the requirements of
SECTION 6.25 below.
- ------------
3
<PAGE>
In addition to the foregoing conditions, in no event shall Bank be
required to advance any of the Chadds Ford Portion if an Event of Default or an
event which with the giving of notice or the passage of time or both would
result in an Event of Default shall have occurred hereunder.
(c) Upon advance by Bank of the Chadds Ford Portion and the
delivery of the documents described above, the Chadds Ford Portion shall become
part of the Bank Indebtedness (as defined below) and the Chadds Ford Property
shall become part of the Collateral (as defined below), and all representations,
warranties and covenants herein and in the other Loan Documents, as applicable,
shall apply to the Chadds Ford Portion and the Chadds Ford Property.
2. INTEREST RATE.
-------------
2.1 INTEREST ON THE LOAN. Interest on the unpaid principal balance of
--------------------
theLoan shall accrue from the date of advance until final payment thereof at a
definite and certain, but variable per annum rate equal to one and one-quarter
percent (1 1/4%) in excess of the Prime Rate in effect from time to time (such
rate to change immediately upon any change in the Prime Rate).
2.2 DEFAULT INTEREST. Interest will accrue on the outstanding principal
----------------
balance of the Loan after the occurrence of an Event of Default at a rate which
is three percent (3%) in excess of the otherwise applicable rate of interest set
forth in SECTION 2.1 above.
-----------
2.3 POST JUDGMENT INTEREST. Any judgment obtained for sums due
----------------------
hereunder or under the Loan Documents shall accrue interest at the applicable
default rate set forth above.
2.4 CALCULATION. Interest will be computed on the basis of a year of
-----------
360 days and paid from the actual number of days elapsed.
2.5 LIMITATION OF INTEREST TO MAXIMUM LAWFUL RATE. In no event will the
---------------------------------------------
rate of interest payable hereunder exceed the maximum rate of interest permitted
to be charged by applicable law (including the choice of law rules) and any
interest paid in excess of the permitted rate will be refunded to Borrower.
Such refund will be made by application of the excessive amount of interest paid
against any sum outstanding hereunder and will be applied in such order as Bank
may determine. If the excessive amount of interest paid exceeds the sums
outstanding, the portion exceeding the sums outstanding will be refunded in cash
by Bank. Any such crediting or refunding will not cure or waive any default by
Borrower. Borrower agrees, however, that in determining whether or not any
interest payable hereunder exceeds the highest rate permitted by law, any
payment other than the interest payments required in SECTION 3.1 below,
-----------
including, without limitation, prepayment fees and late charges, will be deemed
to the extent permitted by law to be an expense, fee, premium or penalty rather
than interest.
3. PAYMENTS.
--------
3.1 PRINCIPAL AND INTEREST ON THE LOAN. Borrower will pay interest
----------------------------------
only on the outstanding principal balance of the Loan on June 1, 1995 and July
1, 1995. Commencing on August 1, 1995 and continuing through and including June
1, 1998, Borrower will pay to Bank equal
4
<PAGE>
and consecutive monthly payments of principal each in the amount of Nine
Thousand Sixty-Nine and 76/100 Dollars ($9,069.76), together with interest
thereon at the applicable rate set forth above. On July 1, 1998, Borrower will
pay to Bank the remaining outstanding principal balance of the Loan, all accrued
and unpaid interest thereon and all other sums due and owing in connection
therewith.
3.2 COMMITMENT FEE. On or before the date hereof, Borrower shall pay to
--------------
Bank a commitment fee of Fifty-Five Thousand Five Hundred Seventy-Five Dollars
($55,575.00). Bank acknowledges that an amount equal to one half ( 1/2) of such
fee has previously been paid to Bank.
3.3 LATE CHARGE. In the event that Borrower fails to pay any principal,
-----------
interest or other fees or expenses payable hereunder for a period of at least
fifteen (15) consecutive days from and including the date such payment is due,
in addition to paying such sums, Borrower will pay to Bank a late charge equal
to five percent (5%) of such past due payment as compensation for the expense
incident to such past due payment.
3.4 PREPAYMENT. Borrower may prepay all or any part of the Loan at
----------
any time without premium or penalty, following delivery of not less than five
(5) days prior written notice to Bank. All such prepayments will be applied to
the regularly scheduled payments under the Loan in the inverse order of their
maturity.
3.5 PAYMENT METHOD. Borrower irrevocably authorizes Bank to debit all
--------------
payments required to be made by Borrower hereunder or under the Loan, on the
date due, from any deposit account maintained by Borrower with Bank, including,
without limitation, the Lease Payments Account (as defined below); provided,
--------
however, prior to the occurrence of an Event of Default or the occurrence of an
- -------
event which, with the giving of notice or the passage of time or both would
become an Event of Default, Bank shall first debit such payments from the Lease
Payments Account. Otherwise, Borrower will be obligated to make such payments
directly to Bank. All payments made by Borrower are to be made in immediately
available funds. If Bank accepts payment in any other form, such payment shall
not be deemed to have been made until the funds comprising such payment have
actually been received by or made available to Bank.
3.6 APPLICATION OF PAYMENTS. Provided that no Event of Default has
-----------------------
occurred, any and all payments on account of the Loan will be applied first to
all fees incurred by Bank in connection with Bank's rights hereunder or which
have otherwise been agreed to by Borrower, then to accrued and unpaid interest
and then to outstanding principal and other sums due hereunder or under the Loan
Documents. After the occurrence of an Event of Default, all payments on account
of the Loan shall be applied to accrued and unpaid interest, outstanding
principal and all other sums due hereunder or under the other Loan Documents in
such order as Bank, in its sole discretion, elects. If Borrower makes a payment
or payments and such payment or payments, or any part thereof, are subsequently
invalidated, declared to be fraudulent or preferential, set aside or are
required to be repaid to a trustee, receiver, or any other person under any
bankruptcy act, state or federal law, common law or equitable cause, then to the
extent of such payment or payments, the obligations or part thereof hereunder
intended to be satisfied shall be revived and continued in full force and effect
as if said payment or payments had not been made.
5
<PAGE>
3.7 INDEMNITY. Borrower will indemnify Bank against any loss or expense
---------
which Bank sustains or incurs as a consequence of an Event of Default,
including, without limitation, any failure of Borrower to pay when due (at
maturity, by acceleration or otherwise) any principal, interest, fee or any
other amount due under this Agreement or the other Loan Documents. If Bank
sustains or incurs any such loss or expense it will from time to time notify
Borrower in writing of the amount determined in good faith by the Bank to be
necessary to indemnify Bank for the loss or expense. Such amount will be due
and payable by Borrower to Bank within ten (10) days after presentation by Bank
of a statement setting forth a brief explanation of and Bank's calculation of
such amount, which statement shall be conclusively deemed correct absent
manifest error. Any amount payable to the Bank under this Section will bear
interest at the default rate payable under the Loan from the due date until
paid, both before and after judgment.
4. SECURITY.
--------
4.1 MORTGAGED PROPERTIES; PERSONAL PROPERTY. As security for the full
---------------------------------------
and timely payment and performance of all Bank Indebtedness, Borrower hereby
grants or shall grant to Bank the following:
(a) A mortgage lien upon and security interest in the premises
described on SCHEDULE 4.1 attached hereto and all improvements thereon and all
------------
rights, licenses, permits, approvals, machinery, fixtures, furniture and
equipment owned by Borrower and related thereto, all as more particularly
described in those certain Open-End Mortgage and Security Agreements of even
date herewith from Borrower to Bank (collectively, the "MORTGAGES"), together
with all rents and leases related thereto, including, without limitation, the
Lease Payments (as defined below) (collectively, the "MORTGAGED PROPERTY").
(b) A security interest in and lien upon all deposits, funds,
instruments, documents, policies, evidences and certificates of insurance,
securities, chattel paper and other assets of Borrower or in which Borrower has
an interest and all proceeds thereof, now or at any time hereafter on deposit
with or in the possession or control of Bank or owing by Bank to Borrower or in
transit by mail or carrier to Bank or in the possession of any other Person
acting on Bank's behalf, including, without limitation, all funds in the Lease
Payments Account (as defined below), without regard to whether Bank received the
same in pledge, for safekeeping, as agent for collection or otherwise, or
whether Bank has conditionally released the same, and in all assets of Borrower
in which Bank now has or may at any time hereafter obtain a lien, mortgage, or
security interest for any reason.
4.2 GENERAL. The collateral described in SECTION 4.1 above is
------- -----------
collectively referred to herein as the "COLLATERAL". IT IS THE EXPRESS INTENT OF
THE BORROWER THAT ALL OF THE COLLATERAL SHALL SECURE NOT ONLY THE OBLIGATIONS
UNDER THE LOAN DOCUMENTS, BUT ALSO ALL OTHER PRESENT AND FUTURE OBLIGATIONS OF
BORROWER TO BANK.
4.3 RELEASE OF COLLATERAL. Provided that no Event of Default or event
---------------------
which with the giving of notice or the passage of time or both would become an
Event of Default shall have
6
<PAGE>
occurred hereunder, in the event Borrower desires to sell any parcel of the
Mortgaged Property, Bank shall, upon request of Borrower, release its lien
against such parcel of the Mortgaged Property and such parcel will be released
from the Master Lease, upon payment to Bank in immediately available funds of an
amount equal to the greater of (a) one hundred percent (100%) of such sales
price for such parcel (net only of real estate commissions and other customary
closing costs), or (b) the appraised value of such parcel pursuant to a current
appraisal in form, content and prepared by an appraiser satisfactory to Bank,
but in no event less than the appraised value for such parcel pursuant to those
certain appraisals prepared for Bank by Ludwig Corporation dated as of March 23,
1995. All costs incurred by Bank in connection with such release shall be borne
by Borrower. Such release payments shall be applied to the payments due under
the Loan in the inverse order of their maturity. Notwithstanding the foregoing,
Borrower shall not be required to pay release amounts in excess of the
outstanding principal balance of the Loan, all accrued and unpaid interest
thereon and all other sums due in connection therewith.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as
------------------------------
follows:
5.1 VALID ORGANIZATION, GOOD STANDING AND QUALIFICATION. Borrower is a
---------------------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania, has full power and authority to
execute, deliver and comply with the Loan Documents, and to carry on its
business as it is now being conducted.
5.2 LICENSES. Borrower, and its employees, servants and agents have all
--------
licenses, registrations, approvals and other authority as may be necessary to
enable it to own and operate its business and perform all services and business
which they have agreed to perform in any state, municipality or other
jurisdiction.
5.3 OWNERSHIP INTERESTS The ownership of all, stock, debentures,
-------------------
options,warrants, bonds and other securities (debt and equity) of Borrower and
all pledges, proxies, voting trusts, powers of attorney and other agreements
affecting the ownership or voting rights of said interests is as set forth on
SCHEDULE 5.3 attached hereto.
- ------------
5.3 SUBSIDIARIES. Except as set forth on SCHEDULE 5.4 attached hereto,
------------ ------------
Borrower does not own any shares of stock or other equity interests in any
Person, directly or indirectly (by any Subsidiary or otherwise).
5.4 PENDING LITIGATION OR PROCEEDINGS. There are no judgments
---------------------------------
outstanding or actions, suits or proceedings pending or, to the best of
Borrower's knowledge, threatened against or affecting Borrower, at law or in
equity or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
5.5 DUE AUTHORIZATION; NO LEGAL RESTRICTIONS. The execution and
----------------------------------------
delivery by Borrower of the Loan Documents, the consummation of the transactions
contemplated by the Loan Documents and the fulfillment and compliance with the
respective terms, conditions and provisions of the Loan Documents: (a) have been
duly authorized by all requisite corporate action of Borrower, (b) will not
conflict with or result in a breach of, or constitute a default (or might, upon
the passage of time or
7
<PAGE>
the giving of notice or both, constitute a default) under, any of the terms,
conditions or provisions of any applicable statute, law, rule, regulation or
ordinance or Borrower's Certificates or Articles of Incorporation or By-Laws or
any indenture, mortgage, loan or credit agreement or instrument to which
Borrower is a party or by which it may be bound or affected, or any judgment or
order of any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, and (c) will not result in the creation
or imposition of any lien, charge or encumbrance of any nature whatsoever upon
any of the property or assets of Borrower under the terms or provisions of any
such agreement or instrument, except liens in favor of Bank.
5.7 ENFORCEABILITY. The Loan Documents have been duly executed by
--------------
Borrower and delivered to Bank and constitute legal, valid and binding
obligations of Borrower, enforceable in accordance with their terms, except as
enforceability may be limited by any bankruptcy, insolvency, reorganization,
moratorium or other laws or equitable principles affecting creditor's rights
generally.
5.8 NO DEFAULT UNDER OTHER OBLIGATIONS, ORDERS OR GOVERNMENTAL
----------------------------------------------------------
REGULATIONS. Borrower is not in violation of its Certificate or Articles of
- -----------
Incorporation or in default in the performance or observance of any of its
obligations, covenants or conditions contained in any indenture or other
agreement creating, evidencing or securing any Indebtedness or pursuant to which
any such Indebtedness is issued and Borrower is not in violation of or in
default under any other agreement or instrument or any judgment, decree, order,
statute, rule or governmental regulation, applicable to it or by which its
properties may be bound or affected.
5.9 GOVERNMENTAL CONSENTS. No consent, approval or authorization of or
---------------------
file designation, declaration or filing with any governmental authority on the
part of Borrower is required in connection with the execution, delivery or
performance by Borrower of the Loan Documents or the consummation of the
transactions contemplated thereby.
5.10 TAXES. Borrower has filed all tax returns which it is required to
-----
and has paid, or made provision for the payment of, all taxes which have or may
have become due pursuant to such returns or pursuant to any assessment received
by it. Such tax returns are complete and accurate in all respects. Borrower
does not know of any proposed additional assessment or basis for any assessment
of additional taxes, except for a potential reassessment with respect to the
Chadds Ford Property.
5.11 TITLE TO COLLATERAL. The Collateral is and will be owned by
-------------------
Borrower free and clear of all liens and other encumbrances of any kind
(including liens or other encumbrances upon properties acquired or to be
acquired under conditional sales agreements or other title retention devices),
excepting only liens in favor of the Bank and those liens and encumbrances
permitted under SECTION 6.9 below. Borrower will defend the Collateral
-----------
against any claims of all persons or entities other than the Bank.
5.12 ADDRESSES. During the past five (5) years, Borrower has not been
---------
known against any claims of by any names (including tradenames) other than
those set forth in SCHEDULE 5.12 attached hereto and has not been located
-------------
at any addresses other than those set forth on SCHEDULE 5.12 attached hereto.
-------------
The portions of the Collateral which are tangible property and Borrower's
books and records pertaining
8
<PAGE>
thereto will at all times be located at the addresses set forth on SCHEDULE
-------
5.12; or such other location determined by Borrower after prior notice to
- -----
Bank and delivery to Bank of any items requested by Bank to maintain perfection
and priority of Bank's security interests and access to Borrower's books and
records. SCHEDULE 5.12 identifies the chief executive office of Borrower.
-------------
5.13 CURRENT COMPLIANCE. Borrower is currently in compliance with all
------------------
of the terms and conditions of the Loan Documents.
5.14 PENSION PLANS. (a) Borrower has no obligations with respect to any
-------------
employee pension benefit plan ("PLAN") (as such term is defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), (b) no events,
including, without limitation, any "Reportable Event" or "Prohibited
Transaction" (as those terms are defined under ERISA), have occurred in
connection with any Plan of Borrower which might constitute grounds for the
termination of any such Plan by the Pension Benefit Guaranty Corporation
("PBGC") or for the appointment by any United States District Court of a trustee
to administer any such Plan, (c) all of the Borrower's Plans meet with the
minimum funding standards of Section 302 of ERISA, and (d) Borrower has no
existing liability to the PBGC. Borrower is not subject to or bound to make
contributions to any "multi-employer plan" as such term is defined in Section
4001(a)(3) of ERISA.
5.15 LEASES AND CONTRACTS. Borrower has complied with the provisions
--------------------
of all material leases, contracts or commitments of any kind to which it is a
party and is not in default thereunder. To the best of Borrower's knowledge, no
other party is in default under any such leases, contracts or other commitments
and no event has occurred which, but for the giving of notice or the passage of
time or both, would constitute an event of default thereunder.
5.16 ACCURACY OF REPRESENTATIONS AND WARRANTIES. No representation or
------------------------------------------
warranty by Borrower contained herein or in any certificate or other document
furnished by Borrower pursuant hereto or in connection herewith fails to contain
any statement of material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made. There is
no fact which Borrower knows or should know and has not disclosed to Bank, which
does or may materially and adversely affect Borrower, or any of its operations.
6 GENERAL COVENANTS. Except with the prior written consent of Bank, Borrower
-----------------
will comply with the following:
6.1 PAYMENT OF PRINCIPAL, INTEREST AND OTHER AMOUNTS DUE. Borrower
----------------------------------------------------
will pay when due all Bank Indebtedness and all other amounts payable by it
hereunder.
6.2 LIMITATION ON SALE AND LEASEBACK. Unless and until all Bank
--------------------------------
Indebtedness has been finally paid in full, Borrower will not enter into any
arrangement whereby it will sell or transfer any real property or improvements
thereon or other fixed assets owned by it and then or thereafter rent or lease
as lessee such property, improvements or assets or any part thereof, or other
property which Borrower shall intend to use for substantially the same purposes
as the property sold or transferred.
9
<PAGE>
6.3 LIMITATION ON INDEBTEDNESS. Borrower will not have at any time
--------------------------
outstanding to any Person other than Bank, any Indebtedness for borrowed money,
Capitalized Lease Obligations, or any outstanding letters of credit, except:
(a) Current accounts payable incurred in the ordinary course of
Borrower's business, accrued expenses and other current items arising out of
transactions (other than borrowings) in the ordinary course of Borrower's
business;
(b) Existing Indebtedness to Nobel Education Dynamics, Inc.
("NOBEL") described on SCHEDULE 6.3 attached hereto, which Indebtedness shall
------------
be fully subordinated to all Bank Indebtedness on terms and conditions
acceptable to Bank; and
(c) Indebtedness incurred by Borrower in connection with
financing the construction of improvements on certain premises located at the
corner of Egypt Road and Surrey Lane, Audubon Village Shopping Center, Audubon,
Pennsylvania (the "AUDUBON PROPERTY") provided that:
(1) No Event of Default or event which with the giving of
notice or passage of time or both would become an Event of Default shall have
occurred hereunder; and
(2) Such Indebtedness is secured only by the Audubon
Property and no other assets of Borrower, including the Collateral.
Except for Indebtedness incurred in connection with the Audubon
Property, no such existing permitted Indebtedness may be refinanced or replaced
without the consent of the Bank. Indebtedness to another Person incurred in
connection with the Audubon Property may be refinanced without the consent of
Bank provided that at the time of such refinancing the provisions set forth in
SECTIONS 6.3(C)(1) AND (2) have been complied with
- --------------------------
6.4 INVESTMENTS AND LOANS Borrower will not have or make any
----------------------
investments in all or a material portion of the capital stock or securities of
any Person, or any loans, advances or extensions of credit to any Person,
except:
(a) Investments in direct or indirect obligations of, or
obligations unconditionally guaranteed by, the United States of America and
maturing within twelve (12) months from the date of acquisition;
(b) Investments in commercial paper of Bank or commercial paper
rated "Prime-1" by Moody's Investors Services or "A-1" by Standard & Poor's
Corporation, or with an equivalent rating by another rating agency of nationally
recognized standing, maturing within three hundred sixty-five (365) days from
the date of acquisition; and
(c) Certificates of deposit maturing within twelve (12) months
from the date of acquisition issued by the Bank.
10
<PAGE>
6.5 GUARANTIES. Except for the CoreStates Guaranty (as defined below),
----------
Borrower will not directly or indirectly guarantee, endorse (other than for
collection or deposit in the ordinary course of business), discount, sell with
recourse or for less than the face value or agree (contingently or otherwise) to
purchase or repurchase or otherwise acquire, or otherwise become directly or
indirectly liable for, or agree (contingently or otherwise) to supply or advance
funds (whether by loan, stock purchase, capital contribution or otherwise) in
respect of, any Indebtedness, obligations or liabilities of any Person. Bank
consents to Borrower entering into a guaranty agreement (the "CORESTATES
GUARANTY") in favor of CoreStates Bank, N.A., as Agent for itself and Foothill
Capital Corp. ("CORESTATES"), guarantying, as surety, the following existing
credit facilities from CoreStates to Nobel: (a) reducing revolving line of
credit and (b) term loan in the original principal amount of Ten Million Dollars
($10,000,000.00). Bank further consents to Borrower granting to CoreStates
mortgage liens on the Mortgaged Property to secure the CoreStates Guaranty (the
"CORESTATES MORTGAGE LIENS"), provided that (a) the CoreStates Mortgage Liens
are subordinated in all respects to the Mortgages, and (b) CoreStates executes
and delivers to Bank a Subordination Agreement in form reasonably acceptable to
Bank providing that, inter alia, CoreStates will not take any action against
----- ----
Borrower or any of Borrower's assets, including, without limitation, the
Mortgaged Property, unless and until all of the Bank Indebtedness shall have
been finally paid in full. The CoreStates Guaranty, the CoreStates Mortgage
Liens and all documents in connection therewith must be on terms and conditions
and in form and content satisfactory to Bank.
6.6 DISPOSITION OF ASSETS. Unless and until all of the Bank
---------------------
Indebtedness shall have been finally paid in full, Borrower will not sell,
lease, transfer or otherwise dispose of all, substantially all, or any material
portion of its property or assets, except for the (a) leasing of the Mortgaged
Property to Nobel pursuant to the terms of the Master Lease, and (b) the sale of
the Audubon Property provided that it is not then subject to a mortgage lien in
favor of Bank. If the Audubon Property is subject to a mortgage lien in favor of
Bank, any such sale shall be in accordance with SECTION 4.3 above.
-----------
6.7 MERGER; CONSOLIDATION; BUSINESS ACQUISITIONS; SUBSIDIARIES.
----------------------------------------------------------
Borrower will not merge into or consolidate with any Person, acquire any
material portion of the stock, ownership interests, assets or business of any
Person, permit any Person to merge into it, or form any new Subsidiaries,
without Bank's prior written approval.
6.8 TAXES; CLAIMS FOR LABOR AND MATERIALS. Borrower will pay or cause
-------------------------------------
to be paid when due all taxes, assessments, governmental charges or levies
imposed upon it or its income, profits, payroll or any property belonging to it,
including without limitation all withholding taxes, and all claims for labor,
materials and supplies which, if unpaid, might become a lien or charge upon any
of its properties or assets; provided that it shall not be required to pay any
such tax (other than real estate taxes which must be paid regardless of
challenge), assessment, charge, levy or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings promptly initiated
and diligently conducted by it, and neither execution nor foreclosure sale or
similar proceedings shall have been commenced in respect thereof (or such
proceedings shall have been stayed pending the disposition of such contest of
validity), and it shall have set aside on its books, or at the request of Bank
deposited with Bank, adequate reserves with respect thereto. Borrower will
11
<PAGE>
not file or consent to the filing of, any consolidated income tax return with
any Person other than Nobel or a Subsidiary.
6.9 LIENS. Borrower will not create, incur or permit to exist any
-----
mortgage,pledge, encumbrance, lien, security interest or charge of any kind
(including liens or charges upon properties acquired or to be acquired under
conditional sales agreements or other title retention devices) on its property
or assets, whether now owned or hereafter acquired, or upon any income, profits
or proceeds therefrom, except:
(a) Security interests and mortgages held by Bank;
(b) Liens incurred or deposits made in the ordinary course of
business (i) in connection with worker's compensation, unemployment insurance,
social security and other like laws or (ii) to secure the performance of
statutory obligations, not incurred in connection with either (A) the borrowing
of money or (B) the deferred purchase price of goods or inventory;
(c) Encumbrances consisting of zoning restrictions, easements,
restrictions on the use of real property or minor irregularities of title
thereto, none of which impairs the use of such property by Borrower in the
operation of its business;
(d) Liens and security interests listed on SCHEDULE 6.9 attached
hereto; ------------
(e) Liens securing financing in connection with the Audubon
Property as permitted under SECTION 6.3 above; or
-----------
(f) The CoreStates Mortgage Liens.
Borrower shall not enter into any agreement with any other Person
which shall prohibit the Borrower from granting, creating or suffering to exist,
or otherwise restrict in any way (whether by covenant, by identifying such event
as a default under such agreement or otherwise) the ability of the Borrower to
grant, create or suffer to exist, any lien, security interest or other charge or
encumbrance upon or with respect to any of its assets in favor of the Bank.
Borrower will not apply for or obtain any letters of credit for the
payment of or to secure the payment for any inventory or other assets to be
acquired by Borrower, except letters of credit issued by Bank, at its
discretion.
6.10 EXISTENCE; APPROVALS; QUALIFICATION; BUSINESS OPERATIONS; COMPLIANCE
--------------------------------------------------------------------
WITH LAWS. Borrower (a) will obtain, preserve and keep in full force and effect
- ---------
its separate corporate existence and all rights, licenses, registrations and
franchises necessary to the proper conduct of its business or affairs; (b) will
qualify and remain qualified as a foreign corporation in each jurisdiction in
which the character or location of the properties owned by it or the business
transacted by it requires such qualification except where the failure to obtain
or maintain such qualification would not have a material adverse effect on the
Collateral, assets, business, operations or financial condition of Borrower or
the ability of Borrower to perform its obligations under the Loan Documents; (c)
will
12
<PAGE>
continue to operate its business as presently operated and will not engage
in any new businesses without the prior written consent of Bank; and (d) will
comply with the requirements of all applicable laws and all rules, regulations
(including environmental regulations) and orders of regulatory agencies and
authorities having jurisdiction over it.
6.11 MAINTENANCE OF PROPERTY. Borrower will maintain, preserve, protect
-----------------------
and keep or cause to be maintained, preserved, protected and kept its real and
personal property used or useful in the conduct of its business in good working
order and condition, reasonable wear, tear, casualty and condemnation excepted,
and will pay and discharge when due the cost of repairs to and maintenance of
the same.
6.12 INSPECTIONS; EXAMINATIONS. Borrower hereby irrevocably authorizes
-------------------------
and directs all accountants and auditors employed by Borrower at any time to
exhibit and deliver to Bank copies of any and all of Borrower's financial
statements, trial balances or other accounting records of any sort in the
accountant's or auditor's possession and copies of all reports submitted to
Borrower by such accountants or auditors, including management letters,
"comment" letters and audit reports, and to disclose to Bank any information
they may have concerning Borrower's financial status and business operations.
Borrower further authorizes all federal, state and municipal authorities to
furnish to Bank copies of reports or examinations relating to Borrower, whether
made by Borrower or otherwise.
The officers of Bank, or such Persons as any of them may designate,
may, when accompanied by a representative of Borrower, visit and inspect any of
the properties of Borrower, examine (either by Bank's employees or by
independent accountants) any of the Collateral or other assets of Borrower,
including the books of account of Borrower, and discuss the affairs, finances
and accounts of Borrower with its officers and with its independent accountants,
at such times as Bank may desire.
6.13 DEFAULT UNDER OTHER INDEBTEDNESS. Borrower will not permit any of
--------------------------------
its Indebtedness to be in default. If any Indebtedness of Borrower is declared
or becomes due and payable before its expressed maturity by reason of default or
otherwise or to the knowledge of Borrower, the holder of any such Indebtedness
shall have the right (or upon the giving of notice or the passage of time, or
both, shall have the right) to declare such Indebtedness to be so due and
payable, Borrower will immediately give Bank written notice of such declaration,
acceleration or right of declaration.
6.14 PENSION PLANS. Borrower will (a) keep in full force and effect any
-------------
and itsits all Plans which are presently in existence or may, from time to time,
come into existence under ERISA, unless such Plans can be terminated without
material liability to Borrower in connection with such termination (as
distinguished from any continuing funding obligation); (b) make contributions to
all of Borrower's Plans in a timely manner and in a sufficient amount to comply
with the requirements of ERISA; (c) comply with all material requirements of
ERISA which relate to such Plans so as to preclude the occurrence of any
Reportable Event, Prohibited Transaction or material "accumulated funding
deficiency" as such term is defined in ERISA; and (d) notify Bank immediately
upon receipt by Borrower of any notice of the institution of any proceeding or
other action which may result in
13
<PAGE>
the termination of any Plan and deliver to Bank, promptly after the filing or
receipt thereof, copies of all reports or notices which Borrower files or
receives under ERISA with or from the Internal Revenue Service, the PBGC, or the
U.S. Department of Labor.
6.15 BANK OF ACCOUNT. Borrower will maintain Bank as its major bank of
---------------
account, unless otherwise agreed by Bank in writing.
6.16 MAINTENANCE OF MANAGEMENT. Borrower shall at all times maintain A.
-------------------------
J. Clegg as its Chief Executive Officer. Borrower will notify Bank promptly in
writing of any change in its board of directors or executive officers and will
provide Bank with a copy of any proposed amendments to its Articles of
Incorporation or By-Laws, prior to adoption. Borrower shall not make any
amendment to its Articles of Incorporation or By-Laws without the prior written
consent of Bank.
6.17 CAPITAL STOCK; DIVIDENDS. Borrower will not redeem, repurchase or
------------------------
otherwise make any payment or distribution to acquire any of its capital stock.
Borrower will not pay dividends or make other distributions on account of its
capital stock.
6.18 TRANSACTIONS WITH AFFILIATES. Except with respect to the Master
----------------------------
Lease,Borrower will not enter into or conduct any transaction with any Affiliate
except on terms that would be usual and customary in a similar transaction
between Persons not affiliated with each other and except as disclosed to Bank.
Borrower will not make any loans or extensions of credit to any of its
Affiliates, shareholders, directors or officers, except for the existing loans
described in SCHEDULE 6.18 attached hereto. Borrower will cause all of its
-------------
Indebtedness at any time owed to its Affiliates, shareholders, directors and
officers to be subordinated in all respects to all present and future Bank
Indebtedness and will not make any payments thereon, except as approved by Bank
in writing.
6.19 RESTRICTION ON STOCK TRANSFER. Borrower will not directly or
-----------------------------
indirectly issue, transfer, sell or otherwise dispose of, or part with control
of, or permit the transfer of, any shares of its capital stock without the prior
written consent of Bank, which consent shall not be unreasonably withheld.
6.20 NAME OR ADDRESS CHANGE. Borrower will not change its name or
----------------------
address except upon thirty (30) days prior written notice to Bank and delivery
to Bank of any items requested by Bank to maintain perfection and priority of
Bank's security interests and access to Borrower's books and records.
6.21 NOTICES. Borrower will promptly notify Bank of (a) any action or
-------
proceeding brought against Borrower wherein such action or proceeding would, if
determined adversely to Borrower, (b) the occurrence of any Event of Default,
(c) any fact, condition or event which, with the giving of notice or the passage
of time or both, could become an Event of Default, (d) the failure of Borrower
to observe any of its undertakings under the Loan Documents, or (e) any material
adverse change in the assets, business, operations or financial condition of
Borrower.
14
<PAGE>
6.22 ADDITIONAL DOCUMENTS AND FUTURE ACTIONS. Borrower will, at its sole
---------------------------------------
cost, take such actions and provide Bank from time to time with such agreements,
financing statements and additional instruments, documents or information as the
Bank may in its reasonable discretion deem necessary or advisable to perfect,
protect, maintain or enforce the security interests in the Collateral, to permit
Bank to protect or enforce its interest in the Collateral, or to carry out the
terms of the Loan Documents. Borrower hereby authorizes and appoints Bank as
its attorney-in-fact, with full power of substitution, to take such actions as
Bank may deem advisable to protect the Collateral and its interests thereon and
its rights hereunder, to execute on Borrower's behalf and file at Borrower's
expense financing statements, and amendments thereto, in those public offices
deemed necessary or appropriate by Bank to establish, maintain and protect a
continuously perfected security interest in and lien upon the Collateral, and to
execute on Borrower's behalf such other documents and notices as Bank may deem
advisable to protect the Collateral and its interests therein and its rights
hereunder. Such power being coupled with an interest is irrevocable. Borrower
irrevocably authorizes the filing of a carbon, photographic or other copy of
this Agreement, or of a financing statement, as a financing statement and agrees
that such filing is sufficient as a financing statement.
6.23 RESTRICTIONS ON USE OF PROCEEDS. Borrower will not carry or purchase
-------------------------------
with the proceeds of the Loan any "margin security" within the meaning of
Regulations U, G, T or X of the Board of Governors of the Federal Reserve
System.
6.24 SUBORDINATED NOTE. Borrower will not prepay or otherwise accelerate
-----------------
payment of that certain (i) Eighty Thousand Two Hundred Ninety-one Dollars and
Forty-six Cents ($80,291.46) Subordinated Note from Borrower to Nobel dated May
1, 1995 and (ii) Note from Borrower to Nobel to be delivered after the date
hereof in the original principal amount of approximately Five Hundred Forty-
three Thousand Five Hundred Sixty-one Dollars and Seventy-six Cents
($543,561.76) (collectively, the "SUBORDINATED NOTES"); and will not make any
other payments thereon except as (a) approved by Bank in writing, (b) set forth
in SECTION 6.26(B) below, or (c) authorized by Bank in that certain
---------------
Subordination Agreement of even date; and will comply with all of the terms of
such Subordination Agreement.
6.25 MASTER LEASE. On or before the date hereof, Borrower shall enter
------------
into a master lease with Nobel (as the same may be amended from time to time,
the "MASTER LEASE"), pursuant to which Nobel shall lease from Borrower all of
the Mortgaged Property (excluding only the Chadds Ford Property). The Master
Lease shall provide for a term of not less than fifteen (15) years and shall
provide for annual rental payments on a triple net basis in an amount equal to
at least one hundred twenty percent (120%) of the sum of the (a) annual
principal and interest payments due under the Loan (assuming a fixed per annum
rate of interest equal to ten percent (10%)), and (b) annual interest payments
due under the Subordinated Notes, and shall otherwise be on terms and conditions
satisfactory to the Bank.
6.26 RENTAL PAYMENTS UNDER THE MASTER LEASE.
--------------------------------------
(a) Borrower shall cause all payments due under the Master Lease or
under any future leases for the Mortgaged Property, or any part thereof
(collectively, the "LEASE PAYMENTS"), to be made directly to Bank. The Lease
Payments shall be held by Bank as part of the Collateral
15
<PAGE>
in a segregated, non-interest bearing account to which Bank shall have sole
access (the "LEASE PAYMENTS ACCOUNT"). Funds in the Lease Payments Account may
be disbursed by Bank to pay itself principal, interest and other sums due under
the Loan as such sums become due and payable; provided, however, the existence
-------- -------
of funds in the Lease Payments Account shall in no way release Borrower of its
obligation to pay sums due under the Loan or hereunder.
(b) Provided that no Event of Default or event which with the
giving of notice or the passage of time or both would result in an Event of
Default has occurred hereunder, Bank shall, at the request of Borrower, permit
the Borrower to use any funds remaining in the Lease Payments Account at the end
of any month, after payment of all sums then due and owing hereunder and under
the Loan through such month, to pay (i) to Nobel interest on the Subordinated
Notes, and/or (ii) expenses incurred by Borrower in connection with the
ownership and operation of the Mortgaged Property, in an aggregate amount equal
to the lesser of the (A) regular monthly, non-accelerated interest payments due
for such month under the Subordinated Notes and/or such expenses, or (B) amount
so remaining in the Lease Payments Account.
(c) In the event that as of the end of any calendar year there
are any funds remaining in the Lease Payment Account, at the request of Borrower
and provided that no Event of Default or event which with the giving of notice
or the passage of time or both would become an Event of Default shall have
occurred, such balance may be applied by Bank to prepay the outstanding
principal balance of the Loan in the inverse order in which such payments are
due.
6.27 EQUITY CONTRIBUTION. On or before the date hereof, Borrower shall
-------------------
deliver evidence satisfactory to Bank that Nobel has made a permanent equity
contribution to Borrower of not less than One Million Five Hundred Thousand
Dollars ($1,500,000.00).
6.28 SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT. On or
-------------------------------------------------------
before the date hereof, Borrower shall cause to be delivered to Bank a
Subordination, Attornment and Non-Disturbance Agreement from Nobel with respect
to the Master Lease in form and content satisfactory to Bank and Nobel.
7. FINANCIAL COVENANTS. Except with the prior written consent of Bank,
-------------------
Nobel and Borrowers, as applicable, will comply with the following:
7.1 CONSOLIDATED NET INCOME. Nobel will have Net Income on a
-----------------------
consolidated basis of not less than Five Hundred Thousand Dollars ($500,000.00)
for Nobel's fiscal year ending December 31, 1995 and for each fiscal year of
Nobel ending thereafter.
7.2 CONSOLIDATED NET WORTH. Nobel will maintain Net Worth on a
----------------------
consolidated basis of not less than Eight Million Dollars ($8,000,000.00) as of
December 31, 1995 and as of the end of each fiscal year of Nobel thereafter.
7.3 CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED NET WORTH RATIO. Nobel
---------------------------------------------------------
will maintain a ratio of Indebtedness to Net Worth on a consolidated basis of
not more than 2.5 to 1.0 as of December 31, 1995 and as of the end of each
fiscal year of Nobel thereafter.
16
<PAGE>
7.4 DEBT SERVICE COVERAGE. The ratio of (a) annual rental payments on a
---------------------
triple net basis under the Master Lease to (b) the sum of (i) annual principal
and interest payments under the Loan (assuming a fixed per annum rate of
interest equal to ten percent (10%) plus (ii) annual interest payments due under
the Subordinated Notes shall at all times be not less than 1.20 to 1.0.
8. ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS. Borrower and
----------------------------------------------------
Nobel will maintain books of record and account in which full, correct and
current entries in accordance with GAAP will be made of all of their dealings,
business and affairs, and Borrower and Nobel will deliver to Bank the following:
8.1 10K STATEMENTS. As soon as available and in any event within ninety
--------------
(90) days after the end of each fiscal year of Nobel, Nobel's 10K Statements for
such fiscal year.
8.2 10Q STATEMENTS. As soon as available and in any event within forty-
--------------
five (45) days after the end of each fiscal quarter of Nobel, Nobel's 10Q
Statements for such fiscal year.
8.3 ANNUAL REAL ESTATE TAX RECEIPTS. As soon as available and in any
-------------------------------
event within thirty (30) days after the end of each fiscal year of Borrower,
copies of Borrower's paid tax receipts for all real property owned by Borrower.
8.4 OPERATING STATEMENTS. As soon as available and in any event within
--------------------
thirty (30) days after the end of each calendar month, operating statements for
Borrower in form and content satisfactory to Bank.
8.5 COMPLIANCE CERTIFICATES. Within the periods provided in
-----------------------
SECTIONS 8.1 AND 8.2 above, a certificate of the principal accounting officer
- --------------------
of Borrower and Nobel: (a) stating that Borrower and Nobel have observed,
performed and complied with their respective undertakings contained herein, (b)
setting forth the information and computations (in sufficient detail) required
in order to establish whether Borrower was operating in compliance with the
financial covenants in SECTION 7 of this Agreement, and (c) certifying that
---------
as of the dateof such certification, there does not exist any Event of Default
or any occurrence or state of affairs which with the giving of notice, passage
of time or both would constitute an Event of Default. Such certificate will be
in the form of EXHIBIT "B" attached hereto.
-----------
8.6 AUDIT REPORTS. Promptly upon receipt thereof, one copy of each
-------------
other report submitted to Borrower or Nobel, by independent accountants,
including management letters, "comment" letters, in connection with any annual,
interim or special audit report made by them of the books of Borrower or Nobel.
8.7 REPORTS TO GOVERNMENTAL AGENCIES AND OTHER CREDITORS. Upon
----------------------------------------------------
request of Bank and within reasonable promptness, copies of all such financial
reports, statements and returns which Borrower or Nobel shall file with any
federal or state department, commission, board, bureau, agency or
instrumentality and any report or statement delivered by Borrower or Nobel to
any supplier or other creditor in connection with any payment restructuring.
17
<PAGE>
8.8 REQUESTED INFORMATION. With reasonable promptness, all such other
---------------------
data and information in respect of the condition, operation and affairs of
Borrower or Nobel as Bank may reasonably request from time to time.
9. ENVIRONMENTAL REPRESENTATIONS AND COVENANTS.
-------------------------------------------
9.1 REPRESENTATIONS. Borrower represents to Bank as follows:
---------------
(a) Borrower Parties and, to the best of Borrower's knowledge, the Environmental
Affiliates are in compliance with all Environmental Requirements and Borrower
has no knowledge of any circumstances which may prevent or interfere with such
compliance in the future; (b) Borrower Parties and, to the best of Borrower's
knowledge, the Environmental Affiliates have all licenses, permits, approvals
and authorizations required under applicable Environmental Requirements; (c)
there are no pending or threatened claims against any of the Borrower Parties
or, to the best of Borrower's knowledge, the Environmental Affiliates or any of
their assets related to the failure to comply with any Environmental
Requirements, or any facts or circumstances which could give rise to such a
claim; (d) no facility or property now or previously owned, operated or leased
by any of the Borrower Parties or, to the best of Borrower's knowledge, any
Environmental Affiliate is an Environmental Cleanup Site; (e) none of the
Borrower Parties nor, to the best of Borrower's knowledge, any Environmental
Affiliate has treated, stored, transported, handled or disposed of Special
Materials at or adjacent to any Environmental Cleanup Site; (f) there are no
liens or claims for cost reimbursement outstanding or threatened against any of
the Borrower Parties or, to the best of Borrower's knowledge, any Environmental
Affiliate or any of their assets, or any facts or circumstances which could give
rise to such a lien or claim; and (g) there are no facts or circumstances which,
under the provisions of any Environmental Requirements, could restrict the use,
occupancy or transferability of any of the Collateral or any of the facilities
owned, leased or operated by any of the Borrower Parties or, to the best of
Borrower's knowledge, any Environmental Affiliate.
9.2 REAL PROPERTY. Borrower represents and warrants to Bank that
-------------
there are no Special Materials presently located on or, to the best of its
knowledge, near any real property owned, leased or operated by any of the
Borrower Parties or, to the best of Borrower's knowledge, any Environmental
Affiliate (collectively, "REAL PROPERTY") except for Special Materials which are
and have at all times been treated, stored, transported, handled and disposed of
in compliance with all Environmental Requirements. Borrower represents to Bank
that the Real Property is not now being used nor, to the best of its knowledge,
has it ever been used in the past for activities involving Special Materials,
including but not limited to the use, generation, collection, storage,
treatment, or disposal of any Special Materials except for Special Materials
which are and have at all times been treated, stored, transported, handled and
disposed of in compliance with all Environmental Requirements. Without limiting
the generality of the foregoing, the Real Property is not being used nor, to the
best of Borrower's knowledge, has it ever been used in the past for a landfill,
surface impoundment or other area for the treatment, storage or disposal of
solid waste (including solid waste such as sludge).
9.3 COVENANT REGARDING COMPLIANCE. Borrower Parties shall take, and
-----------------------------
Borrower shall use its best efforts to cause all Environmental Affiliates to
take, at Borrower's or such Environmental
18
<PAGE>
Affiliate's sole expense, such actions as may be necessary to comply with all
Environmental Requirements, as hereinafter defined. If any of the Borrower
Parties or any Environmental Affiliate shall fail to take such action, Bank may
make advances or payments towards performance or satisfaction of the same but
shall be under no obligation to do so. All sums so advanced or paid, including
all sums advanced or paid by Bank in connection with any judicial or
administrative investigation or proceeding relating thereto, including, without
limitation, attorney's fees, fines, or other penalty payments, shall be at once
repayable by Borrower and all sums so advanced or paid shall become a part of
the Bank Indebtedness.
The Borrower Parties will maintain all licenses, permits, approvals and
authorizations required under applicable Environmental Requirements. In
connection with off-site treatment, storage, handling, transportation or
disposal of Special Materials, the Borrower Parties will conduct such activities
only at facilities and with carriers who operate in compliance with all
Environmental Requirements and will obtain certificates of compliance or
disposal from all contractors retained in connection with such activities.
9.4 NOTICES. In the event Borrower becomes aware of any past, present
-------
or future facts or circumstances which have given rise or could give rise to a
claim against any of the Borrower Parties or any Environmental Affiliate related
to a failure to comply with any Environmental Requirements, Borrower will
promptly give Bank notice thereof, together with a written statement of an
officer of Borrower setting forth the details thereof and the action with
respect thereto taken or proposed to be taken by the Borrower Parties or the
Environmental Affiliates.
9.5 INDEMNITY. Borrower agrees to indemnify, defend and hold harmless
---------
Bank, its parents, subsidiaries, successors and assigns, and any officer,
director, shareholder, employee, Affiliate or agent of Bank, for all loss,
liability, damage, cost and expenses, including, without limitation, attorney's
fees and disbursements (including the reasonable allocated cost of in-house
counsel and staff) arising from or related to (a) the release of any Special
Materials at any facility at any time owned, leased or operated by any of the
Borrower Parties or any Environmental Affiliate, (b) the release of any Special
Materials treated, stored, transported, handled, generated or disposed of by or
on behalf of any of the Borrower Parties or any Environmental Affiliate at any
third party owned site, (c) any claim against any of the Borrower Parties or any
Environmental Affiliate that they have failed to comply with all Environmental
Requirements, and (d) the breach by Borrower of any representation or covenant
in this SECTION 9.
---------
9.6 TESTING. Bank shall have the right from time to time to designate
-------
such persons ("ENVIRONMENTAL CONSULTANTS") as Bank may select to visit, inspect,
examine and test all properties owned, leased or operated by and all products
and wastes generated, treated, stored, transported, handled or disposed of by or
on behalf of any of the Borrower Parties or any Environmental Affiliate, for the
purpose of investigating compliance with Environmental Requirements, any actual
or potential claims related thereto, and any condition which could result in
potential liability, cost or expenses to the Bank. Borrower Parties will permit,
and Borrower will use its best efforts to cause all Environmental Affiliates to
permit, such Environmental Consultants to have access to all of such properties,
products and wastes and all books, records and reports related to compliance by
the Borrower Parties and Environmental Affiliates with all Environmental
Requirements. Borrower
19
<PAGE>
Parties will supply, and Borrower will use its best efforts to cause all
Environmental Affiliates to supply, Bank or the Environmental Consultants with
all information, records, correspondence, audits, reviews and materials related
to compliance by the Borrower Parties and the Environmental Affiliates with all
Environmental Requirements and will make available to Bank or the Environmental
Consultants appropriate personnel employed by or consultants retained by the
Borrower Parties and the Environmental Affiliates having knowledge of such
matters.
Provided that an Event of Default has occurred, or the Bank has a good
faith belief that any of the Borrower Parties or any Environmental Affiliate has
failed to comply with all Environmental Requirements, the cost of such tests,
examinations and inspections shall be borne by Borrower and in the event Bank
pays such costs, such sums shall be at once repayable by Borrower and all sums
so advanced or paid by Bank shall become part of the Bank Indebtedness.
Notwithstanding the foregoing, the Bank shall have no obligation to perform any
tests, examinations or inspections or to monitor any of the Borrower Parties' or
the Environmental Affiliates' compliance with all Environmental Requirements.
9.7 SURVIVAL. The representations and covenants of Borrower contained
--------
in this SECTION 9, including without limitation the indemnification obligation
---------
of Borrower, shall survive the occurrence of any event whatsoever, including the
payment of the Bank Indebtedness or any investigation by or knowledge of Bank.
9.8 DEFINITIONS. For purposes of the foregoing:
-----------
(a) "BORROWER PARTIES" means Borrower, Nobel and any existing
or future shareholder, Affiliate or Subsidiary of Borrower.
(b) "ENVIRONMENTAL AFFILIATE" means any Person (other than any
of the Borrower Parties) for whom Borrower at any time has any liability
(contingent or otherwise) with respect to any claims arising out of the failure
of Borrower or such Person to comply with all applicable Environmental
Requirements.
(c) "ENVIRONMENTAL CLEANUP SITE" shall mean any location which is
listed or proposed for listing on the National Priorities List, on CERCLIS or on
any similar state list of sites requiring investigation or cleanup, or which is
the subject of any pending or threatened action, suit, proceeding or
investigation related to or arising from any alleged violation of any
Environmental Requirements.
(d) "ENVIRONMENTAL REQUIREMENTS" means any and all applicable
federal, state or local laws, statutes, ordinances, regulations or standards,
administrative or court orders or decrees, common law doctrines or private
agreements, relating to (i) pollution or protection of the environment and
natural resources, (ii) exposure of employees or other persons to Special
Materials, (iii) protection of the public health and welfare from the effects of
Special Materials and their products, by-products, wastes, emissions, discharges
or releases, and (iv) regulation, licensing,
20
<PAGE>
approval or authorization of the manufacture, generation, use, formulation,
packaging, labeling, transporting, distributing, handling, storing or disposing
of any Special Materials.
(e) "SPECIAL MATERIALS" means any and all materials which, under
Environmental Requirements, require special handling in use, generation,
collection, storage, treatment or disposal, or payment of costs associated with
responding to the lawful directives of any court or agency of competent
jurisdiction. Special Materials shall include, without limitation: (i) any
flammable substance, explosive, radioactive material, hazardous material,
hazardous waste, toxic substance, solid waste, pollutant, contaminant or any
related material, raw material, substance, product or by-product of any
substance specified in or regulated or otherwise affected by any Environmental
Requirements (including but not limited to any "hazardous substance" as defined
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980 as amended or any similar state or local law), (ii) any toxic chemical or
other substance from or related to industrial, commercial or institutional
activities, and (iii) asbestos, gasoline, diesel fuel, motor oil, waste and used
oil, heating oil and other petroleum products or compounds, polychlorinated
biphenyls, radon, urea formaldehyde and lead-containing materials.
10. CONDITIONS OF CLOSING. The obligation of Bank to make available the Loan
---------------------
is subject to the performance by Borrower of all of its agreements to be
performed hereunder and to the following further conditions (any of which may be
waived by Bank):
10.1 LOAN DOCUMENTS. Borrower and all other required persons and
--------------
entities will have executed and delivered to Bank the Loan Documents.
10.2 REPRESENTATIONS AND WARRANTIES. All representations and
------------------------------
warranties of Borrower set forth in the Loan Documents will be true at and as of
the date hereof.
10.3 NO DEFAULT. No condition or event shall exist or have occurred
----------
which would constitute an Event of Default hereunder (or would, upon the giving
of notice or the passage of time or both, constitute such an Event of Default).
10.4 PROCEEDINGS AND DOCUMENTS. All proceedings taken by Borrower in
-------------------------
connection with the transactions contemplated by this Agreement and all
documents incident to such transactions shall be satisfactory in form and
substance to Bank and Bank's counsel, and Bank shall have received all documents
or other evidence which it reasonably may request in connection with such
proceedings and transactions. Borrower shall have delivered to Bank a
certificate, in form and substance satisfactory to Bank, dated the date hereof
and signed on behalf of the Borrower by an officer of Borrower, certifying (a)
true copies of the Articles of Incorporation and bylaws of the Borrower in
effect on such date, (b) true copies of all corporate actions taken by Borrower
relative to the Loan Documents, and (c) the names, true signatures and
incumbency of the officers of the Borrower authorized to execute and deliver
this Agreement and the other Loan Documents. Bank may conclusively rely on such
certificate unless and until a later certificate revising the prior certificate
has been received by Bank.
21
<PAGE>
10.5 BACKGROUND CHECK. Bank shall have conducted a check of Nobel's
----------------
bank and other references, the results of which must be satisfactory to Bank.
10.6 DELIVERY OF OTHER DOCUMENTS. The following documents shall have
---------------------------
been delivered by or on behalf of Borrower to Bank:
(a) GOOD STANDING AND TAX LIEN CERTIFICATES. A good standing
---------------------------------------
certificate of the Department of State of Pennsylvania certifying to the good
standing and corporate status of Borrower, good standing/foreign qualification
certificates from all other jurisdictions in which Borrower is required to be
qualified to do business, and tax lien certificates for Borrower from each
jurisdiction in which Borrower is required to be qualified to do business.
(b) AUTHORIZATION DOCUMENTS. Evidence of authorization of
-----------------------
Borrower's execution and full performance of this Agreement, the Loan Documents
and all other documents and actions required hereunder.
(c) INSURANCE. Evidence of the insurance coverage required
---------
under SECTION 6.12.
----
(d) OPINION OF COUNSEL. An opinion of counsel for Borrower in
------------------
form and content satisfactory to Bank.
(e) MORTGAGED PROPERTY DOCUMENTS. A title insurance policy
----------------------------
insuring Bank's mortgage lien as required under SECTION 4.1 and otherwise in
-----------
form satisfactory to Bank with no restrictions, liens, encumbrances or
exceptions, except as approved by Bank; copies of all approvals, permits and
authorizations related to ownership and operation of the Mortgaged Property; and
a satisfactory survey of the Mortgaged Property.
(f) APPRAISALS. An appraisal, in form and substance satisfactory
----------
to Bank, of the Mortgaged Property.
(g) LICENSES AND APPROVALS. Copies of all licenses, approvals,
----------------------
consents, authorizations and filings of Borrower, required or necessary for the
operation by Borrower of its business or the Mortgaged Property.
(h) SUBORDINATION AGREEMENT. Subordination Agreement between
-----------------------
Borrower, Nobel and Bank with respect to the Subordinated Notes, in form and
content satisfactory to Bank.
(i) MASTER LEASE. A true and complete copy of the Master Lease.
------------
(j) OTHER DOCUMENTS. Such other documents as may be required to be
---------------
submitted to Bank by the terms hereof or of any Loan Document.
10.7 NON-WAIVER OF RIGHTS. By completing the closing hereunder, or by
--------------------
making advances hereunder, Bank does not thereby waive a breach of any warranty
or representation made by Borrower hereunder or any agreement, document, or
instrument delivered to Bank or otherwise
22
<PAGE>
referred to herein, and any claims and rights of Bank resulting from any breach
or misrepresentation by Borrower are specifically reserved by Bank.
11. DEFAULT AND REMEDIES.
--------------------
11.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
-----------------
following events shall constitute an Event or Events of Default hereunder:
(a) The failure of Borrower to pay any amount of principal or
interest on the Note, or any fee or other sums payable hereunder, or any other
Bank Indebtedness on the date on which such payment is due, whether on demand,
at the stated maturity or due date thereof, or by reason of any requirement for
the prepayment thereof, by acceleration or otherwise, and such failure continues
unremedied for a period of three (3) Business Days from the date of notice from
Bank to Borrower that such payment is past due;
(b) The failure of Borrower or Nobel to duly perform or observe
any obligation, covenant or agreement on its part contained herein or in any
other Loan Document not otherwise specifically constituting an Event of Default
under this SECTION 11.1 and such failure continues unremedied for a period of
------------
thirty (30) days after the earlier of (i) notice from Bank to Borrower of the
existence of such failure, or (ii) any officer or principal of Borrower knows
or, in the exercise of such officer's or principal's reasonable business
judgment, should have known of the existence of such failure, provided that, in
the event such failure is incapable of remedy or was wilfully caused or
permitted by Borrower, Borrower shall not be entitled to any notice or grace
hereunder;
(c) The failure of Nobel to comply with any of the financial
covenants set forth in SECTION 7 above;
---------
(d) The failure of Borrower or Nobel to pay any Indebtedness for
borrowed money due to any third Person or the existence of any other event of
default under any loan, guaranty, security agreement, mortgage or other
agreement pertaining thereto binding Borrower, including, without limitation,
the CoreStates Guaranty or any documents in connection therewith, after the
expiration of any notice and/or grace periods permitted in such documents, which
results in the acceleration of such Indebtedness;
(e) The failure of Borrower to pay or perform any other obligation
to Bank under any other agreement or note or otherwise arising, whether or not
related to this Agreement, after the expiration of any notice and/or grace
periods permitted in such documents;
(f) The adjudication of Borrower as a bankrupt or insolvent, or
the entry of an Order for Relief against Borrower or the entry of an order
appointing a receiver or trustee for Borrower of any of its property or
approving a petition seeking reorganization or other similar relief under the
bankruptcy or other similar laws of the United States or any state or any other
competent jurisdiction;
23
<PAGE>
(g) A proceeding under any bankruptcy, reorganization, arrangement
of debt, insolvency, readjustment of debt or receivership law is filed by or
(unless dismissed within 30 days) against Borrower or Borrower makes an
assignment for the benefit of creditors, or Borrower takes any action to
authorize any of the foregoing;
(h) Borrower becoming unable to meet its debts as they mature, or
the admission in writing by Borrower to such effect, or Borrower calling any
meeting of all or any material portion of its creditors for the purpose of debt
restructure;
(i) All or any part of the Collateral or the assets of Borrower
are attached, seized, subjected to a writ or distress warrant, or levied upon,
or come within the possession or control of any receiver, trustee, custodian or
assignee for the benefit of creditors;
(j) The entry of a final judgment for the payment of money against
Borrower which, within ten (10) days after such entry, shall not have been
discharged or execution thereof stayed pending appeal or shall not have been
discharged within five (5) days after the expiration of any such stay;
(k) Any representation or warranty of Borrower in any of the Loan
Documents is discovered to be untrue in any material respect or any statement,
certificate or data furnished by Borrower pursuant hereto is discovered to be
untrue in any material respect as of the date as of which the facts therein set
forth are stated or certified;
(l) Borrower voluntarily or involuntarily dissolves or is
dissolved, terminates or is terminated;
(m) Borrower is enjoined, restrained, or in any way prevented by
the order of any court or any administrative or regulatory agency, the effect of
which order restricts Borrower from conducting all or any material part of its
business;
(n) A breach by Borrower occurs under any material agreement,
document or instrument, whether heretofore, now or hereafter existing between
Borrower and any other Person;
(o) A material and adverse change occurs in any of Borrower's
operations, management or financial condition or in the value of the Collateral;
(p) The Collateral or the prospects of the payment of the Bank
Indebtedness is jeopardized or impaired;
(q) Any material uninsured damage to, or loss, theft, or
destruction of, any of the Collateral occurs;
(r) The loss, suspension, revocation or failure to renew any
license or permit now held or hereafter acquired by Borrower, which loss,
suspension, revocation or failure to renew might have a material adverse effect
on the business profits, assets or financial condition of Borrower;
24
<PAGE>
(s) Any change in the stock ownership of Borrower, as described
on SCHEDULE 5.3, any issuance of stock, debentures, warrants or other
------------
securities of Borrower or any pledge of the stock of Borrower which causes a
violation of SECTION 6.20 above;
------------
(t) Any breach by Borrower or any creditor of its obligations
under any subordination agreement now or hereafter executed in favor of Bank;
(u) The validity or enforceability of this Agreement, or any of
the Loan Documents, is contested by the Borrower; any stockholder of Borrower;
or Borrower denies that it has any or any further liability or obligation
hereunder or thereunder; or
(v) A default shall have occurred under the Master Lease.
11.2 REMEDIES. At the option of the Bank, upon the occurrence of an
--------
Event of Default, or at any time thereafter:
(a) The entire unpaid principal of the Loan, all other Bank
Indebtedness, or any part thereof, all interest accrued thereon, all fees due
hereunder and all other obligations of Borrower to Bank hereunder or under any
other agreement, note or otherwise arising will become immediately due and
payable without any further demand or notice;
(b) Bank may increase the interest rate on the Loan to the
applicable default rate set forth herein, without notice;
(c) Bank may enter the premises occupied by Borrower and take
possession of the Collateral and any records relating thereto; and/or
(d) Bank may exercise each and every right and remedy granted to
it under the Loan Documents, under the Uniform Commercial Code and under any
other applicable law or at equity.
If an Event of Default occurs under SECTION 11.1(F) or (G), all Bank
--------------- ---
Indebtedness shall become immediately due and payable.
11.3 SET-OFF. Without limiting the rights of Bank under applicable
-------
law, Bank has and may exercise a right of set-off, a lien against and a security
interest in all property of Borrower now or at any time in Bank's possession in
any capacity whatsoever, including but not limited to any balance of any
deposit, trust or agency account, or any other bank account with Bank, as
security for all Bank Indebtedness. At any time and from time to time following
the occurrence of an Event of Default, or an event which with the giving of
notice or passage of time or both would constitute an Event of Default, Bank may
without notice or demand, set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Bank to or for the credit of Borrower against
any or all of the Bank Indebtedness and the Borrower's obligations under the
Loan Documents.
25
<PAGE>
11.4 TURNOVER OF PROPERTY HELD BY BANK. Borrower irrevocably authorize
---------------------------------
any Affiliate of Bank, upon and following the occurrence of an Event of Default,
at the request of Bank and without further notice, to turnover to Bank any
property of Borrower held by such Affiliate, including without limitation, funds
and securities for the Borrower's account and to debit, for the benefit of Bank,
any deposit account maintained by Borrower with such Affiliate (even if such
deposit account is not then due or there results a loss or reduction of interest
or the imposition of a penalty in accordance with law applicable to the early
withdrawal of time deposits), in the amount requested by Bank up to the amount
of the Bank Indebtedness, and to pay or transfer such amount or property to Bank
for application to the Bank Indebtedness.
11.5 DELAY OR OMISSION NOT WAIVER. Neither the failure nor any delay on
----------------------------
the part of Bank to exercise any right, remedy, power or privilege under the
Loan Documents upon the occurrence of any Event of Default or otherwise shall
operate as a waiver thereof or impair any such right, remedy, power or
privilege. No waiver of any Event of Default shall affect any later Event of
Default or shall impair any rights of Bank. No single, partial or full exercise
of any rights, remedies, powers and privileges by the Bank shall preclude
further or other exercise thereof. No course of dealing between Bank and
Borrower shall operate as or be deemed to constitute a waiver of Bank's rights
under the Loan Documents or affect the duties or obligations of Borrower.
11.6 REMEDIES CUMULATIVE; CONSENTS. The rights, remedies, powers and
-----------------------------
privileges provided for herein shall not be deemed exclusive, but shall be
cumulative and shall be in addition to all other rights, remedies, powers and
privileges in Bank's favor at law or in equity.
11.6 CERTAIN FEES, COSTS, EXPENSES, EXPENDITURES AND INDEMNIFICATION.
---------------------------------------------------------------
Borrower agrees to pay on demand all costs and expenses of Bank, including
without limitation:
(a) all costs and expenses in connection with the preparation,
review, negotiation, execution, delivery and administration of the Loan
Documents, and the other documents to be delivered in connection therewith, or
any amendments, extensions and increases to any of the foregoing (including,
without limitation, reasonable attorney's fees and expenses, and the cost of
appraisals and reappraisals of Collateral), and the cost of periodic lien
searches and tax clearance certificates, as Bank deems advisable;
(b) all losses, costs and expenses in connection with the
enforcement, protection and preservation of the Bank's rights or remedies under
the Loan Documents, or any other agreement relating to any Bank Indebtedness, or
in connection with legal advice relating to the rights or responsibilities of
Bank (including without limitation court costs, reasonable attorney's fees and
expenses of accountants and appraisers); and
(c) any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of the Loan Documents, and
all liabilities to which Bank may become subject as the result of delay in
paying or omission to pay such taxes.
In the event Borrower shall fail to pay taxes, insurance, assessments,
costs or expenses which it is required to pay hereunder, or fails to keep the
Collateral free from security interests or lien
26
<PAGE>
(except as expressly permitted herein), or fails to maintain or repair the
Collateral as required hereby, or otherwise breaches any obligations under the
Loan Documents, Bank in its discretion, may make expenditures for such purposes
and the amount so expended (including reasonable attorney's fees and expenses,
filing fees and other charges) shall be payable by Borrower on demand and shall
constitute part of the Bank Indebtedness.
With respect to any amount required to be paid by Borrower under this
Section, in the event Borrower fails to pay such amount on demand, Borrower
shall also pay to Bank interest thereon at the default rate set forth in SECTION
-------
2.2.
- ---
Borrower agrees to indemnify and hold harmless, Bank and Bank's officers,
directors, shareholders, employees and agents, from and against any and all
claims, liabilities, losses, damages, costs and expenses (whether or not such
Person is a party to any litigation), including reasonable attorney's fees and
costs and costs of investigation, document production, attendance at depositions
or other discovery with respect to or arising out of this Agreement, the use of
any proceeds advanced hereunder, the transactions contemplated hereunder, or any
claim, demand, action or cause of action being asserted against Borrower or any
of its Affiliates.
Borrower's obligations under this Section shall survive termination of this
Agreement and repayment of the Bank Indebtedness.
11.8 TIME IS OF THE ESSENCE. Time is of the essence in Borrower's
-----------------------
performance of its obligations under the Loan Documents.
11.9 ACKNOWLEDGEMENT OF CONFESSION OF JUDGMENT PROVISIONS. BORROWER
----------------------------------------------------
ACKNOWLEDGES AND AGREES THAT THE NOTE AND THE LOAN DOCUMENTS CONTAIN PROVISIONS
WHEREBY BANK MAY ENTER JUDGMENT BY CONFESSION AGAINST BORROWER. BEING FULLY
AWARE OF ITS RIGHTS TO PRIOR NOTICE AND HEARING ON THE QUESTION OF THE VALIDITY
OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST IT BY BANK UNDER THE NOTE AND LOAN
DOCUMENTS, BEFORE JUDGMENT CAN BE ENTERED, BORROWER HEREBY WAIVES THESE RIGHTS
AND AGREES AND CONSENTS TO BANK ENTERING JUDGMENT AGAINST BORROWER BY
CONFESSION. ANY PROVISION IN A CONFESSION OF JUDGMENT IN ANY OF THE LOAN
DOCUMENTS FOR AN ATTORNEY'S COLLECTION COMMISSION SHALL IN NO WAY LIMIT
BORROWER'S LIABILITY TO REIMBURSE BANK FOR ALL LEGAL FEES ACTUALLY INCURRED BY
BANK, EVEN IF SUCH FEES ARE IN EXCESS OF THE ATTORNEY'S COLLECTION COMMISSION
PROVIDED FOR IN SUCH CONFESSION OF JUDGMENT.
12. COMMUNICATIONS AND NOTICES.
--------------------------
12.1 COMMUNICATIONS AND NOTICES. All notices, requests and other
--------------------------
communications made or given in connection with the Loan Documents shall be in
writing and, unless receipt is stated herein to be required, shall be deemed to
have been validly given if delivered personally to the individual or division or
department to whose attention notices to a party are to be addressed, or by
27
<PAGE>
private carrier, or registered or certified mail, return receipt requested in
all cases, with charges prepaid, addressed as follows, until some other address
(or individual or division or department for attention) shall have been
designated by notice given by one party to the other:
To Borrower:
Bluegrass Real Estate Company, Inc.
Rose Tree Corporate Center
1400 N. Providence Road, Suite 3055
Media, PA 19063
Attention: President
With a copy to:
Drinker, Biddle & Reath
1000 Westlakes Drive, Suite 300
Berwyn, PA 19312
Attention: David Larsson, Esquire
To Bank:
First Valley Bank
300 Berwyn Park, Suite 211
Berwyn, PA 19312
Attention: Stephen P. Keiser, Assistant Vice President
With a copy to:
LESSER & KAPLIN, P.C.
350 Sentry Parkway, Bldg. 640
Blue Bell, Pennsylvania 19422
Attention: Richard M. Zucker, Esquire
13. DEFINITIONS. The following words and phrases as used in capitalized form
-----------
in this Agreement, whether in the singular or plural, shall have the meanings
indicated:
13.1 "ACCOUNTING TERMS". As used in this Agreement, or any certificate,
-----------------
report or other document made or delivered pursuant to this Agreement,
accounting terms not defined elsewhere in this Agreement shall have the
respective meanings given to them under GAAP.
13.2 "AFFILIATE", as to any Person, means each other Person that
----------
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person in question.
28
<PAGE>
13.3 "BANK INDEBTEDNESS" shall mean all obligations and Indebtedness of
------------------
Borrower to Bank, whether now or hereafter owing or existing, including, without
limitation, all obligations under the Loan Documents, all obligations to
reimburse Bank for payments made by Bank pursuant to any letter of credit issued
for the account or benefit of Borrower by Bank, all other obligations or
undertakings now or hereafter made by or for the benefit of Borrower to or for
the benefit of Bank under any other agreement, promissory note or undertaking
now existing or hereafter entered into by Borrower with Bank, including, without
limitation, all obligations of Borrower to Bank under any guaranty or surety
agreement and all obligations of Borrower to immediately pay to Bank the amount
of any overdraft on any deposit account maintained with Bank, together with all
interest and other sums payable in connection with any of the foregoing.
13.4 "BUSINESS DAY" means any day except a Saturday, Sunday or other day
--------------
on which commercial banks in Pennsylvania are authorized by law to close.
13.5 "CAPITALIZED LEASES" means all lease obligations which have been or
--------------------
should be, in accordance with GAAP, capitalized on the books of the lessee.
13.6 "CAPITALIZED LEASE OBLIGATIONS" means all amounts payable with
-------------------------------
respect to a Capitalized Lease.
13.7 "CORPORATION" means a corporation, partnership, trust, unincorporated
-------------
organization, association or joint stock company.
13.8 "EVENT OF DEFAULT" means each of the events specified in
------------------
SECTION 11.1.
- ------------
13.9 "GAAP" means generally accepted accounting principles in the United
------
States of America, in effect from time to time, consistently applied and
maintained.
13.10 "INDEBTEDNESS", as applied to a Person, means:
--------------
(a) all items (except items of capital stock or of surplus) which
in accordance with GAAP would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person as at the date as
of which Indebtedness is to be determined;
(b) to the extent not included in the foregoing, all indebtedness,
obligations, and liabilities secured by any mortgage, pledge, lien, conditional
sale or other title retention agreement or other security interest to which any
property or asset owned or held by such Person is subject, whether or not the
indebtedness, obligations or liabilities secured thereby shall have been assumed
by such Person; and
(c) to the extent not included in the foregoing, all indebtedness,
obligations and liabilities of others which such Person has directly or
indirectly guaranteed, endorsed (other than for collection or deposit in the
ordinary course of business), sold with recourse, or agreed (contingently or
otherwise) to purchase or repurchase or otherwise acquire or in respect of which
such Person has
29
<PAGE>
agreed to supply or advance funds (whether by way of loan, stock
purchase, capital contribution or otherwise) or otherwise to become directly or
indirectly liable.
13.11 "LOAN DOCUMENTS" means this Agreement, the Note, the Mortgages
----------------
and all other documents, executed or delivered by Borrower pursuant to this
Agreement, as they may be amended from time to time.
13.12 "NET INCOME" means income (or loss) of Nobel on a consolidated basis
------------
after income and franchise taxes and shall have the meaning given such term by
GAAP, provided that there shall be specifically excluded therefrom (a) gains or
losses from the sale of capital assets, (b) net income of any Person in which
Nobel has an ownership interest, unless received by Nobel in a cash
distribution, and (c) any gains arising from extraordinary items, as defined by
GAAP.
13.13 "NET WORTH", as applied to Nobel, on a consolidated basis, means the
-----------
remainder after deducting from the sum of all assets (net of reserve for
uncollectible accounts, depreciation, amortization, obsolescence and the like)
properly appearing on a balance sheet of Nobel and its subsidiaries prepared in
accordance with GAAP, the following:
(a) all Indebtedness of Nobel and its subsidiaries; and
(b) to the extent reflected as an asset in such balance sheet, (i)
all deferred charges, (ii) any write-up in the book value of any asset resulting
from a re-evaluation thereof subsequent to the acquisition thereof(except write-
ups to actual value specifically approved by Bank), (iii) the amount, if any, at
which securities (other than Indebtedness in good standing) of any Person which
is not readily marketable appear on the asset side of such balance sheet, (iv)
the amount, if any, at which inventories or securities appearing on the asset
side of such balance sheet exceed the lower of cost or current market value
thereof or the price at which such Person has agreed to sell such inventories or
securities, (v) the book amount of any asset which is subject to pledge, lien,
encumbrance or charge (including any escrow or similar deposit) to secure the
payment of any obligation or indemnity to the extent that the amount of such
obligation or indemnity does not constitute Indebtedness of Nobel or to the
extent that the amount of such obligation or indemnity cannot be ascertained and
(vi) loans and notes payable due to Nobel from Affiliates, directors or officers
of Nobel.
In calculating Nobel's Net Worth, there shall be no deduction from the
assets of Nobel as a result of that certain standby letter of credit issued by
CoreStates for the account of Nobel and the benefit of the United States
District Court for the Eastern District of Pennsylvania in the face amount of
Six Hundred Thousand Dollars ($600,000.00), unless and only to the extent such
letter of credit has been drawn upon.
13.14 "PERSON" means an individual, a Corporation or a government or any
--------
agency or subdivision thereof, or any other entity.
13.15 "PRIME RATE" means the annual interest rate established from time to
------------
time by Bank and generally known by Bank as its "prime rate", whether published
by it publicly or only for the
30
<PAGE>
internal guidance of its loan officers. The Prime Rate is used merely as a
pricing index and is not and should not be considered to represent the lowest or
best rate available to a borrower.
13.16 "SUBORDINATED INDEBTEDNESS" means that certain Indebtedness of
---------------------------
Borrower owed to Nobel in the principal amount of approximately Six Hundred
Twenty-three Thousand Eight Hundred Fifty-three Dollars and Twenty-two Cents
($623,853.22) evidenced by the Subordinated Notes, which Indebtedness must at
all times be fully subordinated to all Bank Indebtedness on terms acceptable to
Bank in its sole discretion.
13.17 "SUBSIDIARY" means a Corporation (a) which is organized under the
------------
laws of the United States or any State thereof, or any other county or
jurisdiction, (b) which conducts substantially all of its business and has
substantially all of its assets within the United States, and (c) of which more
than fifty percent (50%) of its outstanding voting stock of every class (or
other voting equity interest) is owned by Borrower or one or more of its
Subsidiaries.
14. WAIVERS.
-------
14.1 WAIVERS. IN CONNECTION WITH ANY PROCEEDINGS UNDER THE LOAN
-------
DOCUMENTS, INCLUDING WITHOUT LIMITATION ANY ACTION BY BANK IN REPLEVIN,
FORECLOSURE OR OTHER COURT PROCESS OR IN CONNECTION WITH ANY OTHER ACTION
RELATED TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREUNDER,
BORROWER WAIVES:
(a) all errors, defects and imperfections in such proceedings;
(b) all benefits under any present or future laws exempting
any property, real or personal, or any part of any proceeds thereof from
attachment, levy or sale under execution, or providing for any stay of execution
to be issued on any judgment recovered under any of the Loan Documents or in any
replevin or foreclosure proceeding, or otherwise providing for any valuation,
appraisal or exemption ;
(c) all rights to inquisition on any real estate, which real
estate may be levied upon pursuant to a judgment obtained under any of the Loan
Documents and sold upon any writ of execution issued thereon in whole or in
part, in any order desired by Bank;
(d) presentment for payment, demand, notice of demand, notice
of non-payment, protest and notice of protest of any of the Loan Documents,
including the Note;
(e) any requirement for bonds, security or sureties required
by statute, court rule or otherwise;
(f) any demand for possession of Collateral prior to
commencement of any suit; and
31
<PAGE>
(g) ALL RIGHTS TO CLAIM OR RECOVER ATTORNEY'S FEES AND COSTS
IN THEEVENT THAT BORROWER IS SUCCESSFUL IN ANY ACTION TO REMOVE, SUSPEND OR
PREVENT THE ENFORCEMENT OF A JUDGMENT ENTERED BY CONFESSION.
14.2 FORBEARANCE. Bank may release, compromise, forbear with respect to,
------------
waive, suspend, extend or renew any of the terms of the Loan Documents, without
notice to Borrower.
14.3 LIMITATION ON LIABILITY. Borrower shall be responsible for and Bank
-----------------------
is hereby released from any claim or liability in connection with:
(a) Safekeeping any Collateral;
(b) Any loss or damage to any Collateral;
(c) Any diminution in value of the Collateral; or
(d) Any act or default of another Person related to or in
connection with the transactions contemplated hereby.
Bank shall only be liable for any act or omission on its part constituting
wilful misconduct. In the event that Bank breaches its required standard of
conduct, Borrower agrees that its liability shall be only for direct damages
suffered and shall not extend to consequential or incidental damages. In the
event Borrower brings suit against Bank in connection with the transactions
contemplated hereunder and Bank is found not to be liable, Borrower will
indemnify and hold Bank harmless from all costs and expenses, including
attorney's fees, incurred by Bank in connection with such suit. This Agreement
is not intended to obligate Bank to take any action with respect to the
Collateral or to incur expenses or perform any obligation or duty of Borrower.
15. SUBMISSION TO JURISDICTION.
--------------------------
15.1 SUBMISSION TO JURISDICTION. Borrower hereby consents to the
--------------------------
exclusive jurisdiction of any state or federal court located within the Eastern
District of Pennsylvania, and irrevocably agrees that, subject to the Bank's
election, all actions or proceedings relating to the Loan Documents or the
transactions contemplated hereunder shall be litigated in such courts, and
Borrower waives any objection which it may have based on lack of personal
jurisdiction, improper venue or forum non conveniens to the conduct of any
--------------------
proceeding in any such court and waives personal service of any and all process
upon it, and consents that all such service of process be made by mail or
messenger directed to it at the address set forth in SECTION 12.1. Nothing
------------
contained in this SECTION 15.1 shall affect the right of Bank to serve legal
------------
process in any other manner permitted by law or affect the right of Bank to
bring any action or proceeding against Borrower or its property in the courts of
any other jurisdiction.
32
<PAGE>
16. MISCELLANEOUS.
-------------
16.1 BROKERS. The transaction contemplated hereunder was brought about
-------
and entered into by Bank and Borrower acting as principals and without any
brokers, agents or finders being the effective procuring cause hereof. Borrower
represents to Bank that Borrower has not committed Bank to the payment of any
brokerage fee or commission in connection with this transaction. If any such
claim is made against Bank by any broker, finder or agent or any other Person,
Borrower agrees to indemnify, defend and hold Bank harmless against any such
claim, at Borrower's own cost and expense, including Bank's attorneys' fees.
Borrower further agrees that until any such claim or demand is adjudicated in
Bank's favor, the amount claimed and/or demanded shall be deemed part of the
Bank Indebtedness secured by the Collateral.
16.2 USE OF BANK'S NAME. Borrower shall not use Bank's name or the name
------------------
of any of Bank's Affiliates in connection with any of its business or activities
except as may otherwise be required by the rules and regulations of the
Securities and Exchange Commission or any like regulatory body and except as may
be required in its dealings with any governmental agency.
16.3 NO JOINT VENTURE. Nothing contained herein is intended to permit or
----------------
authorize Borrower to make any contract on behalf of Bank, nor shall this
Agreement be construed as creating a partnership, joint venture or making Bank
an investor in Borrower.
16.4 SURVIVAL. All covenants, agreements, representations and warranties
--------
made by Borrower in the Loan Documents or made by or on its behalf in connection
with the transactions contemplated here shall be true at all times this
Agreement is in effect and shall survive the execution and delivery of the Loan
Documents, any investigation at any time made by Bank or on its behalf and the
making by Bank of the loans or advances to Borrower. All statements contained
in any certificate, statement or other document delivered by or on behalf of
Borrower pursuant hereto or in connection with the transactions contemplated
hereunder shall be deemed representations and warranties by Borrower.
16.5 NO ASSIGNMENT BY BORROWER. Borrower may not assign any of its
-------------------------
rights hereunder without the prior written consent of Bank, and Bank shall not
be required to lend hereunder except to Borrower as it presently exists.
16.6 ASSIGNMENT OR SALE BY BANK. Bank may sell, assign or participate
--------------------------
all or a portion of its interest in the Loan Documents and in connection
therewith may make available to any prospective purchaser, assignee or
participant any information relative to Borrower in its possession.
16.7 BINDING EFFECT. This Agreement and all rights and powers granted
--------------
hereby will bind and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.
16.8 SEVERABILITY. The provisions of this Agreement and all other Loan
-------------
Documents are deemed to be severable, and the invalidity or unenforceability of
any provision shall not affect or impair the remaining provisions which shall
continue in full force and effect.
33
<PAGE>
16.9 NO THIRD PARTY BENEFICIARIES. The rights and benefits of this
----------------------------
Agreement and the Loan Documents shall not inure to the benefit of any third
party.
16.10 MODIFICATIONS. No modification of this Agreement or any of the Loan
-------------
Documents shall be binding or enforceable unless in writing and signed by or on
behalf of the party against whom enforcement is sought.
16.11 HOLIDAYS. If the day provided herein for the payment of any amount
--------
or the taking of any action falls on a Saturday, Sunday or public holiday at the
place for payment or action, then the due date for such payment or action will
be the next succeeding Business Day.
16.12 LAW GOVERNING. This Agreement has been made, executed and delivered
-------------
in the Commonwealth of Pennsylvania and will be construed in accordance with and
governed by the laws of such Commonwealth.
16.13 INTEGRATION. The Loan Documents shall be construed as integrated
-----------
and complementary of each other, and as augmenting and not restricting Bank's
rights, powers, remedies and security. The Loan Documents contain the entire
understanding of the parties thereto with respect to the matters contained
therein and supersede all prior agreements and understandings between the
parties with respect to the subject matter thereof and do not require parol or
extrinsic evidence in order to reflect the intent of the parties. In the event
of any inconsistency between the terms of this Agreement and the terms of the
other Loan Documents, the terms of this Agreement shall prevail.
16.14 EXHIBITS AND SCHEDULES. All exhibits and schedules attached hereto
----------------------
are hereby made a part of this Agreement.
16.15 HEADINGS. The headings of the Articles, Sections, paragraphs and
--------
clauses of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part of this Agreement.
16.16 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
16.17 WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER AND BANK WAIVE ANY RIGHT
--------------------------------
TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING
UNDER ANY OF THE LOAN DOCUMENTS OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF BORROWER OR BANK WITH RESPECT TO ANY OF THE LOAN
DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE. BORROWER AND BANK AGREE AND CONSENT
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY
34
<PAGE>
OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWER
AND BANK TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. BORROWER ACKNOWLEDGES
THAT IT HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL REGARDING THIS SECTION,
THAT IT FULLY UNDERSTANDS ITS TERMS, CONTENT AND EFFECT, AND THAT IT VOLUNTARILY
AND KNOWINGLY AGREES TO THE TERMS OF THIS SECTION.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BLUEGRASS REAL ESTATE COMPANY, INC.
By:_________________________________
John Frock, Vice President
(CORPORATE SEAL)
Attest:_____________________________
Yvonne DeAngelo, Secretary
FIRST VALLEY BANK
By:_______________________________
Stephen P. Keiser, Assistant
Vice President
The undersigned, intending to be legally bound, hereby agrees to be bound
by the terms, conditions and covenants applicable to the undersigned as set
forth in SECTIONS 7 and 8 of the foregoing Agreement; provided, however, Bank's
---------- -
remedies as a result of the undersigned's failure to comply with such terms,
conditions and covenants shall be those set forth herein and in the other Loan
Documents.
NOBEL EDUCATION DYNAMICS, INC.
By:____________________________
Name/Title:____________________
Attest:________________________
Name/Title:____________________
(CORPORATE SEAL)
35
<PAGE>
EXHIBIT
-------
Exhibit "A" - Note
Exhibit "B" - Compliance Certificate
36
<PAGE>
EXHIBIT "A"
-----------
NOTE
----
Blue Bell, Pennsylvania
Dated: May 1, 1995
$3,567,300.00
FOR VALUE RECEIVED AND INTENDING TO BE LEGALLY BOUND, the undersigned
("Borrower") hereby promises to pay to the order of FIRST VALLEY BANK ("Bank")
the principal sum of Three Million Five Hundred Sixty-seven Thousand Three
Hundred Dollars ($3,567,300.00), together with interest thereon upon the
following terms:
1. Note. This Note is the "Note" as defined in that certain Loan Agreement
----
of even date herewith among Borrower and Bank (such Loan Agreement, as the same
may be amended, supplemented or restated from time to time, being the "Loan
Agreement") and, as such, shall be construed in accordance with all terms and
conditions thereof. Capitalized terms not defined herein shall have such meaning
as provided in the Loan Agreement. This Note is entitled to all the rights and
remedies provided in the Loan Agreement and the Loan Documents and is secured by
all collateral as described therein.
2. Interest Rate. Interest on the unpaid principal balance hereof will
-------------
accrue from the date of advance until final payment thereof at the rate per
annum which is one and one quarter percent (1 1/4%) in excess of the Prime Rate
of Bank in effect from time to time (such interest rate to change immediately
upon any change in the Prime Rate).
3. Default Interest. Interest will accrue on the outstanding principal
----------------
amount hereof following the occurrence of an Event of Default or the final
maturity date hereof, until paid at a rate per annum which is three percent (3%)
in excess of the rate payable under Paragraph 2 above (the "Default Rate").
-----------
4. Post Judgment Interest. Any judgment obtained for sums due hereunder or
----------------------
under the Loan Documents will accrue interest at the Default Rate until paid.
5. Computation. Interest will be computed on the basis of a year of three
-----------
hundred sixty (360) days and paid for the actual number of days elapsed.
6. Principal and Interest Payments. On June 1, 1995 and July 1, 1995,
-------------------------------
Borrower shall pay interest only on the outstanding principal balance hereof.
Commencing on August 1, 1995 and
<PAGE>
continuing through and including June 1, 1998, Borrower shall pay to Bank equal
and consecutive monthly payments of principal each in the amount of Nine
Thousand Sixty-nine Dollars and Seventy-six Cents ($9,069.76), together with
interest thereon at the applicable rate set forth above. On July 1, 1998,
Borrower shall pay to Bank the remaining outstanding principal balance hereof,
all accrued and unpaid thereon and all other sums due and owing in connection
herewith.
7. Place of Payment. Principal and interest hereunder shall be payable as
----------------
provided in the Loan Agreement, or at such other place as Bank, from time to
time, may designate in writing.
8. Default; Remedies. Upon the occurrence of an Event of Default, Bank,
-----------------
at its option and without notice to Borrower, may declare immediately due and
payable the entire unpaid balance of principal and all other sums due by
Borrower hereunder and under the other Loan Documents, together with interest
accrued thereon at the applicable rate specified above to the date of the Event
of Default and thereafter at the Default Rate. Payment thereof may be enforced
and recovered in whole or in part at any time and from time to time by one or
more of the remedies provided to Bank in this Note or in the Loan Documents or
as otherwise provided at law or in equity, all of which remedies are cumulative
and concurrent.
9. Waivers. Borrower and all endorsers hereby, jointly and severally, waive
-------
presentment for payment, demand, notice of demand, notice of nonpayment or
dishonor, protest and notice of this Note, and all other notices in connection
with the delivery, acceptance, performance, default or enforcement of the
payment of this Note.
10. Miscellaneous. If any provisions of this Note shall be held invalid or
-------------
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof. This Note has been delivered in and shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
without regard to the law of conflicts. This Note shall be binding upon Borrower
and upon Borrower's successors and assigns and shall benefit Bank and its
successors and assigns. The prompt and faithful performance of all of Borrower's
obligations hereunder, including without limitation, time of payment, is of the
essence of this Note.
11. Joint and Several Liability. If there is more than one Borrower
---------------------------
executing this Note, all agreements, conditions, covenants and provisions of
this Note shall be the joint and several obligation of each Borrower.
12. CONCESSION OF JUDGMENT. BORROWER HEREBY AUTHORIZES AND EMPOWERS ANY
----------------------
ATTORNEY OR THE PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF
PENNSYLVANIA, OR IN ANY OTHER JURISDICTION WHICH PERMITS THE ENTRY OF JUDGMENT
BY CONCESSION, TO APPEAR FOR BORROWER AT ANY TIME AFTER THE OCCURRENCE OF AN
EVENT OF DEFAULT UNDER THE LOAN AGREEMENT IN ANY ACTION BROUGHT AGAINST BORROWER
ON THIS NOTE OR THE LOAN DOCUMENTS AT THE SUIT OF BANK, WITH OR WITHOUT
COMPLAINT OR DECLARATION FILED, WITHOUT STAY OF EXECUTION, AS OF ANY TERM OR
TIME, AND THEREIN TO CONFESS OR ENTER JUDGMENT AGAINST BORROWER FOR THE ENTIRE
UNPAID OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AND ALL OTHER SUMS TO BE PAID
BY BORROWER TO OR
<PAGE>
ON BEHALF OF BANK PURSUANT TO THE TERMS HEREOF OR OF THE LOAN DOCUMENTS AND ALL
ARREARAGES OF INTEREST THEREON, TOGETHER WITH ALL COSTS AND OTHER EXPENSES AND
AN ATTORNEY'S COLLECTION COMMISSION OF THREE PERCENT (3%) OF THE AGGREGATE
AMOUNT OF THE FOREGOING SUMS, BUT IN NO EVENT LESS THAN $5,000.00; AND FOR SO
DOING THIS NOTE OR A COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT
WARRANT. THE AUTHORITY GRANTED HEREIN TO CONFESS JUDGMENT SHALL NOT BE EXHAUSTED
BY ANY EXERCISE THEREOF BUT SHALL CONTINUE FROM TIME TO TIME AND AT ALL TIMES
UNTIL PAYMENT IN FULL OF ALL THE AMOUNTS DUE HEREUNDER. BORROWER ACKNOWLEDGES
THAT IT HAS BEEN REPRESENTED BY COUNSEL IN CONNECTION WITH THE EXECUTION AND
DELIVERY OF THIS NOTE AND THAT IT KNOWINGLY WAIVES ITS RIGHT TO BE HEARD PRIOR
TO THE ENTRY OF SUCH JUDGMENT AND UNDERSTANDS THAT, UPON SUCH ENTRY, SUCH
JUDGMENT SHALL BECOME A LIEN ON ALL REAL PROPERTY OF BORROWER IN THE COUNTY
WHERE SUCH JUDGMENT IS ENTERED AND THAT EXECUTION MAY IMMEDIATELY BE ISSUED ON
THE JUDGMENT TO GARNISH, LEVY ON OR ATTACH ANY PERSONAL PROPERTY OF BORROWER.
IN WITNESS WHEREOF, Borrower, intending to be legally bound hereby, has
caused this Note to be duly executed the day and year first above written.
BLUEGRASS REAL ESTATE COMPANY, INC.
By:
-----------------------------------
John Frock, Vice President
(CORPORATE SEAL)
Attest:
-------------------------------
Yvonne DeAngelo, Secretary
3
<PAGE>
OFFICER'S CERTIFICATION
-----------------------
Dated:
-------------
Stephen P. Keiser, Assistant Vice President
First Valley Bank
300 Berwyn Park, Suite 211
Berwyn, PA 19312
Dear Stephen:
I have reviewed the Loan Agreement (the "Loan Agreement") dated May 1,
1995, between Bluegrass Real Estate Company, Inc. (the "Borrower") and First
Valley Bank.
I hereby certify that (a) the Borrower and Nobel Education Dynamics, Inc.
have observed, performed and complied with each and every one of their
respective undertakings contained in the Loan Agreement, and (b) there does not
exist any Event of Default or any occurrence or state of affairs which, with the
giving of notice, passage of time, or both would constitute an Event of Default,
as defined in the Loan Agreement.
Attached hereto is a copy of the calculations required by Section 8.5 of
-----------
the Loan Agreement showing compliance with Sections 7.1, 7.2, 7.3 and 7.4 of
------------------------------
the Loan Agreement.
By:
------------------------------
Name/Title:
----------------------
EXHIBIT "B"
<PAGE>
SCHEDULES
---------
Schedule 4.1 Mortgaged Property
Schedule 5.3 Ownership Interests, Pledges, etc. of Borrower
Schedule 5.4 Stock owned by Borrower
Schedule 5.12 Names (including tradenames) and Addresses of Borrower
identifying chief executive officer
Schedule 6.3 Permitted Indebtedness for Borrowed Money
Schedule 6.9 Permitted Liens and Security Interests
Schedule 6.18 Permitted Loans to Affiliates, Shareholders, Officers or
Directors
41
<PAGE>
Schedule 4.1
List of Premises
1 Manor Drive - New Britain Township
Chalfont, Pennsylvania 18914
Stoneridge Office Park - Uwchlan Township
101 Tanner Drive, Exton, Pennsylvania 19341
906 S. Media Line Road - Marple Township
Newtown Square, Pennsylvania 19008
51 Marigold Drive - Newtown Township,
Newtown, Pennsylvania 18940
Chadds Ford Business Center - Birmingham Township
7 Dickinson Drive, Chadds Ford, Pennsylvania 19317
<PAGE>
Schedule 5.3
Ownership Interests
Nobel Education Dynamics, Inc. holds all ownership interests
<PAGE>
Schedule 5.4
Subsidiaries
None
<PAGE>
Schedule 5.12
Addresses
Bluegrass Real Estate Company, Inc.
Rose Tree Corporate Center II
1400 North Providence Road
Suite 3055
Media, PA 19063
<PAGE>
Schedule 6.3
Existing Indebtedness
Subordinated Promissory Note to Nobel Education Dynamics, Inc. dated May 1, 1995
in the amount of $80,291.46.
<PAGE>
Schedule 6.9
Liens and Security Interests
None
<PAGE>
Schedule 6.18
Existing Loans with Affiliates
None
<PAGE>
Exhibit 11
----------
Statement re-computation of per share earnings.
-----------------------------------------------
1. Earnings Per Share
------------------
The earnings per share is based on the weighted average number of common
stock and common equivalent shares outstanding. The calculation is as
follows:
<TABLE>
<CAPTION>
3 months ended 3 months ended
March 31, 1995 March 31, 1994
<S> <C> <C> <C> <C>
Primary $ 752,365 - $ 49,686 = .05 $ 643,057 - $49,686 = .04
--------------------- --------------------
15,749,288 16,112,452
Fully Diluted $ 752,365 = .04 $ 643,057 = .03
-------------- --------------
21,407,544 19,034,012
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 882
<SECURITIES> 0
<RECEIVABLES> 606
<ALLOWANCES> 96
<INVENTORY> 0
<CURRENT-ASSETS> 3,087
<PP&E> 13,744
<DEPRECIATION> (4,441)
<TOTAL-ASSETS> 26,360
<CURRENT-LIABILITIES> 6,525
<BONDS> 0
<COMMON> 16
0
5
<OTHER-SE> 9,092
<TOTAL-LIABILITY-AND-EQUITY> 26,360
<SALES> 9,683
<TOTAL-REVENUES> 9,683
<CGS> 7,578
<TOTAL-COSTS> 8,362
<OTHER-EXPENSES> 10
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 286
<INCOME-PRETAX> 1,003
<INCOME-TAX> 251
<INCOME-CONTINUING> 752
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 752
<EPS-PRIMARY> .05
<EPS-DILUTED> .04
</TABLE>
