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Page ____ of ____
Exhibit Index
Appears on Page 4
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 25, 1995
NOBEL EDUCATION DYNAMICS, INC.
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-1003 22-2465204
---------------------------- ----------------- --------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation File Number) Identification No.)
Race Tree Corporate Center II
1400 N. Providence Road, Suite 3055
Media, PA 19063
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 891-8200
---------------
Not Applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. Acquisition or Disposition of Assets.
-------------------------------------
Acquisition of Educo, Inc.
--------------------------
On September 1, 1995, the Registrant acquired all of the outstanding
shares of common stock of Educo, Inc., a Maryland corporation,
pursuant to a Stock Purchase Agreement with Educo, Inc. and the then
existing stockholders of Educo, Inc. (collectively, the "Educo
Stockholders") dated May 23, 1995, as amended. Educo, Inc. is an
operator of 10 schools and preschools located in Maryland, Virginia,
North Carolina and South Carolina. The purchase price for the stock
consisted of (i) $2,000,000 in cash and (ii) an agreement to issue and
deliver to the Educo Stockholders an aggregate of 1,250,000 shares of
the Registrant's Common Stock on January 15, 1996. The cash portion of
the purchase price was financed with proceeds of the Term Loan from
First Valley Bank described in Item 5 below.
ITEM 5. Other Events.
-------------
Acquisition of Child Care Centers in Indiana.
---------------------------------------------
On August 25, 1995, the Registrant acquired from Corydon Day Care
Center, Inc., an Indiana corporation d/b/a "Children Today"
(Corydon"), nine of its child care centers located in the
Indianapolis, Indiana area (the "Centers") and substantially all of
the assets (other than real estate) used by Corydon in the business of
operating the Centers. The Registrant also acquired a leasehold
interest in the buildings and the land upon which the Centers are
located. The purchase price for the business and assets acquired from
Corydon consisted of (i) $1,050,000 in cash and (ii) a subordinated
promissory note in the principal amount of $1,125,000 secured by a
security interest in certain assets located at the Centers. The cash
portion of the purchase price paid by the Registrant was financed by
drawing on the Registrant's then existing line of credit with
CoreStates Bank, N.A. which the Registrant repaid on August 31, 1995
using proceeds of the Term Loan from First Valley Bank described below
in this Item 5.
Refinancing.
------------
On August 30, 1995, the Registrant and certain of its subsidiaries
(collectively, the "Borrowers") entered into a Loan and Security
Agreement with First Valley
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<PAGE>
Bank (the "Loan Agreement"). Pursuant to the Loan Agreement, First
Valley Bank lent the Borrowers a five-year term loan in the original
principal amount of $7,500,000 (the "Term Loan") and established for
the Borrowers from August 30, 1995 and until September 1, 1998 a
revolving line of credit in an amount not to exceed $7,500,000 (the
"Line"). Such loans are secured by liens in favor of the Bank on the
Borrowers' properties. The proceeds of the Term Loan were used by the
Borrowers as follows: (i) $5,500,000 was used by the Registrant to
repay indebtedness of the Registrant to CoreStates Bank, N.A. and (ii)
$2,000,000 was used to fund the cash portion of the acquisition by the
Registrant of Educo, Inc. pursuant to the terms of that certain Stock
Purchase Agreement by and among the Registrant, Educo, Inc. and the
Educo Stockholders dated May 23, 1995, as amended. The proceeds
advanced under the Line shall be used for working capital purposes, to
fund future acquisitions of educational facilities or companies and
construction of educational facilities by the Borrowers and for the
issuance of standby letters of credit; provided however, the sum of
the outstanding amounts of advances under the revolving line of credit
for working capital purposes and the face amount under outstanding
standby letters of credit shall not at any time exceed $1,000,000 in
the aggregate.
In addition, on August 30, 1995, the Registrant and certain of its
subsidiaries (collectively, the "Nobel Companies") entered into an
Investment Agreement with Allied Capital Corporation and its
affiliated funds (collectively, "Allied"), pursuant to which, on such
date, the Registrant sold and issued to Allied (i) Senior Subordinated
Debentures in the aggregate principal amount of $6,000,000 (the
"Debentures") for a purchase price of $6,000,000; (ii) 1,063,830
shares of the Registrant's Series D Convertible Preferred Stock (the
"Preferred Stock") for a purchase price of $2,000,000; and (iii)
Warrants to acquire an aggregate of 1,236,171 shares of the
Registrant's Common Stock, subject to certain adjustments under
antidilution provisions (the "Warrants") for a purchase price of $100.
The Nobel Companies have granted liens on certain of their properties
to Allied securing their obligations to Allied under the foregoing
documents and instruments. A portion of the proceeds of the sale of
the foregoing securities was used to refinance bank debt existing on
August 30, 1995; the remainder will be used for acquisitions and new
campus opening, for transaction expenses and for general corporate
purposes.
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The Debentures bear interest at the rate of 14% per annum, and
principal is repayable commencing October 1, 2000 is equal quarterly
installments. The Preferred Stock is convertible into an aggregate of
1,063,830 shares of the Common Stock of the Registrant, subject to
certain adjustments under antidilution provisions.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements of Businesses Acquired.
--------------------------------------------
It is impracticable at the time of filing of this Current Report for
the Registrant to provide the required financial statements for Educo,
Inc. Accordingly, the Registrant will file the required financial
statements of Educo, Inc. under cover of a Form 8 Amendment to this
Current Report of Form 8-K as soon as practicable, but not later than
60 days after the date on which this Report must be filed with the
Commission.
(b) Pro Forma Financial Information.
--------------------------------
It is impracticable at the time of filing of this Current Report for
the Registrant to provide the required pro forma financial
information. Accordingly, the Registrant will file the required pro
forma financial information under cover of a Form 8 Amendment to this
Current Report on Form 8-K as soon as practicable, but not later than
60 days after the date on which this Report must be filed with the
Commission.
(c) Exhibits.
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Exhibit Number
(Referenced to
Item 601 of
Regulation 8-K) Description of Exhibit
--------------- ----------------------
2A Asset Purchase Agreement dated
August 25, 1995 by and among
Corydon Day Care Center, Inc.,
d/b/a Children Today, Donald
Mitchell, Jeffrey Owen and the
Registrant.
2B Stock Purchase Agreement dated May
23, 1995, by and among Educo, Inc.,
the Educo Stockholders and the
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Registrant, as amended by First Amendment to Stock
Purchase Agreement dated August 31, 1995 and Second
Amendment to Stock Purchase Agreement dated August
31, 1995.
4A Investment Agreement dated as of August 30, 1995 by
and among the Registrant, certain subsidiaries of
the Registrant and Allied Capital Corporation and
its affiliated funds.
4B Senior Subordinated Debenture dated as of August
30, 1995 in the principal amount of $450,000
payable to the order of Allied Capital Corporation.
4C Common Stock Purchase Warrant dated August 30, 1995
entitling Allied Capital Corporation to purchase up
to 92,713 shares (subject to adjustment) of the
Common Stock of the Registrant.
4D Registration Rights Agreement dated August 30, 1995
by and among the Registrant and Allied Capital
Corporation and its affiliated funds.
4E Certificate of Designation, Preferences and Rights
of Series D Convertible Preferred Stock of the
Registrant.
4F Loan and Security Agreement dated August 30, 1995
among the Registrant, certain subsidiaries of the
Registrant and First Valley Bank.
4G Term Note dated August 30, 1995 in the principal
sum of $7,500,000 payable to the order of First
Valley Bank.
4H Line Note dated August 30, 1995 in the principal
sum of $7,500,000 payable to the order of First
Valley Bank.
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Exhibit 4B is one in a series of four Senior Subordinated Debentures
issued pursuant to the Investment Agreement dated as of August 30,
1995 that are identical except for the original holder thereof and the
principal amount thereof, which are as follows:
<TABLE>
<CAPTION>
Holder Principal Amount
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<S> <C>
Allied Capital Corporation II $2,775,000
Allied Investment Corporation $1,800,000
Allied Investment Corporation II $975,000
</TABLE>
Exhibit 4C is one in a series of four Common Stock Purchase Warrants
issued pursuant to the Investment Agreement dated as of August 30,
1995 that are identical except for the Warrant No., the original
holder thereof and the number of shares of Common Stock of the
Registrant for which the Warrant may be exercised, which are as
follows:
<TABLE>
<CAPTION>
Number of Shares of
Common Stock (subject
Warrant No. Holder to adjustment)
----------- ------ ---------------------
<S> <C> <C>
2 Allied Capital Corporation II 571,729
3 Allied Investment Corporation 370,851
4 Allied Investment Corporation II 200,878
</TABLE>
Certain schedules (and similar attachments) to Exhibits 2A, 2B, 4A and
4F are not being filed. The Registrant agrees to furnish
supplementally a copy of any omitted schedules or attachments to the
Commission upon request.
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<PAGE>
SIGNATURES
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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.
Date: September 11, 1995 By: /s/ Yvonne DeAngelo
---------------------------
Yvonne DeAngelo
Controller and Secretary
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EXHIBIT INDEX
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Exhibit No. Title Page No.
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2A Asset Purchase Agreement
dated August 25, 1995 by
and among Corydon Day Care
Center, Inc., d/b/a Children
Today, Donald Mitchell,
Jeffrey Owen and the Registrant.
2B Stock Purchase Agreement
dated May 23, 1995, by and
among Educo, Inc., Educo
Stockholders and the Registrant,
as amended by First Amendment
to Stock Purchase Agreement
dated August 31, 1995 and
Second Amendment to Stock
Purchase Agreement dated
August 31, 1995.
4A Investment Agreement
dated as of August 30, 1995
by and among the Registrant,
certain subsidiaries of the
Registrant and Allied Capital
Corporation and its affiliated
funds.
4B Senior Subordinated Debenture
dated as of August 30, 1995 in
the principal amount of $450,000
payable to the order of Allied
Capital Corporation.
4C Common Stock Purchase Warrant
dated August 30, 1995 entitling
Allied Capital Corporation to
purchase up to 92,713 shares (subject
to adjustment) of the Common Stock of
the Registrant.
4D Registration Rights Agreement
dated August 30, 1995 by and among
the Registrant and Allied Capital
Corporation and its affiliated funds.
4E Certificate of Designation, Preferences
and Rights of Series D Convertible
Preferred Stock of the Registrant.
4F Loan and Security Agreement dated
August 30, 1995 among the Registrant,
certain subsidiaries of the Registrant
and First Valley Bank.
4G Term Note dated August 30, 1995 in the
principal sum of $7,500,000 payable to
the order of First Valley Bank.
4H Line Note dated August 30, 1995 in the
principal sum of $7,500,000 payable to
the order of First Valley Bank.
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Exhibit 2A
ASSET PURCHASE AGREEMENT
BY AND AMONG
CORYDON DAY CARE CENTER, INC.,
D/B/A CHILDREN TODAY,
DONALD MITCHELL,
JEFFREY OWEN
AND
NOBEL EDUCATION DYNAMICS, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. ACQUISITION OF ASSETS.......................................... 1
1.1. Purchased Assets............................................... 1
1.2. Excluded Assets................................................ 2
SECTION 2. PURCHASE PRICE AND PAYMENT..................................... 3
2.1. Purchase Price................................................. 3
2.2. Payment........................................................ 3
SECTION 3. RESPONSIBILITY FOR LIABILITIES................................. 3
3.1. Excluded Liabilities........................................... 3
3.2. Liabilities to be Assumed by Buyer............................. 4
SECTION 4. CLOSING........................................................ 5
4.1. Time and Place of Closing...................................... 5
4.2. Deliveries at the Closing...................................... 5
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.................. 7
5.1. Organization; Authority........................................ 7
5.2. Due Authorization; Binding Agreement........................... 7
5.3. Absence of Conflicting Agreements.............................. 7
5.4. Consents and Approvals......................................... 8
5.5. Brokers........................................................ 8
5.6. Investments and Subsidiaries................................... 8
5.7. Compliance with Laws........................................... 8
5.8. Permits........................................................ 9
5.9. Encumbrances Created by this Agreement......................... 9
5.10. Judgments and Litigation....................................... 9
5.11. Financial Information.......................................... 10
5.12. Tax Matters.................................................... 10
5.13. Absence of Certain Changes..................................... 11
5.14. Title to Property.............................................. 12
5.15. List of Properties, Contracts, etc............................. 12
5.16. Contract Validity, Defaults, Notice/Consent.................... 13
5.17. Managers....................................................... 13
5.18. Labor Matters.................................................. 14
5.19. Relationships.................................................. 14
5.20. Employee Benefit Plans......................................... 14
5.21. Non-Foreign Persons............................................ 14
5.22. Environmental Protection....................................... 15
5.23. Intellectual Property.......................................... 16
5.24. No Child Abuse or Sexual Abuse................................. 16
5.25. No Other Agreements............................................ 16
5.26. Operation of Centers in Non-Compete Area....................... 17
5.27. Disclosure..................................................... 17
5.29. Pre-Existing Entity............................................ 17
5.30. Principal Place of Business.................................... 17
5.31. Purchase Without View to Distribute............................ 17
5.32. Restrictions on Transfer....................................... 18
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5.33. Access to Information.......................................... 18
5.34. Additional Representations of the Company...................... 18
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER........................ 18
6.1. Organization and Standing...................................... 18
6.2. Power and Authority............................................ 18
6.3. Binding Agreement.............................................. 19
6.4. Absence of Conflicting Agreements.............................. 19
6.5. Consents....................................................... 19
6.6. Litigation..................................................... 19
6.7. Brokers........................................................ 20
6.8. Financial Condition............................................ 20
6.9. Disclosure..................................................... 20
SECTION 7. OBLIGATIONS OF THE PARTIES UNTIL THE CLOSING
DATE........................................................... 20
7.1. Conduct of Business Pending Closing............................ 20
7.2. Negative Covenants of the Sellers.............................. 20
7.3. Affirmative Covenants.......................................... 21
7.4. Investigation.................................................. 22
7.5. Pursuit of Consents............................................ 24
7.6. [Reserved]..................................................... 24
7.7. Exclusive Dealing.............................................. 24
7.8. Public Announcements........................................... 25
SECTION 8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.................... 25
8.1. Deliveries at Closing.......................................... 25
8.2. Representations and Warranties................................. 25
8.3. Performance of Covenants....................................... 25
8.4. Legal Matters.................................................. 26
8.5. No Material Adverse Change..................................... 26
8.6. Governmental Approvals......................................... 26
8.7. Other Consents and Approvals................................... 27
8.8. Due Diligence Review........................................... 27
8.9. Leases......................................................... 27
SECTION 9. CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATIONS............... 27
9.1. Deliveries at Closing.......................................... 27
9.2. Representations and Warranties................................. 27
9.3. Performance of Covenants....................................... 28
9.4. No Material Adverse Change..................................... 28
9.5. Legal Matters.................................................. 28
SECTION 10. EMPLOYEES OF THE BUSINESS; EMPLOYEE BENEFITS................... 28
10.1. Employee Benefit and Bonus Claims.............................. 28
10.2. Accrued Vacation Pay........................................... 29
SECTION 11. OBLIGATIONS OF PARTIES AFTER CLOSING........................... 29
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
11.1. Collection of Receivables...................................... 29
11.2. Discharge of Liabilities....................................... 29
11.3. [Reserved]..................................................... 29
11.4. Covenant Not To Compete........................................ 29
11.5. Survival of Representations and Warranties..................... 31
11.6. Indemnification................................................ 31
11.7. Right of Offset................................................ 32
11.8. Representation of Sellers...................................... 33
11.9. Improvements to the Purchased Centers.......................... 33
SECTION 12. TERMINATION AND AMENDMENT..................................... 33
12.1. Termination.................................................... 33
12.2. Effect of Termination.......................................... 33
SECTION 13. MISCELLANEOUS................................................. 34
13.1. Costs and Expenses............................................. 34
13.2. Risk of Loss................................................... 34
13.3. Performance.................................................... 35
13.4. Assignment and Benefit......................................... 35
13.5. Schedules and Exhibits......................................... 35
13.6. Effect and Construction of this Agreement...................... 36
13.7. Cooperation.................................................... 36
13.8. Notices........................................................ 36
13.9. Amendment, Waiver, Discharge, etc.............................. 37
13.10. Number of Days................................................. 37
13.11. Rights of Persons Not Parties.................................. 37
13.12. Governing Law.................................................. 37
Schedule A
Purchased Centers.................................................... Sch. A-1
Schedule 1.1.1
Tangible Personal Property....................................... Sch. 1.1.1-1
Schedule 1.1.3
Contracts and Leases............................................. Sch. 1.1.3-1
Schedule 1.1.4
Permits.......................................................... Sch. 1.1.4-1
Schedule 1.1.6
Lists and Records................................................ Sch. 1.1.6-1
Schedule 1.1.7
Motor Vehicles................................................... Sch. 1.1.7-1
Schedule 1.1.8
Secrecy and Non-Disclosure Agreements............................ Sch. 1.1.8-1
</TABLE>
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Page
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<S> <C>
Schedule 2.2.2
Form of Note..................................................... Sch. 2.2.2-1
Schedule 2.2.3
Form of Security Agreement....................................... Sch. 2.2.3-1
Schedule 3.2.2
Allocation of Cost of Yellow Pages Advertising .................. Sch. 3.2.2-1
Schedule 4.2.1(a)
Form of Bill of Sale.......................................... Sch. 4.2.1(a)-1
Schedule 4.2.1(b)
Form of Omnibus Assignment.................................... Sch. 4.2.1(b)-1
Schedule 4.2.1(i)
Form of License............................................... Sch. 4.2.1(i)-1
Schedule 4.2.2(h)
Form of Opinion of Buyer's Counsel............................ Sch. 4.2.2(h)-1
Schedule 5.3
Conflicting Agreements of Seller................................... Sch. 5.3-1
Schedule 5.4
Required Consents and Approvals of Sellers......................... Sch. 5.4-1
Schedule 5.8
Necessary Permits Not Possessed or
Not Assignable by the Company...................................... Sch. 5.8-1
Schedule 5.10
Judgments and Litigation Affecting Sellers........................ Sch. 5.10-1
Schedule 5.11.1
Annual Statements............................................... Sch. 5.11.1-1
Schedule 5.11.2
Liabilities not Disclosed on
Annual or Interim Statements...................................... Sch. 5.13-1
Schedule 5.13
Material Adverse Changes Since Annual Statement Date.............. Sch. 5.13-2
Schedule 5.14
Title to Personal Property........................................ Sch. 5.14-1
Schedule 5.16
Defaults.......................................................... Sch. 5.16-1
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
Schedule 5.17
List of Employee Contracts........................................ Sch. 5.17-1
Schedule 5.17.1
List of Managers............................................... Sch. 5.17.1 -1
Schedule 5.17.2
List of Managers and Employees
Whose Annual Rate of Compensation Exceeds $12,000.............. Sch. 5.17.2 -1
Schedule 5.19
Relationship Disputes and Controversies........................... Sch. 5.19-1
Schedule 5.20
Employee Benefit Plans............................................ Sch. 5.20-1
Schedule 5.23
Intellectual Property............................................. Sch. 5.23-1
Schedule 5.26
Centers in Non-Compete Area....................................... Sch. 5.26-1
Schedule 6.6
Litigation Affecting Buyer......................................... Sch. 6.6-1
Schedule 8.6
Letter Regarding Improvements to Purchased Centers................. Sch. 8.6-1
Schedule 8.9
Form of Lease...................................................... Sch. 8.9-1
Schedule 10.2
Accrued Vacation Pay Letter....................................... Sch. 10.2-1
</TABLE>
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated August 25, 1995 (this
"Agreement"), by and among CORYDON DAY CARE CENTER, INC., an Indiana corporation
d/b/a "Children Today" (the "Company"), DONALD MITCHELL and JEFFREY OWEN, its
sole shareholders, (collectively, the "Shareholders") (the Company and the
Shareholders are sometimes collectively referred to as the "Sellers"), and NOBEL
EDUCATION DYNAMICS, INC., a Delaware corporation ("Buyer").
BACKGROUND
A. The Company owns and is engaged, among other things, in the business
of operating nine (9) child care centers in the Indianapolis, Indiana area, all
as more particularly described on Schedule A (collectively, the "Purchased
----------
Centers").
B. The parties hereto desire to provide for the acquisition by Buyer of
the Purchased Centers and substantially all of the assets used in the business
of operating child-care centers at the Purchased Centers (together with the
Purchased Centers, the "Business"), all on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. ACQUISITION OF ASSETS
1.1. Purchased Assets. Subject to the terms and conditions of this
----------------
Agreement and on the basis of and in reliance upon the covenants, agreements and
representations and warranties set forth herein, at the Closing (as hereinafter
defined in Section 4.1), the Company (and, if applicable, the Shareholders)
-----------
shall sell, transfer and deliver to Buyer all of its and their right, title and
interest in and to the Business as a going concern and to all of the tangible
and intangible properties and assets owned or held by the Company (or a
Shareholder) on the Closing Date relating to or used or held for use in
connection with the Business or the operation of the Purchased Centers other
than the Excluded Assets (as hereinafter defined in Section 1.2), including the
-----------
following assets owned or held by the Company or, if applicable, a Shareholder
(the "Purchased Assets"):
1.1.1 all of Sellers' furniture, fixtures, equipment,
machinery, teaching and educational supplies, inventories, supplies, and other
tangible personal property used or held at any of the Purchased Centers, as well
as any business
<PAGE>
forms used or held exclusively at the Purchased Centers, including those items
described on Schedule 1.1.1;
--------------
1.1.2 an amount of cash equal to all prepaid tuition payments
and deposits received by the Company with respect to the Business or any
Purchased Centers representing payment for services to be provided after the
Closing Date at any of the Purchased Centers;
1.1.3 to the extent assignable, all maintenance contracts,
service contracts, equipment and other leases (including, if leased, the
telephone system), vehicle leases, real property leases, telephone numbers,
computer software and other rights under contracts (the "Contracts") that Buyer
elects to assume, in each case relating to the Business or any Purchased
Centers, including those described on Schedule 1.1.3;
--------------
1.1.4 to the extent assignable, all permits, franchises,
licenses, approvals and other authorizations relating to the Business or any
Purchased Centers (the "Permits"), including those described on Schedule 1.1.4;
--------------
1.1.5 all goodwill of the Business as a going concern,
including all rights to deal with clients and customers;
1.1.6 all client and customer lists and records, enrollments
and other documents, correspondence and files of the Company relating to the
Business or any Purchased Centers, including all software and computer files,
including those described on Schedule 1.1.6; provided Buyer shall give the
--------------
Sellers reasonable access thereto for five years following the Closing Date for
proper business purposes during normal business hours and permit a Seller to
make copies thereof at the requesting Seller's expense;
1.1.7 the motor vehicles identified on Schedule 1.1.7;
--------------
1.1.8 all secrecy and non-disclosure agreements with current
or former employees, consultants or contractors relating to the Business or any
Purchased Centers, including those described and identified on Schedule 1.1.8;
---------------
and
1.1.9 all other tangible and intangible assets which are used
in or necessary to the operation of the Business, other than those described
below in Section 1.2.
-----------
1.2. Excluded Assets. Notwithstanding anything to the
---------------
contrary in Section 1.1, the following rights, properties and assets of the
-----------
Company (the "Excluded Assets") shall not be included in the Purchased Assets:
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1.2.1 assets not used in or relating to the Business,
including the corporate seal, articles of incorporation, minute books and stock
books of the Company;
1.2.2 all of the Sellers' right, title and interest in and
to all accounts receivable, other than the prepaid tuition payments and deposits
described in Section 1.1.2; and
-------------
1.2.3 all leasehold interests in the Purchased Centers.
SECTION 2. PURCHASE PRICE AND PAYMENT
2.1. Purchase Price. The aggregate purchase price for the Purchased
--------------
Assets (the "Purchase Price") shall be Two Million One Hundred Seventy-Five
Thousand Dollars ($2,175,000).
2.2. Payment.
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2.2.1 At the Closing, Buyer shall deliver to the Company, by
wire transfer in immediately available funds or by certified or cashiers' check,
the amount of One Million Fifty Thousand Dollars ($1,050,000) on account of the
Purchase Price (the "Cash Payment").
2.2.2 At the Closing, Buyer shall deliver to the Company
Buyer's subordinated secured note payable to the Company in the amount of One
Million One Hundred Twenty-Five Thousand Dollars ($1,125,000)(the "Note"), which
Note shall be dated the Closing Date, and shall bear interest, mature and
otherwise be substantially in the form of Schedule 2.2.2.
--------------
2.2.3 At the Closing, Buyer shall deliver to the Company a
security agreement in the form attached hereto as Schedule 2.2.3 (the "Security
--------------
Agreement") and related financing statements on Form UCC-1 (collectively, the
"Financing Statements"), granting to the Company a security interest in the
Purchased Assets described under Section 1.1.1 and Section 1.1.7 (the "Security
------------- -------------
Interest"). The Buyer acknowledges that the Company intends to assign the
Security Agreement and Financing Statements to its lender listed on Schedule
--------
5.13 hereto.
----
SECTION 3. RESPONSIBILITY FOR LIABILITIES
3.1. Excluded Liabilities. Except as otherwise provided specifically
--------------------
in this Section 3, Buyer shall not assume, nor in any way be liable or
---------
responsible for, any liabilities, obligations or debts of the Company or any
Shareholder of any type or nature including, without limitation, tort claims
asserted against any Seller or the Business (including, but not
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<PAGE>
limited to, claims of child abuse or sexual abuse asserted against any Seller,
the Business, or its respective employees or agents); claims against any Seller
or the Business for breach of contract arising out of actions or omissions
occurring in periods prior to the Closing Date; tax liabilities; liabilities
relating to claims for damages based upon the breach by any Seller of, or strict
liability arising under, any environmental or occupational health and safety
laws or regulations, obligations relating to the violation by any Seller of any
Federal, state or local laws or regulations; liabilities incurred for the costs
and expenses of negotiating and consummating the transactions contemplated by
this Agreement; or liabilities incurred in connection with any employee benefit
plan of the Company.
3.2. Liabilities to be Assumed by Buyer. Subject to the terms and
----------------------------------
conditions of this Agreement, at the Closing Buyer shall assume pursuant to the
Omnibus Assignment (as hereinafter defined in Section 4.2.1.(b)) and thereafter
-----------------
in due course satisfy the following liabilities, responsibilities and
obligations of the Company in existence on the Closing Date (the "Assumed
Liabilities"):
3.2.1 all liabilities and obligations accruing from and after
the Closing Date under the written terms and provisions of the Contracts listed
on Schedule 1.1.3 with respect to (and only with respect to) performance which
--------------
becomes due thereunder subsequent to the Closing Date.
3.2.2 With respect to the Company's contract for yellow pages
advertising (a copy of which has been provided to Buyer along with the
calculation, attached hereto as Schedule 3.2.2, of the amounts to be paid by
--------------
Buyer under such contract as provided herein), the Buyer has agreed to pay to
the Company the sum of $1,831.67 on a monthly basis for the period commencing
October 1, 1995 and ending October 1, 1997, which amount represents the charges
for advertising under such contract related to the Purchased Centers.
Liabilities and obligations under the Contracts which have accrued, or the
performance of which is due, on or prior to the Closing Date shall be the sole
responsibility of the Sellers. The Company shall retain (and the Sellers shall
indemnify and hold harmless Buyer pursuant to Section 11.6 for any liability,
------------
loss, cost or expense in respect of) all such obligations and liabilities under
the Contracts and all liabilities and obligations under any contract, commitment
or obligation of any Seller not on Schedule 1.1.3, whether or not identified on
--------------
any other Schedule hereto.
-4-
<PAGE>
SECTION 4. CLOSING
4.1. Time and Place of Closing. The closing of the purchase and sale
-------------------------
of the Business and the Purchased Assets (the "Closing") pursuant to this
Agreement shall take place on or before August 25, 1995, at a place and time
mutually agreed to by the parties hereto (the "Closing Date").
4.2. Deliveries at the Closing. At the Closing:
-------------------------
4.2.1 The Sellers shall deliver, or shall cause to be
delivered, to Buyer:
(a) a bill of sale (the "Bill of Sale") transferring to
Buyer title to all of the Purchased Assets, in the form of Schedule 4.2.1(a);
-----------------
(b) an assignment and assumption agreement (the "Omnibus
Assignment"), in the form of Schedule 4.2.1(b) pursuant to which the Company
-----------------
shall assign and delegate all of the Company's obligations with respect to, and
Buyer shall assume, the Assumed Liabilities;
(c) incumbency certificates relating to the officers of the
Company, together with certified copies of duly and properly adopted resolutions
of the Board of Directors and of the stockholders of the Company, authorizing
the execution, delivery and performance of this Agreement, the Sellers'
Transaction Documents (as hereinafter defined in Section 5.2) and the
-----------
transactions contemplated hereby and thereby including, without limitation, the
sale of the Business;
(d) the closing certificates of the Sellers called for by
Section 8.2, Section 8.3 and Section 8.5, as to the Sellers' representations and
----------- ----------- -----------
warranties, the performance of covenants and the condition of the Business;
(e) the opinion of Bleidt & Keisler, P.S.C., counsel to the
Sellers, dated the Closing Date, in the form of Schedule 4.2.1(e);
-----------------
(f) closing statements containing the Company's
acknowledgement of its receipt of the Cash Payment and the Note;
(g) such other instruments of transfer as shall be
reasonably necessary or appropriate to vest in Buyer good and marketable title
to the Business and the Purchased Assets (including, without limitation, title
documents, transferring title to all the vehicles to Buyer), free and clear of
any lien, claim or encumbrance other than the Permitted Encumbrances (as
hereinafter defined in Section 5.14);
------------
-5-
<PAGE>
(h) the check required by Section 10.2 (Accrued Vacation
------------
Pay); and
(i) a non-exclusive, two (2) year license to use the name
"Children Today" and each other fictitious business name, trade name, registered
and unregistered trademark, service mark and related application (other than the
name "Corydon Day Care Center, Inc." or any derivative thereof, which name is
specifically excluded from such license) and all other intellectual property
rights used in the Business, agreements with respect to the foregoing, and
business forms used in the Business, in the form of Schedule 4.2.1(i) (the
-----------------
"License").
4.2.2 Buyer shall deliver, or shall cause to be delivered,
to the Company:
(a) the Cash Payment;
(b) the Omnibus Assignment;
(c) the Note;
(d) the Security Agreement;
(e) the Financing Statements;
(f) an incumbency certificate relating to the officers of
Buyer, together with certified copies of duly and properly adopted resolutions
of Buyer's Board of Directors authorizing the execution, delivery and
performance of this Agreement, the Buyer's Transaction Documents (as hereinafter
defined in Section 6.2) and the transactions contemplated hereby and thereby;
-----------
(g) the closing certificates of Buyer called for by Section
-------
9.2, Section 9.3 and Section 9.4 as to Buyer's representations and warranties,
--- ----------- -----------
the performance of covenants and Buyer's financial condition;
(h) the opinion of Drinker Biddle & Reath, counsel to
Buyer, dated the Closing Date, in the form of Schedule 4.2.2(h); and
-----------------
(i) the License.
-6-
<PAGE>
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Company and the Shareholders, jointly and severally, represent and
warrant to Buyer as follows:
5.1. Organization; Authority. The Company has been duly incorporated
-----------------------
and is a corporation validly existing and in good standing under the laws of the
State of Indiana and has full corporate power and authority to carry on its
business as now conducted. The Company is also qualified to do business as a
foreign corporation and is in good standing in the State of Kentucky which is
the only other jurisdiction where the conduct of its business or its ownership
or leasing of property requires such qualification. All of the shares of capital
stock of the Company are owned, both beneficially and of record, by the
Shareholders. All of the issued and outstanding shares of capital stock of the
Company have been duly authorized and are validly issued and outstanding. The
Shareholders are also the sole directors and officers of the Company. The
Company has the corporate power and authority to own the properties now owned by
it and to conduct its business as it is presently being conducted.
5.2. Due Authorization; Binding Agreement. Each of the Company and
------------------------------------
the Shareholders has the full legal right, power and authority to execute and
deliver this Agreement and the other agreements and documents required to be
delivered by it (or him) to Buyer at or prior to the Closing (the "Sellers'
Transaction Documents") and to perform its (or his) obligations hereunder and
thereunder. The execution and delivery by the Company of this Agreement and the
Sellers' Transaction Documents and the performance by the Company of its
obligations hereunder and thereunder have been duly and validly authorized by
all necessary action of the Board of Directors and stockholders of the Company.
This Agreement has been duly executed and delivered by each of the Sellers and
constitutes the legal, valid and binding obligation of each of the Sellers,
enforceable against it (or him) in accordance with their respective terms. When
executed and delivered, the Sellers' Transaction Documents shall constitute the
legal, valid and binding obligations of each Seller which is a party thereto,
enforceable against it (or him) in accordance with its terms.
5.3. Absence of Conflicting Agreements. Except as set forth on
---------------------------------
Schedule 5.3, neither the execution or delivery of this Agreement or any of the
------------
Sellers' Transaction Documents, nor the performance by each Seller of the
transactions contemplated hereby or thereby, with or without the giving of
notice, lapse of time or both, conflicts with, or constitutes a breach of or a
default under, or violates or gives to any third party any rights under:
-7-
<PAGE>
5.3.1 any law, statute, rule, regulation, judgment, order,
writ, injunction, decree or ruling of any court or governmental authority
(collectively, "Laws") applicable to any Seller, the Business or by which any
Seller or any of their material assets or properties are bound;
5.3.2 the articles of incorporation or by-laws of the
Company; or
5.3.3 any Contract or any other material agreement,
indenture, instrument or contract to which any Seller is now a party or by which
any Seller is bound.
5.4. Consents and Approvals. Except for the consents and approvals
----------------------
listed on Schedule 5.4, no consent, waiver, approval, license or authorization
------------
of, or filing, registration or qualification with, or notice to, any
governmental authority or any other person or entity is required to be made,
obtained or given by any Seller in connection with the execution, delivery and
performance by such Seller of this Agreement or any of the Sellers' Transaction
Documents, or for the consummation by any Seller of the transactions
contemplated hereby or thereby or for operation by Buyer of the Business
following the Closing.
5.5. Brokers. No person or entity acting on behalf of any Seller or
-------
any of their respective affiliates or under the authority of any of the
foregoing is, or will be entitled to, any brokers', advisors' or finders' fee or
any other commission or similar fee, directly or indirectly, from any of such
parties in connection with any of the transactions contemplated by this
Agreement.
5.6. Investments and Subsidiaries. The Business (including the
----------------------------
Purchased Centers) is and has been conducted solely by and through the Company
and no other person or entity, and the Company has not agreed, contingently or
otherwise, to share any profits, losses, costs or liabilities, or to indemnify
any person or entity or to guaranty the obligations of any person or entity, in
each case, with respect or relating to the Business. The Purchased Assets (and
the Leases described in Section 8.9) are all of the assets used in or necessary
-----------
for the conduct of the Business as it is presently conducted. None of the
Purchased Assets are owned or held by any person or entity (including any
Shareholder) other than the Company. The Company has no subsidiaries.
5.7. Compliance with Laws. The Sellers have operated the Business in
--------------------
compliance in all material respects with all Laws, and no Seller has received
any claim or notice that the Business is not in compliance with any Law.
-8-
<PAGE>
5.8. Permits. Except as set forth on Schedule 5.8, Schedule 1.1.4 is
------- ------------ --------------
a true, correct and complete list of all Permits which are necessary for the
Company to conduct the Business as now conducted. The Company owns, possesses
or has the legal right to use all of the Permits, free of all liens, pledges,
claims, or other encumbrances of any nature whatsoever. All Permits are
transferable without the consent of any other person or entity unless otherwise
indicated in Schedule 5.8. No Seller knows of any default under, nor has any
------------
Seller received any notice of any claim or default or any other claim or
proceeding relating to, any Permit. Except as disclosed in Schedule 5.8, all
------------
Permits are renewable by their terms in the ordinary course of business without
the need to comply with any special qualification procedure or to pay any
amounts other than routine filing fees, and none of the Permits will be affected
adversely by the consummation of the transactions contemplated by this Agreement
and the Sellers' Transaction Documents.
5.9. Encumbrances Created by this Agreement. The execution and
--------------------------------------
delivery of this Agreement and the Sellers' Transaction Documents by each
Seller do not, and the performance of their respective terms will not, create
any liens or other encumbrances on any assets of any Seller in favor of third
parties or give rights to third parties other than Buyer, other than the
Security Interest.
5.10. Judgments and Litigation. Except as described in Schedule
------------------------ --------
5.10, there are no, and during the last three years there have not been any,
claims, actions, suits, proceedings (arbitration or otherwise) or investigations
involving or affecting the Business or any of the Purchased Assets, or the
Company's directors, officers or shareholders in their capacities as such,
before or by any court or governmental agency or instrumentality, or before an
arbitrator of any kind. Except as described in Schedule 5.10, there are no
-------------
outstanding orders, writs, injunctions, fines, citations, penalties, decrees or
unsatisfied judgments of any court, governmental authority or arbitrator against
the Business or the Purchased Assets. Except as described in Schedule 5.10,
-------------
there is no claim, action, suit, proceeding or investigation presently
threatened or contemplated (i) that questions the validity of the Agreement or
any of Sellers' Transaction Documents or the transactions contemplated hereby or
thereby or (ii) with respect to any of the Purchased Assets or the Business, and
there are no facts which could reasonably serve as a basis for any such claim,
action, suit, proceeding or investigation. No Seller is aware of any state of
facts or occurrence of any event that might form the basis of any claim against
the Business, the Company or the Purchased Assets.
-9-
<PAGE>
5.11. Financial Information.
---------------------
5.11.1 Schedule 5.11.1 contains true, correct and complete
---------------
copies of the Company's balance sheets with respect to the Purchased Centers as
of March 31, 1993, 1994 and 1995, and the related statements of operations,
cash-flow and stockholders' equity for the years then ended, including all notes
thereto (if applicable). Only the financial statements of the Company with
respect to the Purchased Centers for the year ended March 31, 1993 have been
audited (all such financial statements of the Company, are hereinafter referred
to collectively, as the "Annual Statements"). The Annual Statements present
accurately and fairly the financial position of the Company with respect to the
Purchased Centers at such dates and the results of its operations and its cash
flow for the periods then ended, in conformity with GAAP, consistently applied.
For the three months ended June 30, 1995, the Company had revenues of not less
than $850,000, and a net income of not less than $34,000, as determined in
conformity with GAAP, consistently applied.
5.11.2 The Annual Statements reflect all liabilities of the
Company with respect to the Purchased Centers, whether absolute, accrued or
contingent, as of the respective dates thereof of the type required to be
reflected or disclosed in a balance sheet (or the notes thereto) prepared in
accordance with GAAP. Except as identified in Schedule 5.11.2, the Company does
---------------
not have any liabilities or obligations with respect to the Purchased Centers of
any nature (whether or not of the nature required to be reflected in a balance
sheet prepared in accordance with GAAP) that are not reflected on the Annual
Statements except for current liabilities with respect to the Purchased Centers
(within the meaning of GAAP), which have been incurred since the date thereof in
the ordinary course of business consistent in nature and amount with past
practice and which are neither material in amount nor inconsistent with any of
the representations and warranties contained herein. The Annual Statements
reflect reserves or other appropriate provisions at least equal to reasonably
anticipated liabilities, losses and expenses of Company with respect to the
Purchased Centers as of the date thereof which are required to be disclosed by
GAAP, including without limitation those with respect to warranty claims, bad
debts, unsalable inventories, product returns, bonuses, salaries, vacation pay
and other accrued compensation.
5.11.3 The Company is not, and will not be rendered, insolvent
by the transactions contemplated by this Agreement and the Sellers' Transaction
Documents.
5.12. Tax Matters. The Company has been taxed as a Subchapter
-----------
S Corporation, as defined in 1361 of the Internal Revenue Code of 1986, as
amended (the "Code"), for federal tax purposes and for state tax purposes in the
State of Indiana and
-10-
<PAGE>
the State of Kentucky in each fiscal year since 1977. The Company has timely
and properly filed all Federal, state, county and local returns and reports
relating to Taxes (as hereinafter defined) and all such returns and reports were
true, correct and complete in all material respects when filed. All Federal,
state, county and local income, profits, franchise, sales, use, payroll,
premium, occupancy, property, severance, excise, withholding, customs,
unemployment, transfer and other taxes, including interest, additions to tax and
penalties (collectively, "Taxes") due or properly shown to be due on any return
referred to in the preceding sentence by the Company with respect to taxable
periods ending on or prior to, and the portion of any interim period up to, the
date hereof have been fully and timely paid or, in the case of Taxes not yet
due, fully provided for on the books of account of the Company. There are no
levies, liens, or other encumbrances relating to Taxes existing, pending or, to
the knowledge of any Seller, threatened with respect to any asset of the
Company. The tax returns of the Company have never been audited by the Internal
Revenue Service or any other taxing authority. No issues have been raised by
any representative or employee of the Company and are currently pending by the
Internal Revenue Service or any other taxing authority in connection with such
tax return and no waivers of statutes of limitations have been given or
requested with respect to any such returns and reports or with respect to any
Taxes. The books and records of the Company are sufficient to prove in all
material respects the correctness of all tax returns for open tax years and to
determine and to prove the adjusted tax basis for Federal income tax purposes of
each asset of the Company.
5.13. Absence of Certain Changes.
--------------------------
5.13.1 Since March 31, 1995, the Sellers have conducted the
Business only in the usual and ordinary course consistent with past practice,
and, except as disclosed in Schedule 5.13, the Company has not (and the
-------------
Shareholders have not permitted or caused the Company to have):
(a) sold, assigned, leased, transferred, mortgaged, pledged or
imposed any lien or other encumbrance on any of its assets or properties used in
or relating to the Business (other than the Security Interest in the Purchased
Assets, as referenced in Section 2.2.3), except in the ordinary course of
-------------
business;
(b) suffered any material damage, destruction or loss, whether
or not covered by insurance, or suffered any shortage, cessation or interruption
of delivery of supplies or utility services used in or required to conduct the
Business.
(c) increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and
-11-
<PAGE>
necessary business expenses) or loan to, any of its employees engaged in the
Business (other than the Shareholders), or made any increase in, or any
additions to, other benefits to which any such employees may be entitled other
than salary increases to non-management level employees made in the ordinary
course of business;
(d) changed any of the accounting principles followed by it or
the methods of applying such principles;
(e) entered into any amendment or termination of any material
agreement or other document or commitment included in the Purchased Assets or
affecting or relating to the Business (or received any notice thereof), or
entered into any material transaction (whether or not in writing) other than
this Agreement;
(f) accelerated the collection of tuition or registration fees
or otherwise collected such fees other than in the ordinary course of business;
or
(g) agreed to do any of the foregoing.
5.13.2 Since June 30, 1995, there has not been any material adverse
change in the operations, properties, assets, prospects, working capital, or
condition (financial or otherwise) of the Business or the Purchased Assets or
any event, condition or contingency that is likely to result in such a material
adverse change.
5.14. Title to Property. Except as described on Schedule 5.14:
----------------- -------------
(i) the Sellers have good and marketable title to all of the Purchased Assets,
free and clear of any restriction, mortgage, deed of trust, pledge, lien,
security interest or other charge, claim or encumbrance, other than liens for
taxes, assessments and other governmental charges not yet due and payable
(together with the Security Interest, the "Permitted Encumbrances"); (ii) all of
the Purchased Assets are in the possession or under the control of the Sellers
and are located at a Purchased Center and are in good condition and repair,
ordinary wear and tear excepted, are suitable for the purposes for which they
are being used and are of a condition, nature and quantity sufficient for the
conduct of the Business as currently conducted or proposed to be conducted; and
(iii) there is no material latent or patent structural, mechanical or other
significant defect or deficiency in the Purchased Centers or the Purchased
Assets. Upon Closing, Buyer will have good and marketable title to all of the
Purchased Assets, free and clear of any restriction, mortgage, deed of trust,
pledge, lien, security interest or other charge, claim or encumbrance (other
than the Security Interest).
-12-
<PAGE>
5.15. List of Properties, Contracts, etc. Schedules 1.1.1 and
---------------------------------- -------------------
1.1.7 contain true, correct and complete lists, as of the date of this
-----
Agreement, of each vehicle, item of machinery, equipment and other tangible
asset included in the Purchased Assets, and all items identified on the list are
located at the Purchased Center specified in such Schedule. Schedule 1.1.3
--------------
contains a true, correct and complete list, as of the date of this Agreement, of
each contract, agreement, purchase order or other commitment (whether or not in
writing) relating to the Business, or by which any Purchased Asset is bound.
Schedules 5.15.1, 5.15.2, 5.15.3 and 5.15.4 contain, respectively, a true,
-------------------------------------------
correct and complete list, as of the date of this Agreement, of:
5.15.1 all patents, trademarks, patent or trademark
applications, copyrights, franchises, licenses and permits, if any (the
"Intellectual Property"), which are owned, possessed or used by the Company in
the operation of the Business;
5.15.2 each form of contract, agreement or commitment used by
the Company as a standard form in the Business;
5.15.3 a summary of each policy and binder of insurance
currently owned by, or maintained for the benefit of, or respecting which any
premiums are paid directly or indirectly by, the Sellers, relating to the
Business or its operation; and
5.15.4 each insurance claim made or loss incurred by the
Company in the preceding five years pursuant to any liability, workers'
compensation or other insurance policy.
5.16. Contract Validity, Defaults, Notice/Consent. Except as
-------------------------------------------
described on Schedule 5.16:
-------------
5.16.1 each contract, agreement and commitment included in
the Purchased Assets was made in the ordinary course of business, is in full
force and effect and is valid, binding and enforceable against the Company and,
to the best of the Sellers' knowledge, the other parties thereto in accordance
with its terms;
5.16.2 the Company has complied in all material respects
with the provisions of the contracts, commitments and agreements listed in
Schedule 1.1.3, and, to the best of the Sellers' knowledge, no other party is in
--------------
default thereunder, and to the best of the Sellers' knowledge, no event has
occurred which, but for the passage of time or the giving of notice or both,
would constitute a default thereunder; and
-13-
<PAGE>
5.16.3 no contract, commitment or agreement listed on Schedule
--------
1.1.3 requires (i) notice to or the consent of any party thereto in order for
-----
the Company effectively to assign to Buyer such contract, commitment or
agreement, or (ii) notice to any party to terminate such contract, commitment or
agreement.
5.17. Managers. Schedules 5.17.1 and 5.17.2, respectively, set
-------- ---------------------------
forth true, correct and complete lists of:
5.17.1 the names of all managers of the Business and all other
persons with managerial level responsibilities in the Business; and
5.17.2 the name and current aggregate annual rate of
compensation (including bonuses) paid or payable by the Company to each of its
managers and employees engaged in the Business (other than the Shareholders)
whose aggregate annual rate of compensation (including bonuses and any salary
increase proposed prior to the Closing Date) exceeds $12,000. Except as
disclosed on Schedule 5.17, there are no contracts, commitments or policies,
-------------
written or oral, relating to the employment or severance of any such manager or
employee currently in effect. The Company does not have any employee whose
employment is not terminable at will.
5.18. Labor Matters. None of the Company's employees is
-------------
represented by any union or other collective bargaining representative nor, to
the best of the Sellers' knowledge, are there currently any attempts by any
union or other collective bargaining representative to organize employees and
there have been no such attempts known to the Seller within the last year.
Since the Company commenced operations, there has not been, nor, to the best
knowledge of the Seller, is there now threatened or contemplated, any strike,
slowdown, picketing or work stoppage by any employees against Company, its
assets or properties wherever located, any lockout by the Company of any of its
employees or any labor trouble or other occurrence, event or condition of a
similar character affecting in any material respect, or which may affect in any
material respect, the operations, assets, properties or prospects of the
Company, the Business or the Purchased Assets.
5.19. Relationships. Except as disclosed in Schedule 5.19 there
------------- -------------
is no dispute or controversy existing between the Company and any of its clients
or customers with respect to any product or service sold or furnished by the
Company; and there is no dispute or controversy existing between the Company and
any supplier or other contractor with respect to any product or service
purchased by the Company from such person or entity.
5.20. Employee Benefit Plans. Except as disclosed on Schedule
---------------------- --------
5.20, the Company has not established any profit-
----
-14-
<PAGE>
sharing, pension, retirement, incentive or other similar plan or arrangement for
any of its employees subject to the Employee Retirement Income Security Act of
1974, as amended. All such plans and arrangements are in compliance in all
material respects with all applicable Laws.
5.21. Non-Foreign Persons. The Company is not a foreign person,
-------------------
foreign partnership, foreign trust or foreign estate as defined in Section
1445(f)(3) of the Code, and the payment of the Purchase Price will not be
subject to the withholding requirements of Section 1445 of the Code.
5.22. Environmental Protection. Except as disclosed in the Phase
------------------------
I Reports (as hereinafter defined in Section 5.22.5), to the best knowledge
--------------
of Sellers:
5.22.1 The Business is now and always has been in compliance
with all Laws relating to industrial hygiene or the protection of health and the
environment (collectively, the "Environmental Laws");
5.22.2 There are no conditions on, about, beneath, adjacent
to or arising from any of the Purchased Centers which might give rise to
liability, the imposition of a statutory lien or require "Response," "Removal"
or "Remedial Action," (as defined herein), under any of the Environmental Laws.
As used in this Agreement, the terms "Response," "Removal" and "Remedial Action"
shall be defined with reference to Sections 101(23) - 101(25) of the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
as amended by the Superfund Amendments and Reauthorization Act ("SARA"), 42
U.S.C. (S)(S) 9601(23) - 9601(25);
5.22.3 "Hazardous Substances" (as defined below), have never
been used, handled, generated, processed, treated, stored, transported to or
from, released, discharged, or disposed of on, about or beneath any of the
Purchased Centers. There are no transformers containing or contaminated with
PCB's or any above or underground storage tanks on any Purchased Center. There
is no asbestos or asbestos containing material at any of the Purchased Centers.
As used in this Agreement, the term "Hazardous Substance" means a hazardous
substance, material or waste including, without limitation, any substance which
is: (i) petroleum, asbestos or polychlorinated biphenyl; (ii) defined,
designated or listed as a "Hazardous Substance" pursuant to Sections 307 and 311
of the Clean Water Act, 33 U.S.C. (S)(S) 1317, 1321, Section 101(14) of CERCLA,
42 U.S.C. (S) 9601 or similar provision of applicable state law; (iii) listed in
the United States Department of Transportation Hazardous Material Table, 49
C.F.R. (S) 172.101; or (iv) defined, designated or listed as a "Hazardous Waste"
under Section 1004(3) of the Resource and
-15-
<PAGE>
Conservation and Recovery Act, 42 U.S.C. 9603(5) or similar provision of
applicable state law; and
5.22.4 No Seller has received notice or had any actual or
constructive knowledge of: (i) any claim, demand, investigation, enforcement,
Response, Removal, Remedial or other governmental or regulatory action
instituted or threatened against the Company or any Purchased Center pursuant to
any of the Environmental Laws; (ii) any claim, demand, suit or action made or
threatened by any person or entity against the Company or any Purchased Center
relating to any form of damage, loss or injury resulting from, or claimed to
result from, any Hazardous Substance on, about, beneath or arising from any
Purchased Center or any alleged violation of the Environmental Laws; or (iii)
any communication to or from any governmental or regulatory agency arising out
of or in connection with Hazardous Substances on, about, beneath, arising from
or generated at any Purchased Center including, without limitation, any notice
of violation, citation, complaint, order, directive, request for information or
response thereto, notice letter, demand letter or compliance schedule.
5.22.5 Phase I Reports. For purposes of this Agreement, the
---------------
term "Phase I Reports" shall mean the written results of the Phase I
Environmental Site Assessment prepared by Alt & Witzig Engineering, Inc.,
together with all attachments and appendices thereto, obtained by Sellers for
each of the Purchased Centers and attached as Schedule 5.22.5 hereto.
---------------
5.23. Intellectual Property. Except as otherwise described
---------------------
in Schedule 5.23, the Company is the sole owner or has the exclusive perpetual
-------------
right to use without consideration, all Intellectual Property, free and clear of
any lien, security interest, restriction, encumbrance or other adverse claim;
the Company has not granted or licensed to any person or entity any rights with
respect to any of the Intellectual Property and no other person or entity has
any rights in or to any of the Intellectual Property (including, without
limitation, any rights to market or distribute any of the Intellectual
Property). From and for two (2) years after the Closing Buyer will succeed to
all of the Company's rights in and to the Intellectual Property (subject to the
Security Interest) by virtue of the License, and the License for the
Intellectual Property is sufficient for the conduct of the Business as such has
been conducted during the last three years and as it is presently conducted.
The Intellectual Property does not infringe and is not alleged to have
infringed any trademark, copyright, patent or other proprietary right of any
person. No Seller has been in breach of, and is not now in breach of, any
agreements concerning third party intellectual property rights or confidential
information.
5.24. No Child Abuse or Sexual Abuse. No acts or events have
------------------------------
occurred or been committed by any present or former
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officer, director, employee or agent of any Seller that have resulted in or
which constitute, child (including physical or sexual) abuse or assault of any
type or nature, against any child or other person.
5.25. No Other Agreements. Other than this Agreement, the
-------------------
Sellers do not have, directly or indirectly, through a finder, broker,
consultant, shareholder or other intermediary, any contract, arrangement or
understanding relating to (i) a merger or consolidation of the Company; (ii) the
sale, issuance or other disposition of the Purchased Assets or the Business (or
any portion thereof); or (iii) the sale, issuance or other disposition of any
shares of capital stock or other securities of the Company.
5.26. Operation of Centers in Non-Compete Area. Schedule 5.26
---------------------------------------- -------------
contains a true, correct and complete list, as of the date of this Agreement, of
each day care or child care facility of any type located within a 50-mile radius
of any Purchased Center, which the Company or any Shareholder, either directly
or indirectly, operates, manages, owns, controls, provides consulting services
to, or is in any way connected with or concerned with or interested in.
5.27. Disclosure. No representation or warranty by the Sellers in
----------
this Agreement or in any other document to be furnished to Buyer pursuant
hereto, and no information in any Schedule attached to this Agreement, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained herein or
therein not misleading. Except as disclosed in this Agreement and the Schedules
attached hereto (and excluding economic, business and regulatory factors
affecting the child care industry generally), there is no fact which the Sellers
have not disclosed to Buyer in writing which materially adversely affects nor,
so far as the Sellers can now foresee, may materially adversely affect the
business, operations, properties, assets, profits, condition (financial or
otherwise) or prospects of the Business.
5.28. Securities Representations. The Company understands that
--------------------------
the Note will not be registered under the Securities Act of 1933, as amended
(the "Act") on the grounds that the issuance of the Note by Buyer provided for
in this Agreement is exempt pursuant to Section 4(2) of the 1933 Act and/or
Regulation D promulgated under Section 3(b) of the 1933 Act, and that the
reliance of Buyer on such exemptions is predicated in part on the Company's
representations, warranties, covenants and acknowledgements set forth in
Sections 5.28 through 5.34.
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5.29. Pre-Existing Entity. The Company represents and warrants to
-------------------
Buyer that it was not organized for the specific purpose of acquiring the Note.
5.30. Principal Place of Business. The Company represents and
---------------------------
warrants to Buyer that the address of its principal place of business is 920
Springdale Drive, Jeffersonville, Indiana 47130.
5.31. Purchase Without View to Distribute. The Company represents
-----------------------------------
and warrants to Buyer that the Note is being acquired by the Company for its own
account, not as a nominee or agent, and not with a view to resale or
distribution within the meaning of the 1933 Act, and the rules and regulations
thereunder, and the Company will not distribute the Note in violation of the
1933 Act.
5.32. Restrictions on Transfer. The Company acknowledges that
------------------------
the Note is not registered under the 1933 Act and that the Note must be held
indefinitely by it unless it is subsequently registered under the 1933 Act or an
exemption from registration is available.
5.33. Access to Information. The Company confirms that Buyer has
---------------------
made available to it the opportunity to ask questions of and receive answers
from Buyer's officers and directors concerning the business and financial
condition of Buyer, and to acquire, and the Company has received to its
satisfaction, such additional information, in addition to that set forth herein,
including copies of Buyer's recent reports on Form 10-K and Form 10-Q, about the
business and financial condition of Buyer as it has requested.
5.34. Additional Representations of the Company. The Company
-----------------------------------------
represents that (a) it is an "accredited investor" as such term is defined in
Rule 501 promulgated under the 1933 Act, (b) its financial situation is such
that it can afford to bear the economic risk of holding the Note for an
indefinite period of time and suffer a loss of its investment in the Note and
(c) its knowledge and experience in financial and business matters are such that
it is capable of evaluating the merits and risks of its acquisition of the Note
as contemplated by this Agreement.
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<PAGE>
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Sellers as follows:
6.1. Organization and Standing. Buyer is a corporation duly
-------------------------
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Buyer is duly qualified to do business as a foreign corporation in
Pennsylvania, and has the corporate power and authority to own and lease the
properties now owned or leased by it and to conduct the business presently being
conducted by it .
6.2. Power and Authority. Buyer has the corporate power and authority
-------------------
to execute, deliver and perform this Agreement, and to execute, deliver and
perform the Note, the Omnibus Assignment, the Security Agreement, the Financing
Statements and the other documents and instruments required to be delivered by
Buyer to the Sellers prior to or at Closing pursuant hereto or thereto
(collectively, the "Buyer's Transaction Documents").
6.3. Binding Agreement. This Agreement has been duly authorized,
-----------------
executed and delivered by Buyer. This Agreement is, and when executed and
delivered by Buyer at the Closing each of the Buyer's Transaction Documents will
be, the legal, valid and binding obligations of Buyer, enforceable against Buyer
in accordance with their respective terms.
6.4. Absence of Conflicting Agreements. Neither the execution or
---------------------------------
delivery of this Agreement or any of Buyer's Transaction Documents by Buyer, nor
the performance by Buyer of the transactions contemplated hereby and thereby,
with or without the giving of notice, lapse of time or both, conflicts with, or
constitutes a breach of or a default under (i) the Certificate of Incorporation
or By-Laws of Buyer, (ii) any material provision of Law, or (iii) any material
agreement, indenture, contract or instrument to which Buyer is a party or by
which it is bound.
6.5. Consents. Except for the approvals of Buyer's lenders and Board
--------
of Directors, no licenses, waivers, authorization of, consents or approvals of,
or registrations, notifications, filings and/or declarations with, any court,
government or governmental agency or instrumentality, creditor, lessor or other
person or entity are required to be given or made by Buyer in connection with
the execution, delivery and performance of this Agreement or any of Buyer's
Transaction Documents or for the consummation by Buyer of the transactions
contemplated hereby or thereby, other than licenses, approvals or consents of
governmental agencies required in order for Buyer to operate the Business after
the Closing Date or which the failure to obtain
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<PAGE>
would not have a material adverse affect on Buyer's ability to consummate the
transactions contemplated herein and therein.
6.6. Litigation. Except as disclosed in Buyer's most recent Annual
----------
Report filed with the Securities and Exchange Commission on Form 10-K and its
quarterly reports on Form 10-Q for the first and second quarters of 1995, or on
Schedule 6.6 hereto, there is no pending, or to the knowledge of Buyer,
------------
threatened suit, action or litigation, or administrative, arbitration or other
proceeding or governmental inquiry or investigation which: (i) if adversely
determined, could reasonably be expected to have a material adverse effect upon
the ability of Buyer to perform its obligations hereunder or under any of
Buyer's Transaction Documents, or (ii) questions the validity of this Agreement
or the transactions contemplated hereby.
6.7. Brokers. No person or entity acting on behalf of Buyer or any of
-------
its affiliates or under the authority of any of the foregoing is, or will be,
entitled to any broker's, advisor's or finder's fee or any other commission or
similar fee, directly or indirectly, from any of such parties in connection with
any of the transactions contemplated by this Agreement.
6.8. Financial Condition. The financial statements included in
-------------------
Buyer's Annual Reports on Form 10-K filed with the Securities and Exchange
Commission (the "Commission") for 1994 and 1993 and Buyer's Quarterly Reports on
Form 10-Q filed with the Commission with respect to the first quarter of 1995
present fairly the consolidated financial position of Buyer and its subsidiaries
as of the respective dates thereof and the results of their operations and cash
flows for the periods then ended, in conformity with GAAP. Since March 31, 1995,
there has occurred no material adverse change in the consolidated financial
condition of Buyer nor any occurrence, circumstance or event which in any
material respect impairs or could reasonably be expected to impair the ability
of Buyer to pay or perform its obligations under the Note.
6.9. Disclosure. No representation or warranty by Buyer in this
----------
Agreement or in any other document to be furnished to Sellers on the Closing
Date pursuant hereto contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
SECTION 7. OBLIGATIONS OF THE PARTIES UNTIL THE CLOSING DATE
7.1. Conduct of Business Pending Closing. Between the date hereof and
-----------------------------------
the Closing Date, the Sellers shall conduct the
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Business solely in the ordinary course consistent with past practice, maintain
inventory and supplies at normal levels by replenishing them as they are
consumed, and collect tuition and registration fees only in accordance with the
Company's normal past practice.
7.2. Negative Covenants of the Sellers. Except as expressly provided
---------------------------------
herein, between the date hereof and the Closing Date (or the earlier termination
of this Agreement),
without the prior written consent of Buyer, the Sellers shall not:
7.2.1 take any action or permit to occur any event which
would breach any covenant of either the Company or the Shareholders contained
herein or cause any representation or warranty of the Sellers contained herein
to be untrue if made immediately after such event;
7.2.2 fail to pay or discharge when due any material
liability or obligation of the Company; or
7.2.3 enter into, amend or terminate any agreement,
commitment or transaction relating to or affecting the Business other than in
the ordinary course of business, consistent with past practice or which is
material to the Business, whether or not in the ordinary course of business.
7.3. Affirmative Covenants. Between the date hereof and the Closing
---------------------
Date, the Sellers shall:
7.3.1 maintain the Purchased Assets in the same repair, order
and condition that they were in at the execution of this Agreement, ordinary
wear and tear excepted;
7.3.2 maintain in full force and effect all Permits;
7.3.3 maintain in full force and effect the insurance
policies and binders currently in effect relating to the Business and the
Purchased Assets including, without limitation, those listed on Schedule 5.15;
-------------
7.3.4 use all commercially reasonable efforts to preserve
intact the Company's present business organization, keep available the services
of its present employees and agents engaged in the Business and maintain its
relations and goodwill with its suppliers, clients, distributors, and any others
having business relations with the Company;
7.3.5 maintain its corporate existence and not merge or
consolidate with any other entity, nor make any amendment to its articles of
incorporation or by-laws;
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<PAGE>
7.3.6 maintain all of the books and records of the Company in
accordance with its past practices;
7.3.7 comply in all material respects with all provisions of
the Contracts and with the provisions of all Laws;
7.3.8 sell, or enter in an agreement to sell capital stock or
other securities of the Company or any substantial portion of the Company's
assets, whether or not in the ordinary course of business; and
7.3.9 promptly advise Buyer in writing of the threat or
commencement against any of the Sellers of any dispute, claim, action, suit or
proceeding, arbitration or investigation, or the occurrence of any development
(exclusive of general economic factors affecting the Business in general) of a
nature that is or could reasonably be expected to be materially adverse to the
operations, condition (financial or otherwise), properties, assets or prospects
of the Business or the Purchased Assets. The Sellers promptly will advise Buyer
in writing of any event or the existence of any fact which makes untrue, or will
make untrue as of the Closing, any representation or warranty of the Company or
the Sellers set forth in this Agreement or in any of the Sellers' Transaction
Documents. The Sellers shall promptly notify Buyer of any event or circumstance
known to such Seller which could prevent or delay the consummation of the
transactions contemplated hereby or which would indicate a breach or non-
compliance with any of the terms, conditions or agreements of any Seller.
Without limiting the foregoing, if discovered prior to Closing, the Sellers
shall immediately advise Buyer of any of the claims or communications listed in
Section 5.22.4 above and also shall advise Buyer immediately of the discovery of
--------------
any Hazardous Substances on, about, beneath, or arising from any of the
Purchased Centers or the discovery of any condition on, about, beneath, or
arising from any of the Purchased Centers which might give rise to liability,
the imposition of a statutory lien or require Response, Removal or Remedial
Action under any of the Environmental Laws.
7.4. Investigation.
-------------
7.4.1 (a) Prior to the Closing Date, the Sellers shall allow
Buyer and its employees, counsel, auditors and accountants (collectively,
"Representatives"), upon reasonable notice, to make, or cause to be made, such
investigation and physical inspections of the Purchased Assets, the Purchased
Centers and the Business and the Company's financial and legal condition during
normal business hours as Buyer deems necessary or advisable. The Sellers shall
permit Buyer and its Representatives, upon reasonable notice, to have full
access to the Purchased Centers, the Purchased Assets and all books and records
of or relating to the Business, and the
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<PAGE>
Sellers shall furnish Buyer and its Representatives with such financial and
operating data and other information and copies of documents with respect to the
products, services, operations and properties of the Business as Buyer shall
from time to time reasonably request. The Sellers shall, and shall cause their
respective Representatives and other persons and entities under any of their
control to, cooperate fully with Buyer and Buyer's Representatives. The Sellers
acknowledge that, prior to or after the Closing Date, Buyer and its
Representatives shall have the right, at Buyer's expense, to perform an audit of
the Company's financial records, and the Sellers shall provide Buyer and its
Representatives with such information as may be reasonably requested, and will
otherwise cooperate in connection with the performance of such audit in the
manner provided above. In connection with such audit, the Sellers shall cause
the Company's officers to sign such management or auditors letters as Buyer's
accountants may require to complete the audit.
(b) Promptly following execution of this Agreement, Sellers
shall deliver to Buyer a letter from Alt & Witzig Engineering, Inc., permitting
Buyer to rely on the Phase I Reports. Prior to the Closing Date, the Sellers
shall allow Buyer to have performed at Buyer's expense a Phase II Environmental
Site Assessment by a qualified environmental firm of its choice at each of the
Purchased Centers, and if requested by Buyer additional environmental surveys
and analyses; provided that such additional environmental surveys and analyses
do not materially interfere with the Company's normal business operations.
(c) Any and all information obtained by Buyer or its
Representatives in connection with the transactions contemplated by this
Agreement or in the course of its investigations of the Company, whether
obtained before or after the date of this Agreement (collectively, the
"Evaluation Material"), shall be used only in connection with this Agreement and
the transactions contemplated hereby, and prior to the Closing, Buyer shall keep
all Evaluation Material strictly confidential. Without the prior written
consent of the Company, Buyer shall not, and shall direct Buyer's
Representatives not to, disclose to any person or make public any Evaluation
Material.
(d) Notwithstanding anything to the contrary set forth in
paragraph (c) above, Buyer may disclose any Evaluation Material (i) to its
Representatives on a need-to-know basis (it being agreed that such Buyer
Representatives shall be informed by Buyer of the confidential nature of such
Evaluation Material and shall be directed by Buyer not to disclose to any person
or entity or make public such Evaluation Material), (ii) to the extent required
by any applicable laws, rules or regulations, and (iii) in any action, suit or
proceeding between or among the parties hereto.
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<PAGE>
(e) If this Agreement is terminated, Buyer will promptly,
upon request of the Company, deliver to the Company or destroy all written
Evaluation Material (including any Evaluation Material that may be in the
possession of any lender or agent of Buyer) without retaining any copies
thereof.
(f) For purposes of this Agreement, the term "Evaluation
Material" does not include information which (i) becomes generally available to
the public other than as a result of disclosure by Buyer or any Buyer
Representative in violation of the terms hereof, (ii) was available on a non-
confidential basis prior to its disclosure to Buyer by a Seller or a Seller
Representative, or (iii) is or becomes available to Buyer on a non-confidential
basis from a source which is not bound by a confidentiality agreement with the
Company.
7.4.2 Buyer shall be given the opportunity at least ten (10)
days prior to Closing to interview key management employees of the Company
engaged in the Business to establish their competency and willingness to
continue their employment within the organization of Buyer. In advance of the
interview process, the Company shall provide to Buyer a complete organizational
structure plus a list of all employees, their functions and responsibilities,
their compensation arrangements, fringe benefits and seniority. The Company
shall also provide to Buyer copies of any existing employment agreements,
written or oral, and a copy of all personnel policies. Buyer may negotiate with
the Company's key management employees regarding employment arrangements with
Buyer after the Closing; provided, however, that Buyer shall have no obligation
-------- -------
to offer employment to any person and, after the Closing Date, may terminate any
employment offered to any person and/or offer any change in compensation levels
and other terms satisfactory to Buyer in its sole discretion. No Seller shall
interfere with, or discourage, Buyer's employment of any employee of the
Business to whom Buyer makes such an offer. In the event that the Closing does
not occur, Buyer agrees that it shall not, for a period of twelve (12) months
from the date on which this Agreement terminates, hire or otherwise interfere
with the Company's employment of any of the key management employees of the
Business listed on Schedule 5.17.1 hereto interviewed by Buyer pursuant to this
---------------
Section 7.4.2.
-------------
7.5. Pursuit of Consents. (a) Prior to the Closing Date, the Sellers
-------------------
shall, at their expense, use their respective reasonable best efforts to obtain
the consent or approval of all persons or entities (other than those
governmental agencies discussed in subsection (b) below) which are necessary for
the transfer of the Business and Purchased Assets to Buyer. This Section 7.5
-----------
shall not require the Sellers to pay money to any such person or entity or agree
to any additional terms or conditions in exchange for its consent other than
reimbursements
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<PAGE>
for reasonable legal fees of such party in processing such consent. Buyer shall
cooperate with the Sellers in obtaining such consents and approvals.
(b) The Sellers shall cooperate with and assist the Buyer in applying for and
obtaining new permits from those governmental agencies which have issued the
non-assignable Permits set forth on Schedule 5.8 hereto.
------------
7.6. [Reserved].
-----------
7.7. Exclusive Dealing. Prior to the Closing Date or until the
-----------------
earlier termination of this Agreement, the Sellers shall not, directly or
indirectly, through a finder, broker, consultant, shareholder or other
Representative or intermediary encourage, solicit, negotiate with or accept an
offer to sell from any person or entity (other than Buyer or its affiliates,
assignees or nominees) relating to a merger or consolidation of the Company, the
sale or other disposition of the Purchased Assets or the Business (or any
portion thereof), or the sale, issuance or other disposition of any shares of
capital stock or other securities of the Company, nor furnish any information to
any third party (other than Buyer or its affiliates, assignees, nominees or
Representatives) in regard to any of the foregoing.
7.8. Public Announcements. Pending completion of the Closing, the
--------------------
parties hereto shall not, and shall not permit their respective Representatives,
agents or brokers to, issue any press releases or make any public statements
concerning the proposed transaction without the prior approval of the other
parties hereto in each such instance, and, subject to the provisions of Section
-------
7.4, each party shall provide its best efforts to maintain overall
---
confidentiality of the execution of this Agreement and the transactions and due
diligence effort contemplated hereby; provided, however, that nothing herein
-------- -------
shall prevent either the Company or Buyer upon notice to the other from making
such public announcements as such party's counsel may consider advisable in
order to satisfy that party's legal and contractual obligations in such regard.
SECTION 8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Unless waived by Buyer, the obligation of Buyer to consummate the
purchase and sale of the Business and the Purchased Assets is subject to the
fulfillment, prior to or at the Closing Date, of each of the following
conditions:
8.1. Deliveries at Closing. The Sellers shall have delivered to Buyer
---------------------
all items required pursuant to Section 4.2.1.
-------------
8.2. Representations and Warranties. The representations and
------------------------------
warranties of each of the Sellers contained
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<PAGE>
in this Agreement or on any Schedule hereto or any, list, certificate or
document delivered pursuant to the provisions hereof shall be true, correct and
complete in all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time, and the Company
shall have delivered to Buyer certificates to that effect, signed by an
authorized officer of the Company and by the Shareholders.
8.3. Performance of Covenants. Each of the Sellers shall have
------------------------
performed or complied in all material respects with each of the agreements and
covenants required by this Agreement to be performed or complied with by each of
the Sellers prior to or at the Closing, and the Company shall have delivered to
Buyer certificates to that effect, signed by an authorized officer of the
Company and by the Shareholders.
8.4. Legal Matters. No suit, action, investigation or legal or
-------------
administrative proceeding shall have been brought or threatened or contemplated
by any person or entity (other than Buyer or an affiliate thereof) which
questions the validity or legality of the transactions contemplated hereby. No
allegation of child (including physical or sexual) abuse or assault of any type
or nature against any child or other person shall have been brought or shall
have been made or, to the knowledge of the Sellers, contemplated by any person
or entity against any of the Sellers, the Business or any employee, agent or
contractor of same.
8.5. No Material Adverse Change. Since March 31, 1995, there shall
--------------------------
not have been any material adverse change in the condition (financial or
otherwise), assets, liabilities, properties, operations or prospects of the
Business, and neither any of the Purchased Centers, the Purchased Assets nor the
operations of the Business shall have been adversely affected in any material
way as a result of disaster, accident, labor dispute, shortage, cessation or
interruption of inventory shipments, supplies or utility services, flood, fire
or other casualty, drought, embargo, civil disturbance, riot, uprising, activity
of armed forces or act of God or public enemy, and the Company shall have
delivered to Buyer a certificate to that effect, signed by an authorized officer
of the Company and by the Shareholders.
8.6. Governmental Approvals. All approvals, consents, permits,
----------------------
licenses and qualifications from any governmental body or agency having
jurisdiction required for the transfer of the Business and the Purchased Assets
to Buyer, and their lawful use, occupancy and enjoyment by Buyer as and for
child-care facilities shall have been obtained and shall be effective and no
such approval, consent, permit, license or qualification shall impose any
condition or provision or requirement on Buyer which was not
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<PAGE>
imposed on the Company by such body or agency or which is not otherwise imposed
upon Buyer under Buyer's Permits of a similar nature. If any governmental
agency or body to which the Buyer applies for a license, permit or other
authorization to operate the Business requires, as a condition to the issuance
of such license, permit or authorization, that the Buyer make any special
improvements to any Purchased Centers, purchase additional machinery or
equipment for any Purchased Center, or otherwise incur any extraordinary
expenses excluding (i) routine application fees or (ii) the cost of those
improvements to the Purchased Centers contemplated by Buyer in its letter to the
Company dated April 28, 1995 set forth on Schedule 8.6 hereto (collectively, the
------------
"Extraordinary Expenses"), then the Buyer, after absorbing the first $25,000 of
such Extraordinary Expenses, shall be entitled to offset against the Purchase
Price the next $50,000 of such Extraordinary Expenses in the manner provided in
Section 11.7 herein, provided that in no event may Buyer offset more than
------------
$50,000 in the aggregate of Extraordinary Expenses.
8.7. Other Consents and Approvals. The consent or approval of all
----------------------------
persons or entities (other than governmental agencies) necessary for the
transfer of the Business and the Purchased Assets to Buyer, and Buyer's use,
occupancy and enjoyment thereof as and for child-care facilities, including the
approvals of Buyer's lenders (if required) as noted in Section 6.5, and the
-----------
consents and approvals (if any) listed in Schedule 5.4 and Schedule 5.16, shall
------------ -------------
have been granted, and no such consent or approval (i) shall have been
conditioned upon the modification, cancellation or termination of any lease,
contract, commitment, agreement, franchise, license, easement, right or other
authorization to be assigned to Buyer by the Company at Closing, or (ii) shall
impose on Buyer any condition or provision or requirement either that is not
currently imposed on the Sellers or that is more restrictive than currently
imposed on the Sellers unless it is otherwise imposed upon Buyer under Buyer's
current authorizations.
8.8. Due Diligence Review. Buyer's due diligence investigation and
--------------------
review of the Business's business, prospects, liabilities, obligations, and
properties including, but not limited to, an evaluation of environmental
matters, financial records, contracts, leases, Permits, employment agreements,
employee benefit plans, all other contracts and Laws, shall have been completed
to Buyer's sole satisfaction, and Buyer, in its sole discretion, shall be
satisfied with the results thereof.
8.9. Leases. On or before the Closing, Buyer shall have entered into
------
lease agreements, in the form attached hereto as Schedule 8.9 (the "Leases"),
------------
signed by the respective owners of the properties listed on Schedule A, pursuant
----------
to which each said owner, as landlord, shall lease to Buyer, as tenant, the
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respective Purchased Centers on the terms and conditions set forth therein.
SECTION 9. CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATIONS
Unless waived by the Sellers, the obligation of the Sellers to
consummate the purchase and sale of the Business and the Purchased Assets is
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions:
9.1. Deliveries at Closing. Buyer shall have delivered to the Company
---------------------
all items required pursuant to Section 4.2.2 hereof.
-------------
9.2. Representations and Warranties. The representations and
------------------------------
warranties of Buyer in this Agreement or on any Schedule hereto or any list,
certificate or document delivered pursuant to the provisions hereof shall be
true and correct in all material respects at and as of the Closing Date as
though such representations and warranties were made at and as of such time and
Buyer shall have delivered to the Sellers a certificate to that effect signed by
an authorized officer of Buyer.
9.3. Performance of Covenants. Buyer shall have performed or complied
------------------------
in all material respects with each of its agreements and covenants required by
this Agreement to be performed or complied with by it prior to or at the
Closing, and Buyer shall have delivered to the Sellers a certificate to that
effect signed by an authorized officer of Buyer.
9.4. No Material Adverse Change. Since March 31, 1995, there shall
--------------------------
have occurred no material adverse change in Buyer's financial condition, and
Buyer shall have delivered to the Sellers a certificate to that effect, signed
by an authorized officer of Buyer.
9.5. Legal Matters. No suit, action, investigation or legal or
-------------
administrative proceeding shall have been brought or shall have been threatened
by any person or entity (other than the Company or an affiliate thereof) which
questions the validity or legality of the transactions contemplated hereby.
SECTION 10. EMPLOYEES OF THE BUSINESS; EMPLOYEE BENEFITS
10.1. Employee Benefit and Bonus Claims. Except to the extent
---------------------------------
otherwise provided in Section 10.2 below:
------------
10.1.1 Buyer shall be responsible for employee benefit claims
of those employees of the Business (or their
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<PAGE>
eligible dependents) who accept employment with Buyer only with respect to
illness, disability or any other state of facts occurring after the Closing
Date; and
10.1.2 The Company shall continue to be responsible for all
benefit claims of employees of the Company (or their eligible dependents) who do
not accept employment with Buyer, and of all retired employees and for all
benefit claims of employees of the employment with Buyer with respect to
disability, illness or any other state of facts occurring on or before the
Closing Date. The Company shall also retain the obligation, if any, to pay any
amounts owing to employees with respect to bonus or incentive awards, if any,
for services rendered on or before the Closing Date in accordance with the terms
of applicable plans or policies of the Company.
10.2. Accrued Vacation Pay. The Company shall deliver to Buyer
--------------------
prior to the Closing Date a tabulation showing the amount of accrued but unused
vacation for each employee of the Business as of the Closing Date who accepts
employment with Buyer, and at the Closing the Company shall deliver to Buyer a
check in U.S. dollars in the aggregate amount of vacation pay for all such
employees in respect of such accrued but unused vacation. To the extent Buyer
receives such funds, Buyer shall assume liability for payment of the vacation
pay owed by the Company to such employees and shall execute and deliver to the
Company at closing a letter to such effect in the form of Schedule 1.02 hereto.
-------------
SECTION 11. OBLIGATIONS OF PARTIES AFTER CLOSING
11.1. Collection of Receivables. From and for a period of six
-------------------------
(6) months after the Closing, Buyer shall use its commercially reasonable
efforts to assist the Company in the Company's collection of the accounts
receivable described in Section 1.2.2; provided, that nothing herein shall be
-------------
construed as creating any duty or obligation of Buyer to perform any collection
duties whatsoever on behalf of the Sellers. If proceedings to collect such
accounts receivable are instituted, they shall be brought at the Sellers'
election, in the Company's own name and at the Company's sole expense.
11.2. Discharge of Liabilities. The Company shall pay all of the
------------------------
Company's liabilities and obligations other than the Assumed Liabilities, as and
when the same shall become due and payable.
11.3. [Reserved].
-----------
11.4. Covenant Not To Compete.
-----------------------
-29-
<PAGE>
11.4.1 For a period of five (5) years from and after the
Closing Date, neither the Company nor any Shareholder shall, directly or
indirectly, operate, manage, own, control, provide consulting services to, or in
any way be connected with or be concerned with or be interested in any day care
or child care facility of any type which is now or hereafter located within a
50-mile radius of any Purchased Center, except for the Speedway Center in
Indianapolis and the RCI, Butler University and Tykestown Centers.
11.4.2 From and after the date hereof, the Company and each
Shareholder shall not disclose directly or indirectly to any person or entity
other than a Representative of Buyer, without the express authorization of Buyer
in each such instance, any customer or client lists, pricing strategies,
customer, client or employee files and records, any proprietary data or trade
secrets of Buyer or the Business, or any financial or other information about
Buyer or the Business not in the public domain.
11.4.3 From and after the date hereof until the fifth
anniversary of the Closing Date, the Company and the Shareholders shall not
engage or participate in any effort or action to induce any of the customers,
clients, suppliers, associates, employees or independent contractors of Buyer
(including, after the Closing, the Business) to take any action or to refrain
from taking any action or inaction which might be disadvantageous to Buyer
including, but not limited to, the solicitation of Buyer's customers, clients,
suppliers, associates, employees or independent contractors to cease doing
business, or to discontinue their association or employment, with Buyer.
11.4.4 Notwithstanding the foregoing provisions of this
Section 11.4, the Company and the Shareholders shall not be precluded hereby
------------
from purchasing or owning, directly or indirectly, securities of any entity that
are publicly traded so long as the Company and each of the Shareholders do not
own beneficially in the aggregate five percent (5%) or more of any class of
securities of such entity, and nothing herein shall preclude the Company or any
Shareholder from operating a Purchased Center as permitted under the Lease for
such Purchased Center in the event Buyer is in default of its obligations under
such Lease or the Security Agreement. Additionally, notwithstanding the
foregoing, the Company and each of the Shareholders may disclose any information
subject to the provisions of Section 11.4.2 (i) to its employees, counsel,
--------------
auditors and accountants on a need-to-know basis (it being agreed that any such
person or entity shall be informed by the party of the confidential nature of
such proprietary information and shall be directed by the party not to disclose
to any person or entity or make public such information), (ii) to the extent
required by
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<PAGE>
any applicable laws, rules or regulations, and (iii) in any action, suit or
proceeding between Buyer and the Sellers.
11.4.5 Each Seller expressly acknowledges that damages alone
shall be an inadequate remedy for any breach or violation of any of the
provisions of this Section 11.4, and that Buyer, in addition to all other
------------
remedies under this Agreement, shall be entitled as a matter of right to
injunctive relief, including specific performance, with respect to any such
breach or violation, in any court of competent jurisdiction.
11.4.6 The Sellers acknowledge and agree that the covenants
contained in this Section 11.4 are fair and reasonable in light of the
------------
consideration paid hereunder and in order to protect Buyer's investment in the
Business, and the invalidity or unenforceability of this provision, or any other
or part of any provision, of this Agreement shall not affect the other
provisions or parts hereof. If any provision hereof is determined to be invalid
or unenforceable by a court of competent jurisdiction, the Sellers shall
negotiate in good faith to provide Buyer with protection as nearly equivalent to
that found to be invalid or unenforceable and if any such provision shall be so
determined to be invalid or unenforceable by reason of the duration or
geographical scope, or both, shall be considered to be reduced to a duration or
geographical scope to the extent necessary to cure such invalidity.
11.5. Survival of Representations and Warranties. All
------------------------------------------
representations, warranties, covenants and agreements made
by a party in this Agreement or in any Schedule, certificate, document or list
delivered by any such party pursuant hereto shall survive the Closing, and each
party hereto shall be entitled to rely upon the representations and warranties
of each other party. Anything in this Agreement to the contrary
notwithstanding, the representations and warranties of the Sellers hereunder,
and the right of Buyer to indemnification for breach thereof, shall not be
affected, limited, eliminated or modified by any investigation of the Company or
any other Seller made by Buyer or its agents or Representatives.
11.6. Indemnification.
---------------
11.6.1 The Company and the Shareholders, jointly and
severally, shall indemnify and hold harmless Buyer, and Buyer shall indemnify
and hold harmless the Company and the Shareholders (the party or parties
providing such indemnification being hereinafter referred to individually and
collectively as the "Indemnifying Party") against any and all losses, costs,
expenses, claims, damages or liabilities (including the amount of any settlement
approved by such Indemnifying Party and expenses of enforcing this Agreement),
which the party or parties seeking such indemnification (such party or parties
are hereinafter
-31-
<PAGE>
referred to individually and collectively as the "Indemnified Party") may
suffer, incur or become subject to, and shall reimburse the Indemnified Party
for any legal, audit or other expenses incurred by it or them in connection with
investigating any claims and defending any actions, insofar as such losses,
costs, expenses, claims, damages, liabilities or actions arise out of or are
based upon (i) any false, misleading or untrue representation or the breach of
any warranty made by any Indemnifying Party herein or in any schedule, written
statement, list, certificate or other instrument attached to this Agreement or
delivered pursuant hereto; (ii) any breach or default in performance by any
Indemnifying Party of any of its (or his) covenants or agreements with the
Indemnified Party contained herein or in any other agreement delivered pursuant
hereto; or (iii) in cases where Buyer is an Indemnified Party and the Company
and the Shareholders are Indemnifying Parties, any liability or obligation of
the Sellers other than an Assumed Liability.
11.6.2 An Indemnified Party seeking indemnification hereunder
shall promptly notify the Indemnifying Parties of the assertion of any claim or
the discovery of any fact upon which the Indemnified Parties intends to base a
claim for indemnification hereunder. With respect to any claim made by a third
party against which an Indemnified Parties is seeking indemnification hereunder,
the Indemnifying Parties shall have the right, at its own expense, to
participate in or assume control of the defense of such claim, and the
Indemnified Parties shall cooperate with the Indemnifying Parties subject to
reim bursement for all expenses incurred as the result of such request by the
Indemnifying Parties. If the Indemnifying Parties do not within 10 days of
written notice thereof elect either to assume control or otherwise participate
in the defense of any third-party claim, the Indemnifying Parties shall be bound
by the results obtained by the Indemnified Parties with respect to such claim.
11.6.3 All claims for breach of any representation or warranty
made by any party must be asserted prior to the third anniversary of the Closing
Date, and no party shall be entitled to indemnity hereunder or other relief at
law for any such claims asserted after that date; provided, however, that in the
-------- -------
case of income or other tax claims and claims relating to environmental matters,
notice may be given within the period of the applicable statute of limitations
provided that neither party takes, nor permits to be taken, any voluntary action
to extend such period of limitations without the other's prior written consent.
This Section 11.6.3 shall not impose any time limitation on the assertion of
--------------
claims for breach of any covenant made by any party or for claims for
indemnification asserted by Buyer against any Seller based upon the assertion
against Buyer of a liability or obligation of a Seller which is
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<PAGE>
not an Assumed Liability or for claims for indemnification asserted by a Seller
against Buyer based upon the assertion against such Seller of an Assumed
Liability.
11.6.4 No Indemnifying Party shall be obligated to indemnify
an Indemnified Party pursuant to Section 11.6.1(i) until the aggregate amount of
-----------------
all damages and losses suffered or incurred by the Indemnified Party for
otherwise indemnifiable claims exceeds $10,000, in which event the Indemnifying
Party shall be liable for all amounts in excess thereof; provided, however, that
-------- -------
the preceding limitation shall not be applicable to any claim for
indemnification pursuant to Section 11.6.1(ii) or (iii).
---------------------------
11.7. Right of Offset. Buyer shall have the option of offsetting,
---------------
against any installments of principal of, or interest on, the Purchase Price
owed under the Note, all or any part of damages Buyer may suffer (which such
offset amount shall be credited against any indemnification to which Buyer is
entitled under Section 11.6) and the amount of any Extraordinary Expenses
------------
incurred by Buyer to the extent permitted in Section 8.6 herein. If, upon
-----------
Buyer's exercise of this right of offset, the Company disputes the amount being
offset in a notice delivered to Buyer by the Company, Buyer shall deposit the
disputed amount into escrow pending resolution of the dispute.
11.8. Representation of Sellers. In any case where more than one
-------------------------
Seller is (or may be) either an Indemnified or an Indemnified Party hereunder,
the Sellers shall appoint a single representative with whom Buyer may deal with
respect to all matters. Any decision made by such representative may be relied
upon by Buyer, and shall be binding on each Seller.
11.9. Improvements to the Purchased Centers. Buyer will use its
-------------------------------------
reasonable best efforts to complete the improvements to the Purchased Centers
outlined in its letter to the Company dated April 28, 1995 attached hereto as
Schedule 8.6 within 18 months after the Closing Date.
------------
SECTION 12. TERMINATION AND AMENDMENT
12.1. Termination. This Agreement may be terminated at any time
-----------
prior to the Closing by:
12.1.1 Buyer, if the conditions set forth in Section 8 hereof
---------
have not been satisfied by August 25, 1995;
12.1.2 Buyer, pursuant to Section 13.2.2;
--------------
-33-
<PAGE>
12.1.3 the Company, if the conditions set forth in Section 9
---------
hereof have not been satisfied by August 25, 1995; or
12.1.4 mutual consent of Buyer and the Company.
12.1.5 Buyer, at any time if any of the conditions set forth
in Section 8 hereof will not be susceptible of satisfaction by the Closing Date.
---------
12.2. Effect of Termination.
---------------------
12.2.1 If a party terminates this Agreement because one of its
condition precedents has not been fulfilled, or if this Agreement is terminated
by mutual consent, this Agreement shall become null and void without any
liability of any party to any other; provided, however, that such termination
-------- -------
shall not preclude an action by any party to recover damages suffered or
incurred by it as a result of another party's breach.
12.2.2 Nothing in this Section 12 shall affect any party's
----------
right to specific performance of another party's obligations hereunder or to
recover damages for a breach of representation or warranty, or of a covenant
which occurred prior to termination.
12.2.3 Notwithstanding any other provision hereof, Section
-------
13.1 shall survive any termination of this agreement.
----
SECTION 13. MISCELLANEOUS
13.1. Costs and Expenses. Except as expressly otherwise provided
------------------
in this Agreement, Buyer shall bear its own costs and expenses and the Sellers
shall bear all of the Sellers' costs and expenses in connection with this
Agreement and the transactions contemplated hereby. All sales and use taxes, if
any, payable in connection with the transfer of the Business and the Purchased
Assets shall be paid one-half by Buyer and one-half by the Company.
13.2. Risk of Loss.
------------
13.2.1 Risk of loss with respect to the property and rights to
be transferred hereunder shall not pass to Buyer until the property and rights
are transferred at the Closing hereunder.
13.2.2 In the event of destruction or condemnation before the
Closing Date of any portion of the Purchased Assets such that a child care
business cannot be
-34-
<PAGE>
carried out at one or more of the Purchased Centers for a period of more than
seven (7) days, the Sellers shall have the right to postpone the Closing for a
period of up to sixty (60) days, so that the Sellers may repair or replace the
damaged or condemned areas; provided, however, that Buyer may, at its sole
-------- -------
option, terminate this Agreement at the end of such sixty (60) day period if
such repair or replacement has not been completed to Buyer's satisfaction.
13.2.3 In the event of destruction or condemnation before the
Closing Date of any portion of the Purchased Assets at one or more of the
Purchased Centers, where Buyer does not have the right to terminate this
Agreement pursuant to Section 13.2.2, and such destruction is not cured on or
--------------
before the Closing Date, Buyer shall have the right either to accept the
proceeds of the insurance or condemnation payable with respect to such
destruction or condemnation and proceed through Closing without reduction in the
Purchase Price on account of such destruction or condemnation, or, at its
option, to exclude from this Agreement that part of the Purchased Assets so
destroyed or condemned, and to reduce the Purchase Price by the amount of the
value of that part of the Purchased Assets so destroyed or condemned, as
determined by a qualified appraiser selected by mutual agreement of the Sellers
and Buyer.
13.3. Performance. In the event of a default, the non-defaulting
-----------
party shall have the right, in addition to any other remedies which may be
available, to obtain specific performance of the terms of this Agreement.
Should any party default in performance of any of the terms and conditions of
this Agreement or any other agreement referred to herein which results in the
filing of a lawsuit for damages, specific performance, or other remedy, the
prevailing party in such lawsuit shall be entitled to its reasonable attorneys'
fees and court costs from the losing party.
13.4. Assignment and Benefit. Buyer may assign this Agreement in
----------------------
whole or in part to any affiliate; provided, that no such assignment by Buyer
--------
shall relieve Buyer of its obligations under the Leases, the Note, the Security
Agreement or the Financing Statements. The Sellers shall not assign this
Agreement or any rights hereunder (other than the Security Interest and/or their
rights to receive payment), or delegate any obligations hereunder, without the
prior written consent of Buyer, except that Sellers may assign the Leases, the
Note or the Security Agreement to the extent permitted in such agreements. This
Agreement shall be binding upon the parties and the respective successors, heirs
and permitted assigns of the parties hereto.
13.5. Schedules and Exhibits. Any and all schedules and exhibits
----------------------
referenced or incorporated herein are
-35-
<PAGE>
deemed to be a part of this Agreement and are binding and enforceable as to any
terms contained therein. The submission of any information on a schedule or on
an exhibit shall constitute a representation by the party providing such
schedule or exhibit of the truth, correctness and completeness of all
information set forth therein. The disclosures in the schedules hereto shall
relate only to the representations and warranties to which they expressly refer
and to no other representation or warranty in this Agreement unless such
schedule contains an appropriate cross-reference, in which case such disclosure
shall be deemed to be made on all schedules containing the cross-reference. In
the event of any inconsistency between the statements made in the body of this
Agreement and those contained on a schedule (other than an expressed exception
to a specifically-identified statement), those in this Agreement shall control.
13.6. Effect and Construction of this Agreement. This Agreement
-----------------------------------------
and the exhibits and schedules hereto embody the entire agreement and
understanding of the parties and supersede any and all prior agreements,
arrangements and understandings relating to matters provided for herein. The
captions are for convenience only and will not control nor affect the meaning or
construction of the provisions of this Agreement. The terms defined herein and
in any agreement executed in connection herewith include the plural as well as
the singular and the singular as well as the plural, and the use of masculine
pronouns shall include the feminine and neuter. Except as otherwise indicated,
all agreements defined herein refer to the same as from time to time amended or
supplemented or the terms thereof waived or modified in accordance herein
therewith. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which counterparts together shall
be deemed to be one and the same instrument.
13.7. Cooperation. Subject to the terms and conditions herein
-----------
provided, each of the parties hereto shall use its respective commercially
reasonable efforts to take, or cause to be taken, such action, to execute and
deliver, or cause to be executed and delivered, such additional documents and
instruments and to do, or cause to be done, all things necessary, proper or
advisable under the provisions of this Agreement and under applicable law to
consummate and make effective the transactions contemplated by this Agreement.
13.8. Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be deemed to be properly given
when delivered personally, mailed by registered or certified mail (return
receipt requested) or sent by overnight courier service or via facsimile
transmission (which is confirmed) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
-36-
<PAGE>
If to the Sellers: Don Mitchell
President
Corydon Day Care Center, Inc.
P.O. Box 7217
Louisville, KY 40257-0217
Facsimile: (502) 228-2386
copy to: John J. Bleidt, Esq.
Bleidt & Keisler, P.S.C.
105 South Sherrin Avenue
Louisville, KY 40207
Facsimile: (502) 893-8706
If to Buyer: John R. Frock
Executive Vice President
Corporate Development
Rose Tree Corporate Center II
1400 North Providence Road, Suite 3055
Media, PA 19063
Facsimile: (610) 891-8222
copy to: Robert H. Strouse, Esq.
Drinker Biddle & Reath
1000 Westlakes Drive, Suite 300
Berwyn, PA 19312-2409
Facsimile: (610) 993-8585
13.9. Amendment, Waiver, Discharge, etc. This Agreement may not
---------------------------------
be released, discharged, abandoned, amended, changed or modified in any manner,
except by an instrument in writing signed on behalf of each of the parties
hereto by their duly authorized officers or representatives in compliance
applicable law. The failure of any party hereto to enforce at any time any of
the provisions of this Agreement shall in no way be construed to be a waiver of
any such provision, nor in any way to affect the validity of this Agreement or
any part thereof or the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.
13.10. Number of Days. Except as otherwise provided herein, in
--------------
computing the number of days for purposes of this Agreement, all days shall be
counted, including Saturdays, Sundays and holidays; provided, however, that if
-------- -------
the final day of any time period falls on a Saturday, Sunday or holiday, then
the final day shall be deemed to be the next day which is not a Saturday, Sunday
or holiday.
13.11. Rights of Persons Not Parties. Nothing contained in this
-----------------------------
Agreement shall be deemed to create rights in persons or entities not parties
hereto, other than the successors, heirs and permitted assigns of the parties
hereto.
-37-
<PAGE>
13.12. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Indiana without reference
to that state's conflict of laws provision.
-38-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, all as of the date first above written.
CORYDON DAY CARE CENTER, INC.,
D/B/A CHILDREN TODAY
By:______________________________
Donald Mitchell, President
_________________________________
DONALD MITCHELL
_________________________________
JEFFREY OWEN
NOBEL EDUCATION DYNAMICS, INC.
By:______________________________
John R. Frock, Executive
Vice President of Development
-39-
<PAGE>
Schedule A
Purchased Centers
1. Park 100 - Indianapolis
2. Crawfordsville, Indiana
3. Eastwood, Indianapolis
4. Shelbyville, Indiana
5. Castleton, Indianapolis
6. 86th Street, Indianapolis
7. Carmel, Indianapolis
8. High School Road, Indianapolis
9. Woodfield, Indianapolis
(See Schedule 3 to form of Note for specific addresses)
Sch. A-1
<PAGE>
Schedule 2.2.2
Form of Note
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND THE TRANSFERABILITY
THEREOF IS SUBJECT TO THE PROVISIONS OF AN ASSET PURCHASE AGREEMENT BY AND
AMONG NOBEL EDUCATION DYNAMICS, INC., CORYDON DAY CARE CENTER, INC. D/B/A
CHILDREN TODAY, DONALD MITCHELL AND JEFFREY OWEN.
THE INDEBTEDNESS EVIDENCED BY THIS NOTE AND ANY RIGHTS OR REMEDIES
HEREUNDER SHALL BE SUBORDINATE AND JUNIOR TO THE RIGHTS OF THE HOLDERS OF
SENIOR INDEBTEDNESS SET FORTH HEREIN TO THE EXTENT SET FORTH HEREIN.
SUBORDINATED PROMISSORY NOTE
$1,125,000.00
AUGUST 25, 1995
FOR VALUE RECEIVED, NOBEL EDUCATION DYNAMICS, INC., a Delaware
corporation with an address at Rose Tree Corporate Center II, 1400 North
Providence Road, Suite 3055, Media, PA 19063 ("MAKER"), promises to pay to
-----
CORYDON DAY CARE CENTER, INC., an Indiana corporation d/b/a "Children Today"
("PAYEE"), at its office at P.O. Box 7217, Louisville, Kentucky 40257-0217 or at
-------
such other address as may hereafter be specified by Payee, in lawful money of
the United States of America, the principal sum of ONE MILLION ONE HUNDRED
TWENTY-FIVE THOUSAND AND 00/100 DOLLARS ($1,125,000.00), together with interest
thereon at the rate, in the installments and at the times hereinafter provided.
1. MATURITY DATE; PRINCIPAL AND INTEREST PAYMENTS; PREPAYMENTS.
-----------------------------------------------------------
1.1 MATURITY DATE. The outstanding principal balance of this
-------------
Note plus all accrued and unpaid interest thereon and all other sums due
hereunder shall be due and payable in full on or before midnight on August 25,
2005 (the "MATURITY DATE").
-------------
1.2 INTEREST RATE. The principal sum outstanding from time to
-------------
time hereunder shall bear interest at a rate (the "INTEREST RATE") equal to
-------------
eight percent (8%) per annum. Accrued but unpaid interest shall be paid on each
Payment Date (as defined hereafter).
1.3 PAYMENTS OF PRINCIPAL AND INTEREST. Maker shall pay the
----------------------------------
principal of this Note in one hundred and twenty (120) consecutive monthly
installments of $9,375.00 in arrears
Sch. 2.2.2-1
<PAGE>
commencing on September 1, 1995 and continuing on the first day of each month
thereafter (EACH, A "PAYMENT DATE").
------------
1.4 TIME AND MANNER OF PAYMENT. All payments (including
--------------------------
prepayments) to be made in respect of principal, interest or other amounts due
from Maker hereunder shall be made to Payee in United States dollars in funds
immediately available at Payee's office set forth in the caption of this Note or
as otherwise specified by Payee, without set-off, counterclaim or other
deduction of any nature except as permitted pursuant to the terms of that
certain Asset Purchase Agreement of even date herewith by and among Payee,
Maker, and the shareholders of Payee (the "ASSET PURCHASE AGREEMENT"), which is
------------------------
hereby incorporated herein by reference. Maker shall have the right to offset
against any installments of principal of, or interest on, this Note in the
manner and to the extent provided in the Asset Purchase Agreement.
1.5 PREPAYMENTS. This Note may be prepaid in whole or in part
-----------
at any time prior to the Maturity Date without prior notice to Payee, without
penalty or premium, provided, however, that no prepayments may be made hereunder
-------- -------
while any Senior Indebtedness (as defined below) remains outstanding without the
prior written consent of the holders of Senior Indebtedness. Any partial
prepayments shall be applied to installments of principal last falling due. No
partial prepayment shall postpone or interrupt payments of interest or the
payment of the remaining principal balance, all of which shall continue to be
due and payable at the time and in the manner set forth above.
2. SECURITY. As security for the payment when due of the principal
--------
of and interest on this Note, the Maker has, under a "SECURITY AGREEMENT" dated
------------------
today and financing statements filed pursuant thereto, granted to Payee a
security interest in the property described on Exhibit A attached hereto, and
all proceeds and products of such property, including insurance payable by
reason of loss or damage (collectively, the "COLLATERAL").
----------
3. SUBORDINATION
-------------
3.1 SENIOR INDEBTEDNESS DEFINED. Notwithstanding anything
---------------------------
in this Note to the contrary, the indebtedness evidenced by this Note shall be
subordinated and junior, to the extent and in the manner set forth below, to all
"SENIOR INDEBTEDNESS" of Maker. As used herein, the term "Senior Indebtedness"
-------------------
means (i) all indebtedness of Maker to those lenders set forth on Exhibit B
hereto, (ii) all other amounts, including costs and expenses, payable by Maker
to any holder of Senior Indebtedness with respect to Senior Indebtedness and
(iii) all renewals, extensions, refunding and modifications of any indebtedness
referred to above or any other financing or refinancing of Senior
Sch. 2.2.2-2
<PAGE>
Indebtedness, whether done with the lenders listed on Exhibit B or with other
lenders. The subordination of this Note to Senior Indebtedness of Maker as
provided for herein shall not be impaired or affected in any way notwithstanding
that the Senior Indebtedness is acquired or originated by an officer, director,
stockholder or other affiliate of Maker.
Notwithstanding anything herein to the contrary, Senior Indebtedness
does not include (i) accounts payable to trade creditors of Maker however
treated or classified on Maker's balance sheet, or (ii) rental obligations under
operating leases.
3.2 SUBORDINATION OF UNSECURED PAYMENTS. The indebtedness
-----------------------------------
evidenced by this Note shall be subordinated and junior in right of payment to
all Senior Indebtedness of Maker in the following manner:
3.2.1 INSOLVENCY, ETC. Subject to Section 3.2.8, in the
--------------- -------------
event of any assignment by Maker for the benefit of its creditors, any
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding, whether instituted by or against Maker or Maker's business or
assets, or any dissolution, liquidation or other winding-up of the affairs of
Maker or of Maker's business, and in all such cases, then the holders of the
Senior Indebtedness shall be entitled to receive payment in full of all Senior
Indebtedness before Payee is entitled to receive any further payment on account
of principal of or interest on this Note; and to that end the holders of the
Senior Indebtedness shall be entitled to receive, to the extent necessary to
make payment in full of all Senior Indebtedness remaining unpaid after giving
effect to any concurrent payment or distribution (or provision therefor) to the
holders of the Senior Indebtedness, for application in payment thereof, any
payment or distribution of any kind or character, whether in cash or property or
securities, which may be payable or deliverable in any such proceedings in
respect of this Note.
3.2.2 MATURITY OF OR DEFAULT ON SENIOR INDEBTEDNESS.
---------------------------------------------
(A) Subject to Section 3.2.8, upon the maturity of any
-------------
Senior Indebtedness by lapse of time, acceleration, or otherwise, and the giving
of written notice thereof to Payee by the holders of such Senior Indebtedness,
all principal and interest on such Senior Indebtedness shall first be paid in
full, or such payment duly provided for in a manner satisfactory to the holders
of such Senior Indebtedness, before any further payment is made on account of
the principal of or interest on this Note.
(B) Subject to Section 3.2.8, upon the happening of an
-------------
event of default with respect to any Senior
Sch. 2.2.2-3
<PAGE>
Indebtedness (as defined in any instrument or agreement under which such Senior
Indebtedness is outstanding) which permits the holders of the Senior
Indebtedness to accelerate the maturity thereof, and upon written notice of such
default given to Payee by the holders of such Senior Indebtedness, then, unless
and until such event of default shall have been cured or waived or shall have
ceased to exist, no further payment shall thereafter be made by Maker with
respect to the principal of or interest on this Note.
3.2.3 PAYMENTS IMPROPERLY RECEIVED. In the event that any
----------------------------
payment (including any pre-payment) on account of principal of or interest on
this Note shall be received by Payee before all Senior Indebtedness is paid in
full, and at a time when Maker shall be prohibited from making such payment by
Sections 3.2.1 or 3.2.2 hereof, such payment(s) shall (but in the case of a
-------------- -----
payment prohibited only by Section 3.2.2(b), only until such event of default or
----------------
default shall have been cured or waived or shall cease to exist), be held in
trust by Payee for the benefit of and shall be paid over to the holders of all
Senior Indebtedness ratably according to the aggregate amounts remaining unpaid
on account of the Senior Indebtedness held by each such holder, to the extent
necessary to make payment in full of all Senior Indebtedness.
3.2.4 RIGHTS.
------
(A) No right of the holders of the Senior Indebtedness to
enforce the subordination provisions contained herein shall be impaired by any
act or failure to act by Maker or Payee. The provisions of this Section 3.2 are
-----------
solely for the purpose of defining the relative rights of the holders of the
Senior Indebtedness, on the one hand, and Payee on the other hand, with respect
to the order in which payments or distributions by or on behalf of Maker shall
be applied to the Senior Indebtedness and the obligations of Maker pursuant to
this Note, and nothing herein shall impair, as between Maker, its creditors
other than the holders of the Senior Indebtedness, and Payee, the obligation of
Maker which is unconditional and absolute (except as otherwise provided in the
Asset Purchase Agreement), to pay Payee the principal of and interest on this
Note in accordance with its terms, or affect the relative rights of Payee and
creditors of Maker other than the holders of the Senior Indebtedness.
(B) Any failure on the part of Maker to make any payment on
account of this Note when due shall, subject to any grace or cure period
applicable under Section 4 hereof, constitute an Event of Default, even if such
---------
failure results from the operation of this Section 3.2. Payee may accelerate the
-----------
maturity of, or institute any proceedings to enforce, this Note, or exercise all
remedies otherwise permitted by applicable law or
Sch. 2.2.2-4
<PAGE>
under this Note upon any Event of Default specified in Section 4 hereof, at the
---------
times and in the manner set forth in Section 3.2.8 herein and subject to the
-------------
rights of the holders of Senior Indebtedness under such Section.
(C) Upon any payment or distribution of assets of Maker
referred to in this Section 3.2, Payee shall be entitled to rely upon any order
-----------
or decree made by any court of competent jurisdiction in which dissolution,
winding-up, liquidation, reorganization, or other similar proceedings are
pending or upon a certificate of the liquidating trustee or agent or other
person or entity making any distribution to Payee for the purpose of
ascertaining the persons or entities entitled to participate in such
distribution, the identity of the holders of the Senior Indebtedness or other
indebtedness of Maker, the amount thereof and payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Section 3.2.
-----------
(D) Payee hereby agrees that, without any notice to or
consent from Payee, and without any other action in respect of Payee on the part
of the holders of the Senior Indebtedness: (x) any demand for payment of Senior
Indebtedness made by the holder of such Senior Indebtedness may be rescinded,
and the Senior Indebtedness and any collateral security therefor may from time
to time be renewed, extended, modified, accelerated, compromised, waived,
surrendered or released, (y) documents in connection with Senior Indebtedness,
including collateral security documents and guarantees, may be amended or
modified from time to time, and (z) any collateral security held by the holder
of Senior Indebtedness at any time for the payment of such Senior Indebtedness
may be sold, exchanged, waived, surrendered or released.
3.2.5 ALLOCATION OF PAYMENTS. No payments or distributions
----------------------
received by the holders of the Senior Indebtedness which, but for the provisions
of this Section 3.2, would otherwise have been made to Payee shall, as between
-----------
Maker, its creditors other than the holders of the Senior Indebtedness, and
Payee, be deemed to have been made as a payment by Maker to or on account of the
Senior Indebtedness, it being understood that the provisions of this Section 3.2
-----------
are and are intended solely for the purpose of defining the relative rights of
Payee, on the one hand, and the holders of the Senior Indebtedness, on the other
hand.
3.2.6 WAIVER. No failure to exercise, and no delay in
------
exercising, on the part of the holders of the Senior Indebtedness, any right,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other
Sch 2.2.2-5
<PAGE>
right, power or privilege. The rights and remedies provided in any agreement
relating to any of the Senior Indebtedness, related collateral security
documents and all other agreements, instruments and documents referred to in any
of the foregoing are cumulative and shall not be exclusive of any rights or
remedies provided by law.
3.2.7 BINDING EFFECT. Maker covenants and agrees, and
--------------
Payee by acceptance of this Note likewise covenants and agrees that: (x) this
Note is issued subject to the provisions of this Section 3.2, (y) Payee will be
-----------
bound by such provisions, and (z) the holders of the Senior Indebtedness shall
be entitled to enforce the provisions of this Section 3.2 directly against
-----------
Payee.
3.2.8 RIGHTS OF PAYEE UPON PAYMENT DEFAULT. Upon the
------------------------------------
occurrence of any default under Section 4.1 herein, before Payee may exercise
-----------
any of its remedies provided herein, it must first give the holders of Senior
Indebtedness two hundred and ten (210) days' advance written notice of its
intention to exercise such remedies. For the period commencing on the date the
holders of Senior Indebtedness receive such notice and ending 210 days
thereafter (the "Remedy Block Period"), each holder of Senior Indebtedness shall
have the sole right to enforce the rights and remedies provided in any
agreement, instrument or other document relating to its Senior Indebtedness and
proceed against its collateral (including the Collateral hereunder), provided
that it (i) commences such action prior to the expiration of the Remedy Block
Period, (ii) liquidates the collateral securing its Senior Indebtedness in a
commercially reasonable manner and (iii) notwithstanding the subordination
provisions contained in Section 3.2 herein and regardless of whether or not the
-----------
Senior Indebtedness has been paid in full, remits to Payee, for application
hereunder, out of the proceeds from any liquidation of the Collateral, an amount
equal to the lesser of (i) $250,000, (ii) the amount outstanding under the Note,
or (iii) the net amount derived from the liquidation of such Collateral (the
"Liquidation Amount"). Payee will not take any action, or exercise any rights it
may have, against Maker prior to expiration of the Remedy Block Period, provided
that the foregoing will be subject in any event to the obligation of the holder
of Senior Indebtedness to pay to Payee the Liquidation Amount. Upon expiration
of the Remedy Block Period, regardless of whether or not the holders of Senior
Indebtedness have taken any action, and assuming the default under Section 4.1
-----------
has not been cured, then, notwithstanding the subordination provisions contained
in Section 3.2 herein, Payee shall be entitled to file suit against Maker and
-----------
obtain a judgment on the Note. Thereafter, provided the holders of Senior
Indebtedness continue to not take any action against Maker, then Payee can
execute on its judgment against Maker and foreclose on the Collateral or on
other assets of Maker and take any other actions available to
Sch. 2.2.2-6
<PAGE>
Payee with respect to the Collateral. If, however, the holders of Senior
Indebtedness take action after the Remedy Block Period, then the only action
which Payee may take is to file suit and obtain a judgment against Maker (but it
may not execute on such judgment) provided, however, that the foregoing is
-------- -------
subject to the obligation of the holders of Senior Indebtedness to pay to Payee
the Liquidation Amount. Nothing contained herein shall preclude any holder of
Senior Indebtedness from taking any action against Maker before or after the
expiration of the Remedy Block Period provided such holders pay the Liquidation
Amount owed to Payee.
3.3 ENFORCEMENT. Payee irrevocably authorizes the holders of
-----------
the Senior Indebtedness (but each such holder of the Senior Indebtedness has no
obligation), under the circumstances set forth in Section 3.2.1, to demand, sue
-------------
for, collect and receive every such payment or distribution described in that
Section, to file claims and proofs of claims in any statutory or non-statutory
proceeding, to vote the full amount of the indebtedness hereunder in their sole
discretion in connection with any resolution, arrangement, plan of
reorganization, compromise, settlement or extension and to take all such other
action (including, without limitation, the right to participate in any
composition of creditors and the right to vote the amount of the indebtedness
hereunder at creditors' meetings for the election of trustees, acceptances of
plans of reorganization and otherwise), in the name of the holders of the Senior
Indebtedness or in the name of Payee or otherwise, as the holders of the Senior
Indebtedness may deem necessary or advisable for the enforcement of the
subordination provisions of this Note. Payee agrees to cooperate with the
holders of the Senior Indebtedness as reasonably requested in writing, to the
extent necessary to permit the holders of the Senior Indebtedness to exercise
their rights described in the preceding sentence. At such time as the holders
of the Senior Indebtedness have exercised their rights under this Section 3.3,
-----------
they promptly will return any instruments evidencing the indebtedness hereunder
that have been delivered to them by Payee under this Section 3.3, if they have
-----------
not been required to deliver such instruments to any other person or entity by
order of court (or other similar authority having jurisdiction over the matter)
or by law. Notwithstanding the foregoing, payments received by the holders of
the Senior Indebtedness shall not reduce the obligation of Maker to Payee for
this Note, and only payments received by Payee and not subject to any claim by
the holders of the Senior Indebtedness shall reduce the obligation of Maker to
Payee hereunder.
4. EVENTS OF DEFAULT. Each of the following shall constitute an
-----------------
event of default (each, an "EVENT OF DEFAULT") hereunder:
----------------
4.1 PAYMENT FAILURE. If Maker fails to make any payment of any
---------------
installment of interest, principal and/or
Sch 2.2.2-7
<PAGE>
principal and interest hereunder or any other sum due hereunder within ten (10)
days after Maker's receipt of notice from Payee of Maker's failure to make such
payment on the date such payment is due; or
4.2 BANKRUPTCY. If any proceeding under the Bankruptcy Code or
----------
any law of the United States or of any state relating to insolvency,
receivership, or debt adjustment is instituted by Maker, or if any such
proceeding is instituted against Maker and is consented to by the respondent or
an order for relief shall be entered in such proceeding or such proceeding shall
remain undismissed for sixty (60) days, or if Maker becomes a debtor under the
Bankruptcy Code or a trustee or receiver is appointed for any substantial part
of its property, or if Maker makes an assignment for the benefit of creditors,
admits in writing its inability to pay debts generally as they become due or
becomes insolvent.
4.3 CROSS-DEFAULT. If Maker materially breaches any of its
-------------
obligations under or specified in (a) the Security Agreement (as defined in
Section 2 herein), (b) any Lease entered into by Maker in connection with the
---------
Asset Purchase Agreement as listed on Exhibit C hereto, or (c) any other Buyer's
Transaction Document as defined in the Asset Purchase Agreement, and such
default continues after the expiration of the applicable notice and grace
period, if any, provided in the applicable agreement. Nothing herein shall
limit any remedies which Payee may have under any Lease with respect to the
leased premises thereunder in the event of a default by Maker under such Lease.
5. REMEDIES. Upon the occurrence of any Event of Default hereunder,
--------
the entire unpaid principal balance of this Note, together with all accrued and
unpaid interest thereon and all other sums owing hereunder shall, at the option
of the holder hereof, become immediately due and payable, without presentation,
demand or further action of any kind, and Payee may forthwith exercise, singly,
concurrently, successively or otherwise, any and all rights and remedies
available to Payee hereunder. The failure of the holder hereof to accelerate
the outstanding principal balance of this Note upon the occurrence of an Event
of Default hereunder shall not constitute a waiver of such default or of the
right to accelerate this Note at any time thereafter so long as the Event of
Default remains uncured. If Payee retains the services of counsel in order to
enforce any remedy available to Payee hereunder, all reasonable attorneys' fees
which are actually incurred by Payee shall be payable upon demand.
6. INTEREST LIMITATIONS. Nothing herein contained nor any
--------------------
transaction related hereto shall be construed or shall operate either presently
or prospectively to require Maker to pay interest at a rate greater than is now
lawful in such case to contract for, but shall require payment of interest only
to the
Sch. 2.2.2-8
<PAGE>
extent of such lawful rate. Any interest paid in excess of the lawful rate
shall be refunded to Maker.
7. SEVERABILITY. In the event that for any reason one or more of
------------
the provisions of this Note or their application to any person or circumstance
shall be held to be invalid, illegal or unenforceable in any respect or to any
extent, such provisions shall, to such extent, be held for naught as though not
herein contained but shall nevertheless remain valid, legal and enforceable in
all such other respects and to such extent as may be permissible. In addition,
any such invalidity, illegality or unenforceability shall not affect any other
provisions of this Note, but this Note shall be construed as if such invalid,
illegal or unenforceable provisions had never been contained herein.
8. SUCCESSORS AND ASSIGNS. This Note inures to the benefit of
----------------------
Payee, its successors and assigns, and is binding upon Maker, its successors and
assigns, and the words "Payee" and "Maker" whenever used herein shall be deemed
and construed to include such respective successors and assigns.
9. NOTICES. All notices required to be given to any of the parties
-------
hereunder shall be in writing and shall be deemed to have been sufficiently
given for all purposes when given in accordance with the terms and conditions of
the Asset Purchase Agreement.
10. CAPTIONS. The captions or headings of the sections in this Note
--------
are for convenience only and shall not control or affect the meaning or
construction of any of the terms or provisions of this Note.
11. GOVERNING LAW; AMENDMENT. This Note shall be governed by and
------------------------
construed in accordance with the laws of the State of Indiana. This Note may
only be amended by an instrument in writing signed by both Maker and Payee.
Sch. 2.2.2-9
<PAGE>
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has
duly executed this Note, under seal, on the date and year first above written.
MAKER:
NOBEL EDUCATION DYNAMICS, INC.
By: ___________________________
John R. Frock
Title: ____________________________
Executive Vice President of
Development
Sch. 2.2.2-10
<PAGE>
EXHIBIT "A" TO SUBORDINATED PROMISSORY NOTE
Description of Collateral
-------------------------
All of the following items which were purchased by Maker from Payee
pursuant to the Asset Purchase Agreement:
1. Maker's furniture, fixtures, equipment, machinery, teaching and
educational supplies, inventories, supplies, and other tangible personal
property used or held at any of the Purchased Centers (as defined in the Asset
Purchase Agreement), as well as any business forms used or held exclusively at
the locations listed on Schedule 3, as described on Schedule 1 hereto; and
---------- ----------
2. The motor vehicles identified on Schedule 2 hereto.
----------
Sch. 2.2.2-11
<PAGE>
SCHEDULE 3
Locations of Collateral
-----------------------
<TABLE>
<CAPTION>
ADDRESS OF CENTER COUNTY
----------------- ------
<S> <C> <C>
1. 4009 North High School Road Marion
Indianapolis, Indiana
2. 4402 East 62nd Street Marion
Indianapolis, Indiana
3. 3722 & 3728 West 86th Street Marion
Indianapolis, Indiana
4. 7221 Woodland Drive Marion
Indianapolis, Indiana
5. 6901 East 75th Street Marion
Indianapolis, Indiana
6. 8485 Woodfield Crossing Boulevard Marion
Indianapolis, Indiana
7. 1501 Amos Road Shelby
Shelbyville, Indiana
8. 1850 Ladoga Road Montgomery
Crawfordsville, Indiana
9. 1001 South Rangeline Road Hamilton
Carmel, Indiana
</TABLE>
Sch. 2.2.2-12
<PAGE>
EXHIBIT B
---------
Holders of Senior Indebtedness
------------------------------
CoreStates Bank, N.A.
First Valley Bank
Sch. 2.2.2-13
<PAGE>
EXHIBIT C
---------
Lease Agreements
----------------
1. Lease Agreement dated August 25, 1995 between Maker and Payee for property
located at 4009 North High School Road, Indianapolis, Indiana.
2. Lease Agreement dated August 25, 1995 between Maker and Payee for property
located at 4402 East 62nd Street, Indianapolis, Indiana.
3. Lease Agreement dated August 25, 1995 between Maker and Payee for property
located at 3722 & 3728 West 86th Street, Indianapolis, Indiana.
4. Lease Agreement dated August 25, 1995 between Maker and Payee for property
located at 7221 Woodland Drive, Indianapolis, Indiana.
5. Lease Agreement dated August 25, 1995 between Maker and Payee for property
located at 6901 East 75th Street, Indianapolis, Indiana.
6. Lease Agreement dated August 25, 1995 between Maker and Payee for property
located at 8485 Woodfield Crossing Boulevard, Indianapolis, Indiana.
7. Lease Agreement dated August 25, 1995 between Maker and Payee for property
located at 1501 Amos Road, Shelbyville, Indiana.
8. Lease Agreement dated August 25, 1995 between Maker and Payee for property
located at 1850 Ladoga Road, Crawfordsville, Indiana.
9. Lease Agreement dated August 25, 1995 between Maker and Payee for property
located at 1001 South Rangeline Road, Carmel, Indiana.
Sch. 2.2.3-1
<PAGE>
Schedule 2.2.3
Form of Security Agreement
SECURITY AGREEMENT dated as of August 25, 1995, made by and between
NOBEL EDUCATION DYNAMICS, INC., a Delaware corporation (the "Company"), CORYDON
DAY CARE CENTER, INC., an Indiana corporation d/b/a "Children Today" ("Secured
Party").
Pursuant to an Asset Purchase Agreement of even date herewith (the
"Asset Purchase Agreement") among the Company, Secured Party and the
shareholders of the Company, the Company has this day acquired from Secured
Party, nine (9) child care centers in the Indianapolis, Indiana area (the
"Purchased Centers"), together with substantially all of the assets used in the
business of operating the Purchased Centers (together with the Purchased
Centers, the "Business"). In connection with the Company's acquisition of the
Business, the Company has executed a Subordinated Promissory Note of even date
herewith (the "Note") in the principal amount of $1,125,000. This Agreement has
been executed and delivered to provide security for the Note under the terms set
forth herein.
NOW, THEREFORE, the parties agree as follows, intending to be legally
bound.
SECTION 1. Grant of Security Interest. As security for payment when
--------------------------
due of the principal of and interest on the Note, and for the performance of all
of the obligations of the Company under this Agreement (collectively, the
"Secured Obligations"), the Company hereby grants to Secured Party a security
interest in the property described on Exhibit A attached hereto, and all
proceeds and products of the foregoing, including insurance payable by reason of
loss or damage (collectively, the "Collateral").
SECTION 2. Further Assurances.
------------------
(a) The Company will execute such financing or continuation
statements, or amendments thereto, and such other agreements, instruments or
notices, as may be reasonably necessary to perfect and preserve the security
interests granted or purported to be granted hereby.
(b) The Company will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
Sch. 2.2.3-1
<PAGE>
SECTION 3. Insurance. The Company shall, at its own expense,
---------
maintain property damage and liability insurance and insurance against loss or
damage to the Collateral, including, without limitation loss by fire, theft and
such other risks of loss as are customarily insured against the types of
Collateral covered hereunder, in such amounts, form and with such insurance as
shall be reasonably satisfactory to the Secured Party. Each insurance policy
shall name the Company as an insured and the Secured Party as an additional
insured and loss payee, as its interests may appear, and shall contain a clause
requiring the insurer to give the Secured Party at least fifteen (15) days prior
written notice of any cancellation or lapse of such policy. If no Event of
Default exists at the time, the Company shall be entitled to use the proceeds of
property damage insurance for the purpose of repairing the damaged property or
replacing it with property of equivalent value.
SECTION 4. Certain Covenants as to Equipment. With respect to any
---------------------------------
equipment that may be included in the Collateral the Company shall:
(a) Keep its equipment in the places specified therefor on Schedule 3
hereto or, upon 30 days' prior written notice to Secured Party, at such other
places as shall be identified in such notice and which shall be in jurisdictions
where all action required by Section 2 can and shall be taken with respect to
such equipment.
(b) Cause its equipment to be maintained and preserved in the same
condition, repair, and working order as when acquired by it, ordinary wear and
tear excepted, and, in the case of any material loss or damage to any of its
equipment, as quickly as practicable after the occurrence thereof, make or cause
to be made all repairs, replacements, and other improvements in connection
therewith which are necessary or desirable to such end.
(c) Pay when due all property and other taxes, assessments, and
governmental charges or levies imposed upon it, and all claims (including claims
for labor, materials and supplies) against its equipment except to the extent
the validity thereof is being contested in good faith and adequate reserves
therefor have been maintained.
(d) After the occurrence and during the existence of an Event of
Default (as defined in the Note) upon written request of Secured Party, receive
in trust for the benefit of Secured Party, all amounts and proceeds received or
collected by the Company in respect of its equipment, segregate such amounts and
Sch. 2.2.3-2
<PAGE>
proceeds from other funds of the Company, and forthwith pay such amounts and
proceeds over to Secured Party in the same form as so received (with any
necessary endorsement) to be held as cash collateral and applied as provided in
Section 8(c).
SECTION 5. Transfers and Liens. The Company shall not:
-------------------
(a) Sell, assign (by operation of law or otherwise), or otherwise
dispose of any of the Collateral except for worn-out or obsolete Collateral or
Collateral disposed of in the ordinary course of business or as permitted in the
Note and/or Asset Purchase Agreement, or any combination of the above.
(b) Create or suffer to exist any lien, security interest, or other
charge or encumbrance upon or with respect to any of the Collateral, other than
the lien of the holders of Senior Indebtedness (as defined in the Note) which
lien is senior to the lien of the Secured Party hereunder, except as may be
permitted in the Note and/or Asset Purchase Agreement.
SECTION 6. Secured Party's Duties. The powers conferred on Secured
----------------------
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty to exercise any such powers. Except for the safe custody of
any Collateral in its possession, and the accounting for moneys actually
received by it hereunder, as may be required under applicable law, Secured Party
shall not have any duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against any parties or any other rights
pertaining to any Collateral.
SECTION 7. Inspection Rights. Secured Party at all times shall have
-----------------
access, during regular business hours and upon reasonable notice, to inspect and
make extracts from all of the Company's records, files, and books of account
relating to the Collateral, and the Company shall deliver any document or
instrument necessary for Secured Party to obtain records from any service bureau
maintaining records for the Company. The Company shall, at Secured Party's
request, take all steps necessary to facilitate such inspection, provided such
inspection shall not interfere with the operation of the Company's business.
SECTION 8. Remedies. If any Event of Default (as defined in the
--------
Note) shall have occurred and be continuing:
(a) Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies
Sch. 2.2.3-3
<PAGE>
of a secured party on default under the Uniform Commercial Code (the "Code") and
other applicable laws and agreements.
(b) Secured Party may (i) require the Company to, and the Company
hereby agrees that it will at its expense and upon request of Secured Party
forthwith, assemble the tangible Collateral as directed by Secured Party and
make it available to Secured Party at a place or places to be designated by
Secured Party which are reasonably convenient to Secured Party and the Company
and (ii) without notice except as specified below or otherwise required by law,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of Secured Party's offices or elsewhere, for cash, on
credit, or for future delivery, and upon such other terms as may be commercially
reasonable. The Company agrees that, to the extent notice of sale shall be
required by law, at least 10 days' notice to the Company of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification to the Company. Secured Party shall not be
obligated to make any sale of the Collateral regardless of notice of sale having
been given. Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice unless required by law, be made at the time and place to
which it was so adjourned. The Secured Party may petition a court of competent
jurisdiction for a receiver to be appointed in the event of an Event of Default
to the extent permitted by law.
(c) All cash proceeds received by Secured Party in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral shall be applied by Secured Party against the Secured Obligations in
such order as Secured Party shall elect. Any surplus of such cash or cash
proceeds held by Secured Party and remaining after payment in full of all the
Secured Obligations shall be paid over to the Company or to whosoever may be
lawfully entitled to receive such surplus.
SECTION 9. Agreement Subject to Subordination Provisions of Note.
-----------------------------------------------------
Notwithstanding anything herein to the contrary, the obligations, covenants and
agreements of the Company set forth in this Agreement are subject to those
provisions of the Note providing for the subordination of the indebtedness
evidenced by the Note to all Senior Indebtedness, as such term is defined in the
Note, and any and all rights of Secured Party set forth herein are expressly
subject to such provisions and to the rights of the holders of Senior
Indebtedness as provided therein.
Sch. 2.2.3-4
<PAGE>
SECTION 10. Amendments, Indulgences, Etc. No amendment or waiver of
----------------------------
any provision of this Agreement nor consent to any departure by the Company
therefrom shall in any event be effective unless the same shall be in writing
and signed by Secured Party and the Company, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. No failure or delay on the part of Secured Party in the
exercise of any right, power, or remedy under this Agreement shall constitute a
waiver thereof, or prevent the exercise thereof in that or any other instance.
SECTION 11. Addresses for Notices. All notices and other
---------------------
communications provided for hereunder shall be given in the manner and to the
addresses specified in the Note.
SECTION 12. Continuing Security Interest; etc. This Agreement shall
----------------------------------
create a continuing security interest in the Collateral and shall (a) be binding
upon the Company and its successors and assigns and (b) be binding upon and
inure to the benefit of Secured Party and its successors, transferees, and
assigns. Without limiting the effect of the foregoing, and notwithstanding any
provision to the contrary contained herein or elsewhere, Secured Party may
assign or transfer the Note and this Security Agreement and any of its rights,
titles and interests hereunder and thereunder, provided, that Secured Party give
notice to the Company of such assignment and the name and address of the
assignee. The execution and delivery of this Agreement shall in no manner impair
or affect any other security (by endorsement or otherwise) for the payment or
performance of the Secured Obligations and no security taken hereafter as
security for payment or performance of the Secured Obligations shall impair in
any manner or affect this Agreement or the security interest granted hereby, all
such present and future additional security to be considered as one general,
continuing security. Any of the Collateral may be released from this Agreement
without altering, varying, or diminishing in any way this Agreement or the
security interest granted hereby as to the Collateral not expressly released,
and this Agreement and such security interest shall continue in full force and
effect as to all of the Collateral not expressly released.
SECTION 13. Governing Law; Code Definitions; Counterparts. This
-------------------------------- -------------
Agreement shall be governed by and construed in accordance with the laws of the
State of Indiana. Unless otherwise defined herein, terms defined in the Code as
in effect in Indiana on the date hereof (including the terms "equipment,"
"proceeds," and "products") are used herein as therein defined as of such date.
This Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one
Sch. 2.2.3-5
<PAGE>
and the same instrument, and any of the parties hereto may execute this
Agreement by signing any such counterpart.
SECTION 14. Severability. The provisions of this Agreement are
------------
independent of and separable from each other, and no such provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other such provision may be invalid or unenforceable in whole or in
part.
SECTION 15. Release. Upon the payment in full of the Secured
-------
Obligations, the security interest granted by the Company in favor of Secured
Party hereunder shall terminate and all rights of Secured Party in and to the
Collateral shall immediately and without the necessity of any further act revert
to the Company. Upon such termination, Secured Party shall release such
security interest in all of the Collateral and execute and deliver to the
Company such documents as the Company shall reasonably request to evidence such
termination and release including, without limitation, termination statements
terminating all of the financing and continuation statements filed by Secured
Party pursuant to the provisions of this Security Agreement.
Sch. 2.2.3-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have executed or caused the execution of this Agreement as of the date first
above written.
NOBEL EDUCATION DYNAMICS, INC.
By:_____________________________
John R. Frock, Executive Vice
President of Development
CORYDON DAY CARE CENTER, INC.
By:____________________________
Donald Mitchell, President
Sch. 2.2.3-7
<PAGE>
EXHIBIT "A"
Description of Collateral
-------------------------
1. Company's furniture, fixtures, equipment, machinery, teaching and
educational supplies, inventories, supplies, and other tangible personal
property used or held at any of the Purchased Centers, as well as any business
forms used or held exclusively at the locations listed on Schedule 3, as
----------
described on Schedule 1 hereto; and
----------
2. The motor vehicles identified on Schedule 2 hereto.
----------
Sch. 2.2.3-8
<PAGE>
Schedule 4.2.1(a)
Form of Bill of Sale
BILL OF SALE
------------
KNOW ALL MEN BY THESE PRESENTS THAT CORYDON DAY CARE CENTER, INC., an
Indiana corporation with an address at P.O. Box 7217, Louisville, KY 40257-0217
(the "Company"), and DONALD MITCHELL and JEFFREY OWEN (collectively,
"Shareholders") (the Company and the Shareholders are collectively referred to
herein as "Sellers") for and in consideration of the sum of One Dollar ($1.00)
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, has granted, bargained, sold, conveyed, transferred,
assigned and delivered to NOBEL EDUCATION DYNAMICS, INC., a Delaware corporation
with an address at Rose Tree Corporate Center II, 1400 North Providence Road,
Suite 3055, Media, PA 19063 ("Buyer") and by these presents does grant,
bargain, sell, convey, transfer, assign and deliver unto Buyer, its successors
and assigns, all right, title and interest in and to all of the tangible and
intangible properties and assets owned or held by Sellers relating to or used or
held for use in connection with the operation of its child-care business at the
nine (9) centers in the Indianapolis, Indiana area as described on Schedule A
----------
hereto (the "Business") including the following assets owned or held by any of
Sellers (the "Personal Property"):
1. all of Sellers' furniture, fixtures, equipment, machinery,
teaching and educational supplies, inventories, supplies, and other tangible
personal property used or held at any of the locations described on Schedule A
----------
hereto (collectively, the Purchased Centers"), as well as any business forms
used or held exclusively at the Purchased Centers, including those items
described on Schedule 1.1.1 hereto;
--------------
2. an amount of cash equal to all prepaid tuition payments and
deposits received by the Company with respect to the Business or any Purchased
Centers representing payment for services to be provided after the date hereof
at any of the Purchased Centers;
3. to the extent assignable, all maintenance contracts, service
contracts, equipment and other leases (including, if leased, the telephone
system), vehicle leases, real property leases, telephone numbers, computer
software and other rights under contracts that Buyer elects to assume, in each
case relating to the Business or any Purchased Centers, including those
described on Schedule 1.1.3 hereto;
--------------
Sch. 4.2.1(a) -1
<PAGE>
4. to the extent assignable, all permits, franchises, licenses,
approvals and other authorizations relating to the Business or any Purchased
Centers, including those described on Schedule 1.1.4 hereto;
--------------
5. all goodwill of the Business as a going concern, including
all rights to deal with clients and customers;
6. all client and customer lists and records, enrollments and
other documents, correspondence and files of the Company relating to the
Business or any Purchased Centers, including all software and computer files
described on Schedule 1.1.6 hereto;
--------------
7. the motor vehicles identified on Schedule 1.1.7 hereto;
--------------
8. all secrecy and non-disclosure agreements with current or
former employees, consultants or contractors relating to the Business or any
Purchased Centers, including those described and identified on Schedule 1.1.8
--------------
hereto; and
9. all other tangible and intangible assets which are used in
or necessary to the operation of the Business, other than those described on
Schedule 1.1.9 hereto.
--------------
TO HAVE AND TO HOLD, all and singular the Personal Property by these
presents granted, bargained, sold, conveyed, transferred, assigned and delivered
unto Buyer, its successors and assigns, forever.
Sellers hereby represent and warrant to Buyer that Sellers hold good
and marketable title to the Personal Property, the Personal Property is being
conveyed to Buyer free and clear of all liens and encumbrances of any kind and
nature, other than the "Security Interest" of the Company retained pursuant to
the terms and conditions of that certain Asset Purchase Agreement dated August
25, 1995, by and between Sellers and Buyer, and Sellers shall warrant and defend
the title to the Personal Property unto Buyer, its successors and assigns,
against any claims and demands whatsoever.
Sch. 4.2.1(a) -2
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, Sellers
have executed, or caused a duly authorized officer to execute, this Bill of Sale
this _____ day of August, 1995.
CORYDON DAY CARE CENTER, INC.
By: ___________________________
Donald Mitchell, President
__________________________________
DONALD MITCHELL
__________________________________
JEFFREY OWEN
Sch. 4.2.1(a) -3
<PAGE>
Schedule 4.2.1
Form of Omnibus Assignment
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") dated August
25, 1995, by and between CORYDON DAY CARE CENTER, INC., an Indiana corporation
with an address at P.O. Box 7217, Louisville, KY 40257-0217("Assignor"), and
NOBEL EDUCATION DYNAMICS, INC., a Delaware corporation with an address at Rose
Tree Corporate Center, 1400 North Providence Road, Suite 3055, Media, PA 19063
("Assignee").
BACKGROUND
By Asset Purchase Agreement (the "Asset Purchase Agreement") dated
August 25, 1995, by and among Assignor, Donald Mitchell, Jeffrey Owen and
Assignee, Assignor agreed to sell to Assignee all of the tangible and intangible
properties and assets owned or held by Assignor relating to or used or held for
use in connection with the operation of its child-care business at nine (9)
locations in Indianapolis, Indiana, all on the terms and conditions set forth in
the Asset Purchase Agreement.
The Asset Purchase Agreement contemplates, inter alia, that Assignor
----- ----
shall assign to Assignee all Contracts of Assignor that Assignee shall elect to
assume, that Assignee shall assume all of the obligations of Assignor under such
assigned Contracts from and after the date of such assignment, and that Assignor
and Assignee shall enter into this Agreement evidencing such assignment.
Capitalized terms used herein and not defined shall have their
respective meanings set forth in the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Assignment of Contracts. Assignor hereby assigns, sets over and
-----------------------
transfers to Assignee all of its right, title and interest in, to and under the
Contracts enumerated in Schedule 1.1.3 attached hereto and made a part hereof.
--------------
2. Assumption of Contracts. Assignee hereby assumes and agrees
-----------------------
hereafter in due course to perform, observe and fully satisfy only those
obligations under the Contracts with respect
Sch. 4.2.1(b) -1
<PAGE>
to which (and only with respect to which) performance becomes due subsequent to
the date hereof.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned have executed this Agreement on and as of the date first set forth
above.
ASSIGNOR:
CORYDON DAY CARE CENTER, INC.
By: __________________________
Donald Mitchell, President
ASSIGNEE:
NOBEL EDUCATION DYNAMICS, INC.
By: __________________________
John R. Frock, Executive
Vice President of Development
Sch. 4.2.1(b) -2
<PAGE>
Schedule 4.2.1(i)
Form of License
LICENSE AGREEMENT
-----------------
This Agreement is made as of this 25th day of August, 1995 between
CORYDON DAY CARE CENTER, INC. D/B/A CHILDREN TODAY, an Indiana corporation
("Licensor"), and NOBEL EDUCATION DYNAMICS, INC., a Delaware corporation
("Licensee").
BACKGROUND
----------
Licensor and Licensee have entered into an Asset Purchase Agreement
dated August 25, 1995 (the "Asset Purchase Agreement") pursuant to which
Licensee is acquiring from Licensor nine (9) child care centers in the
Indianapolis, Indiana area (the "Centers") and substantially all of the assets
used in the business of operating such Centers. It is a condition to closing
under the Asset Purchase Agreement that Licensor and Licensee enter into this
Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Grant of License. Subject to the terms and conditions set forth
----------------
in this Agreement, Licensor grants to Licensee a non-exclusive, royalty-free
license to use the name "Children Today" and each other fictitious business
name, trade name, registered and unregistered trademark, service mark and
related application (other than the name "Corydon Day Care Center, Inc." or any
derivative thereof), and all other intellectual property rights of Licensor
related to the Centers (collectively, the "Intellectual Property Rights"), in
connection with Licensee's operation of the Centers.
2. Term. This Agreement will terminate, unless terminated earlier
----
as provided below, on August 25, 1997 unless extended by mutual agreement of the
parties. Upon termination of this Agreement, Licensee shall have no further
right to use the Intellectual Property Rights. This Agreement will terminate
immediately if any Permit (as such term is defined in the Asset Purchase
Agreement) held by Licensee relating to the Centers is revoked by any state
agency.
3. Compliance with Laws. Licensee shall comply with all applicable
--------------------
laws, ordinances, rules and regulations of all
Sch. 4.2.1(i) -1
<PAGE>
governmental authorities and agencies having jurisdiction in connection with its
use of the Intellectual Property Rights.
4. Assignment; Binding Agreement. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
5. Amendment. This Agreement may not be modified or amended other
---------
than by an agreement in writing signed by the parties hereto.
6. No Partnership, etc. Nothing in this Agreement is intended to or
-------------------
shall be deemed to constitute a partnership or joint venture between Licensor
and Licensee. This Agreement shall not constitute Licensee as an agent of
Licensor for any purpose whatsoever other than establishing the use of the
Intellectual Property Rights, and neither party shall have any right or
authority to assume, create or impose any obligation, liability or
responsibility, express or implied, on or in behalf of, or in the name of the
other party.
Sch. 4.2.1(i) -2
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, Licensor
and Licensee have caused this Agreement to be executed by their duly authorized
officers as of the date first above written.
LICENSOR:
CORYDON DAY CARE CENTER, INC.
D/B/A CHILDREN TODAY
By:____________________________
Donald Mitchell, President
LICENSEE:
NOBEL EDUCATION DYNAMICS, INC.
By:_____________________________
John R. Frock, Executive
Vice President of Development
Sch. 4.2.1.(i) -3
<PAGE>
Schedule 8.9
LEASE
BETWEEN
CORYDON DAY CARE CENTER, INC.
an Indiana corporation
"LANDLORD"
AND
NOBEL EDUCATION DYNAMICS, INC.,
a Delaware corporation
"TENANT"
PREMISES:
4402 East 62nd Street
Indianapolis, Indiana
(Eastwood)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. Definitions................................................... 1
2. Demised Premises; Lease Term; Renewal Terms................... 2
3. Rent.......................................................... 2
4. Taxes......................................................... 3
5. Insurance..................................................... 3
6. Maintenance................................................... 4
7. Utilities..................................................... 4
8. Destruction Of Premises....................................... 4
9. Eminent Domain................................................ 5
10. Alterations................................................... 6
11. Landlord's Access............................................. 6
12. Indemnity..................................................... 6
13. Quiet Enjoyment and Permitted Use............................. 6
14. Assignment and Subletting..................................... 7
15. Default....................................................... 8
16. Non Waiver.................................................... 9
17. Notices....................................................... 9
18. Subordination................................................. 10
19. Liens......................................................... 10
20. Landlord's Default; Additional Representations and Covenants.. 11
21. Integration................................................... 11
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
22. Successors and Assigns........................................ 11
23. Partial Invalidity............................................ 12
24. Headings and Interpretation................................... 12
25. Personal Property Financing................................... 12
26. Hazardous Substances.......................................... 12
27. Miscellaneous General Provisions.............................. 14
</TABLE>
3
<PAGE>
LEASE AGREEMENT
---------------
THIS LEASE made this ____ day of _________, 1995, by and between CORYDON
DAY CARE CENTER, INC., an Indiana corporation having its principal address of
P.O. Box 7217, Louisville, KY 40257-0217, (hereinafter called "Landlord"), and
--------
NOBEL EDUCATION DYNAMICS, INC., a Delaware corporation, having a principal place
of business at Rosetree Corporate Center II, 1400 North Providence Road, Suite
3055, Media, PA 19063 (hereinafter called "Tenant").
------
RECITALS
--------
WHEREAS, Landlord is the fee owner of certain real property known as 4402
East 62nd Street, Indianapolis, Indiana, and more particularly described in
Exhibit A attached hereto and made a part hereof, together with any and all
---------
easements, rights, liberties, privileges, improvements, hereditaments and
appurtenances in any way appertaining thereto (collectively, the "Land"), upon
----
which Landlord has constructed a building and other improvements for Tenant's
occupancy as a child care center licensed for at least 120 children or any other
lawful purpose (collectively, the "Building") (the Land and the Building are
--------
sometimes hereinafter referred to, collectively, as the "Demised Premises"); and
----------------
WHEREAS, Landlord has agreed to let to Tenant, and Tenant has agreed to
rent from Landlord, the Demised Premises subject to the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the covenants and
conditions hereinafter set forth, the parties hereto agree as follows:
1. Definitions. The following terms, when capitalized, shall have the
-----------
respective meanings ascribed to them below or set forth in the Sections of this
Lease referred to below, which meanings shall be applicable to singular and
plural nouns and verbs of any tense:
a. Base Rent: As defined in Section 3 of this Lease.
---------
b. Building: As defined in the Recitals to this Lease.
--------
c. Demised Premises: As defined in the Recitals to this Lease.
----------------
d. Effective Date: The date upon which Landlord and Tenant deliver
--------------
to each other fully executed copies of this Lease.
e. Governmental Authority(ies): Any one or more of the following:
---------------------------
1
<PAGE>
(1) governmental or quasi-governmental authorities having
jurisdiction over the Land, the Building or the Demised Premises;
(2) utility companies providing services to the Land, the
Building or the Demised Premises; and/or
(3) insurance companies and/or underwriters providing or
underwriting insurance coverage to Landlord or Tenant that pertains to the Land,
the Building or the Demised Premises.
f. Initial Term: As defined in Section 2 hereof.
------------
g. Landlord: As defined in the caption to this Lease.
--------
h. Lease Year: The period commencing on each annual anniversary of
----------
the Effective Date, and ending at midnight on the night before the next such
ensuing anniversary. The first (1st) Lease Year commences on the Effective Date
and ends at midnight on the night before the first annual anniversary of the
Effective Date.
i. Operating License: All permits, approvals and licenses required
-----------------
by any Governmental Authority for use and operation of the Building as a child
care facility for at least 120 children.
j. Renewal Term(s): As defined in Section 2 hereof.
---------------
k. Tenant: As defined in the caption to this Lease.
------
2. Demised Premises; Lease Term; Renewal Terms. Landlord hereby agrees
-------------------------------------------
to let to Tenant, and Tenant hereby agrees to rent from Landlord, the Demised
Premises for a term (the "Initial Term") commencing on the Effective Date and
------------
ending at midnight on the last day of the fifteenth (15th) Lease Year. If no
default has occurred and is then continuing thereunder beyond applicable notice
and/or cure periods, Tenant may extend the terms of this Lease for two (2)
periods of five (5) years each (each, a "Renewal Term") under all of the same
------------
terms and conditions as the initial term except that Base Rent will be payable
in the amounts set forth in Section 3 for the Renewal Term.
3. Rent. Tenant covenants to pay rent to Landlord for the Demised
----
Premises at the rate or rates set forth in Exhibit B attached hereto and made a
---------
part hereof ("Base Rent"). Throughout the term of this Lease, monthly payments
---------
on account of Base Rent shall be due and payable on the first day of each month;
except that the first such monthly rental payment, in the amount of $3,390.41,
------
shall be due and payable on or before the Effective Date. In the event payment
of rent is not made within five (5) days by Tenant to Landlord, then, in
addition to any other
2
<PAGE>
remedies available to Landlord, Tenant shall pay as additional rent an amount
equal five percent (5%) of the unpaid payment.
4. Taxes. Tenant shall be liable for all taxes levied against personal
-----
property and trade fixtures placed by Tenant in the Demised Premises. Tenant
shall, during the initial term and any extended term of this Lease, pay before
any interest or penalties begin to accrue, all taxes, assessments, and
governmental charges of any kind and nature whatsoever levied or assessed
against the Demised Premises or any part thereof, including real estate taxes
and other taxes or charges levied in lieu of such taxes, and general and special
public assessments, but not including Landlord's income taxes. Tenant shall
have the right to contest the real estate tax assessment of the Land and
Building by legal proceedings or in such other manner as Tenant may deem
suitable which, if instituted, Tenant shall conduct promptly at its own cost and
expense, free of any expense to Landlord. If necessary, the legal proceedings
will be conducted in the name of and with the cooperation of Landlord, and
Landlord shall execute all documents necessary to accomplish the foregoing. It
is acknowledged that such taxes in the State of Indiana are based on assessments
performed during the year prior to the year in which the taxes based upon such
assessments become due and payable. It is the intention of the parties that
Tenant shall pay such taxes as may become due and payable during Tenant's actual
occupancy of the Demised Premises, regardless of the date of performance of the
assessments upon which such taxes are based.
5. Insurance. Tenant agrees to provide all risk fire and extended
---------
coverage and liability insurance with respect to the Demised Premises, with
coverage equal to 100% of the full replacement cost of the Building (initially
equal to $395,000.00) and in any event sufficient to ensure that neither
Landlord nor Tenant shall be deemed to be a "co-insurer" with respect to the
risks covered by such insurance. Tenant shall provide liability insurance for
injuries to any person or persons with minimum limits of $1,000,000 for injuries
to one person and $1,000,000 for injuries to more than one person, in one
occurrence or incident. Tenant may satisfy the foregoing obligations to furnish
insurance through the use of so called "blanket policies" so long as such
coverage provides the same protection as described above. It is agreed to by the
parties that, the above insurance shall be placed by the Tenant with an
insurance company or companies with a rating of not less than "A" as defined and
determined by A.M Best or equivalent rating agency. Further, said policies or
policies shall name Landlord as an additional insured as its interests may
appear, and no such policy may cancel, expire or terminate without the company
or companies providing Landlord written notice of same at least ten (10) days
prior to such cancellation, expiration or termination. In the event of such
notice, Tenant shall provide new coverages as described above prior to such
cancellation, expiration or termination. If Tenant shall fail to provide such
coverages timely, then Landlord may (at its election but not being required to
do so) obtain such coverages with the cost of same being the responsibility of
Tenant. Failure of Tenant to provide such insurance coverages [or to pay,
within ten (10) days after demand therefor, the cost of same obtained by the
3
<PAGE>
Landlord (such demand being considered as additional rent hereunder)] shall be
deemed a material default hereunder.
6. Maintenance. Except for those portions of the Building which Landlord
-----------
is to maintain as provided herein, Tenant agrees, at its own expense, to make
all necessary repairs to the Building, including but not limited to, all
interior and exterior portions thereof, and to do all other necessary
maintenance in connection with the Demised Premises while this Lease is in
effect to the end that the Demised Premises are kept and maintained in a good,
safe and attractive condition at all times, normal wear and tear and damage
caused by condemnation or casualty excepted. Tenant shall be solely responsible
for snow removal, lawn maintenance and garbage removal. Notwithstanding
anything to the contrary set forth herein, Landlord, and not Tenant, shall bear
the responsibility for (a) maintaining, repairing and replacing the structural
elements (including the roof), slab floor and foundation of the Building in a
good and safe condition, and (b) all material defects and latent construction
defects in the structural elements (including the roof), slab floor and
foundation of the Building. Landlord shall not be liable to anyone for
interruption in or cessation of any services rendered to the Demised Premises or
Building due to any accident, making of repairs, alterations or improvements,
labor difficulties, trouble in obtaining fuel, or supplies from the sources from
which they are usually obtained, or any cause beyond Landlord's control if such
interruption or cessation shall be for less than three (3) days. If such
interruption of cessation shall be for more than three (3) days, Tenant may
abate all Base Rent after the first three (3) days and other obligations of
Tenant under this Lease until such time that service returns to normal. It is
specifically agreed by the parties that Tenant shall solely be responsible for
and shall provide the above described maintenance to all electrical, HVAC,
plumbing and any other mechanical or electrical system in the Demised Premises.
Tenant hereby acknowledges that it has carefully inspected the Demised Premises
and accepts same and all personal property and trade fixtures therein "as is and
where is", except for latent defects.
7. Utilities. Tenant shall pay all charges for heat, water, gas,
---------
electricity and other utilities used or consumed on the Demised Premises.
8. Destruction Of Premises. a. In the event the Building or any part
-----------------------
thereof, shall, during the term of this Lease, be destroyed or damaged by fire,
explosion, the elements or other casualty, Tenant shall give prompt notice
thereof to Landlord. Landlord and Tenant shall determine the extent of any
damage or destruction (and the time required to repair the damage) within thirty
(30) days after the occurrence of such damage or destruction.
b. If the damage or destruction renders the Building untenantable
for Tenant's intended use (in Tenant's judgment, exercised commercially
reasonably), then Tenant may terminate this Lease by written notice to Landlord,
Landlord shall be entitled to receive any proceeds payable out of the all risk
fire and extended coverage insurance to be provided by Tenant pursuant to
Section 5 (without claim of Tenant),
4
<PAGE>
and thereupon this Lease shall terminate, and the parties shall have no further
obligation hereunder except Tenant's obligation to pay the rental and other
charges and obligations accrued to the date of such damage.
c. If the damage or destruction:
(1) renders the Building untenantable for Tenant's intended use
(in Tenant's judgment, exercised commercially reasonably),
and Tenant does not chose to terminate this Lease; or
---
(2) does not, in Tenant's judgment, exercised commercially
---
reasonably, render the Building untenantable for Tenant's
intended use;
then, in either such event, Landlord, shall, at Landlord's cost, utilizing its
best efforts and due speed and diligence, proceed to build, rebuild or repair
the Building to substantially the same condition in which the Building existed
prior to such damage or destruction; provided, however, that Landlord shall only
-------- -------
be required to build, rebuild or repair to the extent that the proceeds from the
all risk fire and extended coverage insurance to be provided by Tenant pursuant
to Section 5 are made available to Landlord. Base Rent shall be equitably
abated during the period of such building, rebuilding and repair by an amount
proportionate to the area of the Building rendered unusable by Tenant.
9. Eminent Domain. In the event the Building or a portion of the
--------------
Building and/or the Land is taken under the power of eminent domain for any
public or quasi-public use so as to render the Building and/or the Land
untenantable for Tenant's intended use (in Tenant's judgment, exercised
commercially reasonably), then this Lease shall terminate effective upon the
earlier of the date Tenant thereafter vacates the Demised Premises or the date
that the condemning authority takes possession of the condemned property and,
thereupon, both parties shall be relieved of any further obligation under this
Lease, except that the parties shall fulfill all of their obligations hereunder
to be performed to the date of such termination. In the event that a portion of
the Building and/or the Land is so taken, but this Lease is not terminated and
canceled as above provided, then the rent thereafter becoming due hereunder
after the date of such taking shall be reduced to a reasonable sum proportionate
to the value of the Demised Premises after the condemnation.
All condemnation proceeds with respect to the Demised Premises shall be the
sole property of Landlord. Tenant hereby waives all rights to any award in
condemnation, including, without limitation, rights arising from termination of
all or any part of Tenant's leasehold interest. Tenant may, however, file a
separate claim for its leasehold improvements, trade equipment, machinery and
fixtures and relocation expenses but not for the value of the unexpired balance
of the term or its leasehold interest.
5
<PAGE>
10. Alterations. a. Landlord agrees that Tenant may, at its own expense,
-----------
from time to time during the term hereof, make such interior alterations and
changes in and to the Demised Premises, as it finds necessary or convenient for
its purposes, provided that such interior alterations or changes shall not
lessen the value of the Building. Any such alterations or changes and any new
structures therein shall remain with the Demised Premises at the end of the term
of this Lease, or any renewal term hereof, and shall be considered as
improvements to and become a part of the real estate of Landlord. Tenant agrees
that any alterations, or changes aforesaid made by it will be erected or made in
a first-class, workmanlike manner and all shall be subject to the terms and
conditions of this Lease. Any alterations or changes having a cost in excess of
$10,000 must be approved in writing by the Landlord prior to being made, such
approval shall not be unreasonably withheld or unduly delayed.
b. Notwithstanding anything contained in Section 10.a hereof, all
trade equipment, machinery and trade fixtures placed in and upon the Demised
Premises by Tenant during the term of this Lease shall be and remain personal
property belonging to Tenant, and, at the expiration of the term of this Lease,
or any renewal hereof, Tenant shall have the right to remove such personal
property from the Demised Premises, restoring and repairing, at its expense, any
damage to the Demised Premises directly caused by the removal of such items of
personal property.
11. Landlord's Access. During Tenant's normal business hours, and
-----------------
provided such entry does not unreasonably interfere with Tenant's business
operations, Landlord and its agent may enter upon the Demised Premises (but only
if accompanied by a representative of Tenant) after reasonable notice to Tenant
(a) to exhibit the Demised Premises during the last six (6) months of this
Lease, or (b) for the purpose of maintaining, repairing and inspecting the same,
or (c) showing said Demised Premises to prospective purchasers or lenders.
12. Indemnity. Tenant shall, to the extent not covered by the liability
---------
insurance herein described, indemnify, pay and save harmless Landlord from all
liability for damages or injury to any person, firm or corporation occasioned by
or resulting from all occurrences or incidents on the Demised Premises during
the term of this Lease, except if caused by the negligence or fault of Landlord
or its agents and employees.
13. Quiet Enjoyment and Permitted Use. Landlord warrants that Tenant, so
---------------------------------
long as no default has occurred and is then continuing under this Lease beyond
applicable notice and/or cure periods, shall have peaceful possession and quiet
enjoyment of the Demised Premises during the term of this Lease and that Tenant
may use the same for a day care center (the "Permitted Use") and for any other
lawful purpose. Tenant's use of the Demised Premises shall not violate any
ordinance, law or regulations of any Governmental Authority. All signs and the
location thereof shall be furnished at the sole cost and expense of Tenant, and
shall be subject to the prior approval of Landlord, such approval not to be
unreasonably
6
<PAGE>
withheld or unduly delayed. Landlord expressly acknowledges that Tenant is
entering into this Lease in reliance upon its ability to conduct the Permitted
Use in compliance with all applicable ordinances, laws and regulations, and
without any limitation or restriction whatsoever by reason of any provision or
restriction which exists as of the date hereof and affected the Demised Premises
(any such limitation or restriction being called a "Restriction"). Landlord
hereby represents and warrants to Tenant that, to the best of Landlord's
knowledge, information and belief, (i) the Demised Premises is currently in
compliance with all such ordinances, laws and regulations which apply or pertain
to the Demised Premises or Tenant's use therein, and (ii) there are no
Restrictions as of the date of this Lease which apply or pertain to the Demised
Premises or Tenant's use therein. With respect to any present Restrictions,
Landlord agrees to indemnify, defend and hold Tenant harmless from and against
all liability, obligation, claims, suits, expenses, including reasonable
attorney's fees, damages or loss including any civil or (to the extent permitted
by law) criminal fine or penalty incurred or suffered by Tenant by reason of
Landlord's breach of the foregoing warranty.
14. Assignment and Subletting. a. Except for a "Permitted Transaction"
-------------------------
(as defined below), Tenant shall not assign, mortgage, pledge or encumber this
Lease or sublet the Building, in whole or part, without the prior written
consent of Landlord, which consent may not be unreasonably withheld or unduly
delayed. For the purposes of this Section, any mortgage, conveyance, transfer
or encumbrance of this Lease and any transfer by operation of law, other than a
Permitted Transaction, shall be deemed an assignment.
b. Tenant may assign this Lease or sublet the Building, in whole or
in part, without Landlord's consent, to a Related Party (as defined below) (such
assignment or subletting, a "Permitted Transaction"). The term "Related Party"
shall mean the following persons or entities:
(1) an "Affiliate" of Tenant, which term is defined as a
subsidiary, parent or subsidiary of a parent of Tenant. A
"subsidiary" is a corporation fifty percent (50%) of whose
voting stock is owned by another corporation, which latter
corporation is referred to as a "parent";
(2) a successor to Tenant by (3) merger or consolidation, or (4)
acquisition of all or substantially all of the assets or
stock of Tenant; or
(5) an Affiliate of any of the entities described in Section
14.b.(2) above.
c. In the event of any assignment or subletting with the written
consent of Landlord (or in the event of any Permitted Transaction), Tenant will
nevertheless remain liable for the performance of all of the terms, conditions
and
7
<PAGE>
covenants of this Lease. In the event of any Permitted Transaction, Tenant will
nevertheless remain liable for the performance of all of the terms, conditions
and covenants of this Lease. Any permitted assignment or subletting (other than
a Permitted Transaction) shall be by agreement in form and content reasonably
acceptable to Landlord.
During any period that Tenant remains liable as assignor-guarantor
hereunder, Tenant shall not be bound by any amendment or modification of this
Lease unless Tenant shall have specifically consented thereto in writing.
Landlord shall notify all guarantors of all failures of performance on the part
of the assignee-in-possession which, with the passage of time could ripen into a
default, within thirty (30) days after such failure of performance occurs,
whether or not Landlord has given the assignee-in-possession notice of such
failure. Following the assignee-in-possession's failure to cure the default,
any guarantor shall be accorded an additional period of five (5) days in the
case of monetary failures and fifteen (15) days in the case of non-monetary
failures (or such longer period of time as may be necessary to cure such non-
monetary failure, so long as such guarantor is proceeding, with due diligence,
to cure such non-monetary failure to comply) in which to cure said failures.
d. Consent by Landlord to any assignment (other than a Permitted
Transaction) shall not constitute a waiver of the necessity for such consent to
any subsequent assignment. If the Premises be occupied by anyone other than
Tenant, whether as assignee, concessionaire or otherwise, Landlord may collect
rent from such occupant and apply the net amount collected to the rent reserved
under this Lease but acceptance of such rent shall not be deemed a consent to
any such occupancy by any such other party. Any consent by Landlord to any
assignment of this Lease (other than a Permitted Transaction, as to which no
such consent shall be required) may be conditioned upon the assignee assuming
the full and faithful performance of all the terms and conditions of this Lease
and upon the continued liability of Tenant under all the terms hereof.
15. Default. If Tenant shall fail to pay to Landlord the rent and/or
-------
other sums of money payable to Landlord as and when due and payable hereunder
and such default shall continue for a period of ten (10) days after written
notice thereof shall be given to Tenant by Landlord, or in the case Tenant shall
fail to comply with any other provisions or conditions of this Lease, upon its
part to be kept and performed, and such default shall continue for a period of
thirty (30) days (or such longer period of time as may be necessary to cure such
non-compliance, so long as Tenant is proceeding, with due diligence, to cure
such nonmonetary failure to comply) after written notice thereof shall be given
to Tenant by Landlord, or if Tenant shall be adjudged bankrupt, or shall make an
assignment for the benefit of creditors, or if a receiver of any property of
Tenant in or upon said Demised Premises or for all or part of Tenant's interest
hereunder be appointed in any action, suit or proceeding, by or against Tenant
and such adjudication, assignment or appointment (unless voluntary) shall not be
vacated or annulled within ninety (90) days, or if the interest of Tenant in the
Demised Premises shall be sold under execution, or other legal process, it shall
be
8
<PAGE>
lawful for Landlord, to terminate this Lease and to remove Tenant from
possession of the Demised Premises, and again have, repossess and enjoy the same
as if this Lease had not been made, and everything herein contained on the part
of Landlord to be done and performed shall cease and determine. The foregoing
rights are without prejudice, however, to the right of Landlord to recover from
Tenant all damages incurred by Landlord as result of Tenant's breach and
additionally Landlord may retake possession of and relet said Demised Premises
for the remainder of said term and may recover from Tenant any deficiency
between the amount so obtained and the rent herein reserved plus all costs
incurred by Landlord as a result of Tenant's default, including without
limitation attorneys' fees, brokerage commissions and remodeling fees; provided,
however, Landlord shall be obligated in such event to make a good faith effort
to mitigate its damages. Landlord hereby confirms its acknowledgement and
agreement that, except as set forth in the Asset Purchase Agreement identified
below and the Security Agreement and Financing Statements forming a part
thereof, it shall have no right of distraint and no right, title or interest
(including, without limitation, any landlord's lien) in or to any trade
equipment, machinery, trade fixtures, or any other personal property placed upon
the Demised Premises by Tenant or any permitted sublessee, assignee, or
occupant. It is acknowledged by the parties that this Lease is being entered
into simultaneously with other lease agreements between the parties or their
affiliates. Attached hereto as and incorporated herein by reference as Exhibit
C is a listing of all of the other lease agreements referenced above. Further,
in connection with the execution of this Lease and the above referenced other
lease agreements, the parties have executed a Asset Purchase Agreement dated as
of August __, 1995, and other related documents, including the Buyer's
Transaction Documents (as defined in the Asset Purchase Agreement). It is
agreed to by the parties hereto that in the event of a default by Tenant beyond
applicable notice and/or cure periods, if any, in any of the Buyer's Transaction
Documents or any one or more of the other lease agreements, as set forth on
Exhibit C, then, at the election of Landlord, this Lease shall be in default and
all of the rights and remedies of Landlord as set forth herein shall apply to
this Lease, any and all of the other leases listed on Exhibit C and any of the
Buyer's Transaction Documents. It is the intention of the parties that there be
a cross-default provision in each of the documents referenced above so that if
there is a default in any one or more such documents beyond applicable notice
and/or cure periods, if any, then, at the election of the Landlord, all or any
of those documents may also be held in default.
16. Non Waiver. No failure to insist on performance in any instance of
----------
any obligation hereunder shall be deemed a waiver of such performance, or any
subsequent performance of such obligation or of the performance of any other
obligation hereunder, and no waiver in any instance of the performance of any
obligation hereunder shall be deemed a waiver of any subsequent performance of
such obligation or of the performance of any other obligation hereunder.
17. Notices. For all purposes hereunder, including the payment of
-------
rentals, the addresses of the parties hereto are as follows:
9
<PAGE>
Landlord:
President
Corydon Day Care Center, Inc.
P.O. Box 7217
Louisville, Kentucky 40257-0211
Tenant:
President
Nobel Education Dynamics, Inc.
Rosetree Corporate Center II
1400 North Providence Road, Suite 3055
Media, PA 19063
Either party may change the foregoing address by notice to the other party
given pursuant to this Section. All notices required or permitted under this
Lease shall be in writing and shall be given by either certified or registered
mail, return receipt requested, or by express, overnight courier (such as
Federal Express). Notice given by mail as provided above shall be effective
three (3) days after mailing. Notice given by express, overnight courier shall
be effective the day after delivery to the courier.
18. Subordination. This Lease and all of the rights of Tenant hereunder
-------------
are and shall be subject and subordinate to the lien of any deed of trust,
mortgage or mortgages, now or hereinafter placed on the Demised Premises or any
part thereof, and to any and all renewals, modifications, consolidations,
replacements, extensions or substitutions of any such deeds of trust, mortgage
or mortgages (all of which are hereinafter termed the mortgage or mortgages);
provided, however, that as a condition to such subordination, each holder of
each or all of such mortgages shall enter into a non-disturbance agreement, in
form and content reasonably acceptable to both Tenant and such holder, to the
effect that so long as Tenant is not in default under this Lease, or any renewal
hereof, no foreclosure of the lien of said mortgage or of any other proceeding
in respect thereof shall divest, impair, modify, abrogate, or otherwise
adversely affect any interests or rights whatsoever of Tenant under the said
Lease. Landlord agrees to obtain from the holders of all existing mortgages
which are senior or superior to Tenant's interest in the Demised Premises under
this Lease a non-disturbance agreement in form acceptable to Tenant, and the
obtaining of such agreement(s) shall be a condition precedent to the validity
and effectiveness of Tenant's obligations under this Lease.
19. Liens. If, because of any act or omission of Tenant or anyone
-----
claiming through or under Tenant, any mechanic's or other lien or order for the
payment of money shall be filed against the Demised Premises, Tenant shall, at
its expense, cause the same to be canceled and discharged of record within
thirty (30) days after the date of filing thereof, or file an appropriate bond,
satisfactory to Landlord, in the exercise
10
<PAGE>
of commercial reasonableness, which will cause such lien to be discharged as a
lien against the Demised Premises, or deliver to Landlord adequate security,
acceptable to Landlord, in the exercise of commercial reasonableness, for the
discharge thereof, and shall also indemnify and hold harmless Landlord from and
against any and all costs, expenses, claims, losses and damages, (including
reasonable attorneys' fees) in connection therewith.
20. Landlord's Default; Additional Representations and Covenants.
------------------------------------------------------------
a. Landlord shall be in default hereunder if Landlord shall fail to
perform any of its obligations under this Lease within thirty (30) days (ten
(10) days in the case of monetary obligations owed by Landlord to Tenant) after
receipt of written notice from Tenant specifying such failure unless the
intrinsic nature of such failure is such that it cannot reasonably be cured
within thirty (30) days in which case Landlord shall have the additional time
reasonably necessary to cure such failure, provided Landlord commences to cure
the failure within such thirty (30) day period and proceeds with diligence and
continuity. If Landlord fails to cure, then Tenant may, at its option, in
addition to any other remedies at law or equity, incur any expense necessary to
perform the obligations of Landlord specified in such notice and deduct such
expense from the rent and other charges becoming due hereunder.
b. Landlord represents and warrants that:
(1) Landlord is the fee simple owner of the Building and Leased
Premises;
(2) Landlord has full right, power and authority to make,
execute and deliver this Lease;
(3) there are no agreements, restrictions, covenants,
encumbrances or easements which will increase any of Tenant's obligations under
this Lease or diminish any of Tenant's rights hereunder.
21. Integration. It is expressly understood and agreed by and between the
-----------
parties hereto that this Lease sets forth all the promises, agreements,
conditions and understandings between Landlord and/or its agents and Tenant
relative to the Demised Premises and that there are no oral promises,
agreements, conditions or understandings between the parties with respect
thereto.
22. Successors and Assigns. This Lease and all the covenants, provisions
----------------------
and conditions herein contained shall be inure to the benefit of and be binding
upon the parties hereto and their respective heirs, personal representatives,
successors and permitted assigns. Without limiting the effect of the foregoing,
and notwithstanding any provision to the contrary contained herein or elsewhere,
Landlord may assign or transfer this Lease or any amounts to be paid to Landlord
hereunder. Further, Landlord may, in its sole discretion, sell or convey the
real estate which is the subject
11
<PAGE>
of this Lease, provided, that the new owner of the real estate shall purchase or
obtain the same subject to the terms and conditions of this Lease. In the event
of an assignment or transfer of this Lease or the sale or conveyance of the real
estate, as described above, then the new holder or owner shall become the
substitute Landlord and is subject to perform all of the duties of "Landlord"
hereunder. Further, in such event, the "Landlord" assigning or transferring this
Lease or selling or conveying the real estate shall be fully released by the
Tenant, and Tenant shall look solely to the new holder or owner for the
performance, of any obligation which accrued or occurred under this Lease.
23. Partial Invalidity. If any term, covenant or condition of this Lease
------------------
or the application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Lease or the application of such
term, covenant or condition of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
24. Headings and Interpretation. The paragraph headings used throughout
---------------------------
this instrument are for convenience and reference only, and words contained
therein shall in no way be held to explain, modify, amplify or aid in the
interpretation, construction, or meaning of the provisions of this Lease.
Whenever herein the masculine gender is used, the same shall include the
feminine and neuter gender.
25. Personal Property Financing. Subject to and in accordance with the
---------------------------
terms and conditions of the Asset Purchase Agreement and the Security Agreement
and Financing Statements forming a part thereof, Tenant may finance some or all
of Tenant's trade fixtures, equipment and furnishings which are located at the
Demised Premises. In this regard, except as set forth in the Asset Purchase
Agreement and the Security Agreement and Financing Statements forming a part
thereof, Landlord agrees that it shall have no lien on such trade fixtures,
equipment and furnishings and that any claim which Landlord may have against
such property shall be and remain junior and inferior to the claim of any third
party providing financing to Tenant for the acquisition of such property.
26. Hazardous Substances. Tenant will comply with all federal, state and
--------------------
local environmental laws, rules, regulation and statutes applicable to Tenant's
use and occupancy of the Demised Premises during the term of this Lease.
Tenant shall not cause or permit any Hazardous Material (as hereinafter
defined) to be brought upon, kept, or used in or about the Demised Premises by
Tenant, its agents, employees, contractors, or invitees, except for such
Hazardous Material as is necessary to Tenant's business.
Any Hazardous Material permitted on the Demised Premises as provided in
this Section, and all containers therefor, shall be used, kept, stored, and
disposed of in a manner that complies with all federal, state and local laws or
regulations applicable to such Hazardous Material.
12
<PAGE>
Landlord agrees to indemnify, defend and hold Tenant free and harmless from
and against any and all cost, claims, suits, causes of action, losses, injury or
damage including without limitation, personal injury damage (including death) as
well as damage to property (including disruption of Tenant's business and its
quiet and peaceful possession of the Demised Premises) resulting from the
presence or removal of Hazardous Materials from the Demised Premises provided
that the same was not placed or installed therein by Tenant.
Landlord shall be solely responsible for and shall comply with all laws,
rules, ordinances or regulations of any governmental authority having
jurisdiction over the Demised Premises with respect to the presence or removal
of Hazardous Materials not installed therein by Tenant.
Tenant shall be solely responsible for and shall comply with all laws,
rules, ordinances or regulations of any governmental authority having
jurisdiction over the Demised Premises with respect to the presence or removal
of Hazardous Materials installed therein by Tenant.
As used herein, the term "Hazardous Material" means (a) a "hazardous waste"
as defined by the Resource Conservation Recovery Act of 1976, as amended from
time to time, and regulations promulgated thereunder; (b) any "hazardous
substance" as defined by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time, and regulations
promulgated thereunder; (c) any oil, petroleum products, and their by-products;
and (d) any substance that is or becomes regulated by any federal, state, or
local governmental authority.
Tenant hereby agrees that it shall be fully liable for all costs and
expenses related to the use, storage, and disposal of Hazardous Material kept on
the Demised Premises by any party other than Landlord, its agents, employees,
contractors, or invitees, and Tenant shall give immediate notice to Landlord of
any violation or potential violation of the provisions of this Section. Tenant
agrees to indemnify, defend and hold Landlord free and harmless from and against
any and all cost, claims, suits, causes of action, losses, injury or damage
including without limitation, personal injury damage (including death) as well
as damage to property resulting (i) from the presence or removal of Hazardous
Materials from the Demised Premises placed or installed therein by any party
other than Landlord, its agents, employees, contractors, or invitees, and (ii)
Tenant's breach of any its covenants set forth in this Section 26. The
provisions of this Section 26 shall be in addition to any other obligations and
liabilities either party may have to the other at law or equity and shall
survive the transactions contemplated herein and shall survive termination of
this Lease.
13
<PAGE>
27. Miscellaneous General Provisions.
--------------------------------
a. Estoppel Certificate. Tenant shall, within fifteen (15) days
following receipt of a written request from Landlord execute acknowledge and
deliver to Landlord or to any lender, purchaser or prospective lender or
purchaser designated by Landlord a written statement certifying (1) that this
Lease is the only lease between the parties and is in full force and effect and
unmodified (or, if modified, stating the nature of such modification); (2) the
date to which rent has been paid; and, (3) that there are not, to Tenant's
knowledge, any uncured defaults (or specifying such defaults if any are
claimed). Any such statement may be relied upon by any prospective purchaser or
mortgagee of all or any part of the Demised Premises.
b. Recording of Memorandum of Lease. If requested by either party,
a Memorandum of Lease containing the information required by Indiana law, or any
other information determined to be pertinent by Landlord concerning this lease
shall be prepared and executed by both parties and filed for record. Recording
costs will be at the expense of the requesting party.
c. No Broker. Each party represents and warrants to the other party
that it has not engaged any broker, finder or other person who will be entitled
to any commission or fee with respect to the negotiation, execution or deliver
of this Lease or any assignment, sublease or renewal thereof and shall indemnify
the other party against any losses, cost, liability or expenses legally imposed
by the other party as a result of any claim asserted by any such broker, finder
or other person.
d. Governing Law. This Lease is being executed and delivered by
Lessor in the State of Indiana and shall be construed and enforced in accordance
with the laws of that state.
e. Definition of the Relationship between the Parties. Landlord
shall not, by virtue of the execution of this Lease or the leasing of the
Demised
14
<PAGE>
Premises to Tenant, become or be deemed a partner of or joint venturer with
Tenant in the conduct of Tenant's business on the Demised Premises or otherwise.
IN WITNESS WHEREOF, the parties have hereunto set their hands the day and
year first above written.
LANDLORD:
CORYDON DAY CARE CENTER, INC.
By:_____________________________
Its Authorized Representative
TENANT:
NOBEL EDUCATION DYNAMICS, INC.
By:_____________________________
Its Authorized Representative
15
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C>
Agreement................................................................ 1
Annual Statements........................................................ 10
Assumed Liabilities...................................................... 4
Bill of Sale............................................................. 5
Business................................................................. 1
Buyer.................................................................... 1
Buyer's Transaction Documents............................................ 19
Cash Payment............................................................. 3
Closing.................................................................. 5
Closing Date............................................................. 5
Code..................................................................... 14
Commission............................................................... 20
Company.................................................................. 1
Contracts................................................................ 2
Environmental Laws....................................................... 15
Evaluation Material...................................................... 23
Event of Default............................................... Sch. 2.2.2-7
Excluded Assets.......................................................... 2
Extraordinary Expenses................................................... 26
Financing Statements..................................................... 3
Hazardous Substance...................................................... 15
Indemnified Party........................................................ 31
Indemnifying Party....................................................... 31
Intellectual Property.................................................... 13
Interest Rate.................................................. Sch. 2.2.2-1
Laws..................................................................... 8
Leases................................................................... 27
License.................................................................. 6
Maker.......................................................... Sch. 2.2.2-1
Maturity Date.................................................. Sch. 2.2.2-1
Note..................................................................... 3
Omnibus Assignment....................................................... 5
Payee.......................................................... Sch. 2.2.2-1
Payment Date................................................... Sch. 2.2.2-2
Permits.................................................................. 2
Permitted Encumbrances................................................... 12
Phase I Reports.......................................................... 16
Purchase Price........................................................... 3
Purchased Assets......................................................... 1
Purchased Centers........................................................ 1
Representatives.......................................................... 22
Security Agreement....................................................... 3
Security Interest........................................................ 3
Sellers.................................................................. 1
Sellers' Transaction Documents........................................... 7
Shareholders............................................................. 1
Taxes.................................................................... 11
</TABLE>
Index 1
<PAGE>
<TABLE>
<S> <C>
Agreement................................................................. 1
Annual Statements......................................................... 10
Assumed Liabilities....................................................... 4
Bill of Sale.............................................................. 5
Business.................................................................. 1
Buyer..................................................................... 1
Buyer's Transaction Documents............................................. 17
Cash Payment.............................................................. 3
Closing................................................................... 5
Closing Date.............................................................. 5
Code...................................................................... 15
Commission................................................................ 19
Company................................................................... 1
Contracts................................................................. 2
Deposit Money............................................................. 3
Environmental Laws........................................................ 15
Escrow Account............................................................ 3
Escrow Agent.............................................................. 3
Escrow Agreement.......................................................... 3
Evaluation Material....................................................... 22
Event of Default................................................ Sch. 2.2.3-7
Excluded Assets........................................................... 2
Financing Statements...................................................... 4
Hazardous Substance....................................................... 15
Indemnified Party......................................................... 30
Indemnifying Party........................................................ 29
Intellectual Property..................................................... 13
Interest Rate................................................... Sch. 2.2.3-1
Interim Balance Sheet..................................................... 10
Interim Statements........................................................ 10
Laws...................................................................... 8
License................................................................... 6
Maker........................................................... Sch. 2.2.3-1
Maturity Date................................................... Sch. 2.2.3-1
Note...................................................................... 3
Omnibus Assignment........................................................ 5
Payee........................................................... Sch. 2.2.3-1
Payment Date.................................................... Sch. 2.2.3-1
Permits.................................................................... 2
Permitted Encumbrances..................................................... 12
Purchase Price............................................................. 3
Purchased Assets........................................................... 1
Purchased Centers.......................................................... 1
Representatives............................................................ 21
Security Agreement......................................................... 4
Security Interest.......................................................... 4
Sellers.................................................................... 1
Sellers' Transaction Documents............................................. 7
Shareholders............................................................... 1
</TABLE>
Index 2
<PAGE>
<TABLE>
<S> <C>
Taxes...................................................................... 11
</TABLE>
Index 3
<PAGE>
Exhibit 2.B
STOCK PURCHASE AGREEMENT
BY AND AMONG
NOBEL EDUCATION DYNAMICS, INC.,
EDUCO, INC.
AND
THE STOCKHOLDERS OF EDUCO, INC.
LISTED ON SCHEDULE A HERETO
DATED
MAY 23, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. ACQUISITION OF SHARES.......................................... 1
1.1 Sale and Purchase of Shares...................................... 1
SECTION 2. PURCHASE PRICE AND PAYMENT..................................... 1
2.1 Purchase Price................................................... 1
2.2 Closing Statement................................................ 2
2.3 Post-Closing Adjustment.......................................... 3
SECTION 3. CLOSING 4
3.1 Time and Place of Closing........................................ 4
SECTION 4. DELIVERIES AT CLOSING.......................................... 4
4.1 Deliveries by Sellers at Closing................................. 4
4.2 Deliveries by Buyer at Closing................................... 7
4.3 Default by Any Seller at Closing................................. 8
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLERS...................... 9
5.1 Organization; Authority.......................................... 9
5.2 Due Authorization; Binding Agreement............................. 9
5.3 Capitalization................................................... 10
5.4 Absence of Conflicting Agreements................................ 10
5.5 Consents and Approvals........................................... 10
5.6 Brokers 10
5.7 Investments and Subsidiaries..................................... 11
5.8 Compliance with Laws............................................. 11
5.9 Permits 11
5.10 Encumbrances Created by this Agreement........................... 11
5.11 Litigation....................................................... 11
5.12 Financial Statements............................................. 12
5.13 Absence of Certain Changes and Events............................ 12
5.14 Title to and Condition of Assets, Properties, etc................ 13
5.15 List of Properties, Contracts, etc............................... 14
5.16 Contract Validity, Defaults, Notice/Consent...................... 14
5.17 Managers......................................................... 15
5.18 Labor Matters.................................................... 15
5.19 Relationships.................................................... 16
5.20 Non-Foreign Persons.............................................. 16
5.21 Employee Benefit Plans........................................... 16
5.22 Environmental Protection......................................... 16
5.23 Child Abuse...................................................... 18
5.24 Taxes............................................................ 18
5.25 Books and Records................................................ 19
5.26 No Unusual Arrangements with Employees or
Customers........................................................ 19
5.27 Disclosure....................................................... 20
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER........................ 20
6.1 Organization and Standing........................................ 20
6.2 Power and Authority.............................................. 20
6.3 Binding Agreement................................................ 20
6.4 Absence of Conflicting Agreements................................ 21
6.5 Consents......................................................... 21
6.6 Litigation....................................................... 21
6.7 Capitalization................................................... 21
6.8 SEC Filings...................................................... 21
SECTION 7. INFORMATION AND RECORDS CONCERNING BUSINESS.................... 22
7.1 Access to Information and Records
Before Closing................................................... 22
7.2 Due Diligence Investigation...................................... 22
SECTION 8. OBLIGATIONS OF THE PARTIES UNTIL THE CLOSING DATE............. 23
8.1 Conduct of Business Pending Closing.............................. 23
8.2 Negative Covenants of the Company................................ 23
8.3 Affirmative Covenants............................................ 23
8.4 Pursuit of Consents.............................................. 24
SECTION 9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.................... 24
9.1 Deliveries at Closing............................................ 25
9.2 Representations and Warranties................................... 25
9.3 Performance of Covenants......................................... 25
9.4 Legal Matters.................................................... 25
9.5 No Material Adverse Change....................................... 25
9.6 Governmental Approvals........................................... 25
9.7 Other Approvals.................................................. 25
9.8 Accounting Matters............................................... 26
SECTION 10. CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS.................. 26
10.1 Deliveries at Closing........................................... 26
10.2 Representations and Warranties.................................. 26
10.3 Performance of Covenants........................................ 26
10.4 Legal Matters................................................... 26
SECTION 11. OBLIGATIONS OF PARTIES AFTER CLOSING.......................... 27
11.1 Remittance of Payments.......................................... 27
11.2 Covenant Not-to-Compete......................................... 27
11.3 Employees of the Company........................................ 28
11.4 Millbrook Facility.............................................. 28
11.5 Guaranteed Value of Nobel Shares................................ 29
SECTION 12. INDEMNIFICATION............................................... 29
12.1 Indemnification by Sellers...................................... 29
12.2 Indemnification by Buyer........................................ 30
12.3 Notice; Control of Defense...................................... 30
12.4 Limitations..................................................... 30
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
12.5 Escrow.......................................................... 31
12.6 Remedies Not Exclusive.......................................... 32
SECTION 13. SECURITIES MATTERS............................................ 32
13.1 Investment Representations and Covenants of
Sellers......................................................... 32
13.2 Registration of Nobel Shares.................................... 34
SECTION 14. TERMINATION................................................... 41
14.1 Termination..................................................... 41
14.2 Effect of Termination........................................... 41
SECTION 15. REPRESENTATION OF SELLERS BY SELLERS' AGENT................... 42
15.1 Appointment of Sellers' Agent................................... 42
15.2 Successor Agent................................................. 43
15.3 Sellers' Actions................................................ 43
SECTION 16. MISCELLANEOUS................................................. 43
16.1 Survival of Representations and
Warranties...................................................... 43
16.2 Best Efforts.................................................... 43
16.3 Public Announcements............................................ 43
16.4 Costs and Expenses.............................................. 44
16.5 Risk of Loss.................................................... 44
16.6 Performance..................................................... 44
16.7 Benefit and Assignment.......................................... 44
16.8 Schedules and Exhibits.......................................... 45
16.9 Effect and Construction of this
Agreement....................................................... 45
16.10 Cooperation..................................................... 45
16.11 Notices......................................................... 45
16.12 Waiver, Discharge, etc.......................................... 46
16.13 Severability.................................................... 46
16.14 Rights of Persons Not Parties................................... 46
16.15 Governing Law................................................... 46
16.16 Sellers' Internal Escrow........................................ 46
</TABLE>
Schedules
---------
Schedule A - List of Sellers and Allocation of Purchase Price
Schedule B - Exceptions to GAAP
Exhibits
--------
Exhibit 2.1(a) - Form of Escrow Agreement
Exhibit 4.1(h) - Forms of Lease Agreements
Exhibit 4.1(i) - Form of Non-Disturbance Agreement
Exhibit 4.1(j) - Form of Consulting and Non-Competition Agreement
with Richard V. McCool
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<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is dated May 23, 1995 by and among
Educo, Inc., a Maryland corporation (the "Company"), the record and beneficial
owners of all of the outstanding shares of capital stock of the Company listed
on Schedule A hereto (each, a "Seller," and collectively, the "Sellers") and
----------
Nobel Education Dynamics, Inc., a Delaware corporation ("Buyer"). This Stock
Purchase Agreement shall be hereinafter referred to as this "Agreement."
BACKGROUND
The Company is engaged in the business (the "Business") of operating
ten schools and pre-schools located in Maryland, Virginia, North Carolina and
South Carolina. The parties hereto desire to provide for the acquisition by
Buyer of the Company through the sale by Sellers to Buyer of all the outstanding
shares of capital stock of the Company, which are owned beneficially and of
record by Sellers, and for certain other matters, all on the terms and
conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
SECTION A. ACQUISITION OF SHARES
1. Sale and Purchase of Shares. Subject to the terms and conditions
---------------------------
of this Agreement, at the Closing (as herein defined), each Seller shall sell,
transfer and deliver to Buyer the shares of the common stock of the Company set
forth beside his or her name on Schedule A hereto, in the aggregate constituting
----------
all of the outstanding shares of the Company's capital stock owned by him or her
(collectively with respect to all such shares owned by all Sellers, the "Educo
Shares"), and Buyer shall purchase the Educo Shares, for the consideration set
forth in Section 2.
SECTION B. PURCHASE PRICE AND PAYMENT.
1. Purchase Price. Subject to adjustment as provided in Section 2.3
--------------
below, the aggregate purchase price (the "Purchase Price") for the Educo Shares
shall be as follows:
a. Buyer shall deposit on the date hereof concurrently with the
execution of this Agreement by the parties the sum of Two Hundred Thousand
Dollars ($200,000) in an interest
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<PAGE>
bearing escrow account pursuant to an Escrow Agreement dated the date hereof and
in the form attached hereto as Exhibit 2.1(a) (the "Escrow Agreement") by and
--------------
among the Buyer, Sellers' Agent (as defined in Section 15.1 hereof) on behalf of
the Sellers and Drinker Biddle & Reath (the "Deposit Escrow Agent"). If Closing
shall occur hereunder, the escrowed funds, exclusive of the interest thereon,
shall be paid over to the Seller or Sellers' Agent at Closing on account of the
Purchase Price as provided in paragraph (b) below and interest on the escrowed
funds shall be paid over to the Buyer. If Closing shall not occur hereunder,
such escrowed funds, together with all interest thereon, shall be held and
delivered by the Deposit Escrow Agent as provided in this Agreement and the
Escrow Agreement. The escrowed funds are hereinafter called the "Deposit
Money."
b. At the Closing, in addition to the Deposit Money to be paid
by the Deposit Escrow agent on behalf of Buyer pursuant to paragraph (a) above,
the Buyer shall deliver to Sellers or Sellers' Agent or Sellers' Escrow Agent
(as defined in Section 16.16 hereof), as the case may be, the aggregate amount
of One Million Eight Hundred Thousand Dollars ($1,800,000), by wire transfer
pursuant to instructions previously given by Sellers to Buyer for that purpose
or by certified or bank cashier's checks payable to the order of each Seller, in
the respective amounts set forth beside each Seller's name on Schedule A hereto,
----------
such that the aggregate amount payable at the Closing to Sellers or Sellers'
Agent shall equal $1,950,000 and the amount payable at the Closing to Sellers'
Escrow Agent shall equal $50,000.
c. Buyer shall issue at Closing in favor of Sellers in the
respective amounts set forth beside each Seller's name on Schedule A hereto an
----------
aggregate of 1,250,000 shares of Buyer's Common Stock (the "Nobel Shares"), of
which an aggregate of 1,156,250 Nobel Shares shall be delivered to and held in
escrow by Sellers' Escrow Agent (as defined in Section 16.16(a) hereof) pursuant
to the provisions of Section 16.16(a) hereof and an aggregate of 93,750 Nobel
Shares shall be delivered to and held in escrow by Escrow Agent (as defined in
Section 12.5 hereof) pursuant to the provisions of Section 12.5 hereof.
2. Closing Statement.
-----------------
a. Promptly following the Closing, Buyer, the Company and
Sellers (and their respective affiliates) shall use their best efforts to enable
Sellers promptly to prepare or cause to be prepared, in accordance with United
States generally accepted accounting principles ("GAAP") applied on a basis
consistent with that used in the preparation of the Company's financial
statements referenced in Section 5.12 hereof except as otherwise provided in
Schedule B hereto, a consolidated balance sheet of the Company as of the Closing
----------
Date (as herein defined).
-2-
<PAGE>
Such balance sheet prepared and finally determined as provided in this Section
2.2 is referred to herein as the "Closing Statement." Within 30 days following
the Closing, Sellers shall deliver to Buyer a final draft of the Closing
Statement, together with a calculation of Adjusted Net Worth (as herein defined)
as of the Closing Date. For the purposes of this Agreement, "Adjusted Net
Worth" shall mean the consolidated assets of the Company, less its consolidated
liabilities, in each case as determined in accordance with GAAP applied on a
basis consistent with that used in the preparation of the Company's financial
statements referenced in Section 5.12 hereof except as otherwise provided in
Schedule B hereto.
----------
b. If Buyer shall have any objections to the Closing Statement
or to the calculation of Adjusted Net Worth, Buyer and Sellers shall attempt in
good faith to reach an agreement as to the matter in dispute. If Buyer and
Sellers shall have failed to resolve such disputed matter within thirty (30)
business days after receipt of notice of such objection, then any such disputed
matter may, at the instance of Buyer or Sellers, be submitted to and determined
by an accounting firm acceptable to Sellers and Buyer (the "Auditors"). The
definitive Closing Statement and calculation of Adjusted Net Worth shall be
audited by the Auditors in accordance with GAAP applied on a basis consistent
with that used in the preparation of the Company's financial statements
referenced in Section 5.12 hereof except as otherwise provided in Schedule B
----------
hereto and shall be final, binding and conclusive on all parties hereto. Buyer,
Company and Sellers shall cooperate fully with such audit, and shall use best
efforts to cause their respective affiliates so to cooperate, so as to cause the
Auditors to complete such audit within 30 days after commencement of such audit.
The fees and expenses of such audit shall be divided equally between Buyer and
Sellers.
3. Post-Closing Adjustment.
-----------------------
a. If the Adjusted Net Worth as of the Closing Date as
conclusively determined as provided herein (such conclusive determination is
referred to herein as "Certified Adjusted Net Worth") is less than $400,000 (the
"Minimum Net Worth"), then each Seller shall pay, or cause to be paid, to Buyer
an amount of such deficiency which is proportionate to his or her allocable
share of the Purchase Price. If the Certified Adjusted Net Worth is greater than
the Minimum Net Worth, then Buyer shall pay to each Seller their proportionate
share of such excess amount. Any payment pursuant to this Section shall be made
within five business days following receipt by the parties of the final Closing
Statement and the Certified Adjusted Net Worth calculation.
-3-
<PAGE>
b. Notwithstanding Section 2.3(a), if Buyer and Sellers dispute
any portion of the Closing Statement or the calculation of Certified Adjusted
Net Worth, but nonetheless agree that, following final determination of
Certified Adjusted Net Worth, a payment will be required to be made pursuant to
Section 2.3(a), the amount of such payment which the parties do not dispute
shall be paid.
c. Amounts payable pursuant to this Section 2.3 by Sellers
shall be made by certified check or wire transfer of immediately available funds
to an account designated by the Buyer or, at Buyer's option, by the release to
Buyer of such number of Withheld Shares (as defined in Section 12.5(a) hereof)
equal to the amount payable to Buyer pursuant to this Section 2.3 divided by the
Guaranteed Value Per Share (as defined in Section 11.5 hereof). Amounts payable
pursuant to this Section 2.3 by Buyer shall be made by certified check to
Sellers at their respective addresses set forth on Schedule A hereto.
----------
SECTION C. CLOSING
1. Time and Place of Closing. The closing of the purchase and sale
-------------------------
of the Shares (the "Closing") pursuant to this Agreement shall take place on
August 31, 1995 at the offices of Drinker Biddle & Reath, 1000 Westlakes Drive,
Suite 300, Berwyn, Pennsylvania, commencing at 10:00 A.M., local time, or at
such other date, time and/or place as may be agreed to by Buyer and Sellers'
Agent (the "Closing Date").
SECTION D. DELIVERIES AT CLOSING
1. Deliveries by Sellers at Closing. At the Closing, in addition to
--------------------------------
the other actions contemplated elsewhere herein, the Sellers shall deliver, or
shall cause to be delivered, to Buyer the following:
a. certificates representing all of the Educo Shares owned by
such Seller, duly endorsed for transfer or with stock powers affixed thereto
executed in blank in proper form for transfer;
b. certificates, dated the Closing Date and signed by or on
behalf of the Sellers and the President or Vice President of Company, to the
effect set forth in Sections 9.2 and 9.3;
c. a copy of the Company's certificate or articles of
incorporation and all amendments thereof to date, certified as of a recent date
by the Secretary of State of its jurisdiction of organization, and a copy of the
Company's bylaws
-4-
<PAGE>
and all amendments thereof to date, certified as of the Closing Date by the
Secretary or an Assistant Secretary of the Company;
d. certificates of good standing of a recent date for the
Company, certified by the Secretaries of State or corresponding certifying
authorities of the Company's jurisdiction of organization and of each state in
which the Company is qualified to do business;
e. copies of the resolutions of the board of directors of
the Company authorizing the execution, delivery and performance of this
Agreement and the other agreements and instruments referred to herein, certified
as of the Closing Date by the Secretary or an Assistant Secretary of the
Company;
f. an incumbency certificate relating to the officers of the
Company;
g. the original corporate seals, minute books and stock
transfer and record books of the Company as they exist on the Closing Date and
such of its files, books and records as Buyer may request;
h. lease agreements, in the forms attached hereto as
Exhibit 4.1(h) (the "Leases"), signed by the respective owners of the parcels of
--------------
real property listed on the Disclosure Schedule pursuant to Section 5.15(c)
hereto (the "Real Properties"), pursuant to which each said owner, as landlord,
shall lease to the Company, as tenant, their respective Real Properties on the
terms and conditions set forth therein;
i. upon the request of Buyer, the Company shall use its
best efforts to obtain a non-disturbance agreement from the holder of any
mortgage, trust deed, deed to secure debt or other instrument or estate in any
of the Real Properties which is or may be senior or superior to the Leases, in
the form attached hereto as Exhibit 4.1(i);
--------------
j. the Consulting and Non-Competition Agreement, in the form
attached hereto as Exhibit 4.1(j) (the "Consulting Agreement"), signed by
--------------
Richard V. McCool;
k. the resignations and releases from each of the officers
and directors of the Company;
l. the agreement of Lois Valentine to be bound by the covenants
set forth in Section 11.2 hereof (except that the provisions of Section 11.2(a)
would apply to Ms. Valentine only with respect to any non-public school located
in Virginia Beach, Virginia);
-5-
<PAGE>
m. a letter to Buyer signed by Judith Dillon whereby Ms. Dillon
agrees to remain the chief operating officer of the Company, at a mutually
agreeable compensation level, through the end of the 1995-1996 school year;
n. an opinion satisfactory to Buyer of Goodman Gary &
Lickstein, P.C., counsel for Sellers and the Company, dated as of the Closing
Date, as to the matters set forth in Sections 5.1 through 5.5 and 5.11 hereof.
In rendering its opinion, such counsel may limit its opinion to the federal laws
of the United States, the laws of the State of Maryland and the states in which
its offices are located and the rules and regulations of governmental agencies
of such jurisdictions. Such counsel may take the customary exception to its
opinion that this Agreement is a valid and binding obligation to allow for the
effect of applicable bankruptcy, insolvency, reorganization and other laws
affecting creditors' rights and equitable principles, and counsel may rely upon
certificates of officers of the Company, Sellers and public officials as to
questions of fact pertinent to such opinion;
o. a receipt executed by each Seller, or by Sellers' Agent on
behalf of each Seller, acknowledging receipt of the cash portion of the Purchase
Price paid at Closing and the Nobel Shares delivered at Closing;
p. a letter of intent addressed to the Company and signed by or
on behalf of the owner of the facility leased by the Company for the Company's
operation of the North Raleigh Country Day School located in Raleigh, North
Carolina, the terms of such letter of intent to be mutually satisfactory to
Buyer and such owner and to provide that: (i) such owner will, provided all
approvals and consents of the local governmental authorities are obtained (see
Section 8.2(d) hereof), construct additional classroom(s) at the site provided
Buyer agrees to lease such additional classroom space at an annual rental rate
equal to the greater of (A) the annual debt service (principal and interest) on
the project based upon a 20-year amortization schedule, provided that the annual
interest rate shall not exceed thirteen percent (13%), or (B) sixteen percent
(16%) of the increase in total tuition and registration fees actually received
resulting from the addition of the new facility; (ii) the Company will be
responsible for all costs and expenses related to obtaining the government
approvals for the additional space; and (iii) such owner will reimburse the
Company for all such costs and expenses incurred by the Company if the
additional space is constructed;
q. releases of the Company from all guarantees of indebtedness
or other obligations of third parties, including without limitation those
guarantees listed on the Disclosure Schedule (as hereafter defined) in
connection with Sections 5.7 and 5.12(c) hereof;
-6-
<PAGE>
r. evidence reasonably satisfactory to the Buyer that the
promissory note from Glean E. Thompson, Jr. to the Company in the principal
amount of $14,375 has been paid in full;
s. evidence reasonably satisfactory to the Buyer that the
curriculum developed and utilized at the Company's Virginia Beach Country Day
School shall be available to Buyer along with authorization to utilize same; and
t. such other documents and instruments of transfer as Buyer
may reasonably request to effectuate or evidence the transaction contemplated by
this Agreement.
2. Deliveries by Buyer at Closing. At the Closing, in addition to
------------------------------
the other actions contemplated elsewhere herein, Buyer shall deliver, or cause
to be delivered, to Sellers or Sellers' Agent the items described below:
a. wire transfer or other immediately available funds in
payment of the cash portion of the Purchase Price payable pursuant to Section
2.1(a) and (b) hereof, other than the cash payment of $50,000 to be deposited
with Sellers' Escrow Agent and held in escrow pursuant to Section 16.16(b)
hereof;
b. the Nobel Shares to be held in escrow and delivered to the
Escrow Agent and Sellers' Escrow Agent pursuant to Sections 12.5 and 16.16(a)
hereof, respectively;
c. a certificate, dated the Closing Date and signed by the
President or a Vice President of Buyer, to the effect set forth in Sections 10.2
and 10.3;
d. a copy of Buyer's certificate of incor poration and all
amendments thereof to date, in each case certified as of a recent date by the
Secretary of State of Delaware, and a copy of Buyer's bylaws and all amendments
thereof to date, certified as of the Closing Date by the Secretary or an
Assistant Secretary of Buyer, and accompanied by a certificate of good standing
for Buyer, certified as of a recent date by the Secretary of State of Delaware;
e. a copy of the resolutions of the board of directors of Buyer
authorizing the execution, delivery and performance by Buyer of this Agreement
and the other agreements and instruments referred to herein, certified as of the
Closing Date by the Secretary or an Assistant Secretary of Buyer;
f. an incumbency certificate relating to the officers of Buyer;
g. the Consulting Agreement executed by Buyer;
-7-
<PAGE>
h. a receipt executed by Buyer acknowledging receipt of the
Educo Shares; and
i. an opinion satisfactory to Sellers of Drinker Biddle &
Reath, counsel to Buyer, dated as of the Closing, as to the matters set forth in
Sections 6.1 through 6.7 hereof. In rendering the foregoing opinion, such
counsel may limit its opinion to the federal laws of the United States, the laws
of the states in which its offices are located and the rules and regulations of
governmental agencies of such jurisdictions. Such counsel may take the customary
exception to its opinion that this Agreement is a valid and binding obligation
to allow for the effect of applicable bankruptcy, insolvency, reorganization and
other laws affecting creditors' rights and equitable principles, and counsel may
rely upon certificates of officers of Buyer and public officials as to questions
of fact pertinent to such opinion.
3. Default by Any Seller at Closing. If any Seller shall fail or
--------------------------------
refuse to deliver any of the Educo Shares as provided in Section 1.1 or to take
any other action required by this Agreement to have been taken prior to or at
the Closing, such failure or refusal shall not relieve such or any other Seller
of their obligations under this Agreement, and Buyer, at its option and without
prejudice to its rights against any such defaulting Seller, may either (i)
acquire all the Educo Shares which the non-defaulting Sellers have agreed to
sell to Buyer hereunder pursuant to the allocation set forth in Schedule A
----------
hereto (in consideration for which the Purchase Price shall be reduced by the
amount which would otherwise have been payable to the defaulting Seller) or (ii)
determine to not make such acquisition and terminate all of its obligations
hereunder, whereupon the Deposit Money (including all interest thereon) shall be
returned to Buyer. Sellers acknowledge that the Educo Shares are unique and
agree that in addition to any other remedies against a defaulting Seller, Buyer
shall have the right, without limitation, to seek and obtain all available
equitable remedies to enforce delivery of the Educo Shares hereunder, including,
without limitation, an action or suit for specific performance.
-8-
<PAGE>
SECTION E. REPRESENTATIONS AND WARRANTIES OF SELLERS
Certain information relating to the representations and warranties of the
Sellers is set forth in a Disclosure Schedule hereto (the "Disclosure Schedule")
prepared by the Sellers and delivered to Buyer pursuant to this Agreement as of
the date hereof. The disclosures in the Disclosure Schedule shall relate only
to the representations and warranties to which they expressly refer and to no
other representation or warranty in this Agreement. In the event of any
inconsistency between the statements made in the body of this Agreement and
those contained in the Disclosure Schedule (other than a disclosure in the
Disclosure Schedule which expressly relates to a specifically identified
representation and warranty), those in this Agreement shall control.
The Company and Sellers, jointly and severally, represent and warrant
to Buyer as follows:
1. Organization; Authority. The Company is a corpo ration duly
-----------------------
organized, validly existing and in good standing under the laws of the State of
Maryland and has full corporate power and authority to carry on its Business as
now conducted. The Company is duly qualified and licensed to do business as a
foreign corporation and is in good standing in the States of Virginia, North
Carolina and South Carolina, and neither the nature of it properties nor the
conduct of its business requires the Company to be so qualified or licensed in
any other jurisdiction.
2. Due Authorization; Binding Agreement. Sellers and the Company
------------------------------------
have the full legal right, power, authority and capacity to execute, deliver and
perform their respective obligations under this Agreement and under the other
agreements and documents required to be delivered to Buyer prior to or at the
Closing (the "Sellers' Transaction Documents") to which they are parties. The
execution and delivery by the Company of this Agreement on the date hereof, the
execution and delivery by the Company on the Closing Date of the Sellers'
Transaction Documents to which the Company is a party, and the performance by
the Company of its obligations hereunder and thereunder have been duly and
validly authorized by all necessary action of the Company. This Agreement has
been duly executed and delivered by each Seller and the Company. This Agreement
is, and when executed and delivered at Closing by each Seller and the Company
each of Sellers' Transaction Documents to which they are parties will be, the
legal, valid and binding obligations of Sellers and the Company, enforceable
against Sellers and the Company in accor dance with their respective terms,
except as such may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws relating to or affecting the enforcement of
creditors' rights generally, and except that the availability of
-9-
<PAGE>
specific performance, injunctive relief or other equitable remedies is subject
to the discretion of the court before which any such proceeding therefor may be
brought.
3. Capitalization.
--------------
a. The authorized capital stock of the Company consists of
1,000 shares of common stock, par value $1.00 per share, all of which shares are
issued and outstanding. All of the outstanding shares have been duly authorized
and validly issued and are fully paid and nonassessable. There are no
outstanding subscriptions, stock options, warrants or other agreements or
commitments obligating the Company to issue additional shares of its capital
stock or any other debt or equity securities or obligating any Seller to sell or
transfer any of his or her Educo Shares.
b. Each Seller has unencumbered title to the number of Educo
Shares set forth after such Seller's name on Schedule A hereto and will convey
to Buyer at Closing good and marketable title to such Educo Shares, free and
clear of any and all security interests, claims, liens or encumbrances.
4. Absence of Conflicting Agreements. Neither the execution or
---------------------------------
delivery of this Agreement or any of Sellers' Transaction Documents by Sellers
or the Company, nor the performance by Sellers or the Company of the
transactions contemplated hereby and thereby, conflicts with, or constitutes a
breach of or a default under, (i) any applicable law, statute, rule, regulation,
judgment, order, writ, injunction, or decree of a governmental unit
(collectively, "Laws") applicable to any Seller or the Company or by which any
Seller or the Company or their respective assets or properties are bound, (ii)
the certificate of incorporation or by-laws of the Company, or (iii) any
agreement, indenture, instrument or contract to which any Seller or the Company
is now a party or by which any Seller or the Company is bound.
5. Consents and Approvals. No consent, waiver, approval, license or
----------------------
authorization of, or filing, registration or qualification with, or notice to,
any governmental unit or any other person is required to be made, obtained or
given by any Seller or the Company in connection with the execution, delivery
and performance of this Agreement or any of Sellers' Transaction Documents,
except for those disclosed on the Disclosure Schedule.
6. Brokers. No person acting on behalf of any Seller or the Company
-------
or any of their respective affiliates or under the authority of any of the
foregoing is or will be entitled to any brokers', advisors' or finders' fee or
any other commission or similar fee, directly or indirectly, from any of such
parties in
-10-
<PAGE>
connection with any of the transactions contemplated by this Agreement.
7. Investments and Subsidiaries. Except as disclosed in the
----------------------------
Disclosure Schedule, the Business is and has been conducted solely by and
through the Company and no other person, and the Company has not agreed,
contingently or otherwise, to share any profits, losses, costs or liabilities,
or to indemnify any person or entity, or to guaranty the obligations of any
person or entity, in each case, with respect to the Business. Except as
disclosed in the Disclosure Schedule, the Company has no subsidiaries.
8. Compliance with Laws. The Company has operated the Business in
--------------------
compliance with all Laws, and the Company has not received any claim or notice
that it is not in compliance with any of the Laws.
9. Permits. The Disclosure Schedule sets forth a true, correct and
-------
complete list of all permits, registrations, franchises, licenses, patents,
copyrights, trademarks, rights and other authorizations (collectively,
"Permits") which are necessary for the Company to conduct the Business as now
conducted. The Company owns, possesses or has the legal right to use the
Permits, free of all liens, pledges, claims, or other encumbrances of any nature
whatsoever. The Company is not in default under, nor has the Company received
any notice of any claim or default or any other claim or proceeding relating to,
any such Permit. Except as disclosed on the Disclosure Schedule, all such
Permits are renewable by their terms in the ordinary course of business without
the need to comply with any special qualification procedure or to pay any
amounts other than routine filing fees, and no Permit will be adversely affected
by the consummation of the transactions contemplated by this Agreement.
10. Encumbrances Created by this Agreement. The execution and
--------------------------------------
delivery of this Agreement or any of the Sellers' Transaction Documents does
not, and the consummation of the transactions contemplated hereby or thereby
will not, create any liens or other encumbrances on the Educo Shares or any
assets of the Company in favor of third parties.
11. Litigation. To the best knowledge of the Sellers and the
----------
Company, there are no claims, actions, suits, proceedings, arbitrations,
inquiries or investigations pending or threatened before any court, governmental
unit or arbitrator with respect to the Business or that question any of the
transactions contemplated by this Agreement or the validity of this Agreement or
any of the other agreements or instruments contemplated hereby or which, if
adversely determined, would have an adverse effect upon the ability of any
Seller or the Company to enter into or
-11-
<PAGE>
perform their respective obligations under this Agreement or any such other
agreements or instruments.
12. Financial Statements.
--------------------
a. Attached to the Disclosure Schedule are true, correct and
complete copies of (1) the Company's balance sheet (the "Balance Sheet") as of
August 31, 1994 (the "Balance Sheet Date") and the Company's related statement
of operations for the fiscal year then ended, (2) the Company's balance sheets
as of September 30, October 31, November 30, and December 31, 1994 and January
31, February 28, March 31, and April 30, 1995 and the Company's statements of
operations for each of the months then ended, and (3) federal tax returns of the
Company for the Company's fiscal years ended August 31, 1991, 1992, 1993 and
1994 (collectively, the "Financial Statements").
b. The Financial Statements have been prepared in accordance
with GAAP consistently applied and present fairly the financial condition of the
Company, the Business and results of its operations at the dates and for the
periods covered thereby.
c. Neither the Company nor the Business has any liabilities or
obligations, whether absolute or contingent, that are not reflected on the
Balance Sheet or the Disclosure Schedule, except for such current liabilities
(within the meaning of GAAP) as have been incurred since the Balance Sheet Date
in the ordinary course of business, consistent in nature and amount with past
practice (such current liabilities are herein referred to as "Current
Liabilities"). Without limiting the foregoing, the Balance Sheet contained, as
of the Balance Sheet Date, adequate reserves or other appropriate provisions for
accrued income and other taxes, depreciation and the costs of all pension, re
tirement, incentive, bonus, profit-sharing, vacation, holiday or other plans or
policies (if any) for the benefit of the Company's and/or the Business's
employees. There is no basis for the assertion against the Company of any
liability or obligation of any nature or in any amount (other than Current
Liabilities as aforesaid) not fully reflected or reserved against in the Balance
Sheet.
13. Absence of Certain Changes and Events. Since the Balance Sheet
-------------------------------------
Date, there has occurred no material adverse change in the condition (financial
or otherwise), assets, liabilities, properties, operations or prospects of the
Business, and, except as disclosed in the Disclosure Schedule, the Company has
not:
a. sold, assigned, or transferred any of its assets or
properties, except in the ordinary course of business consistent with past
practice;
-12-
<PAGE>
b. suffered any damage, destruction or loss, whether or not
covered by insurance, or suffered any repeated, recurring or prolonged shortage,
cessation or interruption of delivery of supplies or utility services required
to conduct the Business, or suffered any change in its financial condition or in
the nature of its business or operations which has had or might have an adverse
effect on the operations, assets, properties or prospects of the Business;
c. increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its shareholders, directors, officers or employees, or made any
increase in, or any additions to, other benefits to which any of its
shareholders, directors, officers or employees may be entitled other than salary
increases to non-management level employees made in the ordinary course of
business;
d. changed any of the accounting principles followed by it or
the methods of applying such principles;
e. entered into any transaction other than in the ordinary
course of business consistent with past practice;
f. accelerated the collection of tuition or registration fees
or otherwise collected such fees in a manner not consistent with the Company's
normal business practice;
g. issued any capital stock or other securities of the Company,
or repurchased or redeemed any such shares of capital stock or other securities;
or
h. declared or paid any dividend or other distribution or
payment in respect of the shares of capital stock of the Company.
14. Title to and Condition of Assets, Properties, etc. Except as set
-------------------------------------------------
forth on the Balance Sheet or the Disclosure Schedule:
a. the Company has good title to all of its tangible and intangible
properties and assets (including those reflected on said Balance Sheet, except
to the extent the same have since been sold or otherwise disposed of in the
ordinary course of business consistent with past practice), free and clear of
all liens, charges, claims or encumbrances of any nature, imperfections of
title, easements and encumbrances, if any, as are not substantial in character,
amount or extent and do not materially detract from the value or otherwise
interfere with the use of any such property or asset; and
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b. to the best knowledge of the Company and Sellers, all tangible
properties and assets owned or leased by the Company are in good condition,
ordinary wear and tear excepted, and are of a condition, nature and quantity
sufficient for the conduct of the business of the Company as it has been
conducted during the past two years and as it is proposed to be conducted.
15. List of Properties, Contracts, etc. The Disclosure Schedule
----------------------------------
lists or adequately summarizes the following:
a. all vehicles and items of machinery, equipment and
other tangible assets (other than real property) owned by the Company with a
fair market or book value in excess of $1,000 in respect of any item and the
location thereof;
b. all machinery, vehicles and equipment under lease to
the Company with a fair market or book value in excess of $1,000 in respect of
any item, together with the identity of the lessor, the annual rental and
unexpired lease term;
c. any real property (including the Real Properties) owned
by or under lease to or by the Company, together with the location thereof, the
identity of the lessor or lessee, the annual rental and unexpired lease term;
d. all contracts, subcontracts, commitments, purchase
orders, agreements or arrangements with any person or entity, including
customers and suppliers, whether written or oral, material in amount or
significance, not specifically required to be listed in another paragraph of
this Section, to which the Company is a party or is bound;
e. a summary of each policy and binder of insurance, owned
by or maintained for the benefit of the Company, relating to the operation of
the Business; and
f. each insurance claim made or loss incurred in the
preceding five years pursuant to any workers' compensation, liability or other
insurance policy.
Sellers have furnished and will furnish or make available to Buyer on or before
the Closing Date true, correct and complete copies of each agreement, plan and
other document required to be disclosed on the Disclosure Schedule pursuant to
this Section.
16. Contract Validity, Defaults, Notice/Consent. Except as described
-------------------------------------------
on the Disclosure Schedule:
a. each contract, agreement and commitment to which the
Company is a party or by which the Company or its assets are bound (including
without limitation any such
-14-
<PAGE>
identified on the Disclosure Schedule) was made in the ordinary course of
business, is in full force and effect and is valid, binding and enforceable
against the parties thereto in accordance with its terms, except as such may be
limited by bankruptcy, insolvency, moratorium, reorganization or other similar
laws relating to or affecting the enforcement of creditors' rights generally,
and except that the availability of specific performance, injunctive relief or
other equitable remedies is subject to the discretion of the court before which
any such proceeding therefor may be brought;
b. all parties to the contracts, commitments and
agreements listed on the Disclosure Schedule have complied with the provisions
thereof, no party is in default thereunder, and no event has occurred which, but
for the passage of time or the giving of notice or both, would constitute a
default thereunder; and
c. no contract, commitment or agreement listed on the
Disclosure Schedule requires notice to or the consent of any party thereto in
connection with the consummation of the transactions contemplated hereby.
17. Managers. The Disclosure Schedule sets forth a true, correct and
--------
complete list of:
a. the names of all managers of the Company and all other
persons with managerial level responsibilities in the Business; and
b. the name and current annual rate of compensation
(including bonuses) paid by the Company to each of its partners, managers and
employees.
There are no contracts, written or oral, for the employment of any officer or
employee of the Company currently in effect.
18. Labor Matters. None of the Company's employees is represented by
-------------
any union or other collective bargaining repre sentative nor are there currently
any attempts by any union or other collective bargaining representative to
organize employees and there have been no such attempts within the last one
year. Since the Company commenced operations, there has not been, nor was there
or, to the knowledge of the Company or any Seller, is there threatened or
contemplated, any strike, slowdown, picketing or work stoppage by any employees
against the Company, its assets or properties wherever located, any lockout by
the Company of any of its employees or any labor trouble or other occurrence,
event or condition of a similar character affecting, or which may affect, the
operations, assets, properties or prospects of the Company.
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<PAGE>
19. Relationships. Except as disclosed in the Disclosure Schedule,
-------------
to the best knowledge of the Company and the Sellers there is no dispute or
controversy existing between the Company and any of its clients with respect to
any product or service sold or furnished by the Company; and there is no dispute
or controversy existing between the Company and any supplier or other contractor
with respect to any product or service purchased by the Company from such
person.
20. Non-Foreign Persons. No Seller is a foreign person, foreign
-------------------
partnership, foreign trust or foreign estate as defined in Section 1445(f)(3) of
the Internal Revenue Code, as amended (the "Code"), and the payment of the
Purchase Price will not be subject to the withholding requirements of Section
1445 of the Code.
21. Employee Benefit Plans. Except as disclosed in the Disclosure
----------------------
Schedule, the Company does not maintain, or contribute to, any employee benefit
plans. All employee pension benefit plans listed on the Disclosure Schedule are
qualified for federal income tax purposes under the Code and are in compliance
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the Code, and the Company is not subject to any
liabilities based on past non-compliance, if any. The Company has made all
required contributions under each employee benefit plan listed on the Disclosure
Schedule for all periods through the Closing. The Company has never been
obligated to contribute to a multiemployer plan. The Company does not maintain
any employee benefit plan(s) providing for continued life or health benefits or
coverage for any employee (or beneficiary thereof) after the employee's
termination of employment, other than as required by Section 601 et seq. of
-- ----
ERISA. As used in this Section, the terms "employee benefit plan," "employee
pension benefit plan" and multiemployer plan" shall have the respective meanings
assigned to such terms in Section 3 of ERISA. "Company" as used in this Section
5.21 shall include any other entity required to be aggregated with the Company
under Section 414(b), 414(c), 414(m), or 414(o) of the Code.
22. Environmental Protection. Except as disclosed in the Disclosure
------------------------
Schedule, to the best knowledge of Sellers and the Company:
a. The Business is now and always has been in compliance
with all federal, state, and local statutes, ordinances, regulations, rules,
standards, and requirements of common law concerning or relating to industrial
hygiene and the protection of health and the environment (collectively, the
"Environmental Laws").
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<PAGE>
b. There are no conditions on, about, beneath or arising
from the Real Properties which might give rise to liability, result in the
imposition of a statutory lien or require any "Response," "Removal" or "Remedial
Action," as defined herein, under any of the Environmental Laws. As used in this
Agreement, the terms "Response," "Removal" and "Remedial Action" shall be
defined with reference to Sections 101(23) -101(25) of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), as amended by
the Superfund Amendments and Reauthorization Act ("SARA"), 42 U.S.C. (S)(S)
9601(23) - 9601(25).
c. "Hazardous Substances," as defined below, have never
been used, handled, generated, processed, treated, stored, transported to or
from, released, discharged, or disposed of on, about or beneath the Real
Properties. There are no transformers or other equipment containing or
contaminated with polychlorinated biphenyls ("PCBs") or any aboveground or
underground storage tanks on the Real Properties. There is no asbestos or
asbestos containing material on the Real Properties. As used in this Agreement,
the term "Hazardous Substance" shall mean a hazardous substance, material or
waste including, without limitation, any substance which is or contains: (i)
petroleum, asbestos or PCBs; (ii) defined, designated or listed as a "Hazar dous
Substance" pursuant to Sections 307 and 311 of the Clean Water Act, 33 U.S.C.
(S)(S) 1317, 1321, Section 101(14) of CERCLA, 42 U.S.C. (S) 9601 or similar
provision of applicable state law; (iii) listed in the United States Department
of Transportation Hazardous Material Table, 49 C.F.R. (S) 172.101; or (iv)
defined, designated or listed as a "Hazardous Waste" under Section 1004(3) of
the Resource and Conservation and Recovery Act, 42 U.S.C. 9603(5) or similar
provision of applicable state law.
d. The Company has not received notice or actual or
constructive knowledge of: (i) any claim, demand, investigation, enforcement,
Response, Removal, Remedial Action or other governmental or regulatory action
instituted or threatened against the Company or the Real Properties pursuant to
any of the Environmental Laws; (ii) any claim, demand, suit or action made or
threatened by any person against the Company or the Real Properties relating to
any form of damage, loss or injury resulting from, or claimed to result from,
any Hazardous Substance on, about, beneath or arising from the Real Properties
or any alleged violation of the Environmental Laws; and (iii) any communication
to or from any governmental or regulatory agency arising out of or in connection
with Hazardous Substances on, about, beneath, arising from or generated at the
Real Properties, including without limitation, any notice of violation,
citation, complaint, order, directive, request for information or response
thereto, notice letter, demand letter or compliance schedule. If discovered
prior to Closing, the Company and Sellers shall immediately advise Buyer of any
of the claims or communications
-17-
<PAGE>
listed in clauses (i)-(iii) above and also shall immediately advise Buyer of the
discovery of any Hazardous Substances on, about, beneath, or arising from the
Real Properties or the discovery of any condition on, about, beneath, or arising
from the Real Properties which might give rise to liability, the imposition of a
statutory lien or require Response, Removal or Remedial Action under any of the
Environmental Laws.
23. Child Abuse. Since the Company commenced operation of the
-----------
Business, there has not been, nor to the knowledge of any Seller or the Company
has there been threatened or contemplated, any event, allegation, report or
publicity, or any charge, suit, action or other proceeding, regarding any acts
of alleged child abuse or sexual abuse, of any nature whatsoever, involving
either the Company or the Business or any of its present or former officers,
directors, employees or agents.
24. Taxes. Except as set forth in the Disclosure Schedule:
-----
a. all federal, state, local and foreign tax returns and
tax reports (or extensions relating thereto) required to be filed by the Company
have been filed on a timely basis with the appropriate governmental agencies in
all jurisdictions in which such returns and reports are required to be filed,
and all such returns and reports were true and correct when filed;
b. all federal, state, local and foreign income, profits,
franchise, sales, use, payroll, premium, occupancy, property, severance, excise,
withholding, value added and other taxes (including deferred taxes), including
interest, additions to tax and penalties (collectively, "Taxes) due from or
properly accruable (under generally accepted accounting principles) by the
Company with respect to taxable periods ending on or prior to, and the portion
of any interim period up to, the date hereof have been fully and timely paid or
adequately provided for on the Balance Sheet or on the books and records of the
Company;
c. there are no levies, liens, or other encumbrances
relating to Taxes existing, threatened or pending with respect to any asset of
the Company;
d. no issues have been raised with any representative or
employee of the Company (and are currently pending) by the Internal Revenue
Service or any other taxing authority in connection with any of the returns and
reports referred to in paragraph (a) above; and
e. no waivers of statutes of limitation have been given or
requested with respect to any tax returns and
-18-
<PAGE>
reports referred to paragraph (a) above or with respect to any Taxes. The
Disclosure Schedule lists all federal, state, local and foreign income and
franchise tax returns of the Company which have been examined or which are
currently under examination by the Internal Revenue Service or by other
appropriate taxing authorities, or with respect to which the applicable statute
of limitations (including all extensions and tolling periods) has not yet run
and, except as and to the extent set forth in such Disclosure Schedule or
provided for on the financial statements or on the books and records of the
Company, any and all deficiencies assessed or assessments made as a result of
such examinations have been fully paid, and there are no other unpaid
deficiencies asserted or assessments made by any taxing authority against the
Company. The Company has not made an election under Section 341(f) of the Code,
nor has the Company, at any time during the past five years, been an electing
corporation under Subchapter S of Chapter One of the Code. The Company uses the
accrual method of accounting for federal income tax purposes. The Company has
not agreed to nor is it required to may any adjustments under Section 481(a) of
the Code by reason of a change in accounting method or otherwise. The
Disclosure Schedule lists all elections by or with respect to the Company for
federal income tax purposes that are currently applicable.
25. Books and Records.
-----------------
a. The copies of the certificate of incorporation of the
Company, as certified by the Secretary of State of its jurisdiction of
incorporation, and of its bylaws, as certified by its secretary, which have been
delivered to Buyer are true, complete and correct and are in full force and
effect as of the date hereof.
b. The stock records of the Company fairly and accurately
reflect the record ownership of all of its outstanding shares of capital stock.
The minute books of the Company contain complete and accurate records of all
meetings held of, and corporate action taken by, the shareholders, the board of
directors and each committee of the board of directors of the Company and no
meetings of such shareholders or of such board of directors or committee have
been held for which minutes have not been prepared and included in such minute
books. The other books and records of the Company, including financial records
and books of account, are complete and accurate in all material respects and
have been maintained in accordance with sound business practices. Complete and
accurate copies, as of the date hereof, of all such minute books and stock
records have been made available to Buyer.
26. No Unusual Arrangements with Employees or Customers. Except as
---------------------------------------------------
disclosed on the Disclosure Schedule, the Company has no unusual or cash payment
arrangements with any of
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<PAGE>
the Company's employees. All employees are paid through the Company's payroll
system and receive only the payments disclosed by such system. Except as
indicated on the Disclosure Schedule, the Company has no arrangements or
obligations with any of its customers or children whereby the Company offers
pickup, delivery, care or custody services except at the location of the
Company's existing schools.
27. Disclosure. No representation or warranty by the Company or
----------
Sellers in this Agreement and no information in any statement, certificate,
schedule or other document furnished or to be furnished to Buyer pursuant
hereto, or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein not misleading. Except as disclosed in this Agreement and the
Disclosure Schedule attached hereto and excluding economic, business and
regulatory factors affecting the education industry generally and such facts as
are public knowledge, there is no fact which the Company and Sellers have not
disclosed to Buyer in writing which materially adversely affects nor, so far as
the Company and Sellers can now foresee, may materially adversely affect the
business, operations, prospects, properties, assets, profits or condition
(financial or otherwise) of the Business.
SECTION F. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
1. Organization and Standing. Buyer is a corporation validly
-------------------------
existing and in good standing under the laws of the State of Delaware. Buyer
has the corporate power and authority to own and lease the properties now owned
or leased by it and to conduct the business presently being conducted by it.
2. Power and Authority. Buyer has the corporate power and authority
-------------------
to execute, deliver and perform this Agreement, and to execute, deliver and
perform the other documents and instruments required to be delivered by Buyer to
Sellers at Closing (collectively, the "Buyer's Transaction Documents").
3. Binding Agreement. Upon approval by Buyer's board of directors,
-----------------
this Agreement will have been duly authorized, executed and delivered by Buyer.
Upon approval by Buyer's board of directors, this Agreement will be, and when
executed and delivered by Buyer at the Closing each of Buyer's Transaction
Documents will be, the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its
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<PAGE>
respective terms, except as such may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws relating to or affecting the
enforcement of creditors' rights generally, and except that the availability of
specific performance, injunctive relief or other equitable remedies is subject
to the discretion of the court before which any such proceeding therefor may be
brought.
4. Absence of Conflicting Agreements. Neither the execution or
---------------------------------
delivery by Buyer of this Agreement or any of Buyer's Transaction Documents, nor
the performance by Buyer of the transactions contemplated hereby and thereby,
conflicts with or constitutes a breach of or a default under (i) the Certificate
of Incorporation or By-Laws of Buyer, (ii) any Law, or (iii) any applicable
agreement, indenture, contract or instrument to which Buyer is a party or by
which it is bound.
5. Consents. Except for the approvals of Buyer's board of directors
--------
and Buyer's lenders and any required filings under applicable Federal and state
securities laws, no license, consent or approval of any person (other than
licenses, approvals or consents of governmental agencies required in order for
Buyer to operate the Business after the Closing Date) is required in connection
with the execution and delivery by Buyer of this Agreement or any of Buyer's
Transaction Documents or for the consummation by Buyer of the transactions
contemplated hereby or thereby.
6. Litigation. There is no pending or, to the knowledge of Buyer,
----------
threatened suit, action or litigation, or administrative, arbitration or other
proceeding or governmental inquiry or investigation, questioning the validity of
this Agreement or the transactions contemplated hereby.
7. Capitalization. The authorized capital stock of Buyer consists
--------------
of 60,000,000 shares, including 50,000,000 shares of common stock, par value
$.001 per share, and 10,000,000 shares of preferred stock, par value $.001 per
share. The Nobel Shares to be issued and delivered at Closing pursuant to this
Agreement will, upon consummation of the Closing, be duly authorized, validly
issued, fully paid and nonassessable by Buyer.
8. SEC Filings. Buyer previously has delivered to Sellers' Agent
-----------
copies of Buyer's Proxy Statement dated May 16, 1994, its Current Report on Form
8-K dated February 1, 1995, its Annual Report on Form 10-K for 1994 containing
audited financial statements for 1994, its Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995 and its 1994 Annual Report, filed by Buyer with the
Securities and Exchange Commission (the "SEC"). The audited consolidated
financial statements and unaudited interim financial statements of Buyer
included in such reports have been prepared in accordance with generally
accepted
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<PAGE>
accounting principles consistently applied (except as may be indicated in the
notes thereto) and fairly present the financial position of Buyer and its
consolidated subsidiaries as at the dates thereof and the results of their
operations and changes in cash flows for the periods then ended, subject, in the
case of the unaudited interim financial statements, to normal year-end
adjustments and any other adjustments described therein.
SECTION G. INFORMATION AND RECORDS CONCERNING BUSINESS
1. Access to Information and Records Before Closing.
------------------------------------------------
a. Buyer and its authorized representatives may, prior to the
Closing Date, make, or cause to be made, such reasonable investigation and
physical inspections of the Business and its financial and legal condition as
Buyer deems necessary or advisable. The Company and Sellers shall permit Buyer
and its authorized representatives (including legal counsel and independent
accountants) upon reasonable notice to have full access to the properties,
plans, assets, personnel (including the Company's accountants) and relevant
books and records of the Business, at reasonable business hours, and the Company
and Sellers will furnish Buyer with such financial and operating data and other
information and copies of documents with respect to the products, services,
operations and properties of the Business as Buyer shall from time to time
reasonably request. The Company and Sellers shall cooperate with Buyer in
approaching customers of the Company and other third parties designated by
Buyer.
b. In the event of the termination of this Agreement prior to
Closing, Buyer will deliver to the Company all documents, work papers and other
materials obtained from the Company and Sellers and copies thereof relating to
the Company or the transactions contemplated hereby, whether so obtained before
or after the execution hereof, and Buyer will use its best efforts to keep
confidential all such information, except that such restriction shall not apply
to any information (1) which is in or comes into the public domain other than
through Buyer, (2) which was in the possession of Buyer before the commencement
of negotiations contemplated hereby, or (3) which at any time lawfully comes
into the possession of Buyer from third parties who have a right to disclose
such information otherwise than in connection with this Agreement.
2. Due Diligence Investigation. As an inducement to Buyer to expend
---------------------------
substantial sums in the performance of its due diligence investigation, Sellers
agree that Buyer may terminate this Agreement at any time prior to the Closing
Date, upon written notice to Sellers, if Buyer, in good faith but in its sole
discretion, determines that the financial and legal
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<PAGE>
condition or the condition of the assets, properties and business of the Company
or its prospects, are unsatisfactory.
SECTION H. OBLIGATIONS OF THE PARTIES UNTIL THE CLOSING DATE
1. Conduct of Business Pending Closing. Between the date of this
-----------------------------------
Agreement and the Closing Date, the Company will conduct the Business solely in
the ordinary course of business consistent with past practice, maintain
inventory and supplies at normal levels by replenishing them as they are
consumed, maintain the Company's existence as a corporation and collect tuition
and registration fees only in accordance with the Company's normal past
practice.
2. Negative Covenants of the Company. Without the prior written
---------------------------------
approval of Buyer, the Company shall not, between the date hereof and the
Closing Date, cause or permit to occur any of the events or occurrences
described in Section 5.13 (Absence of Certain Changes) other than events
described in Section 5.13(b), as to which events the Company shall use its best
efforts to prevent their occurrence; provided, however, that Buyer agrees that
-------- -------
on or before the Closing Date the Company may:
a. assign to Richard V. McCool the life insurance policy
held by the Company on his life;
b. purchase the interest of Valschool, Inc. in the VB
Joint Venture for a price equal to $160,000 on such terms as are reasonably
satisfactory to Buyer;
c. sell to MTP Joint Venture the Company's interest in the
MTP Joint Venture for a price equal to $15,500 on such terms as are reasonably
satisfactory to Buyer;
d. continue, at its expense, its efforts to obtain all
requisite approvals and permits to allow the expansion of the Company's
facilities for its North Raleigh Country Day School located in North Raleigh,
North Carolina; and
e. increase the salaries or other compensation of the
Company's employees on such terms as are reasonably satisfactory to Buyer.
3. Affirmative Covenants. Between the date hereof and the Closing
---------------------
Date, the Company will:
a. maintain the assets of the Business, whether owned or
leased, in the same repair, order and condition that they were in at the
execution of this Agreement, ordinary wear and tear excepted;
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b. maintain in full force and effect all Permits;
c. maintain in full force and effect the insurance policies and
binders currently in effect relating to the Business and the Company's assets;
d. use its best efforts to preserve intact the Company's
present business organization, keep available the services of its present
employees and agents (but this shall not require that the Company make any
salary increases between the date hereof and the Closing Date), and maintain its
relations and goodwill with its suppliers, clients, distributors, and any others
having business relations with the Company;
e. maintain all of the books and records of the Company in
accordance with its past practices;
f. comply with all provisions of all contracts, agreements and
other documents to which the Company is a party and with the provisions of all
Laws;
g. promptly advise Buyer in writing of the threat or
commencement against any Seller or the Company of any dispute, claim, action,
suit or proceeding, arbitration or investigation or the occurrence of any
development (exclusive of general economic factors affecting the Business in
general) of a nature that is or may be adverse to the operations, properties,
assets or prospects of the Business; and
h. obtain the agreement of Lois Valentine to remain the
headmistress of Virginia Beach Country Day School at her current compensation
level for up to 90 days after the date of this Agreement (but not later than
August 31, 1995), or such shorter period as Buyer may determine.
4. Pursuit of Consents. Prior to the Closing Date, Sellers and the
-------------------
Company shall, at their expense, use their best efforts to obtain the consent or
approval of persons which are necessary for the consummation of the transactions
contemplated hereby. This Section 8.4 shall not require Sellers or the Company
to pay money to any person in exchange for their consent other than
reimbursements for reasonable legal fees of such party in processing such
consent. Buyer shall cooperate with Sellers and the Company in obtaining such
consents and approvals.
SECTION I. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Unless waived by Buyer, the obligation of Buyer to consummate the
purchase of the Educo Shares is subject to the
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fulfillment, prior to or at the Closing Date, of each of the following
conditions:
1. Deliveries at Closing. Sellers shall have delivered, or caused
---------------------
to be delivered, to Buyer all items required pursuant to Section 4.1 hereof.
2. Representations and Warranties. The representa tions and
------------------------------
warranties of the Company and Sellers contained in this Agreement or any
schedule, list, certificate or document de livered pursuant to the provisions
hereof shall be true in all material respects at and as of the Closing Date as
though such representations and warranties were made at and as of such time
(except that the actions described under Sections 8.2(a), (b), (c), (d) and (e)
shall be permitted), and Sellers shall have delivered to Buyer a certificate to
that effect.
3. Performance of Covenants. Sellers and the Company shall have
------------------------
performed or complied in all material respects with each of the agreements and
covenants required by this Agreement to be performed or complied with by Sellers
prior to or at the Closing, and Sellers shall have delivered to Buyer a
certificate to that effect.
4. Legal Matters. No suit, action, investigation, or legal or
-------------
administrative proceeding shall have been brought or shall have been threatened
by any person (other than Buyer or an affiliate thereof) which questions the
validity or legality of the transactions contemplated hereby.
5. No Material Adverse Change. Neither the assets, operations or
--------------------------
prospects of the Business shall be materially adversely affected in any way as a
result of disaster, accident, labor dispute, shortage, cessation or interruption
of inventory shipments, supplies or utility services, flood, fire or other
casualty, drought, embargo, civil disturbance, riot, uprising, activity of armed
forces or act of God or public enemy.
6. Governmental Approvals. All approvals, consents, permits,
----------------------
licenses or qualifications from any governmental body or agency having
jurisdiction required for the transfer of the Educo Shares to Buyer, and for
Buyer's ownership and operation of the Business, shall have been obtained and
shall be effective and no such approval, consent, permit, license or
qualification shall impose any condition or provision or requirement on Buyer
which was not imposed on the Company by such body or agency.
7. Other Approvals. The consent or approval of all persons (other
---------------
than governmental agencies) necessary for the transfer of the Educo Shares to
Buyer, and Buyer's ownership and operation of the Business, including the
consents noted in Sections 5.5, 5.16(c) and 6.5, shall have been granted, and no
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such consent or approval (1) shall have been conditioned upon the modification,
cancellation or termination at Closing of any lease, contract, commitment,
agreement, franchise, license, easement, right or other authorization or (2)
shall impose on Buyer any condition or provision or requirement not imposed on
the Company or, if imposed on the Company, that is more restrictive on Buyer
than on the Company.
8. Accounting Matters. Buyer shall have received the financial
------------------
statements of the Company at and for the fiscal year ended August 31, 1994, as
audited by Coopers & Lybrand L.L.P. and accompanied by an "unqualified opinion"
of Coopers & Lybrand L.L.P. thereon. Buyer shall pay the fees of Coopers &
Lybrand L.L.P. in connection with such audit.
SECTION J. CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
Unless waived by the Sellers, the obligation of the Sellers to
consummate the sale of the Educo Shares is subject to the fulfillment, prior to
or at the Closing, of each of the following conditions:
1. Deliveries at Closing. Buyer shall have delivered, or caused to
---------------------
be delivered, to Sellers all items required pursuant to Section 4.2 hereof.
2. Representations and Warranties. The representa tions and
------------------------------
warranties of Buyer in this Agreement or on any schedule, list, certificate or
document delivered pursuant to the provisions hereof shall be true in all
material respects at and as of the Closing Date as though such representations
and warranties were made at and as of such time, and Buyer shall have delivered
to Sellers a certificate to that effect signed by an authorized officer of
Buyer.
3. Performance of Covenants. Buyer shall have performed or complied
------------------------
in all material respects with each of its agreements and covenants required by
this Agreement to be performed or complied with by it prior to or at the Closing
and shall have obtained the approval of Buyer's board of directors on or before
July 1, 1995, and Buyer shall have delivered to Sellers a certificate to that
effect signed by an authorized officer of Buyer.
4. Legal Matters. No suit, action, investigation or legal or
-------------
administrative proceeding shall have been brought or shall have been threatened
by any person (other than Sellers or an affiliate thereof) which questions the
validity or legality of the transactions contemplated hereby.
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SECTION K. OBLIGATIONS OF PARTIES AFTER CLOSING
1. Remittance of Payments. From and after the Closing, Sellers
----------------------
shall immediately remit to the Company, in the form received, any payments which
they or any affiliate may receive (such as payments of tuition or other fees)
which properly belong to the Company.
2. Covenant Not-to-Compete.
-----------------------
a. Except as otherwise permitted in this Section 11.2(a), for a
period of five (5) years from and after the Closing Date, no Seller shall
directly or indirectly operate, manage, own, control, provide consulting
services to, or in any way be connected with or be concerned with or be
interested in any school, pre-school or child care business of any type which is
now or hereafter located within the states of California, Delaware, Illinois,
Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina or Virginia;
provided however, that nothing contained in this Section 11.2(a) shall prohibit
----------------
Sellers from owning in the aggregate less than 5% of the publicly traded stock
of any company. Notwithstanding the foregoing, no Seller shall be prohibited
from acting as owner, manager, partner, consultant or otherwise in the purchase,
development and leasing or sale of physical facilities which are to be used for
any school, pre-school or child care business; provided however, that this
-------- -------
exception is provided on the condition that Buyer shall have a right of first
refusal with respect to any lease of any such facility. In addition, nothing
contained in this Section 11.2(a) shall prohibit Richard V. McCool from
assisting Lois Valentine and/or her corporation in the selection of a site and
establishment of a new private school in Chesapeake, Virginia.
b. From and after the Closing Date, no Seller shall disclose
directly or indirectly to any person outside of the employ of Buyer, without the
express authorization of Buyer, any customer lists, pricing strategies, customer
and employee files and records, any proprietary data or trade secrets of the
Company, or any financial or other information about the Company not in the
public domain.
c. For a period of five (5) years from and after the Closing
Date, no Seller shall intentionally engage or participate in any effort or act
to induce any of the customers, suppliers, associates, employees or independent
contractors of Buyer or the Company to take any action or to refrain from taking
any such action or inaction which might be disadvantageous to Buyer or the
Company, including, but not limited to, the solicitation of Buyer's or the
Company's customers, suppliers, associates, employees or independent contractors
to cease doing business, or their association or employment, with Buyer or the
Company.
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d. Each Seller expressly acknowledges that damages alone will
be an inadequate remedy for any breach or violation of any of the provisions of
this Section 11.2, and that Buyer, in addition to all other remedies under this
Agreement, shall be entitled as a matter or right to injunctive relief,
including specific performance, with respect to any such breach or violation, in
any court of competent jurisdiction.
3. Employees of the Company. Buyer agrees that the Company's
------------------------
teachers and other key personnel (School Directors, Ann Woodall and Ann Pierce)
shall continue as employees of the Company during the 1995-1996 school year, at
such compensation levels as are currently in effect or as may be agreed to in
writing by Buyer, provided that any employee of the Company may be terminated by
--------
the Company at any time.
4. Millbrook Facility. The parties acknowledge and agree that the
------------------
Company and the owner of the facility leased by the Company for the Company's
operation of the Millbrook Country Day School located in Raleigh, North Carolina
are currently negotiating the proposed renovation of that facility or the
construction of a new facility on the existing site. The parties also
acknowledge and agree that a third party may construct a new facility on a
different site in close proximity to the present site. Sellers covenant and
agree that on or before August 15, 1996, either the renovation of the facility
or the construction of a new facility (at the present site or at another site in
close proximity to the present site) will be completed (such completion to be
evidenced by the delivery to the Company and Buyer of a certificate of occupancy
or other similar instrument), in each case to the satisfaction of the Company
and Buyer. If the foregoing covenant is not satisfied by August 15, 1996, the
Sellers will forfeit the 93,750 Nobel Shares held in escrow pursuant to Section
12.5 hereof. Buyer agrees to negotiate in good faith with the owner of such
facility the terms and conditions of the lease of such facility prior to the
construction of the facility. The terms and provisions of the lease on the new
facility shall be essentially as set forth in the lease provided for the North
Raleigh school site, in the form attached as Exhibit 4.1(h), with the exception
--------------
of the commencement date, termination date, property description, and lease
rental rate. The lease rate on the facility shall be such that after taking
into account the total costs of construction and ground acquisition, the annual
rental rate shall be equal to the greater of (A) the annual debt service
(principal and interest) on the project based upon a 20-year amortization
schedule, provided that the annual interest rate shall not exceed thirteen
percent (13%), or (B) sixteen percent (16%) of total tuition and registration
fees actually received from the facility. If the new facility is built on the
current location, the rental rate on the facility shall be the greater of (A)
the annual debt service (principal and interest) on the costs of
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construction (excluding land) based upon a 20-year amortization schedule,
provided that the annual interest rate shall not exceed thirteen percent (13%),
plus $36,000 per year representing the land value or (B) sixteen percent (16%)
of the total tuition and registration fees actually received from the facility.
5. Guaranteed Value of Nobel Shares. In the event that during the
--------------------------------
Effectiveness Period (as defined in Section 13.2(a) hereof) a Seller sells any
Nobel Shares in bona fide Brokers' Transactions (as defined in Section
13.2(i)(8) hereof) at a price less than $1.60 per share (such price, as
appropriately adjusted for any stock dividends, stock splits or similar events,
shall be hereinafter referred to as the "Guaranteed Value Per Share"), then
Buyer shall pay to such Seller the difference between the Guaranteed Value Per
Share and the actual sales price (excluding commissions, fees and other charges
related to such sale) for the Nobel Shares actually sold by such Seller;
provided that the Sellers shall not sell in the aggregate more than 70,000 Nobel
--------
Shares during any 30-day period during the Effectiveness Period. Amounts
payable by Buyer pursuant to this Section 11.5 shall be made by certified check
within 30 days of Buyer's receipt of the written confirmation statement from the
selling broker.
SECTION L. INDEMNIFICATION
1. Indemnification by Sellers. Sellers shall, jointly and
--------------------------
severally, indemnify and hold Buyer and its officers, directors and shareholders
harmless against and in respect of any and all losses, costs, expenses, claims,
damages, obligations and liabilities, including interest, penalties and
reasonable attorneys fees and disbursements (collectively, "Damages"), which
Buyer or any such person may suffer, incur or become subject to arising out of,
based upon or otherwise in respect of: (a) any inaccuracy in or breach of
representations or warranties of the Company or any Seller made in or pursuant
to this Agreement or any Sellers' Transaction Document; (b) any breach or non-
fulfillment of any covenant or obligation of the Company or any Seller contained
in this Agreement or any Sellers' Transaction Document; (c) any matters required
to be disclosed on the Disclosure Schedule pursuant to Section 5.11 but not
disclosed; (d) all liabilities of the Company for or with respect to any Taxes
for which consolidated or combined returns are filed (whether or not reserved
against or contested) for taxable periods up to and including the Closing Date;
(e) all liabilities and obligations (whether known or unknown, disclosed or
undisclosed, and whether absolute, accrued, contingent or otherwise) of the
Company existing on the Closing Date, except for Current Liabilities,
liabilities and obligations of the Company reflected on the Balance Sheet and
liabilities and obligations of the Company disclosed on the Disclosure Schedule
which expressly relate to Sections 5.7, 5.9, 5.13(c), 5.14(a),
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5.15(a), 5.15(c), 5.17 and 5.26 hereof; and (f) the presence, use, handling,
generation, processing, treatment, storage, transportation, release, discharge
or disposal of any Hazardous Substances on, about, or beneath any of the Real
Properties by any person on or prior to the Closing Date, regardless of whether
the related claim is asserted prior to, on or after the Closing Date.
2. Indemnification by Buyer. Buyer shall indemnify and hold Sellers
------------------------
harmless against and in respect of any and all Damages which Sellers may suffer,
incur or become subject to arising out of, based upon or otherwise in respect of
: (a) any inaccuracy in or breach of any representation or warranty of Buyer
made in or pursuant to this Agreement or any Buyer's Transaction Document; (b)
any breach or nonfulfillment of any covenant or obligation of Buyer contained in
this Agreement or any Buyer's Transaction Document; and (c) the operation of the
Company after the Closing Date.
3. Notice; Control of Defense. Any party (for this purpose the
--------------------------
Sellers jointly and severally being one party and Buyer being the other party)
seeking indemnification hereunder (an "Indemnified Party") shall promptly notify
in writing the other party from whom such indemnification is sought (an
"Indemnifying Party") of the assertion of any claim or the discovery of any fact
upon which the Indemnified Party intends to base a claim for indemnification
hereunder. With respect to any claim made by a third party against which an
Indemnified Party is seeking indemnification hereunder, the Indemnifying Party
shall have the right, at its own expense, to participate in or assume thereof
from the Indemnified Party, and the Indemnified Party shall fully cooperate with
the Indemnifying Party subject to reimbursement for actual out-of-pocket
expenses incurred as the result of such request by the Indemnifying Party. If
the Indemnifying Party does not elect to assume control or otherwise participate
in the defense of any third-party claim after receipt of notice thereof from the
Indemnified Party, the Indemnifying Party, in the absence of gross negligence or
willful misconduct on the part of the Indemnified Party, shall be bound by the
results obtained by the Indemnified Party with respect to such claim.
4. Limitations.
-----------
a. All claims for breach of any representation or warranty made
by any party must be asserted prior to the second anniversary of the Closing
Date, and no party shall be entitled to indemnity hereunder or other relief at
law or in equity for any such claims asserted after that date; provided,
--------
however, that in the case of income and other tax claims and environmental
-------
claims, claims may be made within the period of the applicable statute of
limitations provided that neither party takes, nor
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permits to be taken, any action to extend such period of limitations without the
other's written consent in advance. This Section 12.4 shall not impose any time
limitation on the assertion of claims for indemnification under Section 12.1(b),
(c) or (e) or Section 12.2(b) or (c).
b. With respect to any claim for indemnification under this
Section 12 arising out of, based upon or otherwise in respect of any inaccuracy
in or breach of representations or warranties, the Indemnified Party shall not
be entitled to indemnification hereunder unless and until the aggregate of all
valid claims of the Indemnified Party for such indemnification exceeds the sum
of $25,000 (the "Threshold"), provided that once the Threshold has been
exceeded, the Indemnified Party shall be entitled to recover the full amount of
its valid claims hereunder, not just the amount in excess of the Threshold.
c. The liability of each Seller hereunder shall not exceed the
Purchase Price (including the Nobel Shares) paid to such Seller by Buyer for
such Seller's Educo Shares.
5. Escrow.
-------
a. At Closing, Sellers will deliver to Buyer as escrow
agent (the "Escrow Agent") certificates representing 93,750 Nobel Shares duly
endorsed in blank by Sellers (such shares, the "Withheld Shares"). The Withheld
Shares shall be held by Escrow Agent in escrow, and Buyer is hereby granted a
security interest in such shares, as security for Sellers' timely performance of
(i) Sellers' obligations under Section 2.3 hereof ("Obligations"), (ii) the
covenant set forth in Section 11.4 hereof or (iii) Sellers' obligation to
indemnify Buyer under this Section 12 against any Damages that Buyer may suffer,
incur or become subject to. If it is finally determined (either by agreement of
the parties, by judgment of a court of competent jurisdiction or by award of an
arbitrator) that an amount is owed to Buyer in respect of any matters described
in the immediately preceding sentence, Buyer shall have the right to have
transferred into its name that number of Withheld Shares as is equal to the
quotient obtained by dividing (a)(i)the dollar amount of such Damages or
Obligations, as the case may be, or (ii) $150,000 in the event of the breach of
the covenant set forth in Section 11.4 hereof by (b) the Guaranteed Value Per
Share (as defined in Section 11.5 hereof). The Escrow Agent shall notify Sellers
promptly of the transfer to Buyer of any Withheld Shares.
b. Any Withheld Shares not transferred to Buyer hereunder
shall be delivered by the Escrow Agent to Sellers' Escrow Agent if the covenant
set forth in Section 11.4 is satisfied in accordance with its terms, provided
--------
that if on or before the satisfaction of the covenant set forth in Section 11.4
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the Buyer has given written notice to Sellers of any claim or claims by Buyer
hereunder, the Escrow Agent shall continue to withhold such number of the
Withheld Shares as is equal to the estimated total dollar amount of such claim
or claims, calculated as specified in subsection (a), until there has been a
final determination as to the claim.
c. Sellers shall not transfer or convert any of the
Withheld Shares, or any interest therein, or make any other pledge of the
Withheld Shares, so long as the Withheld Shares are held in escrow hereunder.
d. Unless and until Withheld Shares become the property of
Buyer as above provided, any cash dividend thereon shall be delivered, as paid,
to the Seller owning such Shares. In the case of any stock dividend, stock split
or similar event, the additional shares shall be added to the Withheld Shares,
and an appropriate adjustment shall be made in the Guaranteed Value Per Share.
Except as provided in this Section 12.5, all other rights incident to the
Withheld Shares, including voting rights, shall be in Sellers.
6. Remedies Not Exclusive. The indemnification obligations
----------------------
contained in this Section 12 are not intended to waive or preclude any other
claims, rights or remedies which may exist at law (whether statutory or
otherwise) or in equity with respect to the matters covered hereby, except that
the Withheld Shares shall be Buyer's sole remedy against Sellers in the event of
the breach of the covenant set forth in Section 11.4 hereof.
SECTION M. SECURITIES MATTERS
1. Investment Representations and Covenants of Sellers.
---------------------------------------------------
a. Sellers understand that the issuance of the Nobel
Shares will not be registered under the Securities Act of 1933, as amended (the
"1933 Act"), on the grounds that the issuance of the Nobel Shares is exempt from
registration pursuant to Section 4(2) of the 1933 Act and/or Regulation D
promulgated under the 1933 Act ("Regulation D"), and that the reliance of Buyer
on such exemptions is predicated in part on the Sellers' representations,
warranties, covenants and acknowledgements set forth in this Section.
b. Sellers hereby represent and warrant to Buyer that they
are Accredited Investors, as that term is defined in Regulation D, and that the
Nobel Shares will be acquired by them for their own account, not as a nominee or
agent, for investment and without a view to resale or other distribution within
the meaning of the 1933 Act, and the rules and regulations
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thereunder, and Sellers will not distribute any of the Nobel Shares in violation
of the 1933 Act.
c. Sellers: (i) acknowledge that the Nobel Shares are not
registered under the 1933 Act and must be held indefinitely by Seller unless the
Nobel Shares are subsequently registered under the 1933 Act (in accordance with
the provisions of Section 13.2 hereof or otherwise) or an exemption from
registration is available, (ii) are aware that any routine sales of the Nobel
Shares made under Rule 144 of the SEC under the 1933 Act may be made only in
limited amounts and in accordance with the terms and conditions of that Rule and
that in such cases where the Rule is not applicable, registration or compliance
with some other registration exemption will be required, (iii) are aware that
Rule 144 is not presently, and for a period of at least two years following the
Closing Date hereof probably will not be, available for use by Sellers for
resale of the Nobel Shares, and (iv) are aware that Buyer is not obligated to
register any sale, transfer or other disposition of the Nobel Shares except in
accordance with the provisions of Section 13.2 hereof.
d. Sellers represent and warrant to Buyer that Sellers
have such knowledge and experience in financial and business matters that they
are fully capable of evaluating the risks and merits of Sellers' investment in
the Nobel Shares.
e. Sellers acknowledge receipt of the SEC filings and
materials referred to in Section 6.8 hereof and confirm and acknowledge that:
(i) Buyer has afforded Sellers the opportunity to ask questions of and receive
answers from Sellers' officers and various directors concerning the terms and
conditions of this Agreement and Sellers' investment in the Nobel Shares and to
obtain such additional information as the Sellers have requested, and (ii)
Sellers have availed themselves of such opportunity to the extent they deem
necessary and have received the information requested.
f. In order to ensure compliance with the provisions of
subsection (b) hereof, each Seller covenants and agrees that, after the Closing,
he or she, as the case may be, will not sell, transfer or otherwise dispose of
any of the Nobel Shares or any interest therein (unless such sale, transfer or
disposition has been registered under the 1933 Act in accordance with the
provisions of Section 13.2 hereof or otherwise) or otherwise without there first
having been compliance with either of the following conditions:
(1) Buyer shall have received a written opinion of
counsel in form and substance reasonably satisfactory to Buyer, or a
copy of a "no-action" or interpretive letter of the SEC, specifying
the nature
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and circumstances of the proposed transfer and indicating that the
proposed transfer will not be in violation of any of the provisions of
the 1933 Act and the rules and regulations promulgated thereunder; or
(2) Buyer shall have received an opinion from its own
counsel to the effect that the proposed transfer will not be in
violation of any of the provisions of the 1933 Act and the rules and
regulations promulgated thereunder.
g. Each Seller also acknowledges and agrees that the
certificates representing the Nobel Shares issuable to him or her will contain a
restrictive legend noting the restrictions on transfer described in this Section
13 and under federal and applicable state securities laws, and that appropriate
"stop-transfer" instructions will be given to Buyer's stock transfer agent.
2. Registration of Nobel Shares.
----------------------------
a. Registration Statement. Within ten (10) business days after
----------------------
the Closing Date, Buyer shall prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement of Form S-3 (the "Registration
Statement") under the 1933 Act to permit the offer and sale of the Nobel Shares
(which term, for the purposes of this Section 13.2, shall include any securities
into which or for which the Nobel Shares subsequently may be converted or
exchanged) by the Sellers from time to time through the facilities of the
National Association of Securities Dealers Automated Quotation System at market
prices current at the time of sale or in other transactions at negotiated
prices; provided, however, that the Sellers agree that they will not sell in the
-----------------
aggregate more than 70,000 Nobel Shares during any 30-day period during the
Effectiveness Period (as hereinafter defined). Buyer shall use reasonable
efforts to cause the Registration Statement to be declared effective promptly
and, except as set forth below, to remain effective under the 1933 Act for 18
months thereafter, and will prepare and file with the SEC any amendments or
post-effective amendments as may be necessary to keep the Registration Statement
effective under the 1933 Act during that period. Buyer will promptly notify
the Sellers in writing of the date on which the Registration Statement is
declared effective. Notwithstanding the foregoing, Buyer shall not be obligated
to keep the Registration Statement or any prospectus included therein (the
"Prospectus") current during any period (A) of up to 90 days per calendar year
if Buyer's chief executive officer advises the Sellers that he has determined in
good faith that valid business reasons make doing so inadvisable, provided that
the Effectiveness Period shall be extended for such number of days that the
Prospectus is not kept current pursuant to this clause
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<PAGE>
(A), or (B) when financial statements do not satisfy the requirements of the
last sentence of paragraph (b) of Rule 3-12 of Regulation S-X (or any successor
rule) to the extent, and only to the extent, that the SEC interprets such
sentence as being applicable to the continued effectiveness of the Registration
Statement, provided Buyer uses reasonable efforts to satisfy such requirements
as soon as possible. For purposes of this Agreement, the "Effectiveness Period"
shall be the period during which the Prospectus is kept current pursuant to the
provisions of this Section 13.2(a).
b. Copies of Documents. During the Effectiveness Period, Buyer
-------------------
shall furnish to the Sellers such number of copies of the Registration
Statement, the Prospectus (including each preliminary Prospectus) and any
amendments and supplements thereto and any documents incorporated by reference
in the Registration Statement as the Sellers shall reasonably request.
c. Blue Sky Compliance. Buyer shall use reasonable efforts to
-------------------
register or qualify or cooperate with the Sellers in connection with the
notification, coordination, registration or qualification (or use reasonable
efforts to obtain exemption from such registration or qualification) of the
Nobel Shares under the securities or blue sky laws of such jurisdictions in the
United States as the Sellers reasonably shall request, up to a maximum of five
states, and do any and all other acts and things which may be reasonably
necessary to enable the Sellers to consummate the disposition of the Nobel
Shares in such jurisdictions during the Effectiveness Period; provided, that in
no event shall Buyer be required to qualify to do business as a foreign
corporation in any jurisdiction where it is not so qualified, to subject itself
to taxation in any jurisdiction where it has not theretofore done so or to take
any action which would subject it to general service of process in any such
jurisdiction where it is not then so subject.
d. Notification. During the Effectiveness Period, Buyer shall
------------
notify the Sellers promptly (i) of any request by the SEC for amendments or
supplements to the Registration Statement or a Prospectus or for additional
information relating thereto, (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, (iii) of the receipt by Buyer of any
notification with respect to the suspension of the registration, qualification
or exemption from registration or qualification of any of the Nobel Shares
covered by the Registration Statement for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (iv) of the
happening of any event which makes any statement made in the Registration
Statement or in the Prospectus or any document incorporated therein by
reference, or
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deemed to be incorporated therein by reference, untrue in any material respect
or which requires the making of any changes in the Registration Statement or the
Prospectus so that such documents will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
e. Supplements and Post-Effective Amendments. Subject to the
-----------------------------------------
provisions of the last sentence of Section 13.2(a) above, during the
Effectiveness Period, upon the occurrence of any event contemplated by clause
(i) or (iv) of Section 13.2(d) above, Buyer will prepare a post-effective
amendment to the Registration Statement or a supplement to the Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Nobel Shares being
sold thereunder, the Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
f. Listing. Buyer shall use reasonable efforts to cause all of
-------
the Nobel Shares covered by the Registration Statement to be listed on each
securities exchange, if any, on which similar securities issued by Buyer are
then listed, provided that the applicable listing requirements are satisfied.
g. Correspondence with the SEC. Buyer shall, upon request from
---------------------------
a Seller, deliver promptly to the Seller copies of all correspondence between
the SEC and Buyer, its counsel or auditors, and all memoranda relating to
discussions with the SEC or its staff with respect to the Registration
Statement.
h. Stock Certificates. Buyer will cooperate with the Sellers
------------------
to facilitate the timely preparation and delivery of certificates representing
Nobel Shares sold under the Registration Statement, which certificates shall not
have any restrictive legends.
i. Obligations of the Sellers. Following the filing of the
--------------------------
Registration Statement and during any period that the Registration Statement is
effective, each Seller shall:
(1) not effect any stabilization transactions or engage in
any stabilization activity in connection with shares of Common Stock of Buyer in
contravention of Rule 10b-7 under the 1933 Exchange Act of 1934, as amended (the
"Exchange Act");
(2) furnish each broker through whom the Seller offers
Nobel Shares such number of copies of the
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Prospectus as the broker may require and otherwise comply with the prospectus
delivery requirements under the 1933 Act;
(3) report to Buyer each month all sales, pledges and other
dispositions of Nobel Shares made by the Seller during said month;
(4) not, and shall not permit any Affiliated Purchaser (as
that term is defined in Rule 10b-6 under the Exchange Act) to, bid for or
purchase for any account in which the Seller has a beneficial interest, or
attempt to induce any other person to purchase, any shares of stock of Buyer in
contravention of Rule 10b-6 under the Exchange Act;
(5) not offer or agree to pay, directly or indirectly, to
anyone any compensation for soliciting another to purchase, or for purchasing
(other than for the Seller's own account), any securities of Buyer on a national
securities exchange in contravention of Rule 10b-2 under the Exchange Act;
(6) cooperate with Buyer as Buyer fulfills its obligations
under Section 13.2(c) above;
(7) furnish such information concerning the Seller as Buyer
may from time to time request;
(8) sell Nobel Shares pursuant to the Registration
Statement only in "brokers' transactions" or in transactions directly with a
"market maker," as defined in paragraphs (f) and (g) of Rule 144 under the 1933
Act (collectively, "Brokers' Transactions"); and
(9) not sell under the Registration Statement during any
period after Buyer has provided notice to the Seller pursuant to Section
13.2(d)(iv) above and until Buyer provides to the Seller notice that the
Registration Statement no longer fails to state a material fact required to be
stated therein, or no longer misstates a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
made not misleading.
(j) Expenses. Buyer shall bear all expenses incident to Buyer's
--------
performance of or compliance with this Section 13.2, including all registration
and filing fees and expenses of compliance with securities or blue sky laws,
including without limitation reasonable fees and disbursements of counsel in
connection with blue sky qualifications, rating agency fees, printing expenses,
messenger and delivery expenses, internal expenses, the fees and expenses
incurred in connection with the listing of the securities to be registered on
each securities exchange on which such securities are required to be listed (if
any), fees and disbursements of counsel for Buyer and
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its independent certified public accountants (including the expenses of any
special audit conducted at Buyer's option or "cold comfort" letters required by
or incident to such performance), securities acts liability insurance (if Buyer
elects to obtain such insurance), and the reasonable fees and expenses of any
special experts retained by Buyer. Notwithstanding the foregoing, Buyer shall
not be required to bear the expenses of any underwriting discounts or
commissions or brokerage commissions attributable to the sale of the Nobel
Shares or any out-of-pocket expenses of the Sellers, including travel costs and
the costs of any counsel or any other advisers engaged by the Sellers to
represent or advise them in connection with the transactions contemplated by
this Section 13.2.
(k) Indemnification.
---------------
(1) Indemnity by Buyer. Buyer shall (i) indemnify and hold
------------------
harmless each Seller (each such person being hereinafter referred to in this
Section 13.2(k)(1) as an "Indemnified Party") against any losses, claims,
damages, liabilities or expenses ("Losses"), to which each such Indemnified
Party may become subject, under the 1933 Act or otherwise, insofar as such
Losses (or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or underlying Prospectus, as amended or supplemented if
Buyer has furnished any amendments or supplements thereto, or any document filed
under a state securities or blue sky law (each such document individually being
referred to as a "Registration Document" and collectively as "Registration
Documents") or insofar as any Losses (or actions in respect thereof) arise out
of or are based upon the omission or alleged omission to state in any
Registration Document or underlying Prospectus, as amended or supplemented if
Buyer has furnished any amendments or supplements thereto, a material fact
required to be stated therein or necessary to make the statements made therein
(in the case of a Prospectus, in the light of the circumstances under which they
were made), not misleading, and (ii) reimburse each Indemnified Party for all
legal or other expenses reasonably incurred by it in connection with
investigating or defending any Loss, including any amounts paid in settlement of
any litigation, commenced or threatened, if such settlement is effected with the
prior written consent of Buyer; provided, that Buyer shall not be liable for any
Losses arising out of or based upon any untrue statement or omission made in any
Registration Document in reliance upon and in conformity with written
information furnished to Buyer by or on behalf of a Seller stating that it is
for use in the preparation of the Registration Document; and provided further,
that Buyer shall not be liable to a particular Indemnified Party with respect to
any such Prospectus, as amended or supplemented, to the extent that the Loss
arises from the sale of any Nobel Shares by such Indemnified Party to the person
-38-
<PAGE>
asserting Loss and to which there was not sent or given, within the time
required by the 1933 Act, a copy of such Prospectus as then amended or
supplemented, if Buyer has previously furnished copies thereof to such
Indemnified Party and such Prospectus as then amended or supplemented has
corrected the misstatement or omission at issue.
(2) Indemnity by the Sellers. Each Seller shall (i) indemnify
------------------------
and hold harmless Buyer, any officer, director, employee or agent of Buyer, and
each other person, if any, who controls Buyer within the meaning of Section 15
of the 1933 Act (each such person being hereinafter referred to in this Section
13.2(k)(2) as an "Indemnified Party") against any Losses to which each such
Indemnified Party may become subject under the 1933 Act or otherwise, insofar as
such Losses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Document, or arise out of or are based upon the omission or
alleged omission to state in any Registration Document a material fact required
to be stated therein or necessary to make the statements made therein (in the
case of a prospectus, in the light of the circumstances under which they were
made,) not misleading, and (ii) reimburse each Indemnified Party for all legal
or other expenses reasonably incurred by it in connection with investigating or
defending any such Losses or action, including any amounts paid in settlement of
any litigation, commenced or threatened, if such settlement is effected with the
prior written consent of the Seller; provided, that such indemnification or
reimbursement shall be payable only if, and to the extent that, any Losses arise
out of or are based upon an untrue statement or omission made in any
Registration Document in reliance upon and in conformity with written
information furnished to Buyer by the Seller specifically stating that it is for
use in the preparation thereof.
(3) Procedure for Indemnification. Promptly after receipt by an
-----------------------------
Indemnified Party (as defined under Sections 13.2(k)(1) or 13.2(k)(2), as the
case may be) of notice of the commencement of any action, the Indemnified Party
shall notify the party from whom indemnification is being sought (the
"Indemnifying Party") in writing of the commencement thereof, if a claim in
respect thereof is to be made against an Indemnifying Party under this Section
13.2(k); provided, that the omission of such notice shall not relieve the
Indemnifying Party from liability which it may have to the Indemnified Party
under this Section 13.2(k), except to the extent that the Indemnifying Party is
actually prejudiced by such failure to give notice, and shall not relieve the
Indemnifying Party from any liability which it may have to any Indemnified Party
otherwise than under this Section 13.2(k). In case any action is brought
against the Indemnified Party and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be
-39-
<PAGE>
entitled to participate in, and to the extent that it chooses, to assume the
defense thereof with counsel reasonably satisfactory to the Indemnified Party,
and after notice from the Indemnifying Party to the Indemnified Party that it so
chooses, the Indemnifying Party shall not be liable for any legal or other
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof; provided, that (i) if the Indemnifying Party fails to take
reasonable steps necessary to defend diligently the claim within 20 days after
receiving notice from the Indemnified Party that the Indemnified Party believes
the Indemnifying Party has failed to diligently defend such claim, or (ii) if
the Indemnified Party who is a defendant in any action or proceeding which is
also brought against the Indemnifying Party reasonably shall have concluded that
there are legal defenses available to the Indemnified Party which are not
available to the Indemnifying Party, or (iii) if representation of both parties
by the same counsel is otherwise inappropriate under applicable standards of
professional conduct, then the Indemnified Party shall have the right to assume
or continue its own defense as set forth above. In no event, however, shall the
Indemnifying Party be responsible for the fees of more than one firm of counsel
for all Indemnified Parties.
(4) Non-Exclusive Indemnity. Any indemnity agreements contained
------------------------
in this Section 13.2(k) shall be in addition to any other rights to
indemnification or contribution which any Indemnified Party may have pursuant to
law or contract and shall remain operative and in full force and effect
regardless of any investigation made or omitted by or on behalf of any
Indemnified Party.
(5) Contribution. If for any reason the foregoing indemnity is
------------
unavailable, or is insufficient to hold harmless an Indemnified Party, then the
Indemnifying Party shall contribute to the amount paid or payable by the
Indemnified Party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and the Indemnified Party on the other (determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Party or the Indemnified Party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission), or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law or provides a
lesser sum to the Indemnified Party than the amount hereinafter calculated, in
such proportion as is appropriate to reflect not only the relative fault of the
Indemnifying Party and the Indemnified Party, but also the relative benefits
received by the Indemnifying Party on the one hand and the Indemnified Party on
the other, as well as any other relevant equitable
-40-
<PAGE>
considerations. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
SECTION N. TERMINATION
1. Termination. This Agreement may be terminated at any time prior
-----------
to the Closing by:
a. Buyer, if the conditions set forth in Section 9 hereof have
not been satisfied by the Closing Date;
b. Buyer pursuant to Section 16.5(b) hereof;
c. Sellers, if the conditions set forth in Section 10 hereof
have not been satisfied by the applicable date or the Closing Date; or
d. mutual consent of Buyer and the Sellers.
2. Effect of Termination.
---------------------
a. If Buyer terminates this Agreement pursuant to Section 16.5,
or if a party terminates this Agreement because one of its conditions precedent
has not been fulfilled, or if this Agreement is terminated by mutual consent,
this Agreement shall become null and void without any liability of any party to
the other, provided, however, that: (i) if such termination is by Sellers
pursuant to Section 14.1(c) as a result of a breach by Buyer of any of its
representations, warranties or covenants in this Agreement, or if such
termination is by Buyer pursuant to Section 7.2 (other than as a result of a
breach by the Company or Sellers of any of their representations, warranties or
covenants in this Agreement), the Deposit Money, together with all interest
thereon, shall be paid to and retained by the Sellers as liquidated damages and
the Buyer shall have no further liability to the Sellers by reason of such
breach (retention of the Deposit Money with interest being Sellers' exclusive
remedy for Buyer's breach of this Agreement); and (ii) if such termination is by
Buyer pursuant to Section 14.1(a) as a result of a breach by the Company or
Sellers of any of their representations, warranties or covenants in this
Agreement, Buyer shall be entitled to recover its damages and to the return of
the Deposit Money and all interest thereon. In all other cases where this
Agreement is terminated and the Deposit Money is not required to be paid to
Sellers, the Deposit Money, together with all interest thereon, shall be
returned to Buyer.
-41-
<PAGE>
b. Nothing in this Section 14 shall affect either party's right
to specific performance of the other parties' obligations hereunder.
c. The provisions of Section 7.1(b) shall survive the
termination of this Agreement.
SECTION O. REPRESENTATION OF SELLERS BY SELLERS' AGENT
1. Appointment of Sellers' Agent.
-----------------------------
a. Each of the Sellers (herein called the "Represented
Sellers") hereby irrevocably appoints Richard V. McCool (herein called the
"Sellers' Agent") as such Represented Sellers' agent and attorney-in-fact to
take any action required or permitted to be taken by such Represented Seller
under the terms of this Agreement, including, without limiting the generality of
the foregoing, the execution, delivery and receipt of any notices, certificates
or other documents (including without limitation the Escrow Agreement) to be
executed, delivered or received by or on behalf of any or all of the Represented
Sellers, the payment of expenses relating to the transactions contemplated by
this Agreement, the preparation of the Closing Statement and the agreement of
the Represented Sellers as to Certified Adjusted Net Worth as provided in
Section 2.2 hereof, the representation of the Represented Sellers in the
resolution of any disputed matters hereunder or under the Escrow Agreement and
in indemnification proceedings hereunder, and the right to waive, modify or
amend any of the terms of this Agreement and the Escrow Agreement. Each
Represented Seller agrees to be bound by any and all actions taken by the
Sellers' Agent on such Represented Seller's behalf. The Represented Sellers
agree jointly and severally to indemnify the Sellers' Agent from and against and
in respect of any and all liabilities, damages, claims, costs and expenses,
including but not limited to attorneys' fees, arising out of or due to any
action as the Sellers' Agent and any and all actions, proceedings, demands,
assessments or judgments, costs and expenses incidental thereto, except to the
extent that the same result from bad faith or gross negligence on the part of
the Sellers' Agent.
b. The Buyer and the Deposit Escrow Agent shall be
entitled to rely exclusively upon any communications given by the Sellers' Agent
on behalf of any Represented Seller and shall not be liable in any manner
whatsoever for any action taken or not taken in reliance upon the actions taken
or not taken or communications made by the Sellers' Agent. The Buyer and the
Deposit Escrow Agent shall be entitled to disregard any notices or
communications given or made by Represented Sellers unless given or made through
the Sellers' Agent, except as provided in Section 15.2 below.
-42-
<PAGE>
2. Successor Agent. In the event of the death or resignation of the
---------------
Sellers' Agent or his inability to perform his functions hereunder, the
Represented Sellers shall promptly appoint a new agent or agents as attorney-in-
fact or attorneys-in-fact, and such appointment or appointments shall be deemed
to have been made when communicated to the Buyer in writing signed by the former
holders (or the personal representatives thereof) of at least 51% of the Educo
Shares owned by Represented Sellers immediately prior to the Closing Date. If
the Represented Sellers do not within fifteen days appoint a new agent or
agents, then the Represented Seller then living who previously owned the
greatest number of Educo Shares outstanding immediately prior to the Closing
Date shall serve as Sellers' Agent if he or she is able and willing to do so,
until a successor agent or agents shall have been appointed in accordance with
the provisions hereof.
3. Sellers' Actions. The manner and form by which the Represented
----------------
Sellers shall decide upon any new agent and attorney-in-fact shall be decided
solely by the former holders (or the personal representatives thereof) of at
least 51% of the Educo Shares owned by Represented Sellers outstanding
immediately prior to the Closing Date. The Represented Sellers recognize, and
hereby acknowledge, that the Sellers' Agent has an interest in the subject
matter of this Agreement and that the appointment of such Agent (which shall
include any person who becomes the Sellers' Agent pursuant to the provisions of
Section 15.2 above) as the Sellers' Agent constitutes an irrevocable power-of-
attorney coupled with an interest.
SECTION P. MISCELLANEOUS
1. Survival of Representations and Warranties. All representations,
------------------------------------------
warranties, covenants and agreements made by Buyer and the Sellers (but not the
Company) in this Agreement or in any schedule, certificate, document or list
delivered by any such party pursuant hereto shall survive the Closing and
notwithstanding any investigation conducted before or after the Closing Date or
the decision of any party to complete the Closing, each party hereto shall be
entitled to rely upon the representations and warranties of the other party.
2. Best Efforts. Sellers and Buyer shall use their respective best
------------
efforts with respect to matters within their control to cause the transactions
contemplated by this Agreement to be consummated.
3. Public Announcements. Any announcements or sim ilar publicity
--------------------
with respect to this Agreement or the transactions contemplated herein shall be
at such time and in such manner as Sellers and Buyer shall agree, provided that
nothing herein shall
-43-
<PAGE>
prevent either party upon notice to the other from making such public
announcements as such party's counsel may consider advisable in order to satisfy
that party's legal and contractual obligations in such regard.
4. Costs and Expenses. Any and all costs and expenses (including,
------------------
without limitation, all legal, accounting and financial advisory fees) incurred
by the Company or Sellers in connection with the negotiations leading up to and
performance under this Agreement shall be borne by the Company and shall be paid
by the Company on or before the Closing Date, and Sellers promptly shall
reimburse the Company for any such expenses paid by the Company after the
Closing Date. Subject to the foregoing, each party hereto shall bear its own
costs and expenses in connection with this Agreement and the transactions
contemplated hereby.
5. Risk of Loss.
------------
a. The Company shall give Buyer prompt written notice of any
damage to or destruction of all or any material part of the assets and
properties of the Company, or of any notice of condemnation proceedings or other
proceedings in the nature of eminent domain affecting all or any material part
of the assets and properties of the Company.
b. In the event of (i) the occurrence of any event described in
paragraph (a) above or (ii) the destruction or condemnation before the Closing
Date of any portion of the Real Properties such that a school or pre-school, as
the case may be, cannot be carried out at such location for a period of more
than seven days, Buyer may at its option terminate this Agreement, whereupon the
Deposit Money (including all interest thereon) shall be returned to Buyer and
this Agreement shall become null and void without any liability of any party to
the other.
6. Performance. In the event of a default, either party shall have
-----------
the right, in addition to any other remedies which may be available, to obtain
specific performance of the terms of this Agreement. Should any party default
in performance of any of the terms and conditions of this Agreement or any other
agreement referred to herein which results in the filing of a lawsuit for
damages, specific performance, or other remedy, the prevailing party in such
lawsuit shall be entitled to its reasonable attorney's fees and court costs from
the losing party.
7. Benefit and Assignment. This Agreement will be binding upon the
----------------------
respective heirs, legal representatives, successors and permitted assigns of the
parties hereto. Prior to Closing, none of the parties hereto may assign its
interest under this Agreement to any other person without the prior consent of
the other parties.
-44-
<PAGE>
8. Schedules and Exhibits. Any and all schedules (including the
----------------------
Disclosure Schedule) and exhibits referenced or incorporated herein are deemed
to be a part of this Agreement and are binding and enforceable as to any terms
contained therein. The submission of any information on a schedule (including
the Disclosure Schedule) or on an exhibit shall constitute a re presentation by
the party providing such schedule or exhibit of the truth and correctness of all
information set forth therein.
9. Effect and Construction of this Agreement. This Agreement and
-----------------------------------------
the exhibits and schedules hereto embody the entire Agreement and understanding
of the parties and supersede any and all prior agreements arrangements and
understandings relating to matters provided for herein. The captions are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement. This Agreement may be executed in one or more
counterparts and all such counterparts will constitute one and the same
instrument.
10. Cooperation. Subject to the terms and conditions herein
-----------
provided, each of the parties hereto shall use its best efforts to take, or
cause to be taken, such action, to execute and deliver, or cause to be executed
and delivered, such addi tional documents and instruments and to do, or cause to
be done, all things necessary, proper or advisable under the provisions of this
Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement.
11. Notices. All notices required or permitted here under shall be
-------
in writing and shall be deemed to be properly given when personally delivered to
the party entitled to receive the notice or when sent by certified or registered
mail, postage prepaid, properly addressed to the party entitled to receive such
notice at the address stated below.
If to the Company: 1899 Preston White Drive
Reston, VA 22091
Attn: President
If to Sellers: At the address of each Seller set forth on
Schedule A hereto
----------
with a copy to: Stuart H. Gary, Esq.
Goodman Gary & Lickstein, P.C.
8500 Leesburg Pike
Suite 7000
Vienna, VA 22182
-45-
<PAGE>
If to Buyer: Rose Tree Corporate Center II
1400 North Providence Road
Suite 3055
Media, PA 19063
Attn: Chairman or
Chief Executive Officer
with a copy to: John E. Stoddard III, Esq.
Drinker Biddle & Reath
Suite 400
47 Hulfish Street
Princeton, NJ 08542
12. Waiver, Discharge, etc. This Agreement may not be released,
----------------------
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing signed on behalf of each of the parties hereto by their
duly authorized officers or representatives. The failure of any party hereto to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part thereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
13. Severability. The invalidity or unenforceability of any
------------
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
14. Rights of Persons Not Parties. Nothing contained in this
-----------------------------
Agreement shall be deemed to create rights in persons not parties hereto, other
than the successors and permitted assigns of the parties hereto.
15. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware without reference to that
State's conflict of laws provision.
16. Sellers' Internal Escrow.
------------------------
a. At Closing Buyer shall deliver certificates representing
1,156,250 Nobel Shares duly endorsed in blank by Sellers to Glenn E. Thompson,
Jr. and Stuart L. Sussman, jointly as Sellers' escrow agent (together, "Sellers'
Escrow Agent"). For so long as these Nobel Shares are held in escrow, Sellers'
Escrow Agent shall be deemed the owner thereof on behalf of Sellers for all
purposes, as well as the recipient for all dividends with respect thereto.
-46-
<PAGE>
b. At Closing Buyer shall pay to Sellers' Escrow Agent on
behalf of Sellers Fifty Thousand Dollars ($50,000) of the cash portion of the
Purchase Price that would otherwise be payable directly to Sellers pursuant to
Section 2.1(b).
-47-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, all as of the date first above written.
NOBEL EDUCATION DYNAMICS, INC. SELLERS:
By: xxx
---------------------------
Title: xxx xxx
------------------------ --------------------------
A.J. Clegg, Chairman. Dr. George August
President and CEO
xxx
--------------------------
EDUCO, INC. Muriel Breger
By: xxx xxx
--------------------------- ---------------------------
Title: xxx Shirley F. Cohen, T/U/A
------------------------ William Cohen dated 5/25/83
xxx
---------------------------
Maurice Greenman
xxx
---------------------------
Richard V. McCool
xxx
---------------------------
Dr. Murray Paul
xxx
---------------------------
Stuart L. Sussman
xxx
---------------------------
Glenn E. Thompson, Jr.
-48-
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
==============================================================================================================================
ALLOCABLE SHARE OF PURCHASE PRICE AT CLOSING
-----------------------------------------------------------------------------------
Name, Address and Number of CASH PAYABLE TO NOBEL SHARES ISSUABLE TO
Taxpayer Identification Educo Shares -----------------------------------------------------------------------------------
Number of Sellers Owned
Sellers' Sellers' Total Nobel
Sellers Escrow Agent Total Cash Escrow Agent Escrow Agent Shares
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Dr. George August
9255 Colesville Road
Silver Spring, MD 20910 40 $ 78,000 $ 2,000 $ 80,000 46,250 3,750 50,000
Taxpayer I.D. No.:
###-##-####
------------------------------------------------------------------------------------------------------------------------------
Muriel Breger
3310 N. Leisure World Blvd.
Apt. 1026 30 58,500 1,500 60,000 34,687 2,813 37,500
Silver Spring, MD 20906
Taxpayer I.D. No.:
###-##-####
------------------------------------------------------------------------------------------------------------------------------
Shirley F. Cohen,
T/U/A William Cohen
dated 5/25/83 530 1,033,500 26,500 1,060,000 612,812 49,688 662,500
2384 Silver Palm Road, West
Boca Raton, FL 33432
Taxpayer I.D. No.:
###-##-####
------------------------------------------------------------------------------------------------------------------------------
Maurice Greenman
670 Tusculum Road
Bethesda, MD 20817 50 97,500 2,500 100,000 57,813 4,687 62,500
Taxpayer I.D. No.:
###-##-####
------------------------------------------------------------------------------------------------------------------------------
Richard V. McCool
1904 Ramstead Lane
Reston, VA 22091 50 97,500 2,500 100,000 57,813 4,687 62,500
Taxpayer I.D. No.:
###-##-####
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================================
ALLOCABLE SHARE OF PURCHASE PRICE AT CLOSING
-----------------------------------------------------------------------------------
Name, Address and Number of CASH PAYABLE TO NOBEL SHARES ISSUABLE TO
Taxpayer Identification Educo Shares -----------------------------------------------------------------------------------
Number of Sellers Owned
Sellers' Sellers' Total Nobel
Sellers Escrow Agent Total Cash Escrow Agent Escrow Agent Shares
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Dr. Murray Paul
13601 Stoner Drive
Silver Spring, MD 20904 100 195,000 5,000 200,000 115,625 9,375 125,000
Taxpayer I.D. No.:
###-##-####
------------------------------------------------------------------------------------------------------------------------------
Stuart L. Sussman
20 Yale Drive
Manhasset, NY 11030 100 195,000 5,000 200,000 115,625 9,375 125,000
Taxpayer I.D. No.:
###-##-####
------------------------------------------------------------------------------------------------------------------------------
Glenn E. Thompson, Jr.
12201 Brookhaven Drive
Silver Spring, MD 20902 100 195,000 5,000 200,000 115,625 9,375 125,000
Taxpayer I.D. No.:
###-##-####
------------------------------------------------------------------------------------------------------------------------------
TOTAL 1,000 $1,950,000 $50,000 $2,000,000 1,156,250 93,750 1,250,000
===== ========== ======= ========== ========= ====== =========
==============================================================================================================================
</TABLE>
-50-
<PAGE>
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT is dated as of August
31, 1995, by and among Educo, Inc., a Maryland corporation (the "Company"), the
record and beneficial owners of all of the outstanding shares of capital stock
of the Company listed on Schedule A hereto (each, a "Seller," and collectively,
----------
the "Sellers") and Nobel Education Dynamics, Inc., a Delaware corporation
("Buyer"). The Stock Purchase Agreement dated May 23, 1995, between the parties
shall be hereinafter referred to as the "Agreement." All capitalized terms not
otherwise defined herein shall have the same meanings as are ascribed to them in
the Agreement.
BACKGROUND
A. Pursuant to Section 2.1(b) of the Agreement, at Closing the amount
payable by Buyer to Sellers or Sellers' Agent is $1,950,000 and the amount
payable by Buyer to Sellers' Escrow Agent is $50,000. The Sellers have decided
that they desire to increase the amount payable to Sellers' Escrow Agent to
$75,000 thus reducing the amount payable to Sellers or Sellers' Agent to
$1,925,000.
B. Pursuant to Section 2.1(c) of the Agreement, Buyer is to issue and
deliver the Nobel Shares at Closing, and pursuant to Section 13.2 of the
Agreement, Buyer is to cause the Registration Statement to filed within ten (10)
business days after the Closing Date. Buyer and Sellers have decided that it is
in their mutual best interests to modify the Agreement to provide for two
installment payments of the Purchase Price with (i) the cash portion of
$2,000,000 paid at Closing and (ii) the issuance and delivery of the Nobel
Shares occurring on January 15, 1996.
C. Pursuant to Section 4.1(p) of the Agreement, the Sellers are obligated
to deliver, or cause to be delivered, to the Buyer at Closing "a letter of
intent addressed to the Company and signed by or on behalf of the owner of the
facility leased by the Company for the Company's operation of the North Raleigh
Country Day School ... [pursuant to which] such owner will ... construct
additional classroom(s) at the site..." Such owner has already agreed to
construct such additional classroom(s), and the parties wish to amend the
Agreement to reflect the terms and conditions pursuant to which such additional
classroom(s) shall be leased to the Company.
D. Pursuant to Section 4.1(q) of the Agreement, the Sellers are obligated
to deliver, or cause to be delivered, to the Buyer at Closing "releases of the
Company from all guarantees of indebtedness or other obligations of third
parties, including without limitation those guarantees listed on the Disclosure
- 1 -
<PAGE>
Schedule (as hereafter defined) in connection with Sections 5.7 and 5.12(c)" of
the Agreement.
E. The Sellers are unable to deliver, or cause to be delivered to the
Buyer at Closing a release of the Company from a certain portion of such
indebtedness; namely, that certain Small Business Administration (SBA) Guaranty
dated June 10, 1987 (the "SBA Guaranty"), from the Company and certain other
guarantors to and for the benefit of the Small Business Administration (the
"SBA") in order to induce the SBA to make a loan in the amount of $153,000 (the
"Loan") to ILM Joint Venture, a North Carolina general partnership ("ILM").
F. Pursuant to Section 4.1(h) of the Agreement, the Sellers are obligated
to deliver, or cause to be delivered, to the Buyer at Closing, the Leases.
G. The Buyer is willing to release Seller from its obligation to deliver
to the Buyer at Closing a release of the Company from the SBA Guaranty; SUBJECT
-------
TO THE CONDITION PRECEDENT that the Lease (the "Wilmington Lease") pertaining to
--------------------------
the Wilmington, North Carolina, property (e.g., Early Childhood Learning Center,
----
ILM Joint Venture, Wilmington, North Carolina) be amended:
1. to provide for a reduction of $1,000 in each monthly
installment of Annual Basic Rent for the first 12 monthly installments of the
lease term (representing an aggregate reduction of $12,000); and
2. to permit the tenant under the Wilmington Lease to offset,
against Annual Basic Rent and any and all other sums that may become due and
payable under the Wilmington Lease, any and all sums paid or costs incurred by
the Company under or pursuant to the SBA Guaranty.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. Section 2.1(b) of the Agreement is hereby amended by replacing the
ninth word on the twelfth line of such Section with the following "$1,925,000"
and by replacing the last word of such Section with the following "$75,000" and
all references in the Agreement to this Section shall likewise be deemed
amended.
2. Section 2.1(c) of the Agreement is hereby amended by replacing the
fourth and fifth words on the first line of such Section with the following "on
January 15, 1996".
- 2 -
<PAGE>
3. The first sentence of Section 2.3(c) of the Agreement is hereby
amended and restated in its entirety as follows:
"(c) Amounts payable pursuant to this Section 2.3 by Sellers shall be
made by certified check or wire transfer of immediately available funds to an
account designated by the Buyer."
4. Section 4.1(p) of the Agreement is hereby deleted in its entirety.
5. The form of North Raleigh Lease attached as part of Exhibit 4.1(h) of
the Agreement is hereby amended and restated in its entirety as set forth in
Exhibit 1 attached to this First Amendment and made a part hereof.
6. Section 4.1(q) of the Agreement is hereby amended and restated in its
entirety as follows:
"(q) releases of the Company from all guarantees of indebtedness or
other obligations of third parties, including without limitation those
guarantees listed on the Disclosure Schedule (as hereafter defined) in
connection with Sections 5.7 and 5.12(c) hereof; PROVIDED, HOWEVER, that the
-------- -------
Sellers shall have no obligation to deliver to the Buyer, at closing, a release
of the Company from that certain Small Business Administration (SBA) Guaranty
dated June 10, 1987 (the "SBA Guaranty"), from the Company and certain other
guarantors to and for the benefit of the Small Business Administration (the
"SBA") in order to induce the SBA to make a loan in the amount of $153,000 (the
"Loan") to ILM Joint Venture, a North Carolina general partnership ("ILM");"
7. Paragraphs 1(c) and 5(c) of the form of Wilmington Lease attached as a
part of Exhibit 4.1(h) of the Agreement are hereby amended and restated in their
entirety as set forth in Exhibit 2 attached to this First Amendment and made a
part hereof.
8. The first line of Section 4.2 of the Agreement is hereby amended by
adding the following words after the third word and before the comma "(except
for the actions contemplated by Sections 4.2(b) and (h) which shall instead
occur on January 15, 1996)"
9. The second sentence of Section 6.7 of the Agreement is hereby amended
and restated in its entirety as follows:
"The Nobel Shares to be issued and delivered on January 15, 1996
pursuant to this Agreement will, upon the issuance of such Shares, be duly
authorized, validly issued, fully paid and nonassessable by Buyer."
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<PAGE>
10. Section 12.5 of the Agreement is hereby amended by replacing the first
and second words (but retaining the comma) on the first line of such Section
with the following "On January 15, 1996".
11. Section 13.1(c) of the Agreement is hereby amended by replacing the
sixth, seventh and eighth words on the thirteenth line of such Section with the
following "issuance and delivery of the Nobel Shares".
12. Section 13.1(f) of the Agreement is hereby amended by replacing the
fifth word (but retaining the comma) on the third line of such Section with the
following "issuance and delivery of the Nobel Shares".
13. Section 13.2 of the Agreement is hereby amended by replacing the first
nine words (but retaining the comma) in the first sentence of such Section with
the following "Prior to the issuance and delivery of the Nobel Shares".
14. Section 16.16(a) of the Agreement is hereby amended by replacing the
first two words on the first line of such Section with the following "On January
15, 1996".
15. Section 16.16(b) of the Agreement is hereby amended by replacing the
first two words on the first line of such Section with the following "On January
15, 1996".
16. Nothing set forth herein shall be deemed to alter in any manner the
powers conferred on the Sellers' Agent in Section 15 of the Agreement.
17. Except as amended and modified hereby or inconsistent with the
provisions hereof, the Agreement is hereby ratified and confirmed.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, all as of the date first above written.
NOBEL EDUCATION DYNAMICS, INC. SELLERS:
By: __________________________ _____________________________
Title:_________________________ Dr. George August
A. J. Clegg
Chairman, Pres & CEO _____________________________
Muriel Breger
EDUCO, INC.
_____________________________
By: ___________________________ Shirley F. Cohen, T/U/A
Title:_________________________ William Cohen Dated 5/25/83
_____________________________
Maurice Greenman
_____________________________
Richard V. McCool
_____________________________
Dr. Murray Paul
_____________________________
Stuart L. Sussman
_____________________________
Glenn E. Thompson, Jr.
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<PAGE>
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT is dated August 31,
1995, by and among Educo, Inc., a Maryland corporation (the "Company"), the
record and beneficial owners of all of the outstanding shares of capital stock
of the Company listed on Schedule A hereto (each, a "Seller," and collectively,
----------
the "Sellers") and Nobel Education Dynamics, Inc., a Delaware corporation
("Buyer"). The Stock Purchase Agreement dated May 23, 1995, between the
parties, as amended by the First Amendment to Stock Purchase Agreement dated
August 31, 1995, shall be hereinafter referred to as the "Agreement." All
capitalized terms not otherwise defined herein shall have the same meanings as
are ascribed to them in the Agreement.
BACKGROUND
A. Pursuant to Section 5.9 of the Agreement, the Sellers represented and
warranted to Buyer, among other things, that "no Permit will be adversely
affected by the consummation of the transactions contemplated by this
Agreement."
B. The Sellers have subsequently discovered that the operating permit
(the "Existing Millbrook Permit") for the facility currently leased by the
Company for the Company's operation of the Millbrook Country Day School in
Raleigh, North Carolina (the "Existing Millbrook Facility") may be adversely
affected by the consummation of the transactions contemplated by this Agreement.
C. Section 11.4 of the Agreement sets forth certain rights and
obligations of the parties after Closing with respect to the Existing Millbrook
Facility and the possible replacement of the Existing Millbrook Facility with a
new facility (the "New Millbrook Facility") on a different site in close
proximity to the Existing Millbrook Facility.
D. The parties wish to amend the Agreement to reflect the rights and
obligations of the parties with respect to the Existing Millbrook Permit, the
Existing Millbrook Facility and the New Millbrook Facility.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. Schedule A of the Agreement is hereby amended and restated in its
entirety in the form attached to this Amendment.
2. Section 2.1(b) of the Agreement is hereby amended and restated in its
entirety as follows:
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<PAGE>
(b) At the Closing, Buyer shall deliver: (i) to Sellers or Sellers' Agent
(as defined in Section 16.16 hereof), as the case may be, the aggregate amount
of One Million Eight Hundred Thousand Dollars ($1,800,000), by wire transfer
pursuant to instructions previously given by Sellers to Buyer for that purpose
in the respective amounts set forth beside each Seller's name on Schedule A
hereto, such that the aggregate amount payable at the Closing to Sellers or
Sellers' Agent shall equal $1,725,000 and the amount payable at the Closing to
Sellers' Escrow Agent shall equal $75,000 and (ii) to Escrow Agent (as defined
in Section 12.5 hereof) $200,000 pursuant to Section 12.5 hereof.
3. Section 5.9 of the Agreement is hereby amended to insert the phrase
"except as disclosed in Section 11.4," immediately prior to the phrase "no
Permit will be adversely affected by the consummation of the transactions
contemplated by this Agreement."
4. Section 11.4 of the Agreement is hereby amended and restated in its
entirety as follows:
"11.4. Millbrook Facility.
------------------
11.4.1. The parties acknowledge and agree that the operating
permit (the "Existing Millbrook Permit") for the facility currently leased by
the Company for the Company's operation of the Millbrook Country Day School in
Raleigh, North Carolina (the "Existing Millbrook Facility") may be adversely
affected by the consummation of the transactions contemplated by this Agreement.
11.4.2. Buyer is currently negotiating in good faith with the
owner of the Existing Millbrook Facility (the "Millbrook Owner") the terms and
conditions of a lease (the "New Millbrook Lease") pursuant to which the
Millbrook Owner would construct and lease to Buyer a new facility (the "New
Millbrook Facility") on a different site in close proximity to the Existing
Millbrook Facility. The terms and provisions of the New Millbrook Lease shall be
essentially as set forth in the lease provided for the North Raleigh school
site, in the form attached as Exhibit 4.1(h), with the exception of the
commencement date, termination date, property description, and lease rental
rate. The lease rate on the New Millbrook Facility shall be such that after
taking into account the total costs of construction and ground acquisition, the
annual rental rate shall be equal to the greater of (A) the annual debt service
(principal and interest) on the project based upon a 20-year amortization
schedule, provided that the annual interest rate shall not exceed thirteen
percent (13%), or (B) sixteen percent (16%) of total tuition and registration
fees actually received from the New Millbrook Facility. If the New Millbrook
Facility is built on the current
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<PAGE>
location, the rental rate on the New Millbrook Facility shall be the greater of
(A) the annual debt service (principal and interest) on the costs of
construction (excluding land) based upon a 20-year amortization schedule,
provided that the annual interest rate shall not exceed thirteen percent (13%),
plus $36,000 per year representing the land value or (B) sixteen percent (16%)
of the total tuition and registration fees actually received from the New
Millbrook Facility.
11.4.3. At Closing, Sellers shall place in escrow, pursuant to
Section 12.5 of this Agreement, (a) $200,000 in cash (the "Withheld Cash"), and
(b) certificates representing 125,000 Nobel Shares duly endorsed in blank by
Sellers (such shares, the "Withheld Shares"). The Withheld Cash shall be held in
an interest-bearing account, and all interest earned thereon shall follow the
principal.
11.4.4. Sellers covenant and agree that on or before August 15, 1996,
the construction of the New Millbrook Facility will be completed (such
completion ("Completion") to be evidenced by the delivery to the Company and
Buyer of a certificate of occupancy or other similar instrument and operating
permit for the New Millbrook Facility in such period of time as to permit Buyer
to move its operations from the Existing Millbrook Facility to the New Millbrook
Facility without any interruption in operations), in each case to the
satisfaction of the Company and Buyer.
11.4.5. Sellers covenant and agree that the Existing Millbrook Permit
shall remain in full force and effect and shall not be revoked prior to
Completion.
11.4.6. If the Existing Millbrook Permit is revoked prior to
commencement of construction of the New Millbrook Facility (such commencement
("Commencement") to be evidenced by the installation of footings and
foundations), then:
(a) the Escrow Agent shall immediately transfer to Buyer 62,500
of the Withheld Shares (but shall retain the remaining 62,500 Withheld Shares
for further disposition in accordance with the terms hereof);
(b) if Completion subsequently occurs on or before August 15,
1996, then, upon such Completion, the Escrow Agent shall transfer to Sellers the
remaining 62,500 Withheld Shares; and
(c) if Completion does not subsequently occur on or before
---
August 15, 1996, then, on August 16, 1996, the Escrow Agent shall transfer to
Buyer the remaining 62,500 Withheld Shares; PROVIDED, HOWEVER, that, if
-------- -------
Completion has been substantially performed except for minor, non-material items
that
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<PAGE>
will not materially adversely affect Buyer's use of the New Millbrook Facility,
then the performance dates set forth in this Section 11.4.6(c) shall be extended
for a commercially reasonable period of time to permit the correction of such
non-material items.
11.4.7. If the Existing Millbrook Permit is not revoked, but
Commencement does not occur on or before August 15, 1996, then, on August 16,
1996, the Escrow Agent shall transfer (a) to Buyer 93,750 of the Withheld Nobel
Shares held in escrow pursuant to Section 12.5 hereof, and (b) to Sellers all of
the Withheld Cash, together with the remaining 31,250 Withheld Shares held in
escrow pursuant to Section 12.5 hereof; PROVIDED, HOWEVER, that, if Completion
-------- -------
has been substantially performed except for minor, non-material items that will
not materially adversely affect Buyer's use of the New Millbrook Facility, then
the performance dates set forth in this Section 11.4.7 shall be extended for a
commercially reasonable period of time to permit the correction of such non-
material items.
11.4.8. If Commencement occurs on or before August 15, 1996, then the
Escrow Agent shall transfer to Sellers all of the Withheld Cash (but shall
retain of the Withheld Shares for further disposition in accordance with the
terms hereof).
11.4.9. If, after Commencement occurs, the Existing Millbrook Permit
is not revoked, and Completion occurs on or before August 15, 1996, then, upon
such Completion, the Escrow Agent shall transfer to Sellers all of the Withheld
Shares held in escrow pursuant to Section 12.5 hereof.
11.4.10. If, after Commencement occurs, the Existing Millbrook Permit
is not revoked, but Completion does not occur on or before August 15, 1996,
---
then, on August 16, 1996, the Escrow Agent shall transfer (a) to Buyer 93,750 of
the Withheld Nobel Shares held in escrow pursuant to Section 12.5 hereof, and
(b) to Sellers all of the remaining 31,250 Withheld Shares held in escrow
pursuant to Section 12.5 hereof; PROVIDED, HOWEVER, that, if Completion has been
-------- -------
substantially performed except for minor, non-material items that will not
materially adversely affect Buyer's use of the New Millbrook Facility, then the
performance dates set forth in this Section 11.4.10 shall be extended for a
commercially reasonable period of time to permit the correction of such non-
material items.
11.4.11. If, after Commencement occurs, the Existing Millbrook Permit
is revoked, then:
(a) the Escrow Agent shall immediately transfer to Buyer 62,500
of the Withheld Shares (but shall retain the remaining 62,500 Withheld Shares
for further disposition in accordance with the terms hereof);
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<PAGE>
(b) if Completion subsequently occurs on or before August 15,
1996, then, upon such Completion, the Escrow Agent shall transfer to Sellers the
remaining 62,500 Withheld Shares; and
(c) if Completion does not subsequently occur on or before
---
August 15, 1996, then, on August 16, 1996, the Escrow Agent shall transfer to
Buyer the remaining 62,500 Withheld Shares; PROVIDED, HOWEVER, that, if
-------- -------
Completion has been substantially performed except for minor, non-material items
that will not materially adversely affect Buyer's use of the New Millbrook
Facility, then the performance dates set forth in this Section 11.4.11(c) shall
be extended for a commercially reasonable period of time to permit the
correction of such non-material items.
11.4.12. A graphic representation of the terms and conditions of this
Section 11.4 is attached hereto as Schedule 11.4 and made a part hereof."
2. The first two paragraphs of Section 12.5 of the Agreement are hereby
amended and restated in their entirety as follows:
"12.5 At Closing, Sellers will deliver to Buyer as escrow agent
(the "Escrow Agent") (a) the Withheld Cash, and (b) the Withheld Shares duly
endorsed in blank by Sellers. The Withheld Shares shall be held by Escrow Agent
in escrow, and Buyer is hereby granted a security interest in such shares, as
security for Sellers' timely performance of (i) Sellers' obligations under
Section 2.3 hereof ("Obligations"), (ii) the covenants set forth in Section 11.4
hereof (the "Millbrook Covenants"), or (iii) Sellers' obligation to indemnify
Buyer under this Section 12 against any Damages that Buyer may suffer, incur or
become subject to. If it is finally determined (either by operation of the terms
and conditions of Section 11.4, by other agreement of the parties, by judgment
of a court of competent jurisdiction or by award of an arbitrator) that an
amount is owed to Buyer in respect of any matters described in the immediately
preceding sentence, Buyer shall have the right to have transferred into its name
that number of Withheld Shares as is specifically directed by the terms and
conditions of this Agreement, or, if not so specifically directed, that number
of Withheld Shares as is equal to the quotient obtained by dividing (a) the
dollar amount of such Damages or Obligations, as the case may be, by (b) the
Guaranteed Value Per Share (as defined in Section 11.5 hereof). The Escrow Agent
shall notify Sellers promptly of the transfer to Buyer of any Withheld Shares.
Any Withheld Shares not transferred to Buyer
hereunder shall be delivered by the Escrow Agent to
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<PAGE>
Sellers' Escrow Agent in accordance with the terms and conditions of Section
11.4."
3. Except as amended and modified hereby or inconsistent with the
provisions hereof, the Agreement is hereby ratified and confirmed.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, all as of the date first above written.
NOBEL EDUCATION DYNAMICS, INC. SELLERS:
By: /s/ A.J. Clegg EDUCO, INC.
---------------------------
Title: Chairman, Pres & CEO
------------------------
By: _______________________
Title: ____________________
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<PAGE>
SCHEDULE A
- 7 -
<PAGE>
SCHEDULE 11.4
CONSTRUCTION NEVER COMMENCES
License is revoked prior to License remains in effect
8/15/95 through 8/15/96
Nobel immediately gets 62,500 1. On 8/26/96, Nobel gets
shares; cash and remaining 93,750 shares of stock
62,500 shares remain in escrow
until 8/15/96 -- if Completion 2. On 8/26/96, Sellers get
has not then occurred, cash 31,250 shares of stock
and remaining shares go to plus cash
Nobel ----
CONSTRUCTION COMMENCES
$200,000 cash is
released to Seller
License remains in License remains in License is revoked
effect, Nobel moves effect, but Buyer prior to 8/15/96
into new facility by does not move into
8/15/96 new licensed
facility by 8/15/96
Seller gets all 1. On 8/16/96, Nobel immediately
125,000 shares Nobel gets gets 62,500 shares;
remaining in escrow 93,750 shares the remaining 62,500
shares remain in
2. On 8/16/96, escrow until 8/15/96
Sellers get
31,250 shares
Nobel moves into new Nobel does not move
---
licensed facility by into new licensed
8/15/96: facility by 8/15/96:
Sellers get Nobel gets remaining
remaining 62,500 62,500 shares
shares
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<PAGE>
EXHIBIT 4A
_______________________________________
_______________________________________
NOBEL EDUCATION DYNAMICS, INC.
INVESTMENT AGREEMENT
$6,000,000 SUBORDINATED DEBENTURES
AND
$2,000,000 CONVERTIBLE PREFERRED
STOCK AND WARRANTS
DATED AS OF
AUGUST 30, 1995
FUNDS PROVIDED BY
ALLIED CAPITAL CORPORATION
ALLIED CAPITAL CORPORATION II
ALLIED INVESTMENT CORPORATION
ALLIED INVESTMENT CORPORATION II
_______________________________________
_______________________________________
<PAGE>
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this "Agreement") is made as of the 30th
day of August, 1995 by and among: (i) Bad News Bears, Inc.Nobel Education
Dynamics, Inc., a California limited liability company ("Nobel"); (ii) Imagine
Educational Products, Inc., a Delaware corporation, Bluegrass Real Estate
Company, Inc., a Pennsylvania corporation, Merryhill Schools, Inc., a California
corporation, and Children's Park, Incorporated, a Delaware corporation
(collectively, the entities listed in this clause (ii) shall be referred to as
the "Subsidiaries") (Nobel and the Subsidiaries, on a consolidated basis, being
collectively referred to as the "Company"); and (iii) ALLIED CAPITAL FINANCIAL
CORPORATION, ALLIED CAPITAL CORPORATION II, ALLIED INVESTMENT CORPORATION, and
ALLIED INVESTMENT CORPORATION II, each a Maryland corporation (collectively,
"Allied").
RECITALS:
A. The Company has entered into a commitment letter with Allied dated
July 24, 1995, a copy of which is attached hereto as Exhibit A (the "Commitment
---------
Letter"), to refinance the Company's existing bank debt, to finance acquisitions
and new campus openings; and to finance transaction expenses and general
corporate purposes.
B. The parties desire to set forth herein their understandings and
agreements pertaining to this transaction.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants contained herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Allied and the
respective successors and assigns of Allied (individually, a "Lender" and
collectively, the "Lenders") and the Company hereby agree as follows:
ARTICLE I: DEFINITIONS
1.01 Definitions. In addition to the terms defined elsewhere herein,
-----------
when used herein, the following capitalized terms shall have the meanings
indicated:
"Accounts" shall mean all of Company's now owned and hereafter
acquired rights to payment for goods sold or leased or for services rendered;
"Act of Bankruptcy," when used in reference to any Person, shall mean
the occurrence of any of the following with respect to such Person: (i) such
Person shall have made an assignment for the benefit of his or its creditors;
(ii) such Person shall have admitted in writing his or its inability to pay his
or its debts as they become due; (iii) such Person shall have filed a voluntary
petition in bankruptcy; (iv) such Person shall have been adjudicated a bankrupt
<PAGE>
or insolvent; (v) such Person shall have filed any petition or answer seeking
for himself or itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future Applicable Law pertinent to such circumstances; (vi) such Person shall
have filed or shall file any answer admitting or not contesting the material
allegations of a bankruptcy, insolvency or similar petition filed against such
Person; (vii) such Person shall have sought or consented to, or acquiesced in,
the appointment of any trustee, receiver, or liquidator of such Person or of all
or any substantial part (20% or more) of the properties of such Person; (viii)
60 days shall have elapsed after the commencement of an action against such
Person seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
Applicable Law without such action having been dismissed or without all orders
or proceedings thereunder affecting the operations or the business of such
Person having been stayed, or if a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely
appealed; or (ix) 60 days shall have expired after the appointment, without the
consent or acquiescence of such Person of any trustee, receiver or liquidator of
such Person or of all or any substantial part of the assets and properties of
such Person without such appointment having been vacated.
"Act of Dissolution," when used in reference to any Person (other than
an individual) shall mean the occurrence of any action initiating, or any event
that results in, the dissolution, liquidation, winding-up or termination of such
Person.
"Affiliate," when used in reference to any Person, shall mean any
Person that controls, is controlled by, or is under common control of, the
Person in question. For purposes of this definition, "control" shall mean the
holding of 20% or more of the equity interest of the Person in question or the
direct or indirect ability to manage the business and affairs of the Person in
question.
"Applicable Law(s)," when used in the singular, shall mean any
applicable federal, state or local law, ordinance, order, regulation, rule or
requirement of any governmental or quasi-governmental agency, instrumentality,
board, commission, bureau or other authority having jurisdiction, and, when used
in the plural, shall mean all such applicable federal, state and local laws,
ordinances, orders, regulations, rules and requirements.
"Applicable UCC" shall mean the Uniform Commercial Code, as enacted in
the State of Maryland, as amended through the date hereof.
"Bank" shall mean First Valley Bank.
"Bank Loan Agreement" shall mean the Loan and Security Agreement dated
as of August 30, 1995 between Nobel and the Bank in the principal amount of not
more than $7,500,000 for the revolving line of credit and in principal amount of
not more than $7,500,000 for the term loan, together with interest, fees and
expenses not in excess of the limits contained in
- 2 -
<PAGE>
the subordination agreement related thereto, and any modifications, renewals,
extensions and refinancings of any such indebtedness.
"Chattel Paper" shall mean, collectively, all of the Company's now
owned and hereafter acquired "chattel paper," as that term is defined in Section
9-105(1)(b) of the Applicable UCC.
"Collateral" shall mean, collectively, all of the now-owned and
hereafter acquired tangible and intangible property of the Company, including
all of the following: (i) all Accounts; (ii) all Chattel Paper, (iii) all
Equipment; (iv) all Goods; (v) all Instruments; (vi) all Inventory; (vii) all
General Intangibles; (viii) all Proceeds; (ix) all books and records of the
Company, including those relating to any of the foregoing; (x) all monies,
deposit accounts, and rights to money of any kind; (xi) all additions or
accessions to any of the foregoing; (xii) all substitutions for any of the
foregoing; and (xiii) all replacements, products and proceeds of the foregoing;
but excluding Real Property.
"Current Portion of Long Term Debt" shall mean the portion of the
Company's long term debt that must be discharged within a one year period,
determined in accordance with generally accepted accounting principles
consistently applied.
"Debt Service Coverage Ratio" shall mean Net Income plus an amount
equal to Non Cash Expense divided by the Current Portion of Long Term Debt.
"EBIT" shall mean the Company's consolidated earnings before interest
expense, and tax expense on federal, state and local income taxes, calculated in
accordance with generally accepted accounting principles, consistently applied.
In calculating EBIT for purposes of Section 6.10(c) for any period in which the
Company has made an acquisition, the acquisition shall be deemed to have
occurred as of the first day of the period for which EBIT is being calculated.
Adjustments for cost savings made in calculating EBIT for purposes of Section
6.10(c) shall be subject to the approval of Lenders, which shall not be
unreasonably withheld.
"Equipment" shall mean all of Company's now owned and hereafter
acquired equipment and fixtures, and all replacements and substitutions therefor
and thereof, and all accessions thereto, including, without limitation, every
item which is or may be necessary or convenient in relation to the operation of
the Company's business.
"Existing Secured Debt" shall mean the secured indebtedness of the
Company outstanding on the Closing Date in an aggregate principal amount of
$4,645,005, as set forth on Exhibit 1.01A, which exhibit shall describe the
-------------
lender, the borrower, the principal amount, the repayment terms and the
collateral relating to each debt.
"Goods" shall mean, collectively, all of the Company's now owned and
hereafter acquired "goods," as that term is defined in Section 9-105(1)(h) of
the Applicable UCC.
- 3 -
<PAGE>
"General Intangibles" shall mean, collectively, all of the Company's
now owned and hereafter acquired general intangibles, including without
limitation, all rights, licenses, permits and authorizations held by the
Company; all rights under governmental ordinances or agreements with
governmental authorities; things in action; contractual rights; goodwill;
literary rights; rights to performance; rights in curriculum design, structure
and content, and all of the Intellectual Property (as defined below).
"Instruments" shall mean, collectively, all of the Company's now owned
or hereafter acquired instruments, notes, items of payment, negotiable
documents, and documents of title.
"Intellectual Property" shall mean, collectively, all of the Company's
now owned and hereafter acquired intellectual property, including, without
limitation the following: (a) all patents (including all rights corresponding
thereto throughout the world, and all improvements thereon); (b) all trademarks
(including service marks, trade names and trade secrets, and all goodwill
associated therewith), (c) all copyrights (including all renewals, extensions
and continuations thereof); (d) all applications for patents, trademarks or
copyrights and all applications otherwise relating in any way to the subject
matter of such patents, copyrights and trademarks; (e) all patents, copyrights,
trademarks or applications therefor arising after the date of this Agreement;
(f) all reissues, continuations, continuations-in-part and divisions of the
property described in the preceding clauses (a), (b), (c), (d), and (e),
including, without limitation, any claims by the Company against third parties
for infringement thereof; and (g) all rights to sue for past, present and future
infringements or violations of any such patents, trademarks, and copyrights.
"Inventory" shall mean, collectively, all of the Company's now owned
and hereafter acquired inventory and all products, replacements, and
substitutions therefor and thereof, and all accessions thereto, and all books,
records, computer software and logs relating to and necessary or appropriate to
the conduct of the business and operation the Company.
"Loan Documents" shall mean, collectively, this Agreement, the
Debentures, the Security Documents, the UCC financing statements, the Management
Agreement and all other instruments and documents executed and delivered in
connection with the Loan.
"Loan Party(ies)" when used in the singular, shall mean the Company
and any other party (other than any of the Lenders) to any of the Loan
Documents, and when used in the plural, shall mean the Company and all other
parties to any of the Loan Documents (other than any of the Lenders).
"Net Income" shall mean the excess of revenues and gains of the
Company for a period over all expenses and losses for the period of the Company,
determined in accordance with generally accepted accounting principles
consistently applied.
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<PAGE>
"Net Worth" shall mean the excess of all tangible and intangible
assets of the Company for a period over all liabilities of the Company for the
period, determined in accordance with generally accepted accounting principles
consistently applied.
"Non Cash Expense" shall mean the Company's expenses for a period that
do not require the expenditure of cash in such period, determined in accordance
with generally accepted accounting principles consistently applied.
"Obligations" shall mean, collectively, all of the Company's
indebtedness, liabilities and obligations arising under this Agreement, each of
the Security Documents and each of the other Loan Documents and any renewals,
modifications, and extensions thereof, including, but not limited to, the
principal, interest, late charges and other sums due and owing under the
Debentures and the Security Documents and any other obligations of the Company
to any of the Lenders, including such other or additional financing that any of
the Lenders may extend to the Company at any time in the Lenders' sole
discretion, other than obligations arising pursuant to Section 3.03.
"Permitted Encumbrances" shall mean any lien, mortgage, security
interest or other encumbrance that results from any of the following: (i) the
liens, mortgages, security interests and other encumbrances created or arising
pursuant to this Agreement and the other Loan Documents; (ii) liens for taxes
and assessments not delinquent or actively being contested in good faith by the
Company; (iii) deposits or pledges for goods or services made in the ordinary
course of the Company's business; (iv) title of a bona fide lessor of tangible
personal property to the Company or the security interest of a bona fide seller
of tangible personal property to the Company; (v) customary liens in favor of
mechanics and materialmen which arise by operation of law and not by Company's
agreement incurred in the ordinary course of Company's business; (vi) liens,
mortgages or security interests securing purchase money obligations, including
Permitted Seller Debt, as defined below; (vii) liens, mortgages or security
interests securing the Permitted Senior Debt, as defined below; (viii) liens,
mortgages or security interests securing the Existing Secured Debt, as defined
above; (ix) encumbrances created or arising pursuant to operating leases entered
into in connection with real property constructed to the Company's
specifications; and (x) those liens and encumbrances described on Exhibit 1B
atttached hereto.
"Permitted Seller Debt" shall mean all indebtedness of the Company to
the seller of property to the Company which indebtedness is: (i) secured by a
lien on such property in favor of such seller and incurred after the Closing
Date in accordance with the requirements of Section 6.10(b); or (ii) evidenced
by that certain subordinated promissory note made by Nobel to Corydon Day Care
Center, Inc., in the principal amount of $1,125,000 dated August 25, 1995.
"Permitted Senior Debt" shall mean all indebtedness (as initially
incurred or as refinanced) of the Company to a bank or other financial
institution (whether funded or available
- 5 -
<PAGE>
pursuant to a written commitment, loan agreement, or other obligation) which is
(i) secured by liens on all or a part of the property of the Company, (ii) a
full recourse obligation of the Company, (iii) senior in right of repayment and
lien priority to the Obligations hereunder and under the Debentures, pursuant to
a subordination agreement executed by Lenders, and (iv) in aggregate principal
amount on the Closing Date as specified in the Subordination Agreement, which
principal amount may be increased following the Closing Date to an aggregate
principal amount of up to $25,000,000 upon the conditions set forth in Section
6.10(c).
"Person" shall mean any individual, corporation, partnership, joint
venture, limited liability company, unincorporated association, trust, or other
legal entity.
"Proceeds" shall mean all cash and noncash proceeds (including
insurance proceeds) resulting from any complete or partial Transfer of the
Collateral or any portion thereof or otherwise relating to or generated by, any
of the Collateral.
"Real Property" shall mean, collectively, all real property owned by
the Company or in which Company has a leasehold interest and all real property
hereafter acquired by the Company in fee or by means of a leasehold interest,
together with all goods located on any such real property that are or may become
"fixtures" under the law of the jurisdiction in which such real property is
located.
"Total Debt" shall mean total long-term liabilities of the Company,
plus the current portion of such liabilities, determined in accordance with
generally accepted accounting principles consistently applied.
"Transfer of Company's Business" shall mean one or more transactions
undertaken by the Company resulting in either: (i) the Transfer (as defined
below) of all or substantially all of the assets of the Company to any other
Person (as defined above), other than a Wholly-Owned Affiliate of the Company
existing as of the date hereof; (ii) a merger or consolidation of the Company
with another Person where the Company is not the surviving or successor entity
(other than a merger or consolidation of the Company into or with a Wholly-Owned
Affiliate of the Company existing as of the date hereof) which results in a
Person of group of Persons acting in concert (other than the stockholders of the
Company that are existing as of the date hereof) owning stock in the surviving
entity having more than 50% of the voting power in the election of directors; or
(iii) the Transfer by any of the stockholders of the Company of any of his, its
or their ownership interest in the Company which results in a Person or group of
Persons acting in concert (other than the stockholders of the Company that are
existing as of the date hereof) owning in excess of 50% of the outstanding
capital stock of the Company.
"Transfer" shall mean the sale, assignment, lease, transfer,
mortgaging, encumbering or other disposition, whether voluntary or involuntary,
and whether or not consideration is received therefor.
- 6 -
<PAGE>
"Wholly-Owned Affiliate," when used in reference to a particular
Person, shall mean an Affiliate of that Person, where the Person in question
holds 100% of the legal and beneficial interests in the Affiliate.
ARTICLE II: LOAN TERMS
2.01 Funding. At the closing under this Agreement (the "Closing"),
-------
Nobel and the Subsidiaries, jointly and severally, will borrow, and the Lenders
will lend, in immediately available funds, the aggregate sum of Two Million Six
Hundred Fifty-Five Thousand and 00/100 Dollars ($2,655,0006,000,000) (the
"Loan"), such indebtedness to be evidenced by, and to be repaid according to the
terms of, Senior Subordinated Debentures (collectively, the "Debentures") in the
form attached hereto as Exhibit 2.01. The entire principal sum will be advanced
------------
at Closing. The principal indebtedness under the Debentures will be advanced
by, and allocated among, the Lenders as follows:
<TABLE>
<S> <C>
Allied Capital Corporation $450,000
Allied Capital Corporation II 2,775,000
Allied Investment Corporation 1,800,000
Allied Investment Corporation II 975,000
-------
TOTAL: $6,000,000
==========
</TABLE>
2.02 Collateral. Repayment of the Debentures and other Obligations
----------
shall be secured ratably by subordinated liens on, and security interests in,
all of the Collateral. To evidence and create the above-described liens and
security interests, the Company and any related parties, as appropriate, shall
execute and deliver to Allied at Closing all of the following documents and such
additional documents as Allied or its counsel may reasonably deem to be
necessary or appropriate (collectively, the "Security Documents"):
(a) A security agreement in the form attached hereto as Exhibit
-------
2.02(a) covering all of the Collateral, except as specifically covered by the
-------
other Security Documents;
(b) UCC-1 Financing Statements in the form attached hereto as
Exhibit 2.02(b), to be filed in each of the offices in each of the jurisdictions
---------------
described in the Security Agreement, subject only to liens described in Section
2.03 hereof;
(c) A stock pledge by Nobel in the form attached hereto as Exhibit
-------
2.02(c) covering all of the capital stock of the Subsidiaries;
-------
(d) An insurance policy on the life of A. J. Clegg in the amount of
$1,000,000, with the policy assigned to Allied and listing Allied as a
beneficiary; provided that proceeds of such policy shall be used to reduce the
principal and interest outstanding on the Debentures, with any excess proceeds
payable to the Company;
- 7 -
<PAGE>
(e) An assignment of trademarks in the form attached hereto as
Exhibit 2.02(e).
---------------
The liens and security interests in the Collateral created by the Security
Documents shall be continuing in nature, and shall attach when: (i) the Company
has executed and delivered the Security Documents; (ii) the Company has acquired
rights in the Collateral; and (iii) the Lenders have made a complete
disbursement of proceeds under the Debentures to the Company, the Company's
designated payee, or an escrow agent.
2.03 Permitted Senior Debt; Permitted Seller Debt and Existing
---------------------------------------------------------
Secured Debt.
------------
(a) The indebtedness under the Debentures and the Lenders' rights
herein and therein shall be subordinate as to right of payment, and as to lien
priority with respect to collateral common to both, only to Permitted Senior
Debt. In connection therewith, the Bank and the Lenders have entered into a
Subordination Agreement in the form of Exhibit 2.03 (the "Subordination
------------
Agreement").
(b) The indebtedness under the Debentures and the Lenders' rights
herein and therein shall be subordinate as to lien priority with respect to any
Collateral securing the Permitted Seller Debt, and as to right of payment to the
extent of proceeds from the sale of such Collateral securing the Permitted
Seller Debt. At the request of the Company, Lenders shall deliver to holders of
Permitted Seller Debt incurred after the date hereof, at the election of the
Company either (i) a letter confirming the lien priority of such holder, or (ii)
a fully executed UCC-3 Amendment to Financing Statement, stating the lien
priority of such holder.
(c) The indebtedness under the Debentures and the Lenders' rights
herein and therein shall be subordinate as to lien priority with respect to any
Collateral securing the Existing Secured Debt, and as to right of payment to the
extent of proceeds from the sale of such Collateral securing the Existing
Secured Debt.
2.04 Subordinated Debt. All other indebtedness of the Company which
-----------------
is not Permitted Senior Debt, Permitted Seller Debt, or Existing Secured Debt
shall be subordinate to the Debentures in priority of lien position with respect
to the Collateral.
2.05 Prepayment. The Debentures may be prepaid at any time, in whole
----------
or in part, without premium or penalty.
2.06 Due On Sale. The Company's obligations under the Debentures and
-----------
this Agreement are not assumable, and to the extent provided in the Debentures,
the Debentures and all of the other Obligations are payable in full in
connection with a Transfer of the Company's Business.
- 8 -
<PAGE>
2.07 Attorney-in-Fact. The Company hereby appoints as its attorney-
----------------
in-fact, in the name of the Company and on its behalf, for the sole purpose of
signing financing statements, continuation statements or other recordable
documents reasonably necessary to provide notice of the security interest
granted herein in the applicable public records. This power is coupled with an
interest and is irrevocable so long as any Obligations remain outstanding. This
appointment may be discharged by any officer or attorney of Allied Capital
Corporation.
2.08 Closing. Closing must occur on or before the close of business
-------
on the date hereof, unless extended in writing by Allied, in Allied's
sole discretion.
2.09 Conditions Precedent to Lenders' Obligations. The obligation of
--------------------------------------------
Allied to make the Loan is subject to the satisfaction of the following
conditions precedent at or prior to the Closing (unless waived in writing by
Allied prior to Closing):
(a) Each of the representations and warranties contained in this
Agreement must be true and accurate in all material respects as of the date of
Closing, and the Company and all other Loan Parties (if any) must have performed
all of their respective obligations hereunder, including execution and delivery
of all of the documents, instruments, opinions and certificates required by this
Agreement in such forms as are satisfactory to Allied and its counsel; and
(b) Allied shall have completed a due diligence report that reflects
favorably on the Company and its management. In this regard, the Company
covenants and agrees to furnish to Allied such information as Allied may request
in order to enable Allied to complete the required due diligence.
2.10 Funding; Remittance to Nobel as Agent. The Loan will be fully
-------------------------------------
funded at Closing. All funding of the Loan shall be made by disbursement to
Nobel, as agent for all of the Subsidiaries, and each of the Subsidiaries
expressly consents to such funding arrangement and appoints Nobel as its
attorney-in-fact to receive the proceeds of the Loan on its behalf.
2.11 Representations and Warranties of Allied. Allied represents and
----------------------------------------
warrants to the Company that:
(a) it was not organized for the specific purpose of purchasing the
Debentures, Warrants and Series D Preferred Stock purchased by it hereunder;
(b) as of the date hereof, and prior to the purchase of the
Debentures, Warrants and Series D Preferred Stock as contemplated hereunder, (i)
it is not the "beneficial owner" of any securities of the Company, as such term
is defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and (ii) it is not a member of a group which has
acquired beneficial ownership of securities of the Company for purposes of
Sections 13(d) and 13(g) of the Exchange Act;
- 9 -
<PAGE>
(c) the address of its principal place of business is 1666 K St.,
Suite 901, Washington, D.C. 20006;
(d) the Debentures, Warrants, shares of Series D Preferred to be
purchased by it, and any shares of Common Stock acquired upon exercise of such
Warrants or conversion of the Series D Preferred Stock (collectively, the
"Securities") are being or will be, as the case may be, acquired by Allied for
its own account, not as a nominee or agent, and not with a view to resale or
distribution within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations thereunder, and Allied will not
---------------
distribute the Debentures, Warrants or Warrant Shares in violation of the
Securities Act.
(e) it understands that (i) the Securities have not been registered
under the Securities Act by reason of their issuance in a transaction exempt
from the registration requirements of the Securities Act; (ii) the Securities
must be held indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration, (iii) the
Securities will bear a legend as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR UNDER STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT OR SUCH STATE SECURITIES LAWS COVERING
SUCH SECURITIES, OR AN OPINION OF COUNSEL TO THE COMPANY STATING
WITHOUT RESERVATION THAT SUCH REGISTRATION IS NOT REQUIRED.
(f) it is an "accredited investor" as such term is defined in Rule
501 promulgated under the Securities Act, and an "institutional investor" within
the meaning of the Pennsylvania Securities Act of 1972 and the regulations
promulgated thereunder;
(g) its financial situation is such that it can afford to bear the
economic risk of holding the Securities for an indefinite period of time;
(h) its knowledge and experience in financial and business matters
are such that it is capable of evaluating the merits and risks of its purchase
of the Securities as contemplated by this Agreement; and
(i) the purchase of the Securities by it has been duly and properly
authorized and this Agreement has been duly executed by it or on its behalf.
- 10 -
<PAGE>
ARTICLE III: EQUITY
3.01 Preferred Stock and Warrants.__
----------------------------
(a) Authorization. Nobel has, or before the Closing will have, duly
-------------
authorized the sale and issuance of 1,063,830 shares of its Series D Convertible
Preferred Stock, $.001 par value per share (the "Series D Preferred"), having
------------------
the rights, restrictions, privileges and preferences set forth in the
Certificate of Designation attached hereto as Exhibit 3.01(a) (the "Certificate
---------------
of Designation"). Nobel has, or on or before the Closing will have, adopted and
filed the Certificate of Designation with the Secretary of State of State of
Delaware.
(b) Sale of Shares and Warrants. Subject to the terms and conditions
---------------------------
of this Agreement, at the Closing, Nobel will sell and issue to Allied, and
Allied will purchase from Nobel, an aggregate of 1,063,830 shares of Series D
Preferred for the purchase price of $1.88 per share. The shares of Series D
Preferred being sold under this Agreement are referred to as the "Shares." In
connection with the sale of the Shares, at Closing, Nobel will issue and sell to
Allied certain Stock Purchase Warrants (the "Warrants") to acquire shares of
Nobel's Common Stock, par value $.001 (the "Common Stock"), the form of which is
set forth as Exhibit 3.01(b), which will entitle Allied to purchase 1,236,171
---------------
shares of Nobel's authorized but unissued Common Stock. The aggregate purchase
price for the Warrants shall be $100.00, and the per share exercise price for
the Warrants shall be $1.88. The Warrants will expire eight years from the date
of the Closing.
(c) Allocation. The Shares and Warrants will be allocated among
----------
Allied as follows:
<TABLE>
<CAPTION>
Number of Shares of
Common Stock for which
Number of Shares Warrant may be Exercised
---------------- ------------------------
<S> <C> <C>
Allied Capital Corporation 79,787 92,713
Allied Capital Corporation II 492,021 571,729
Allied Investment Corporation 319,149 370,851
Allied Investment Corporation II 172,873 200,878
--------- ---------
Total 1,063,830 1,236,171
</TABLE>
3.02 Registration Rights. At Closing, Nobel and Allied will execute
-------------------
the Registration Rights Agreement, the form of which is set forth as Exhibit
-------
3.02.
----
3.03 Put Rights.
----------
(a) Price. At any time after that date which is five years from the
-----
date of Closing, if Nobel's Common Stock is not listed on a national stock
exchange and not included
- 11 -
<PAGE>
on The Nasdaq Stock Market, each Lender may by written demand require Nobel to
purchase all or a portion of its Warrants and the shares of stock issued
thereunder at the highest of the following prices (the "Put Price") (in each
case deducting the Exercise Price of the Warrant to determine the Put Price),
determined at the time of the exercise of this right:
(i) six times the Company's EBIT for the year just ended,
plus cash but less total debt, times the Lender's
percentage of equity ownership or potential equity
ownership of Nobel's capital stock, as the case may be,
as determined on a fully diluted basis and expressed as a
decimal fraction;
(ii) 15 times the Company's profits after taxes for the year
just ended, times the Lenders' percentage of equity
ownership or potential equity ownership of Nobel's
capital stock, as the case may be, as determined on a
fully diluted basis and expressed as a decimal fraction;
or
(iii) The Appraised Value, pursuant to Section 3.03(b) below,
of the Lender's equity ownership and potential equity
ownership of Nobel's capital stock, as the case may be,
which appraisal shall be based on determinations of
earnings and book value and other appropriate items.
(b) Appraised Value. The "Appraised Value" shall be determined
---------------
by the following method:
(i) Each of the Company and the Lenders, as a group, shall
select an appraiser who shall each determine a value;
(ii) If the values determined by such two appraisers are the
same (or the lower value determined by an appraiser is
within one percent of the value determined by the other),
then such value (or the average of such two values) shall
be the Appraised Value;
(iii) If the foregoing two appraisals are not the same and the
lower value determined by an appraiser differs by more
than one percent of the value determined by the other,
then the appraisers shall together select a third
appraiser to determine a value;
(iv) If the determination of the third appraiser is greater
than the largest of the first two appraisals or less than
the smallest of the first two appraisals, then the
average of the first two appraisals shall be the
Appraised Value; and
- 12 -
<PAGE>
(v) If the determination of the third appraiser is between the first
two appraisals, then the average of the third appraisal and the
closest of the first two appraisals shall be the Appraised Value.
Each party shall pay the fees and costs of the appraiser it selects, and the
fees and costs of the third appraiser, if any, shall be paid equally by Company
and the Lenders.
(c) Remedies. Failure to comply with the terms of the put right set
--------
forth in this Section 3.03 within 30 days of Lenders' demand thereunder shall
entitle the Lenders to all of the rights and remedies available to Lenders under
this Agreement and at law or equity, including, without limitation, the right of
specific performance.
(d) Financing of Put. Upon the exercise of the put rights described
----------------
in this section, the Company shall pay the Put Price in cash, to the extent the
Company (i) has funds legally available, and (ii) has available cash or short
term investments which may be liquidated. To the extent the Company is unable
to pay the Put Price in cash, the Company may finance the Put Price in the form
of senior debt, subordinated debt without equity (at an interest rate of 13% per
annum or less) or with a note payable to Allied on commercially reasonable
terms. The Company shall not be required to finance the Put Price by issuing
additional equity securities.
(e) Limitation on Exercise of Put. In no event may the Lenders
-----------------------------
exercise their rights hereunder if doing so would cause the Company to violate
the terms of the Bank Loan Agreement, or any successor document, or any similar
agreement entered into by the Company with a lender of Permitted Senior Debt.
3.04 Personal Gain Upon Sale. In the event of a Transfer of the
-----------------------
Company's Business, then any personal gain relating to such Transfer of the
Company's Business and flowing to any officer, director or principal shareholder
of the Company otherwise than through direct payment for their equity ownership
in the Company or through dividends or return of capital paid in respect
thereof, shall be added to the direct consideration for the sale in calculating
the total sale price for purposes of determining any share thereof which the
Lenders may be entitled to receive. Such personal gain shall include without
limitation any salaries or consulting fees in excess of fair market compensation
payable in connection with the Company's operations after such sale or any
points or fees paid to induce such sale. In the event of any disputes arising
hereunder, the parties shall obtain a fairness opinion from an investment banker
chosen by the parties. In the event the parties cannot agree on an investment
banker, the Company shall select one investment banker, the Lenders shall select
one investment banker and the two investment bankers shall select a third
investment banker who shall be retained to render the fairness opinion. The
Company and the Lenders shall equally share the expenses related hereto.
- 13 -
<PAGE>
ARTICLE IV: REPRESENTATIONS AND WARRANTIES
To induce Lenders to enter into this transaction, the Company
represents and warrants to Lenders as follows (which representations and
warranties shall survive the execution and delivery of this Agreement ):
4.01 Organization.
------------
(a) Nobel and each of the Subsidiaries is a corporation formed,
validly existing and in good standing under the laws of the jurisdiction of its
formation. Attached hereto as Exhibit 4.01(a) are true, correct and complete
---------------
copies of the certificate of incorporation, bylaws, all amendments to the
foregoing and all other constituent documents of the Company, and all
amendments and supplements to any of the foregoing (collectively, the "Company
Constituent Documents"). All of the Company Constituent Documents are in full
force and effect as of the date hereof.
(b) The authorized capital stock of Nobel (immediately prior to the
Closing) consists of 50,000,000 shares of Common Stock, $.001 par value per
share of which 15,645,068 shares are issued and outstanding; and 10,000,000
shares of Preferred Stock, $.001 par value per share, of which (i) 2,500,000
shares are classified as Series A Convertible Preferred Stock, 2,484,320 of
which shares are issued and outstanding; (ii) 2,500,000 shares are classified as
Series C Convertible Preferred Stock of which 2,500,000 shares are issued and
outstanding; and (iii) 1,063,830 shares are classified as Series D Convertible
Preferred Stock, none of which are issued and outstanding. 1,250,000 shares of
Common Stock will be issued to the stockholders of Educo, Inc. at the closing of
that certain Stock Purchase Agreement dated May 23, 1995.
All of the issued and outstanding shares of Common Stock and Preferred
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in Exhibit 4.01(b) hereto or provided in
---------------
this Agreement, (i) no subscription, warrant, option, convertible security or
other right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, (ii) there is no
commitment of the Company to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets of the
Company, and (iii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. Except as provided in this Agreement or as disclosed in the
Exhibits hereto, no person or entity is entitled to (x) any preemptive or
similar right with respect to the issuance of any capital stock of the Company,
or (y) any rights with respect to the registration of any capital stock of the
Company under the Securities Act. All of the issued and outstanding shares of
Common Stock and Preferred Stock have been offered, issued and sold by the
Company in compliance with applicable Federal and state securities laws.
- 14 -
<PAGE>
4.02 Qualification. The Company is duly qualified to conduct
-------------
business as it is currently being conducted and is in good standing as a foreign
corporation in all jurisdictions in which the nature of its business or location
of its properties require such qualification, except where failure to be so
qualified or in good standing would not have a materially adverse effect on the
Company's business or financial condition, and except as set forth on Exhibit
-------
4.02 hereto.
----
4.03 Power and Authority. The Company has full corporate power and
-------------------
authority to enter into this Agreement and each of the other Loan Documents, to
incur the Obligations as contemplated hereby, and to carry out the provisions of
this Agreement and each of the other Loan Documents. The Company has taken all
corporation action necessary for the execution and delivery of this Agreement
and each of the other Loan Documents and for the performance by Company of each
of its obligations hereunder and thereunder, as evidenced by the resolution(s)
of the Company's Board of Directors or other authorization set forth in Exhibit
-------
4.03 attached hereto.
----
4.04 Enforceability. Upon execution and delivery by each of the
--------------
parties thereto, this Agreement and each of the other Loan Documents shall be
the legal, valid and binding obligations of the Company and each other Loan
Party, to the extent the Company or such other Loan Party(ies) is a party
thereto and shall be enforceable against the Company and such other Loan
Party(ies) in accordance with its respective terms. The Company has caused its
counsel to deliver an opinion of counsel in the form attached hereto as Exhibit
4.04. -------
----
4.05 Litigation. The Company has not been made a party to or, to the
----------
best of the Company's knowledge, threatened by any suits, actions, claims,
investigations by governmental bodies or legal, administrative, arbitration or
mediation proceedings, except as set forth in the schedule of litigation
attached hereto as Exhibit 4.05 ("Litigation Schedule"), and except where such
------------
litigation would not have a materially adverse effect on the Company's business
or financial condition. The Company does not know of any basis or grounds for
any such suit, action, claim, investigation or proceeding.
4.06 Orders; Decrees; Judgments. Except as set forth on Exhibit
-------------------------- -------
4.05, there are no outstanding orders, judgments, writs, injunctions or decrees
of any court, government agency or arbitration or mediation panel or tribunal
against or affecting the Company any other Loan Party, any of the Collateral, or
any of the other properties, assets or business of the Company or any other Loan
Party.
4.07 Non-Contravention. Except for matters set out in the Litigation
-----------------
Schedule, neither the Company nor any other Loan Party is in breach of, default
under, or in violation of: (a) any Applicable Law, decree, or order which may
materially and adversely affect them; or (b) any deed, lease, loan agreement,
commitment, bond, note, deed of trust, restrictive covenant, license, indenture,
contract, or other agreement, instrument or obligation to which any of them is a
party or by which any of them is bound or to which any of their respective
assets (including,
- 15 -
<PAGE>
but not limited to, the Collateral) are subject, except where such breach,
default or violation would not have a material and adverse effect on the
Company's business or financial condition. Neither the execution and delivery of
this Agreement and the Loan Documents nor the performance by the Company or any
other Loan Party of their respective obligations hereunder and thereunder will
cause any such breach, default or violation or will require the consent or
approval of any court, governmental or regulatory agency or body, except as
expressly contemplated by the terms of this Agreement.
4.08 Company's Business. The Company is primarily engaged in the
------------------
business of operating educational institutions and child care facilities.
4.09 Title. The Company has good, complete, indefeasible and
-----
marketable title to, and ownership of, all of the Collateral and to all other
real or personal property it purports to own (if any), free and clear of all
liens, defects, claims, security interests and encumbrances other than the
Permitted Encumbrances.
4.10 Taxes. The Company has filed all federal, state and local tax
-----
returns which are required to be filed, and the Company has duly paid or fully
reserved for all taxes or installments thereof (including any interest or
penalties) as and when due pursuant to the filed returns or pursuant to any levy
or assessment received by the Company. The Company has previously delivered to
Allied true, correct and complete copies of all tax returns (including all
required schedules) for the Company for tax year 1993.
4.11 Financial Condition.
-------------------
(a) Attached hereto as Exhibit 4.11(a) is a true and complete copy of
---------------
the audited consolidated financial statements summarizing the financial results
of operation of the Company for the fiscal year ending December 31, 1994
provided to Allied by the Company (the "Audited Financials"). The Audited
Financials were prepared in accordance with generally accepted accounting
principles consistently applied, and present fairly, in all material respects,
the consolidated financial position of the Company and the results of its
operations at such dates and for the periods then ended. The auditors have
issued an unqualified statement to the Company concerning the Audited
Financials, a copy of which is included with the Audited Financials in Exhibit
-------
4.11(a) attached hereto; and
-------
(b) Attached hereto as Exhibit 4.11(b) is a true and complete copy of
---------------
preliminary, unaudited consolidated financial statements summarizing the
financial results of operation of the Company for the six-month period ended
June 30, 1995 (the "Interim Financials"). The Interim Financials were prepared
in accordance with generally accepted accounting principles consistently
applied, and present fairly, in all material respects, the consolidated
financial position of the Company and the results of its operations at such
dates and for the periods then ended, subject to normal year-end adjustments.
- 16 -
<PAGE>
4.12 Solvency. As of the date hereof, giving effect to the
--------
transactions contemplated by this Agreement, the present fair saleable value of
the Company's assets as a going concern is greater than the amount required to
pay the Company's total indebtedness (contingent or otherwise), and is greater
than the amount that will be required to pay such indebtedness as it matures and
as it becomes absolute and matured. The transactions contemplated hereby were
effectuated without actual intent to hinder, delay or defraud present or future
creditors of the Company; it is the Company's express intention that it will
maintain a solvent financial condition, giving effect to the debt incurred
hereunder, as long as any of the Obligations remain outstanding or the Company
is obligated to the Lenders in any other manner whatsoever. The Company has
sufficient capital to carry on its business and transactions as now conducted
and as planned to be conducted in the future.
4.13 Material Leases. Attached hereto as Exhibit 4.13 is an
--------------- ------------
accurate and complete list of all material leases of Real Property to which the
Company is a party or by which the Company or any of the Company's assets is
bound, together with all amendments or supplements thereto (collectively, the
"Leases"). True and complete copies of each of the Leases have been made
available to Allied prior to the date hereof. To the best of the Company's
knowledge, each of the Leases is valid, binding and enforceable in accordance
with its terms and remains in full force and effect. Except as set forth on
Exhibit 4.13, the Company is not in default or alleged to be in default with
------------
respect to any of its obligations under any of the Leases (nor would be in
default or alleged to be in default with the giving of notice, passage of time,
or both), and, to the best of the Company's knowledge, no party other than the
Company is in default with respect to such party's obligations under any of the
Leases (or would be in default or alleged to be in default with the giving of
notice, passage of time, or both). The Company's possession of any property
leased by it has not been disturbed, nor has any claim been asserted against the
Company that is or could be adverse to the Company's interests under any of the
Leases. None of the Leases is subject to any rights of set-off, recoupment or
similar deduction or offset. Except as disclosed on Exhibit 4.13, the Company
------------
has not assigned or encumbered any of its rights, title or interest in or under
any of the Leases nor agreed to any oral modifications of any of the provisions
of any of the Leases.
4.14 Material Contracts. The Company has made available to Allied
------------------
prior to the date hereof true and complete copies of (i) the transactional
documents relating to its acquisition of Educo, Inc. and (ii) drafts of the
transactional documents relating to its proposed acquisition of Corydon Day Care
Center, Inc. The Stock Purchase Agreement dated May 23, 1995 among Nobel, Educo,
Inc. and the stockholders of Educo, Inc. is valid, binding and enforceable in
accordance with its terms and remains in full force and effect. The Company is
not in default with respect to any of its obligations thereunder, and to the
best of the Company's knowledge, no party other than the Company is in default
with respect to such party's obligations thereunder. No claim has been asserted
against the Company that is or could be adverse to the Company's interest
thereunder. Attached hereto as Exhibit 4.14 is an accurate and complete list of
------------
all facilities for borrowed money in existence on the date hereof and not being
paid off on or prior to
- 17 -
<PAGE>
the date of the Closing, including financing arrangements with sellers in
connection with acquisitions by the Company.
4.15 Offering Memorandum. Attached hereto as Exhibit 4.15 is a copy
------------------- ------------
of the Company's Offering Memorandum dated May 1995, as updated and
supplemented, other than the financial forecasts and projections contained
therein (the "Offering Memorandum"). To the best of the Company's knowledge, all
information contained in the Offering Memorandum is true and correct in all
material respects as of the date of this Agreement.
4.16 Projections. Attached hereto as Exhibit 4.16 are five-year
----------- ------------
projections for the Company dated July 19, 1995 (the "Projections"). The
Projections were prepared by the Company based upon assumptions that the Company
believes to be reasonable in light of all facts currently known by Company
Management. The Projections have not been reviewed by the Company's independent
accountants or any other person or entity independent of the Company.
4.17 No Untrue Statements or Omissions. Neither this Agreement
---------------------------------
nor the Exhibits attached hereto contains any untrue statement of material fact
or, to the best of the Company's knowledge, omits any statement of material fact
necessary to make the statements contained herein or therein not misleading.
4.18 Management History. Except as set forth on Exhibit 4.18, during
------------------ ------------
the past five years (with respect to non-management directors) and during the
past ten years (with respect to management directors), no director, officer or
member of management of the Company (including, but not limited to, any other
Loan Party) has been arrested for, or convicted of, any criminal offense, has
been the subject of an Act of Bankruptcy or has served as an officer, director,
general partner, member, or manager of any Person that has been or is the
subject of an Act of Bankruptcy or an Act of Dissolution. With respect to non-
management directors, this representation is made to the extent of the Company's
knowledge, and based solely on questionnaires completed by such non-management
directors.
4.19 Nobel Affiliates and Subsidiaries. Attached hereto as
---------------------------------
Exhibit 4.19 is an accurate and complete list of all Affiliates of Nobel,
------------
including all of its subsidiaries.
4.20 Other Debts. Except for the debts described in the Audited
-----------
Financials and Interim Financials attached hereto as Exhibit 4.11(a) and Exhibit
--------------- -------
4.11(b), respectively, the Company has no indebtedness, liabilities or
-------
obligations of any nature at the dates of the balance sheets included in such
Audited Financials and Interim Financials that were required under generally
accepted accounting principles to be reflected on such balance sheets on such
dates (whether liquidated or unliquidated, mature or not yet mature, absolute or
contingent, secured or unsecured).
4.21 Ownership and Control. Attached hereto as Exhibit 4.21 is an
--------------------- ------------
accurate and complete list of the following information: a list of all
officers, directors and stockholders of the
- 18 -
<PAGE>
Company that, to the best of the Company's knowledge, hold greater than five
percent (5%) of the capital stock of Nobel on a fully-diluted basis. Except as
listed in Exhibit 4.01(b) attached hereto, there are no outstanding options,
---------------
rights of first refusal or other preemptive rights granted or conveyed by the
Company to any person as of the date hereof.
4.22 No Material Change. Except as set forth on Exhibit 4.22
------------------
attached hereto, or elsewhere in this Agreement or any Exhibit to this
Agreement, since the ending date of the Interim Financials, the Company has not:
(i) suffered any material change in its condition (financial or otherwise) or
its overall business prospects; (ii) entered into any material transactions or
incurred any debt other than the Obligations; (iii) sustained any material loss
or damage to its Real Property or personal property, whether or not insured;
(iv) suffered any material interference with its business or operations, present
or proposed; and (v) made any Transfer, abandonment or other disposition of any
of its Real Property or personal property or any interest therein or relating
thereto, that is material to the financial position or prospects of the Company.
4.23 No Side Agreements. Neither the Company nor any director,
------------------
officer nor members of management of the Company (collectively, "Company
Management") are party to any agreement with any Person (including any of the
Lenders) whereby the Company or any of Company Management, acting in such
capacities, have agreed to do anything beyond the requirements of formal,
written contracts executed by the Company. Other than this Agreement, the other
Loan Documents, and documents relating to transactions described herein and in
the Exhibits, neither the Company, nor Company Management is a party to any
agreement calling for any action by the Company or such party outside the
ordinary course of their respective businesses. To the best of the Company's
knowledge, there exists no agreement or understanding calling for any payment or
consideration from a customer or supplier of the Company to the Company
Management with respect to any transaction between the Company and such supplier
or customer. Except for arrangements with JBS Investment Banking, Inc., and
arrangements described in the Proxy Statement dated August 22, 1995 attached
hereto as Exhibit 4.23, no Affiliate of the Company, directly or indirectly,
------------
transacts any business with the Company, except for employment arrangements
covered by the terms of Section 6.08 below.
4.24 SBA Forms and Representations. Attached hereto as Exhibits
----------------------------- -------
4.24(a), 4.24(b), 4.24(c) and 4.24(d), respectively, are complete copies of
--------------------------------------
the Size Status Declaration (SBA Form 480), the Assurance of Compliance for Non-
Discrimination (SBA Form 652), the Portfolio Financing Report (SBA Form 1031)
and the Economic Impact Assessment signed where required by the Company and
furnished to Allied (collectively, the "SBA Forms").
4.25 Investment Company Act Representations. The Company is not and
--------------------------------------
does not intend to become, an "investment company", as such term is defined in
the Investment Company Act of 1940, as amended (the "40 Act"), and neither the
Company nor any of its officers, directors, partners or controlling persons is
an "associate" of any Lender, as such terms
- 19 -
<PAGE>
are defined in Section 107.3 of the amended Regulations promulgated under the
SBA Act, nor an "affiliated person" of any Lender, as such term is defined in
Section 2(a)(3) of the 40 Act.
4.26 General Legal Compliance. To the best of the Company's
------------------------
knowledge, the Company is not in violation of any Applicable Law that would
apply to it or to its business, the violation of which would have a material
adverse effect on the Company, its business, or its prospects.
4.27 Environmental Legal Compliance. Without limiting the
------------------------------
generality of the representation and warranty made in Section 4.26 above, to the
best of the Company's knowledge, the Company is not in violation of any
applicable Environmental Law, which violation would have a material adverse4975
effect on the Company or its business or prospects, and the Company has not been
notified of any action, suit, proceeding or investigation which calls into
question compliance by the Company with any Environmental Laws or which seeks to
suspend, revoke or terminate any license, permit or approval necessary for the
generation, handling, storage, treatment or disposal of any Hazardous Material.
As used in this Agreement, the term "Environmental Law" shall mean,
collectively, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. (S)9601 et seq. ("CERCLA"); the
Solid Waste Disposal Act, as amended, 42 U.S.C. (S)6901 et seq.("SWDA")
including the Resource Conservation and Recovery Act of 1976, as amended, 42
U.S.C. (S)6901 et seq. ("RCRA"); the Clean Water Act, as amended, 42 U.S.C.
(S)1251 et seq.("CWA"); the Clean Air Act, as amended, 42 U.S.C. (S)7401 et
seq.; any "superfund" or "superlien" law; and any other Applicable Law
regulating, relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic or dangerous waste, substance or material, and
the term "Hazardous Material" shall mean and include any hazardous, toxic or
dangerous waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Law.
4.28 Employee Benefit Matters. There is no existing single-employer
------------------------
plan defined in Section 4021(a) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") as to which the Company is, or immediately after
the Closing will be, an "employer" or a "substantial employer" as defined in
Sections 3(5) and 4001(a)(2) of ERISA, respectively. Attached hereto as Exhibit
-------
4.28 is an accurate and complete list of each plan described in Section 4021(a)
----
of ERISA, as to which the Company is assuming any liability or will be liable to
make contributions or for the payment of benefits. The Company has made
available to Allied true and complete copies of each of the plans listed on
Exhibit 4.28 attached hereto. To the best knowledge of the Company, there have
------------
been no "reportable events" as set forth in Section 4043(b) of ERISA with
respect to any such plan, and no termination of any such plan since the
effective date of ERISA which could result in any tax, penalty or liability
being imposed upon the Company. The Company has not participated in, and the
execution and delivery of this Agreement by the Company will not involve, any
"prohibited transaction" (as defined in Section 4975 of the Internal Revenue
Code of 1986, as amended) that could subject the Company to any tax or penalty
imposed by Section 4975 of the Internal Revenue Code of 1986, as amended. To
the best knowledge of the Company, no predecessor-in-interest to the Company has
participated in any "prohibited transaction" (as defined in Section 4975 of the
Internal Revenue Code of 1986, as amended) that could subject the Company to any
tax or penalty imposed by Section 4975 of the Internal Revenue Code of
- 20 -
<PAGE>
1986, as amended. Since the effective date of ERISA, neither the Company, nor,
to the best knowledge of the Company, any predecessor-in-interest to the
Company, has incurred any "accumulated funding deficiency", as such term is
defined in Section 302 of ERISA, to which the Company could be subject or for
which it might be liable. The Company is not, and immediately after the Closing
will not be, a party to, and none of the operations of the Company is, or after
the Closing will be, covered by, a "multiemployer plan", as defined in Section
3(37) of ERISA.
4.29 Collective Bargaining. The Company is not, and after the
---------------------
Closing will not be, a party to or subject to any collective bargaining
agreements or union contracts. There are no labor disputes pending or
threatened against the Company or, to the best knowledge of the Company, between
the Company and its employees which have affected, or so far as the Company can
reasonably foresee may affect, materially and adversely the business or
condition of the Company or the Company's business or prospects.
4.30 Employees. Attached hereto as Exhibit 4.30 is an accurate and
--------- ------------
complete list of all employment and compensation contracts, including all
retirement benefit agreements not disclosed on Exhibit 4.28, between the Company
------------
and officers and executives of the Company. The Company has made available to
the Lenders accurate and complete copies of all such contracts. No officer of
the Company has advised the Company (orally or in writing) that he or she
intends to terminate employment with the Company.
4.31 Brokers. Except for a fee payable by the Company as set forth
-------
in the engagement letter between the Company and Legg Mason Wood Walker,
Incorporated, the Company has no knowledge of any brokerage fees due for the
transactions contemplated hereby and will indemnify Lenders for any claims with
respect thereto.
ARTICLE V: AFFIRMATIVE COVENANTS
Until the Debentures are repaid in full and each of the other
Obligations has been satisfied in full and discharged and as long as Allied
holds an equity interest in Nobel, the Company covenants and agrees to do all of
the following:
5.01 Monthly Financials. The Company shall forward, or cause to be
------------------
forwarded, to Lenders the Company's monthly year-to-date financial statements
prepared in accordance with generally accepted accounting principles,
consistently applied within 45 days from the end of each month, together with a
monthly one-page management summary description of operations. In addition, the
Company shall forward, or cause to be forwarded, to Lenders any materials
distributed to the members of the board of directors.
- 21 -
<PAGE>
5.02 Certification of Non-Default. The Company shall provide to the
----------------------------
Lenders in writing each calendar quarter an officer's certificate, signed by
Nobel's President or Chief Financial Officer or Comptroller, certifying that no
Event of Default has occurred under this Agreement, or if any such Event of
Default exists, stating the nature of such Event of Default.
5.03 Annual Audit. The Company shall forward, or cause to be
------------
forwarded, to Lenders the Company's audited year-end balance sheet, profit and
loss statement and cash flow statement, without qualification thereof, within 90
days of such accounting year-end, which shall be prepared at the Company's sole
expense by an independent accounting firm acceptable to the Lenders according to
generally accepted accounting principles, consistently applied. For purpose of
this Agreement, unless notice is expressly given to the contrary by any Lender,
all national and major regional firms shall be considered acceptable to the
Lenders.
5.04 Notice of Filings. Within 30 days of filing, the Company shall
-----------------
provide the Lenders with copies of all returns and documents (other than
federal, state and local tax returns, which shall be provided only upon request)
filed by the Company with federal, state or local government agencies,
including, without limitation, the U.S. Internal Revenue Service, the U.S.
Environmental Protection Agency, the U.S. Occupational Safety & Health
Administration, the U.S. Small Business Administration, the U.S. Securities &
Exchange Commission (the "SEC").
5.05 Notice of Litigation. The Company shall notify the Lenders of
--------------------
any material litigation to which the Company is a party by mailing to the
Lenders, by U.S. registered mail, within 30 days of receipt thereof, a copy of
the Complaint, Motion for Judgment or other such pleadings served on or by the
Company. As to any material litigation to which the Company is not a party but
which could substantially affect the Collateral or the operation of the Company,
the Company shall notify the Lenders by mailing to the Lenders, by U.S.
registered mail, a copy of all pleadings obtained by the Company in regard to
such litigation, or if no pleadings are obtained, a letter setting out the facts
known about the litigation within 30 days of receipt thereof; provided, however,
that the Company shall not be obliged by this Section 5.05 to give notice of
suits where the Company is a creditor seeking collection of one or more
Accounts.
5.06 Notice of Defaults or Judgments. The Company shall give the
-------------------------------
Lenders notice of any default declared with respect to any material lease or
loan of the Company or any judgment entered against the Company, by mailing an
accurate and complete copy thereof to Lenders within ten days of receipt thereof
by the Company.
5.07 Financial Covenant The Company shall, at all times, comply with
------------------
and maintain the financial covenant(s) set forth below:
(a) Total Debt to Net Worth. The Company will maintain on a
-----------------------
consolidated basis a ratio of Total Debt to Net Worth of not more than (i) 2.65
to 1.0 as of the date of Closing and at all times thereafter through December
30, 1996; (ii) 2.50 to 1.0 as of December 31, 1996 and at all times thereafter
through December 30, 1997; (iii) 2.0 to 1.0 as of December 31, 1997
- 22 -
<PAGE>
and at all times thereafter through December 30, 1998; (iv) 1.75 to 1.0 as of
December 31, 1998 and at all times thereafter through December 30, 1999; and (v)
1.50 to 1.0 as of December 31, 1999 and at all times thereafter. Such ratio
shall be tested by Lender on a quarterly basis on the last day of each calendar
quarter.
(b) Debt Service Coverage Ratio. The Company will maintain on a
----------------------------
consolidated and rolling twelve (12) month basis a Debt Service Coverage Ratio
of not less than 1.3 to 1.0 as of the date of Closing and as of the last day of
each calendar quarter thereafter.
5.08 Insurance. Attached hereto as Exhibit 5.08 is an accurate and
--------- ------------
complete list of all insurance policies and binders presently providing coverage
to the Company or any of its assets, including all insurance providing coverage
with respect to any of the Collateral. The Company has made available to Allied
copies of appropriate insurance certificates and accurate and complete copies of
the insurance binders or policies for all of the insurance listed in Exhibit
-------
5.08. At all times until all of the Obligations have been satisfied in full,
----
the Company shall maintain all such insurance or equivalent replacement
insurance in full force and effect.
5.09 Use of Proceeds. The Company shall use the proceeds from the
---------------
Debentures and the sale of the Shares for the refinance of the existing bank
debt, for acquisitions and new campus openings, and for transaction expenses and
general corporate purposes.
5.10 Payments and Obligations. The Company shall promptly make all
------------------------
payments of principal, interest and other charges as and when due under the
Debentures, shall timely perform or comply with, as the case may be, all of the
other Obligations, and shall comply in all respects with all terms, conditions
and covenants of all this Agreement and the other Loan Documents.
5.11 Other Debts. The Company shall promptly make all payments of
-----------
principal and interest as and when due under any other debt obligations of the
Company, but nothing herein shall require the Company to pay any amounts that it
in good faith believes is not due and owing or as to which it believes it has
adequate defenses; provided, however, that this covenant shall not be construed
as permitting any other debt obligations of the Company or as permitting the
making of any payments on account of any other debt obligations of the Company
that are not otherwise permitted by the terms and conditions of this Agreement.
5.12 Information Requests. The Company shall furnish from time to
--------------------
time to any Lender all information such Lender may reasonably request to enable
such Lender to prepare and file any form required of such Lender by the SEC, or
any other regulatory authority.
5.13 Credit Checks; Access to Records. The Company shall permit any
--------------------------------
authorized representative(s) of any Lender and their attorney(s) and
accountant(s) to obtain credit and other background information on the Company,
and to inspect, examine and make copies and abstracts of the books of account
and records of the Company at reasonable times during
- 23 -
<PAGE>
normal business hours. The Company shall allow Lenders or their agent(s) to
conduct reasonable interviews with the Company's outside accountants, who, by
this covenant, are hereby irrevocably instructed to respond to such inquiries as
fully as if made by the Company itself. The Lenders shall hold all non-public
information furnished to them under this Agreement pertaining to the Company or
its directors and officers in confidence and shall not disclose it to any
person, other than Lenders' counsel, accountants, or financial advisers, or use
it for any purpose other than in connection with Lenders' investment in the
Company.
5.14 Maintain Copies; Financing Statements. The Company shall
-------------------------------------
maintain an original or a true copy of this Agreement and any modifications
hereof, which shall be available for inspection as called for herein or in the
Debentures. The Company shall pay the taxes and costs of, or incidental to, any
recording or filing of any of the Security Documents and any financing
statements concerning the Collateral. The Company agrees that a photographic or
other reproduction of this Agreement or of a financing statement is sufficient
as a financing statement.
5.15 Maintain Existence. The Company shall take or cause to be taken
------------------
all steps and perform or cause to be performed all actions necessary or
appropriate to preserve and keep in full force and effect its existence as a
corporation and its right to conduct its business in a prudent and lawful manner
in all jurisdictions in which it conducts business. Nothing in this Section
5.15 shall prohibit a Subsidiary from merging or consolidating with or into (i)
Nobel or another Subsidiary, or (ii) any other entity, to the extent necessary
to complete an acquisition of such entity or its assets by the Company.
5.16 Protect the Collateral. The Company shall take or cause to be
----------------------
taken all steps and perform or cause to be performed all actions necessary or
appropriate to administer, supervise, preserve and protect the Collateral and to
maintain the Lenders' perfected security interest in the Collateral.
5.17 Board of Directors Meetings. Nobel shall hold meetings of its
---------------------------
Board of Directors not less than once per quarter, and shall provide Allied with
reasonable notice of such meetings. If requested by Allied, Nobel shall use its
best efforts to cause the election to Nobel's Board of Directors one member
nominated by Allied. Pursuant to the Management Agreement in the form of
Exhibit 5.17 hereto, certain stockholders of Nobel have agreed to vote for one
------------
member of Nobel's Board of Directors nominated by Allied. If Allied chooses not
to participate on the Board, it shall have the right to have an observer attend
each Board meeting. Nobel shall reimburse the Allied Board member or one
observer from Allied for his reasonable out-of-pocket travel and lodging
expenses. The Allied representative on the Board of Directors or Allied
observer at board meetings shall be either Thomas Westbrook or Cabell Williams,
or such other person designated by Allied as may be reasonably satisfactory to
the Company.
5.18 Termination of Affirmative Covenants. At such time as the
------------------------------------
Debentures have been paid in full, the Warrants have not been exercised and the
Shares have not been
- 24 -
<PAGE>
converted into shares of Common Stock, (each to the extent as provided in the
following sentence), the obligations set forth in Sections 5.02, 5.03, 5.04,
5.07, 5.08 and 5.09 shall terminate. Thereafter, at such time as Allied has
purchased at least 75% of the shares of Common Stock purchasable under the
Warrants and has converted at least 75% of the Shares into shares of Common
Stock, all of the remaining obligations set forth in this Article V shall
terminate.
ARTICLE VI: NEGATIVE COVENANTS
Until the Debentures are repaid in full and each of the other
Obligations has been satisfied in full and discharged and so long as Allied
holds an equity interest in the Company, the Company covenants and agrees with
the Lenders not to do any of the following, without the prior written consent of
---
the Lenders (which consent may be withheld by Lenders in Lenders' discretion for
any reason whatsoever, except in the case of the action contemplated by Section
6.01 as to which Lenders agree not to unreasonably withhold their approval):
6.01 Change of Chief Executive Officer. Nobel shall not change its
---------------------------------
Chief Executive Officer.
6.02 Dividends. Nobel shall not declare or pay any cash, stock or
---------
other dividend or distribution on any class of stock so long as a material
default hereunder, or under the Debentures, exists; provided, however, Nobel may
pay a dividend to holders of its outstanding Series A Preferred Stock in an
aggregate amount not to exceed $200,000 per year if no such material default
exists.
6.03 Change of Site, Etc. The Company shall not change the physical
--------------------
location of its headquarters without thirty (30) days prior written notice to
Lenders, or expend or invest any funds in any manner not strictly related to its
existing business.
6.04 Judgments. The Company shall not permit any material judgment
---------
obtained against the Company to remain unpaid for over thirty (30) days without
obtaining a stay of execution or bond.
6.05 Dissipation of Assets. The Company shall not Transfer or in any
---------------------
other manner convey or dispose of any equitable, beneficial or legal interest in
any of the Collateral or any of its other material assets (if any) necessary to
run its business with a value greater than $1,000,000, or dissolve and
liquidate, or merge or consolidate with another company that results in a
Transfer of the Company's Business, provided that no Event of Default shall
occur if the Debentures are paid in full at the time of such Transfer as
provided in the Debentures. This Section 6.05 shall not be interpreted as
prohibiting the sale by the Company of its real property assets.
6.06 No Encumbrances. The Company shall not permit to exist against
---------------
any of the Collateral or any of its other material assets (if any) any lien,
mortgage, pledge, security
- 25 -
<PAGE>
interest, title retention device, or other encumbrance junior or senior to the
liens and security interests of Lenders under the Security Documents, except for
the Permitted Encumbrances.
6.07 Major Expenditures. The Company shall not make expenditures for
------------------
capital improvements, acquisitions or otherwise in any fiscal year in excess of
Two Hundred Fifty Thousand Dollars ($250,000), unless and to the extent such
expenditures are included in an annual budget approved by the Company's Board of
Directors each year (the "Annual Budget"), or made in connection with
acquisitions that have been approved by the Board of Directors of the Company.
6.08 Employee Compensation. The Company shall not pay wages,
---------------------
salaries, loans, advances, or other payments to, or on behalf of, any officer of
the Company (any such, "Employee Compensation") which, in total, are in excess
of the amounts established by a Compensation Committee, of which a majority of
the committee members are non-management directors.
6.09 Inside Transactions. The Company shall not purchase or sell any
-------------------
property or services, nor borrow or lend money or property from or to, or co-
invest in, any transaction with any officer, director, or Affiliate of the
Company, unless such transaction has been approved by a majority of the
directors of the Company who are not parties to the transaction in question, and
except for employment compensation arrangements consistent with the requirements
imposed pursuant to Section 6.08 above.
6.10 Additional Debts and Liabilities.
--------------------------------
(a) In General. The Company shall not incur any additional
----------
indebtedness or create or incur any contingent liability to pay the indebtedness
of third parties (including guaranties or endorsements) other than: (i) the
Obligations; (ii) the Permitted Senior Debt; (iii) the Permitted Seller Debt;
(iv) Existing Secured Debt; (v) trade debt or short-term working capital debt
incurred in the normal and ordinary course of the Company's business; (vi)
depositing checks and other instruments for the payment of money acquired in the
ordinary course of business; (vii) purchase money obligations entered into in
the ordinary course of the Company's business other than transactions that
result in Permitted Seller Debt; and (viii) a guarantee of the indebtedness of
Child Care Investors, L.P., to Fidelity Bank in the aggregate principal amount
of $1,200,000.
(b) Incurring Permitted Seller Debt. After the Closing, the
-------------------------------
Company may incur Permitted Seller Debt as long as no other default hereunder
exists or would exist, giving effect to such Permitted Seller Debt.
(c) Incurring Permitted Senior Debt. After the Closing, the
-------------------------------
Company may incur or refinance Permitted Senior Debt provided that, giving
effect to such Permitted Senior Debt: (i) the following ratios are not violated,
(ii) the aggregate amount of Permitted
- 26 -
<PAGE>
Senior Debt does not exceed $25,000,000, and (iii) no other default hereunder
exists or would exist:
A. Permitted Senior Debt to EBIT. Permitted Senior Debt to EBIT
-----------------------------
(for the twelve (12) month period ending on the last day of the month
preceding the month in which such Permitted Senior Debt is incurred or
refinanced) of not more than (i) 4.5 to 1.0 as of the date of Closing
and at all times thereafter through December 30, 1995; (ii) 4.0 to 1.0
as of December 31, 1995 and at all times thereafter through December
30, 1996; (iii) 3.75 to 1.0 as of December 31, 1996 and at all times
thereafter through December 30, 1997; (iv) 3.0 to 1.0 as of December
31, 1997 and at all times thereafter through December 30, 1998; (v)
2.5 to 1.0 as of December 31, 1998 and at all times thereafter through
December 30, 1999; and (vi) 2.0 to 1.0 as of December 31, 1999 and at
all times thereafter..
B. Permitted Senior Debt to Net Worth. Permitted Senior Debt to
----------------------------------
Net Worth (as of the last day of the month preceding the month in
which such Permitted Senior Debt is incurred or refinanced) of not
more than (i) 1.4 to 1.0 as of the date of Closing and at all times
thereafter through December 30, 1997; (ii) 1.3 to 1.0 as of December
31, 1997 and at all times thereafter through December 30, 1999; (iii)
1.2 to 1.0 as of December 31, 1999 and at all times thereafter.
(d) Compliance Certification. Prior to incurring any
------------------------
obligation in connection with Permitted Seller Debt or Permitted Senior Debt,
the Company must provide Lenders with a certificate executed by the Chief
Financial Officer or Controller of Nobel (i) setting forth the information and
computations (in sufficient detail) required in order to establish, on a pro
forma basis, giving effect to the Permitted Seller Debt or the Permitted Senior
Debt, as the case may be, whether the Company would be operating in compliance
with the requirements set forth in subparagraph (b) or (c), as the case may be;
and (ii) certifying that as of the date of 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.
(e) Bank Loan Agreement. The covenants set forth in Section
-------------------
6.10(c) shall not affect the ability of the Company to draw on funds available
under the Bank Loan Agreement.
(f) Future Subordination Agreements. In the event the Company
-------------------------------
incurs Permitted Senior Debt in compliance with this Agreement, Lenders hereby
agree to execute a subordination agreement with the lender of the Permitted
Senior Debt on terms substantially similar to those of the Subordination
Agreement, or otherwise reasonably acceptable to Lenders.
6.11 No Adverse Actions. The Company shall not, by amendment to the
------------------
Company Constituent Documents or through any reorganization, reclassification,
consolidation, merger, sale of assets, Act of Dissolution, issuance or Transfer
of securities or any other action, avoid or seek to avoid the observance or
performance of any of the terms, covenants and
- 27 -
<PAGE>
conditions of this Agreement or any of the other Loan Documents, but shall at
all times carry out in good faith all such terms and take all such actions as
may be necessary or appropriate to protect the rights of the Lenders hereunder
and under each of the Loan Documents.
6.12 Termination of Negative Covenants. At such time as the
---------------------------------
Debentures have been paid in full, but the Warrants have not been exercised and
the Shares have not been converted into shares of Common Stock, (each to the
extent as provided in the following sentence), the obligations set forth in
Sections 6.01, 6.02, 6.03, 6.04, 6.06, 6.07 and 6.10 shall terminate.
Thereafter, at such time as Allied has purchased at least 75% of the shares of
Common Stock purchasable under the Warrants and has converted at least 75% of
the Shares into shares of Common Stock, all of the remaining obligations set
forth in this Article VI shall terminate.
6.13 Operating Leases. Nothing herein shall prohibit the Company
----------------
from selling its real estate and leasing it back under leases that will be
treated as operating leases for financial reporting purposes, or from entering
into build-to-suit arrangements with W.P. Carey or other persons pursuant to
which they will build new schools and centers to the Company's specifications
and lease them to the Company under leases treated as operating leases for
financial reporting purposes.
ARTICLE VII: FEES, EXPENSES AND INDEMNIFICATION
7.01 Fees and Expenses. The Company shall pay:
-----------------
(a) A commitment fee to Lenders, shared ratably among the
Lenders, of One Hundred Thirty Thousand Dollars ($130,000), of which Sixty-Five
Thousand Dollars ($65,000) was paid at the time of the execution and delivery of
the commitment letter and the balance of Sixty-Five Thousand Dollars ($65,000)
is due and payable in full at Closing;
(b) All reasonable fees and disbursements for work done for
the Lenders by the Lenders' attorneys and legal staff (whether by outside
counsel or the legal staff of Allied Capital Advisers, Inc.); and
(c) A processing fee equal to all reasonable out-of-pocket
costs and expenses up to a maximum of $1,000, incurred by the Lenders or Allied
Capital Advisers, Inc. in connection with performing a due diligence examination
of the Company and the Company's business.
All amounts described in this Section 7.01 shall be due and payable in
full by the Lenders at the Closing.
7.02 Indemnification. In addition to its indemnification provisions
---------------
contained elsewhere herein and in the other Loan Documents, the Company agrees
to indemnify, defend
- 28 -
<PAGE>
and hold harmless each of the Lenders and each of their respective officers,
directors, partners, employees, agents and controlling persons (collectively,
the "Indemnified Parties") from and against any and all losses, claims, damages,
liabilities and related expenses, including reasonable attorneys' fees and
expenses, incurred by or asserted against any of the Indemnified Parties by any
third parties arising out of, in any way in connection with, or as a result of:
(i) this Agreement and the other Loan Documents, (ii) the performance by the
Lenders and Loan Parties of their respective obligations hereunder and
thereunder and consummation of the transactions contemplated hereby and thereby;
(iii) the occurrence of any Event of Default hereunder or any event that would
constitute an Event of Default but for the giving of notice and/or passage of
time; (iv) any federal, state or local transfer or recording taxes or filing
fees which may become payable in connection with this transaction; (v) the
spilling, leaking, pumping, pouring, unsettling, discharging, leaching or
releasing of any Hazardous Materials on any of the Real Property or any other
property owned by the Company; (vi) any violations by the Company of any other
Environmental Law, regulation or ordinance; (vii) any brokerage, finders, or
other fees in connection with the transactions contemplated by this Agreement;
or (viii) any claim, litigation, investigation or proceeding relating to any of
the foregoing, whether or not any of the Indemnified Parties is a party thereto;
provided, however, any such indemnity shall not apply to any such losses,
claims, damages, liabilities or related expenses arising from the gross
negligence or willful misconduct of any of the Lenders or breach of this
Agreement by the Lenders.
7.03 Survival; Timing of Payments. The provisions of this Article
----------------------------
VII and any other indemnification provisions contained in this Agreement and the
other Loan Documents shall survive and remain operative and in full force and
effect regardless of the termination of this Agreement or expiration of the term
of this Agreement, the consummation of the transactions contemplated hereby, the
repayment of the Debentures and satisfaction and discharge of the other
Obligations, the invalidity or unenforceability of any term or provision of this
Agreement, the Debentures or any Security Documents, or any investigation made
by or on behalf of any of the Lenders. Except as provided to the contrary, all
amounts due under this Article VIII shall be payable on written demand therefor.
ARTICLE VIII: DEFAULT PROVISIONS
The occurrence of any of the events specified below in this Article
VIII (any such, an "Event of Default") shall constitute an immediate breach of,
and default under, this Agreement entitling the Lenders to exercise all of the
rights and remedies specified in this Agreement, in the Security Documents, in
any other Loan Document, and under all Applicable Laws, without the obligation
to furnish any further notice or opportunity to cure (beyond that specified in
the applicable sections of this Article VIII), all of which are hereby expressly
waived by the Company and all other Loan Parties:
8.01 Monetary Defaults. Any installment payment of principal,
-----------------
interest or other charge under any of the Debentures is not received by the
Lenders within 15 calendar days of the
- 29 -
<PAGE>
due date thereof, or any other monetary Obligation is not fully paid and
discharged within 15 calendar days of the due date thereof.
8.02 Other Breaches. The Company or any other Loan Party shall fail
--------------
to comply with their respective affirmative or negative covenants, agreements
and undertakings in this Agreement, the Debentures or any of the Security
Documents and such failure shall continue for a period of 15 calendar days from
the date of the delivery of written notice thereof from any Lender.
8.03 Misrepresentation. Any representation or warranty made by the
-----------------
Company in this Agreement, in any of the Security Documents, any of the other
Loan Documents, shall be untrue in any material respect and shall remain so
after ten days' written notice.
8.04 Transfer of Company Business. Any Transfer of Company's
----------------------------
Business shall occur.
8.05 Act of Bankruptcy or Dissolution. Any Act of Bankruptcy or Act
--------------------------------
of Dissolution shall have occurred with respect to the Company or any other Loan
Party.
8.06 Other Loan Document Defaults. The Company or any other Loan
----------------------------
Party shall be in default under any of the other Loan Documents (after taking
into account the giving of any notice and the expiration of the applicable cure
period (if any) required pursuant to the applicable terms of such other Loan
Document or Loan Documents).
8.07 Other Defaults Generally. Any default shall have been declared
------------------------
(after giving effect to any applicable notice and/or grace periods) under any
material lease, material contract, or other material obligation of the Company.
For purposes of this Section 8.07, "material" shall mean requiring payment
during the term of such obligation of an amount equal to or greater than
$250,000.
8.08 Loss of Key Employee. A. J. Clegg is no longer employed by
--------------------
Nobel as Chief Executive Officer (except due to death or disability) or does
not give his primary attention to the Company's business, except a change may be
made by the Board of Directors of Nobel if the new Chief Executive Officer is
reasonably acceptable to Lenders.
ARTICLE IX: CERTAIN REMEDIES
Upon the occurrence of an Event of Default under this Agreement,
subject to the rights of the holders of the Permitted Senior Debt under the
Subordination Agreement, each of the Lenders shall be entitled to exercise any
or all of the following rights and remedies, in addition to such other rights
and remedies as may be provided for in the other Loan Documents or as may be
available at law or in equity:
- 30 -
<PAGE>
9.01 Acceleration. Following the occurrence of an Event of Default,
------------
any of the Lenders may, at their option, accelerate the maturity of each of the
Debentures and all other Obligations and demand immediate payment in full of all
amounts payable under the Debentures and all of the Obligations, without
presentment, demand, protest, or further notice by any of the Lenders to the
Company, all of which are hereby expressly waived by the Company.
9.02 Sale of Collateral. Following the occurrence of an Event of
------------------
Default, any of the Lenders may sell, assign, and deliver the whole or any part
of the Collateral, as more fully described in the Security Agreement.
9.03 Collections, Compromises, Etc. Following the occurrence of an
------------------------------
Event of Default, any of the Lenders are empowered to collect or cause to be
collected or otherwise to be converted into money all or any part of the
Collateral, by suit or otherwise, and to surrender, compromise, release, renew,
extend, exchange or substitute any item of the Collateral in transactions with
the Company or any third party, irrespective of any assignment thereof by the
Company, and without prior notice to or consent of the Company or any assignee.
9.04 Costs. The Company shall pay all expenses of any nature,
-----
whether incurred in or out of court, and whether incurred before or after the
Debentures shall become due at their maturity date or otherwise (including, but
not limited to, reasonable attorneys' fees and costs) which Lenders may deem
necessary or proper in connection with the collection of any of the Obligations
or the administration, supervision, preservation, protection of (including, but
not limited to, the maintenance of adequate insurance) or the realization upon,
any of the Collateral. The Lenders are authorized to pay at any time and from
time to time any or all of such expenses, to add the amount of such payment to
the amount of principal outstanding under the Debentures, and to charge interest
thereon at the rate specified in the Debentures.
9.05 Remedies Non-Exclusive. None of the rights, remedies,
----------------------
privileges or powers of the Lenders expressly provided for herein shall be
exclusive, but each of them shall be cumulative with, and in addition to, every
other right, remedy, privilege and power now or hereafter existing in favor of
the Lenders, whether pursuant to the other Loan Documents, at law or in equity,
by statute or otherwise.
ARTICLE X: MISCELLANEOUS
10.01 Non-Waiver. No course of dealing between a Lender and any
----------
other party hereto or any failure or delay on the part of a Lender in exercising
any rights or remedies hereunder shall operate as a waiver of any rights or
remedies of any Lender under this or any other applicable instrument. No single
or partial exercise of any rights or remedies hereunder shall operate as a
waiver or preclude the exercise of any other rights or remedies hereunder.
- 31 -
<PAGE>
10.02 Security Interest Not Impaired. The security interest of the
------------------------------
Lenders and their assigns shall not be impaired by a Lender's sale,
hypothecation or re-hypothecation of a Debenture, or by any indulgence,
including, but not limited to:
(a) Any renewal, extension, or modification which a Lender may
grant with respect to the Obligations or any part thereof;
(b) Any surrender, compromise, release, renewal, extension,
exchange, or substitution which a Lender may grant with respect to the
Collateral or any portion thereof; or
(c) Any indulgence granted in respect of any endorser,
guarantor or surety.
The purchaser, assignee, transferee or pledgee of the Debentures,
Collateral, any guaranty, or any other Loan Document (or any of them), sold,
assigned, transferred, pledged or repledged shall forthwith become vested with,
and entitled to exercise, all powers and rights given by this Agreement to
Lenders, as if said purchaser, assignee, transferee or pledgee were originally
named in this Agreement in place of the Lenders.
10.03 Notices. All notices or communications under this Agreement
-------
or the prepaid, or delivered to the following addresses (or to such other
address as shall at any time be designated by any party in writing to the other
parties):
To the Lenders: Allied Capital Corporation
- and -
Allied Capital Corporation II
- and -
Allied Investment Corporation
- and -
Allied Capital Corporation
c/o Allied Capital Corporation
1666 K Street, N.W., Ninth Floor
Washington, D.C. 20006
Attention: G. Cabell Williams III, President
With a copy to Piper & Marbury, L.L.P
1200 Nineteenth Street, N.W.
Washington, D.C. 20036
Attention: Anthony H. Rickert, Esquire
To the Company: Nobel Education Dynamics, Inc.
Rose Tree Corporate Center II
1400 N. Providence Road
Suite 3055
- 32 -
<PAGE>
Media, PA 19063
Attention: A. J. Clegg, President
with a copy to: Drinker Biddle & Reath
1000 Westlakes Drive
Berwyn, PA 19312-2409
Attention: Robert H. Strouse, Esquire
Rejection or other refusal to accept, or the inability to deliver because
of a changed address of which no notice was given, shall not affect the
effectiveness or the date of delivery for any notice sent in accordance with the
foregoing provisions. Each such notice, request or other communication shall be
deemed sufficiently given, served, sent and received for all purposes at such
time as it is delivered to the addressee (with the return receipt, the delivery
receipt, the affidavit of the messenger or the answer back being deemed
conclusive (but not exclusive) evidence of such delivery) or at such time as
delivery is refused by addressee upon presentation.
10.04 Binding Agreement;Limitation on Transfer. This Agreement
----------------------------------------
shall bind and inure to the benefit of each of the Lenders, the Company any
other Loan Parties, and to the extent provided herein, their respective heirs,
successors and assigns. Allied shall not transfer or assign the Debentures or
any of the Loan Documents to any third party not affiliated with Allied without
the prior written consent of Nobel.
10.05 Entire Agreement; Integration Clause. This Agreement, the
------------------------------------
Exhibits hereto, and the other Loan Documents set forth the entire agreements
and understandings of the parties hereto with respect to this transaction, and
any prior agreements are hereby merged herein and terminated.
10.06 No Oral Modification or Waivers. The terms herein may not be
-------------------------------
modified or waived orally, but only by an instrument in writing signed by the
party against which enforcement of the modification or waiver (as the case may
be) is sought.
10.07 Relationship of the Parties; Advice of Counsel. This Agreement
----------------------------------------------
provides for the making of an investment in the form of secured loans made by
the Lenders, in their capacity as lenders, to the Company, in its capacity as
borrower, and for the payment of interest and repayment of principal by the
Company to Lenders. The provisions herein for compliance with financial
covenants and delivery of financial statements are intended solely for the
benefit of the Lenders to protect their interests as lenders in assuring
payments of interest and repayment of principal, and nothing contained in this
Agreement shall be construed as permitting or obligating the Lenders to act as
financial or business advisors or consultants to the Company, as permitting or
obligating Lenders to control the Company or to conduct the Company's
operations, as creating any fiduciary obligation on the part of the Lenders to
the Company, or as creating any joint venture, agency or other relationship
between the parties other than as explicitly and specifically stated in this
Agreement. A Lender is not (and shall not be construed as) a partner, joint
venturer, alter-ego, manager, controlling person, operator or other business
- 33 -
<PAGE>
participant of any kind of the Company; neither Lenders nor the Company intend
that the Lenders assume such status, and, accordingly, the Lenders shall not be
deemed responsible for (or a participant in) any acts or omissions of the
Company. The Company and each of the other Loan Parties each represent and
warrant to the Lenders that they have had the advice of experienced counsel of
their own choosing in connection with the negotiation and execution of this
Agreement and with respect to all matters contained herein.
10.08 Controlling Law. This Agreement and each of the other Loan
---------------
Documents shall be governed by, and interpreted and construed in accordance
with, the internal laws of the State of Maryland (without regard to its
conflicts of law principles).
10.09 Venue; Personal Jurisdiction; Full Faith and Credit; Personal
-------------------------------------------------------------
Service.
-------
(a) Venue for the adjudication of any claim or dispute arising
out of this Agreement or any of the other Loan Documents shall be proper only in
the state or federal courts of the State of Maryland, and all parties to this
Agreement and the other Loan Documents hereby consent to such venue and agree
that it shall not be not inconvenient and not subject to review by any court
other than such courts in Maryland;
(b) The Company and each of the other Loan Parties intend and
agree that the courts of the jurisdictions in which the Company is formed and in
which the Company conducts its business should afford full faith and credit to
any judgment rendered by a court of the State of Maryland against the Company or
any other Loan Party under this Agreement and the other Loan Documents, and the
Company and each other Loan Party under this Agreement and the other Loan
Documents each intend and agree that such courts should hold that the Maryland
courts have jurisdiction to enter a valid, in persona judgment against the
Company or such other Loan Party(ies), as the case may be;
(c) The Company and each other Loan Party agree that service
of any summons and complaint, and other process which may be served in any suit,
action or other proceeding, may be made by mailing via U.S. certified or
registered mail or by hand-delivering a copy of such process to the Company or
such other Loan Party (as applicable) at its address specified above; and
(d) The Company and each other Loan Party all expressly
acknowledge and agree that the provisions of this Section 10.09 are reasonable
and made for the express benefit of each of the Lenders.
10.10 Waiver of Trial by Jury. Each party to this Agreement agrees
-----------------------
that any suit, action or proceeding, whether claim, defense or counterclaim,
brought or instituted by any party hereto or any successor or assign of any
party on or with respect to this Agreement or any other Loan Document or which
in any way relates, directly or indirectly, to the Debentures or any event,
transaction or occurrence arising out of or in any way connected with this
Agreement, the other Loan Documents or the dealings of the parties with respect
thereto, shall be tried only by a
- 34 -
<PAGE>
court and not by a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL
BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND ACKNOWLEDGES THAT THIS IS A
WAIVER OF A LEGAL RIGHT AND THAT IT MAKES THIS WAIVER VOLUNTARILY AND KNOWINGLY
AFTER CONSULTATION WITH, OR THE OPPORTUNITY TO CONSULT WITH, COUNSEL OF ITS
CHOICE.
10.11 Costs and Fees Related to Enforcement or a Successful Defense.
-------------------------------------------------------------
Without limiting the Lenders' entitlements under Section 9.04 above, the Company
and each other Loan Party, severally and not jointly (each, a "Reimbursing
Party"), hereby agrees to reimburse the Lenders for any and all costs and fees,
including reasonable attorneys' fees and expenses, incurred by any of the
Lenders or their Affiliates in connection with: (i) any suit, action, claim or
other activity of the Lenders to collect the Obligations or any portion thereof
or to enforce any of the provisions of this Agreement or any other Loan Document
against such Reimbursing Party; and (ii) any suit, action, claim or other
liability asserted against any of the Lenders or their Affiliates by such
Reimbursing Party in any case in which such Reimbursing Party does not prevail
with respect to substantially all of its or his claim.
10.12 Independent Covenant to Make Payments. The payment and
-------------------------------------
performance by the Company and any other Loan Party of all of the Obligations
shall be absolute and unconditional, irrespective of any defense or any rights
of set-off, recoupment or counterclaim the Company or any other Loan Party might
otherwise have against any of the Lenders, and the Company and each other Loan
Party shall pay and perform all of the Obligations (to the extent applicable to
him or it), free of any deductions and without abatement, diminution,
recoupment, counterclaim or set-off. Until payment in full of all of the
Obligations, the Company shall: (a) not suspend or discontinue any payments
required pursuant to the Debentures, this Agreement or any other Loan Documents;
and (b) perform and observe all of the other terms and provisions of all of the
Loan Documents.
10.13 Headings. The headings of the paragraphs and sub-paragraphs
--------
of this Agreement and the other Loan Documents are inserted for convenience only
and shall not be deemed to constitute a part of this Agreement or the other Loan
Documents.
10.14 Severability. To the extent any provision herein violates any
------------
applicable law, that provision shall be considered void and the balance of this
Agreement shall remain unchanged and in full force and effect.
10.15 Counterparts. This Agreement may be executed in as many
------------
counterpart copies as may be required. It shall not be necessary that the
signature of, or on behalf of, each party appear on each counterpart, but it
shall be sufficient that the signature of, or on behalf of, each party appear on
one or more of the counterparts. All counterparts shall collectively constitute
a single agreement. It shall not be necessary in any proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties.
- 35 -
<PAGE>
10.16 Deliveries to Lenders. To the extent the terms of this
---------------------
Agreement or any of the other Loan Documents require the Company to deliver any
documents or other materials to any or all of the Lenders, then, until such time
as Allied (or one or more Affiliates of Allied) shall no longer hold complete
title to each of the Debentures, the Company may fully satisfy and discharge
such requirement by delivering a single copy of the document(s) or other
material(s) in question to the Lenders' notice party identified in Section 10.03
above in lieu of separate deliveries to each of the Lenders. Following a
complete or partial Transfer by Allied of any its right, title or interest in
and to any of the Debentures to one or more Persons that is not an Affiliate of
Allied, then the Company shall be required to deliver copies of the document(s)
or other material(s) in question to each of the Lenders separately.
10.17 Consent and Approval of Lenders. To the extent the terms of
-------------------------------
this Agreement or any of the other Loan Documents require the Company to obtain
the consent or approval of each of the Lenders, then, until such time as Allied
(or one or more Affiliates of Allied) shall no longer hold complete title to
each of the Debentures, the Company may fully satisfy and discharge such
requirement by obtaining the consent or approval (in writing if necessary) of
the holder of not less than 55% of the outstanding principal balance of the
Debentures in lieu of the separate consent or approval of each of the Lenders.
Following a complete or partial Transfer by Allied of any its right, title or
interest in and to any of the Debentures to one or more Persons that is not an
Affiliate of Allied, then the Company shall be required to obtain the consent or
approval (in writing if necessary) of the Lenders holding not less than 75% of
the outstanding principal balance of the Debentures.
- 36 -
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first above written.
WITNESS/ATTEST: "COMPANY":
NOBEL EDUCATION DYNAMICS, INC.
a Delaware corporation
By: xxx By: xxx (SEAL)
------------------------ ---------------------
President
IMAGINE EDUCATIONAL PRODUCTS, INC.
a Delaware corporation
By: xxx By: xxx (SEAL)
------------------------ ---------------------
President
BLUEGRASS REAL ESTATE COMPANY, INC.
a Pennsylvania corporation
By: xxx By: xxx (SEAL)
------------------------ ---------------------
President
MERRYHILL SCHOOLS, INC.
a California corporation
By: xxx By: xxx (SEAL)
------------------------ ---------------------
President
Signatures continued on next page.
- 37 -
<PAGE>
CHILDREN'S PARK, INCORPORATED
a Delaware corporation
By: xxx By: xxx (SEAL)
------------------------- ---------------------
President
"ALLIED":
ALLIED CAPITAL CORPORATION
a Maryland corporation
By: xxx By: xxx (SEAL)
------------------------- ---------------------
ALLIED CAPITAL CORPORATION II,
a Maryland corporation
By: xxx By: xxx (SEAL)
------------------------- ----------------------
ALLIED INVESTMENT CORPORATION
a Maryland corporation
By: xxx By: xxx (SEAL)
------------------------- ----------------------
ALLIED INVESTMENT CORPORATION
a Maryland corporation
By: xxx By: xxx (SEAL)
------------------------- ----------------------
- 38 -
<PAGE>
Exhibit 4B
THE INDEBTEDNESS EVIDENCED BY THIS DEBENTURE AND ANY RIGHTS OR REMEDIES
HEREUNDER SHALL BE SUBORDINATE AND JUNIOR TO FIRST VALLEY BANK AND ITS
SUCCESSORS AND ASSIGNS TO THE EXTENT AND IN THE MANNER SET FORTH IN A
SUBORDINATION AGREEMENT DATED AS OF AUGUST 30, 1995.
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR APPLICABLE STATE SECURITIES LAWS. THIS DEBENTURE MAY NOT BE OFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OF THE DEBENTURE UNDER SUCH
ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR UPON SATISFACTION BY THE
ISSUER HEREOF THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SUCH SALE OR OFFER.
NOBEL EDUCATION DYNAMICS, INC.
SENIOR SUBORDINATED DEBENTURE
$450,000 Dated as of August 30, 1995
FOR VALUE RECEIVED, the undersigned, (i) NOBEL EDUCATION DYNAMICS, INC., a
Delaware corporation having an address at Rosetree Corporate Center II, 1400 N.
Providence Road, Suite 3055, Media, PA 19063 ("Nobel"), and (ii) Imagine
Educational Products, Inc., a Delaware corporation, Bluegrass Real Estate
Company, Inc., a Pennsylvania corporation, Merryhill Schools, Inc., a California
corporation, and Children's Park, Incorporated, a Delaware corporation
(collectively, the entities listed in this clause (ii) shall be referred to as
the "Subsidiaries") (collectively, Nobel and the Subsidiaries shall be referred
to as the "Borrower"), hereby jointly, severally, and unconditionally promise to
pay to the order of ALLIED CAPITAL CORPORATION or its registered assigns (the
"Holder"), at its offices located at 1666 K Street, N.W., Suite 901, Washington,
D.C. 20006, or such other places the Holder shall from time to time have
designated to the Company in writing, the principal amount of FOUR HUNDRED FIFTY
THOUSAND AND 00/100 DOLLARS ($450,000), together with interest thereon, at the
times and in the manner hereinafter provided.
1. Investment Agreement. This Debenture is subject to the terms of, and
--------------------
is one of the four debentures (collectively, the "Debentures") limited in
aggregate principal amount to SIX MILLION DOLLARS ($6,000,000) issued by the
Borrower pursuant to the Investment Agreement, dated as of August 30, 1995, by
and among the Borrower and the lenders named therein, including the initial
Holder referenced above (the "Investment Agreement"), a copy of which may be
examined during normal business hours at the Company's offices. Capitalized
terms used herein and not otherwise defined herein shall have the meanings given
to them in the Investment Agreement.
<PAGE>
2. Interest. From the date hereof and thereafter until repayment of this
--------
Debenture, interest shall accrue hereunder at the rate of fourteen percent (14%)
per annum. Interest shall be calculated on the basis of a 360-day year and
shall be computed for each monthly payment period on the basis of 30 days having
elapsed.
3. Payments.
--------
3.1 Payment of Interest. Commencing on October 1, 1995 and
-------------------
continuing on the first day of each calendar month thereafter until the Maturity
Date (as defined below), the Borrower shall pay to Holder an amount equal to all
interest accruing on the principal balance of this Debenture from time to time
outstanding.
3.2 Principal Payments and Payment at Maturity. Commencing on
------------------------------------------
October 1, 2000 and continuing on the first day of each calendar quarter
thereafter until the Maturity Date (as defined below), the Borrower shall pay to
Holder an additional sum of FIFTY-SIX THOUSAND TWO HUNDRED FIFTY and 00/100
Dollars ($56,250) (i.e., an amount equal to 1/8th of the original principal
amount). On or before August 31, 2002 (the "Maturity Date") or upon the
acceleration of this Debenture, the Borrower will pay to Holder the entire
principal amount of this Debenture then outstanding, together with all accrued
and unpaid interest thereon.
3.3 Other Payment Provisions. All payments of principal and interest
------------------------
hereunder shall be payable to the Holder in lawful money of the United States of
America not later than 2 p.m. on the date when due, without any offset or
deduction whatsoever. Any payment coming due on a day which is not a business
day within the District of Columbia shall be made on the next succeeding such
business day, and any such extension of the time of payment shall be included in
the computation of interest hereunder.
3.4 Penalty. If any payment of principal or interest due under this
-------
Debenture shall be overdue, such overdue amount shall bear interest from and
after the date due, to and including the date when paid in full, at a rate equal
to the lesser of (i) the maximum rate allowed by law and (ii) fifteen percent
(15%) per annum.
3.5 Prepayments. The unpaid principal amount of this Debenture and
-----------
any accrued and unpaid interest thereon may be prepaid, in whole or in part, at
any time upon 10 days prior written notice to Holder, without penalty or
premium. Such prepayments shall be credited against principal in inverse order
of maturity. Prepayments made without the required notice will not be credited
against principal until 10 days after receipt.
3.6 Due on Sale. Notwithstanding anything herein or in the
-----------
Investment Agreement to the contrary, the entire indebtedness hereunder shall
become due and payable upon the earlier of the Maturity Date or a Transfer of
the Company's Business, as defined in Section 1.01 of the Investment Agreement.
- 2 -
<PAGE>
4. Collateral. Pursuant to the terms of the Investment Agreement and
----------
certain Security Documents executed and delivered pursuant thereto, this
Debenture is secured by the Collateral.
5. Subordination. The indebtedness represented by this Debenture is
-------------
subordinate to the Senior Debt of the Borrower in accordance with the terms of
the Investment Agreement, and the Subordination Agreement among the Borrower,
the Holder, and other holders of the Debentures and First Valley Bank.
6. No Assignment by Borrower. The Borrower shall not assign any of its
-------------------------
rights under this Debenture nor delegate any of its duties under this Debenture
without the prior written consent of Holder. Holder may freely assign its
rights hereunder.
7. Covenants and Agreements. The Borrower covenants and agrees that, so
------------------------
long as any indebtedness is outstanding hereunder, it will, unless the Holder
shall otherwise consent prior thereto in writing, comply with and perform each
of the covenants and agreements set forth in the Investment Agreement, which
provisions are incorporated herein by this reference as if set forth at length
herein.
8. Default and Acceleration.
------------------------
8.1 Events of Default. Upon the occurrence of any Event of Default
-----------------
described in Article VIII of the Investment Agreement, then a default may be
declared hereunder at the option of the Holder, without presentment, demand,
protest or further notice of any kind (all of which are hereby expressly
waived). In such event, the Holder shall be entitled to exercise any or all of
the rights and remedies described in Article IX of the Investment Agreement, at
its option, in addition to such other rights and remedies as may be provided for
in other Security Documents or as may be available at law or in equity. At any
time after a declaration of default hereunder, but before a judgment or decree
for the payment of money has been obtained, the Holder may, by written notice,
rescind the declared default if the Borrower has paid a sum sufficient to pay
all overdue interest and overdue principal amounts, all interest on the overdue
installments of interest and/or principal at the penalty rate, and the Holder's
reasonable costs of enforcing its rights hereunder (including attorneys' fees
and disbursements).
8.2 No Waiver. No course of dealing between the Holder and any other
---------
party hereto or any failure or delay on the part of the Holder in exercising any
rights or remedies hereunder shall operate as a waiver of any rights or remedies
of the Holder under this or any other applicable instrument. No single or
partial exercise of any rights or remedies hereunder shall operate as a waiver
or preclude the exercise of any other rights or remedies hereunder.
9. Definitions. The term "indebtedness" as used herein shall mean the
-----------
indebtedness evidenced by this Debenture, including principal, interest and
expenses whether contingent, now due or hereafter to become due, and whether
heretofore or contemporaneously herewith or hereafter contracted.
- 3 -
<PAGE>
10. Confession of Judgment. If payment of the indebtedness evidenced by
----------------------
this Debenture, or any part thereof, shall not be made when due and at maturity,
by acceleration or otherwise, the Borrower hereby authorizes and empowers any
attorney of any court of record in the United States to appear for all of the
undersigned in court, or before any clerk thereof, and confess judgment against
the undersigned in favor of the Holder of this Debenture for the amount due
thereon with interest and costs.
11. Waiver of Trial by Jury. The Borrower agrees that any suit, action or
-----------------------
proceeding, whether claim or counterclaim, brought or instituted by the Holder
on or with respect to this Debenture or any event, transaction or occurrence
arising out of or in any way connected with the Investment Agreement or the
dealing of the parties with respect thereto , shall be tried only by a court and
not by a jury. THE BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. The Borrower acknowledges and
agrees that the Holder would not extend credit under the Investment Agreement to
the Borrower and would not purchase this Debenture if this waiver of jury trial
were not part of the Investment Agreement and this Debenture.
12. Venue; Service of Process. Venue for any adjudication hereof shall be
-------------------------
only in the courts of the State of Maryland or the Federal courts in the State
of Maryland, the jurisdiction of which courts all parties hereby consent to as
the agreement of the parties, as not inconvenient and as not subject to review
by any court other than such courts in Maryland. The Company intends that the
courts of the jurisdiction(s) in which the Company is incorporated and conducts
business should afford full faith and credit to any judgment rendered by a court
of the State of Maryland against the Company hereunder, and should hold that the
Maryland courts have jurisdiction to enter a valid, in personam judgment against
-- --------
the Company hereunder. The Company agrees that service of any summons or
complaint, and other process which may be served in any action, may be made by
mailing via registered mail or delivering a copy of such process to the Company,
and the Company hereby agrees that this submission to jurisdiction and consent
to service of process are reasonable and made for the express benefit of Holder.
13. Controlling Law. This Debenture and all matters related hereto shall
---------------
be governed in accordance with the laws of the State of Maryland, without regard
to its principles of conflicts of law.
{Signatures on pages following}
- 4 -
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly caused this instrument
to be executed and delivered as of the date first above written.
WITNESS/ATTEST: "COMPANY":
NOBEL EDUCATION DYNAMICS, INC.
a Delaware corporation
XXX XXX
By:------------------------- By:-------------------------(SEAL)
President
IMAGINE EDUCATIONAL PRODUCTS, INC.
a Delaware corporation
XXX XXX
By:------------------------- By:-------------------------(SEAL)
President
BLUEGRASS REAL ESTATE COMPANY, INC.
a Pennsylvania corporation
XXX XXX
By:------------------------- By:-------------------------(SEAL)
President
MERRYHILL SCHOOLS, INC.
a California corporation
XXX XXX
By:------------------------- By:-------------------------(SEAL)
President
(Signatures continued on next page.)
- 5 -
<PAGE>
CHILDREN'S PARK, INCORPORATED
a Delaware corporation
XXX XXX
By:------------------------- By:-------------------------(SEAL)
President
- 6 -
<PAGE>
Exhibit 4C
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER
THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
NOBEL EDUCATION DYNAMICS, INC.
Common Stock Purchase Warrant
Warrant No. 1 August 30, 1995
NOBEL EDUCATION DYNAMICS, INC., a Delaware corporation (the "Company"),
hereby certifies that, for value received, ALLIED CAPITAL CORPORATION (the
"Holder"), or its successors or registered assigns, is entitled, subject to the
terms set forth below, to purchase from the Company at any time or from time to
time on or after August 30, 1995 and before 5:00 p.m., Washington, D.C. time, on
the Expiration Date (as hereinafter defined) up to an aggregate of 92,713 fully
paid and nonassessable shares of the Company's common stock $.001 par value per
share (the "Common Stock") at a price per share equal to the Exercise Price (as
hereinafter defined) in effect at the time of the exercise of this Warrant. The
number of shares of Common Stock issuable upon the exercise of this Warrant and
the Exercise Price are subject to adjustment as provided in this Warrant.
This Warrant is one of a series of warrants (collectively, the
"Warrants"), issued pursuant to a certain Investment Agreement (the "Agreement")
dated as of August 30, 1995, by and among the Company and the persons named
therein (the "Purchasers"), a copy of which is on file at the principal office
of the Company. The holder of this Warrant shall be entitled to the benefits of
the Agreement, as provided therein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The terms "Company" shall include Nobel Education Dynamics, Inc.
and any corporation that shall succeed to or assume the obligations of
Nobel Education Dynamics, Inc. hereunder.
(b) The term "Exercise Price" shall mean, subject to adjustment
pursuant to Section 5 hereof, $1.88 per share of Common Stock.
(c) The term "Expiration Date" refers to 5:00 p.m., Washington, D.C.
time, on August 30, 2003.
- 1 -
<PAGE>
1. Exercise and Conversion of Warrant.
----------------------------------
1.1 Exercise. Subject to Section 1.3 hereof, this Warrant may be
--------
exercised in full or in part at any time or from time to time until the
Expiration Date by the holder hereof either (a) by surrender of this Warrant and
the subscription form annexed hereto (duly executed) by such holder, to the
Company at its principal office, accompanied by payment, in cash, by the
surrender of any promissory note or notes or other instruments evidencing any
indebtedness outstanding from the Company to the holder hereof or by certified
or official bank check payable to the order of the Company in the amount
obtained by multiplying (x) the number of shares of Common Stock designated by
the holder in the subscription form by (y) the Exercise Price then in effect, or
(b) if in connection with a registered public offering of the Company's
securities, the surrender of this Warrant (with the subscription form annexed
hereto duly executed) at the principal office of the Company together with
notice of arrangements reasonably satisfactory to the Company for payment to the
Company either by check or from the proceeds of the sale of shares to be sold by
the holder in such public offering of an amount equal to the then applicable
Exercise Price per share multiplied by the number of shares of Common Stock then
being purchased. On any partial exercise the Company at its expense will
forthwith issue and deliver to or upon the order of the holder hereof a new
Warrant or Warrants of like tenor, in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes) may
request, providing in the aggregate on the face or faces thereof for the number
of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.2 Conversion.
----------
(a) The holder of this Warrant shall have the right to require
the Company to convert this Warrant (the "Conversion Right"), in whole or in
part, at any time prior to the Expiration Date, into shares of Common Stock as
provided for in this Section 1.2. Upon exercise of the Conversion Right, the
Company shall deliver to the holder (without payment by the holder of any
Exercise Price) such number of fully paid and nonassessable shares of Common
Stock as is computed using the following formula:
X = Y (A-B)
--------
A
where X = the number of shares of Common Stock to be issued to the holder
hereof pursuant to this Section 1.2.
Y = the number of shares of Common Stock then issuable upon the exercise
of this Warrant that the holder hereof is surrendering in connection
with the exercise of the Conversion Right.
A = the Fair Market Value of one share of Common Stock, at the time the
Conversion Right is exercised pursuant to this Section 1.2.
- 2 -
<PAGE>
B = the Exercise Price in effect under this Warrant at the time the
Conversion Right is exercised pursuant to this Section 1.2.
(b) The Conversion Right may be exercised by the holder,
at any time, or from time to time, prior to the Expiration Date, on any business
day by delivering a written notice (the "Conversion Notice") to the Company
exercising the Conversion Right and specifying (i) the total number of shares of
Common Stock the holder wishes to acquire pursuant to such conversion and (ii) a
place and a date not less than one nor more than 20 business days from the date
of the Conversion Notice for the closing of such purchase.
(c) Upon any exercise of the Conversion Right under
Section 1.2(b) hereof, (i) the holder will surrender the Warrant and (ii) the
Company will deliver to the holder a certificate or certificates for the number
of shares of Common Stock issuable upon such conversion, together with cash, in
lieu of any fraction of a share, as provided in Section 2 below. Upon any
partial exercise of such Conversion Right, the Company at its expense will
forthwith issue and deliver to or upon the order of the holder hereof a new
Warrant or Warrants of like tenor, in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes) may
request, providing in the aggregate on the face or faces thereof for the number
of shares of Common Stock for which such Warrant or Warrants may still be
exercised or converted after giving effect to the exercise of the Conversion
Right.
(d) Fair Market Value of a share of Common Stock as of a
particular date (the "Determination Date") shall mean:
(i) If the Company's Common Stock is traded on an
exchange or is quoted on The Nasdaq National Market, then the average
of the sale prices reported for the 20 business days immediately
preceding the Determination Date.
(ii) If the Company's Common Stock is not traded on an
exchange or on The Nasdaq National Market but is traded in the over-
the-counter market, then the average of the means of the closing bid
and asked prices reported for the 20 business days immediately
preceding the Determination Date.
(iii) Except as provided in subsections 1.2(d)(iv) below,
if the Company's Common Stock is not publicly traded, then the
Appraised Fair Market Value, pursuant to Section 1.2(e) below.
(iv) If the Determination Date is the date of a
liquidation, dissolution or winding up of the Company, or any event
deemed to be a liquidation, dissolution or winding up pursuant to the
Company's Certificate of Incorporation, as amended (the "Charter"),
then the amount specified in the Charter upon liquidation, dissolution
or winding up, assuming for purposes of this
- 3 -
<PAGE>
subsection 1.2 that all of the shares of Common Stock issuable upon
exercise of all of the Warrants are outstanding at the Determination
Date.
(e) Appraised Fair Market Value. The "Appraised Fair Market
---------------------------
Value" shall be determined by the following method:
(i) If the Company and the Holder agree on the selection of
an appraiser, such appraiser shall determine a value, and such value
shall be the Appraised Fair Market Value;
(ii) If the Company and the Holder shall not agree on the
selection of an appraiser within 10 days, each of the Company and the
Holder, shall select an appraiser who shall each determine a value;
(iii) If the values determined by such two appraisers are
the same (or the lower value determined by an appraiser is within one
percent of the value determined by the other), then such value (or the
average of such two values) shall be the Appraised Fair Market Value;
(iv) If the foregoing two appraisals are not the same and
the lower value determined by an appraiser differs by more than one
percent of the value determined by the other, then the appraisers
shall together select a third appraiser to determine a value;
(iv) If the determination of the third appraiser is greater
than the largest of the first two appraisals or less than the smallest
of the first two appraisals, then the average of the first two
appraisals shall be the Appraised Fair Market Value; and
(v) If the determination of the third appraiser is between
the first two appraisals, then the average of the third appraisal and
the closest of the first two appraisals shall be the Appraised Fair
Market Value.
Each party shall pay the fees and costs of the appraiser it selects, and the
fees and costs of the third appraiser, if any, shall be paid equally by Company
and the Holder.
1.3 Trustee for Warrant Holders. In the event that a bank or trust
---------------------------
company shall have been appointed as trustee for the holder of the Warrant
pursuant to subsection 4.2 hereof, such bank or trust company shall have all the
powers and duties of a warrant agent appointed pursuant to Section 15 and shall
accept, in its own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise or conversion of this Warrant
- 4 -
<PAGE>
pursuant to this Section 1. The Company shall give the holder of the Warrant
notice of the appointment of any trustee and any change thereof.
2. Delivery of Stock Certificates. As soon as practicable after the
------------------------------
exercise or conversion of this Warrant, and in any event within 30 days
thereafter, the Company at its expense (including the payment by it of any
applicable issue or stamp taxes) will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock to which such
holder shall be entitled on such exercise or conversion, in such denominations
as may be requested by such holder, plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value (as determined in good faith by the
Board of Directors) of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise or conversion pursuant to Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.;
--------------------------------------------------------
Reclassification, etc. In case at any time or from time to time, the holders of
----------------------
Common Stock shall have received, or (on or after the record date fixed for the
determination of shareholders eligible to receive) shall have become entitled to
receive, without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporation rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 5),
then and in each such case the holder of this Warrant, on the exercise or
conversion hereof as provided in Section 1, shall be entitled to receive the
amount of stock and other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3) which such holder
would hold on the date of such exercise or conversion if on the date hereof he
had been the holder of record of the number of shares of Common Stock called for
on the face of this Warrant and had thereafter, during the period from the date
hereof to and including the date of such exercise or conversion retained such
shares and all such other or additional stock and other securities and property
(including cash in the cases referred to in subdivisions (b) and (c) of this
Section 3) receivable by him as aforesaid during such period, giving effect to
all adjustments called for during such period by Section 4.
- 5 -
<PAGE>
4. Adjustment for Reorganization, Consolidation, Merger, etc.
----------------------------------------------------------
4.1 Reorganization; Merger; Sale of Assets. In case at any time or
--------------------------------------
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then in each such
case, the holder of this Warrant, on the exercise or conversion hereof as
provided in Section 1 at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case
may be, shall receive, in lieu of the Common Stock issuable on such exercise or
conversion prior to such consummation or such effective date, the stock and
other securities and property (including cash) to which such holder would have
been entitled upon such consummation or in connection with such dissolution, as
the case may be, if such holder had so exercised or converted this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
4.2 Dissolution. In the event of any dissolution of the Company
-----------
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the holder of this Warrant after the effective date of
such dissolution pursuant to this Section 4 to the holder or a bank or trust
company having its principal office in Washington, D.C., as trustee for the
holder or holders of the Warrants.
4.3 Continuation of Terms. Upon any reorganization, consolidation,
---------------------
merger or transfer followed by dissolution referred to in this Section 4 (where,
in the case of a transfer followed by a dissolution, the transferee is paying
for the Company's assets all or in part with its equity securities), this
Warrant shall continue in full force and effect and the terms hereof shall be
applicable to the shares of stock and other securities and property receivable
on the exercise or conversion of this Warrant after the consummation of such
reorganization, consolidation or merger or the effective date of dissolution
following any such transfer, as the case may be. The Company shall be
obligated, prior to and as a condition of such transaction, to enter into an
agreement for the benefit of the Warrant holders that is binding upon the issuer
of any such stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the properties or
assets of the Company, pursuant to which such person shall expressly assume the
terms of this Warrant as provided in Section 6.
5. Other Adjustments.
-----------------
5.1 Adjustment for Extraordinary Events. In the event that the
-----------------------------------
Company shall (i) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii) subdivide or reclassify
outstanding shares of Common Stock, or (iii) combine outstanding shares of
Common Stock into a smaller number of shares of Common
- 6 -
<PAGE>
Stock, then, in each such event, the Exercise Price shall, simultaneously with
the happening of such event be adjusted by multiplying the then Exercise Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such event and the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Exercise Price then
in effect. The Exercise Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 5. The Holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive that number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
issuable upon the exercise of this Warrant immediately prior to such issuance by
a fraction of which (i) the numerator is the Exercise Price in effect
immediately prior to the issuance resulting in an adjustment to the Exercise
Price and (ii) the denominator is the Exercise Price in effect after giving
effect to any adjustment resulting from such issuance.
5.2 Adjustment for Issuances Below Exercise Price. If the Company
---------------------------------------------
shall at any time or from time to time after August 30, 1995 issue or sell any
shares of Common Stock (other than (i) shares issued in transactions to which
Section 5.1 of this Warrant applies, (ii) up to 792,450 shares of Common Stock
(appropriately adjusted for subdivisions, combinations, stock dividends and the
like) issued as compensation or pursuant to the exercise of options granted as
compensation to employees, officers, directors or consultants of the Company in
connection with their service to the Company, (iii) shares of Common Stock
issuable upon conversion of the Series A Convertible Preferred Stock, Series C
Convertible Preferred Stock, or Series D Convertible Preferred Stock, (iv)
shares of Common Stock to be issued to shareholders of Educo, Inc. and (v)
shares of Common Stock issuable pursuant to subscriptions, warrants, options,
convertible securities, or other rights outstanding as of August 30, 1995 and
not included in clauses (i), (ii) or (iii) above) for a consideration per share
less than the Exercise Price in effect for this Warrant immediately prior to the
time of such issue or sale, then forthwith upon such issue or sale the Exercise
Price shall (until another such issue or sale) be reduced to a price (calculated
to the nearest cent) determined by dividing (i) an amount equal to the sum of
(X) the number of shares of Common Stock outstanding immediately prior to such
issue or sale, multiplied by the Exercise Price in effect immediately prior to
such event plus (Y) the consideration, if any, received by the Company upon such
issue or sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale. Further, the number of shares purchasable
thereunder shall be increased to a number determined by dividing (i) the number
of shares purchasable hereunder immediately prior to such issue or sale,
multiplied by a fraction of which (x) the numerator is the Exercise Price
hereunder immediately prior to such event, and (y) the denominator is the
Exercise Price in effect immediately after the foregoing adjustment.
For the purposes of this Section 5.2, the following provisions shall
also be applicable:
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<PAGE>
A. In case the Company shall in any manner offer any rights to
subscribe for or to purchase shares of Common Stock, or grant any options for
the purchase of shares of Common Stock, at a price less than the Exercise Price
in effect immediately prior to the time of the offering of such rights or the
granting of such options, as the case may be, all shares of Common Stock which
the holders of such rights or options shall be entitled to subscribe for or
purchase pursuant to such rights or options shall be deemed to be issued or sold
as of the date of the offering of such rights or the granting of such options,
as the case may be, and the minimum aggregate consideration named in such rights
or options for the Common Stock covered thereby, plus the consideration received
by the Company for such rights or options, shall be deemed to be the
consideration actually received by the Company (as of the date of the offering
of such rights or the granting of such options, as the case may be) for the
issue or sale of such shares.
B. In case the Company shall in any manner issue or sell any shares
of any class or obligations directly or indirectly convertible into or
exchangeable for shares of Common Stock and the price per share for which Common
Stock is deliverable upon such conversion or exchange (determined by dividing
(i) the total minimum amount received or receivable by the Company in
consideration of the issue or sale of such convertible or exchangeable shares or
obligations, plus the total minimum amount of premiums, if any, payable to the
Company upon conversion or exchange, by (ii) the total number of shares of
Common Stock necessary to effect the conversion or exchange of all such
convertible or exchangeable shares of obligations) shall be less than the
Exercise Price in effect immediately prior to the time of such issue or sale,
then such issue or sale shall be deemed to be an issue or sale (as of the date
of issue or sale of such convertible or exchangeable shares or obligations) of
the total maximum number of shares of Common Stock necessary to effect the
conversion or exchange of all such convertible or exchangeable shares or
obligations, and the total minimum amount received or receivable by the Company
in consideration of the issue or sale of such convertible or exchangeable shares
or obligations, plus the total minimum amount of premiums, if any, payable to
the Company upon exchange or conversion, shall be deemed to be the consideration
actually received (as of the date of the issue or sale of such convertible or
obligations) for the issue or sale of Common Stock.
C. In determining the amount of consideration received by the
Company for Common Stock, securities convertible thereinto or exchangeable
therefor, or rights or options for the purchase thereof, expenses or
underwriting discounts or commissions paid by the Company shall be excluded.
The Board shall determine in good faith the fair value of the amount of
consideration other than money received by the Company upon the issue by it of
any of its securities. The Board shall also determine in good faith the fair
value of any dividend or other distribution made upon Common Stock payable in
property, securities of the Company other than Common Stock or securities of a
corporation other than the Company. The Board shall, in case any Common Stock,
securities convertible thereinto or exchangeable therefor, or rights or options
for the purchase thereof are issued with other stock, securities or assets of
the Company, determine in good faith what part of the consideration received
therefor is applicable to the issue of the Common Stock, securities convertible
thereinto or exchangeable therefor, or rights or options for the purchase
thereof.
- 8 -
<PAGE>
D. If there shall be any change in (i) the minimum aggregate
consideration named in the rights or options referred to in Subsection A above,
(ii) the consideration received by the Company for such rights or option, (iii)
the price per share for which Common Stock is deliverable upon the conversion or
exchange of the convertible or exchangeable shares or obligations referred to in
Subsection B above, (iv) the number of shares which may be subscribed for or
purchased pursuant to the rights or options referred to in Subsection A above,
or (v) the rate at which the convertible or exchangeable shares or obligations
referred to in Subsection B above are convertible into or exchangeable for
Common Stock, then the Exercise Price in effect at the time of such event shall
be readjusted to the Exercise Price which would have been in effect at such time
had such rights, options, or convertible or exchangeable shares or obligations
still outstanding provided for such changed consideration, price per share,
number of shares, or rate of conversion or exchange, as the case may be, at the
time initially offered, granted, issued or sold.
E. Upon the expiration of the right to convert or exchange any
convertible securities, or upon the expiration of any rights, options or
warrants, without conversion, exchange or exercise, the issuance of which
convertible securities, rights, options or warrants effected an adjustment in
the Exercise Price, the Exercise Price shall forthwith be readjusted and
thereafter be the price which it would have been (but reflecting any other
adjustments in the Exercise Price made pursuant to the terms hereof after the
issuance of such convertible securities, rights, options or warrants) had the
adjustment of the Exercise Price made upon the issuance or sale of such
convertible securities or issuance of rights, options or warrants been made on
the basis of the issuance only of the number of additional shares of Common
Stock actually issued upon conversion or exchange of such convertible
securities, or upon the exercise of such rights, options or warrants, and
thereupon only the number of additional shares of Common Stock actually so
issued, if any, shall be deemed to have been issued and only the consideration
actually received by the Company (computed as set forth herein) shall be deemed
to have been received by the Company.
5.3 Adjustment for Monetary Defaults. If the Company shall be in
--------------------------------
default under the payment terms of the Debentures as defined in the Investment
Agreement for a continuous period of 270 days, the Exercise Price shall
immediately thereafter be reduced to the lesser of $1.00 per share or the Fair
Market Value of a share of Common Stock on the last day of such 270 day period,
as determined pursuant to Section 1.2(d).
6. No Impairment. The Company will not, by amendment of its charter or
-------------
through any reorganization, transfer of assets, consolidation, merger,
dissolution, or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of the Warrant against impairment due to such event.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of stock receivable
- 9 -
<PAGE>
on the exercise or conversion of the Warrant above the amount payable therefor
on such exercise or conversion, (b) will take all action that may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of stock, free from all taxes, liens and charges
with respect to the issue thereof, on the exercise or conversion of all or any
portion of this Warrant from time to time outstanding, and (c) will not
consolidate with or merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not the surviving
person) or transfer all or substantially all the assets of the Company to
another person, unless such other person shall expressly assume in writing and
will be bound by all the terms of this Warrant, including the provisions of
Section 4.
7. Certificate as to Adjustments. In each case of any adjustment or
-----------------------------
readjustment in the number or type of shares or securities issuable on the
exercise or conversion of this Warrant, an officer of the Company will promptly
compute such adjustment or readjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment or readjustment,
the Exercise Price resulting therefrom and the increase or decrease, if any, or
the number of shares purchasable at such price upon exercise or conversion of
the Warrant, and showing in detail the facts and computation upon which such
adjustment or readjustment is based. The Company will forthwith mail a copy of
each such certificate to each registered holder of this Warrant, and will, on
the written request at any time of the holder of this Warrant, furnish to such
holder a like certificate setting forth the Exercise Price at the time in effect
and showing how such Exercise Price was calculated.
8. Notices of Record Date, Etc. In the event of
---------------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend on, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
registered holder of this Warrant a notice specifying (i) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock
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<PAGE>
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up, and (iii) the amount and character of any stock or other securities,
or rights or option with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant and the persons or class of persons to whom
such proposed issue or grant is to be offered or made. Such notice shall also
state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or a favorable vote of stockholders if either is
required. Such notice shall be mailed at least 20 days prior to the date
specified in such notice on which any such action is to be taken or the record
date, whichever is earlier.
9. Reservation of Stock, etc., Issuable on Exercise of Warrants. The
------------------------------------------------------------
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise or conversion of the Warrant, all shares of Common
Stock from time to time issuable on the exercise or conversion of this Warrant.
10. Registration. If the issuance of any shares of Common Stock required
------------
to be reserved for purposes of exercise or conversion of this Warrant or for the
conversion of such shares requires registration with, or approval of, any
Federal governmental authority under any Federal or state law (other than any
registration under the Securities Act) or listing on any national securities
exchange, before such shares may be issued upon exercise or conversion of this
Warrant or such conversion, the Company will, at its expense, use its best
efforts to cause such shares to be duly registered or approved, or listed on the
relevant national securities exchange, as the case may be, at such time, so that
such shares may be issued in accordance with the terms hereof and so converted.
11. Transfer of Warrant. The transfer of this Warrant and all rights
-------------------
hereunder, in whole or in part, is registrable at the office or agency of the
authorized attorney, upon surrender of this Warrant properly endorsed. Each
taker and holder of this Warrant, by taking or holding the same, consents and
agrees that this Warrant, when endorsed in blank, shall be deemed negotiable,
and that the holder hereof, when this Warrant shall have been so endorsed, may
be treated by the Company and all other persons dealing with this Warrant as the
absolute owner and holder hereof for any purpose and as the person entitled to
exercise the rights represented by this Warrant, or to the registration of
transfer hereof on the books of the Company; and until due presentment for
registration of transfer on such books the Company may treat the registered
holder hereof as the owner and holder for all purposes, and the Company shall
not be affected by notice to the contrary.
12. Register of Warrants. The Company shall maintain, at the principal
--------------------
office of the Company (or such other office as it may designate by notice to the
holder hereof), a register in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as the
name and address of each transferee and each prior owner of such Warrant. The
ownership of the Warrant shall be proved by reference to the register and, prior
to
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<PAGE>
due presentation for registration of transfer, the Company may treat the
person in whose name the Warrant shall be registered as the absolute owner
thereof for all purposes.
13. Exchange of Warrant. Subject to Section 20, this Warrant is
-------------------
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 12, for one or more new Warrants of
like tenor representing in the aggregate the right to subscribe for and purchase
the number of shares of Common Stock which may be subscribed for and purchased
hereunder, each of such new Warrants to represent the right to subscribe for and
purchase such number of shares as shall be designated by said holder hereof at
the time of such surrender.
14. Replacement of Warrant. On receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor;
provided, however, if this Warrant of which the original holder of this Warrant,
-------- -------
its nominee, or any of its officers or directors is the registered holder is
lost, stolen or destroyed, the affidavit of the President, Vice President,
Treasurer, or any General Partner of the registered holder setting forth the
circumstances with respect to such loss, theft or destruction shall be accepted
as satisfactory evidence thereof, and no indemnity bond or other security shall
be required as a condition to the execution and delivery by the Company of a new
Warrant in replacement of such lost, stolen or destroyed Warrant other than the
registered holder's written agreement to indemnify the Company.
15. Warrant Agent. The Company may, by written notice to the registered
------- -----
holder of this Warrant, appoint an agent for the purpose of issuing Common Stock
on the exercise or conversion of the Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 13, and replacing this Warrant pursuant to
Section 14, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
16. Remedies. The Company stipulates that the remedies at law of the
--------
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
17. Closing of Books. The Company will at no time close its transfer
----------------
books against the transfer of any Warrant or of any shares of Common Stock
issued or issuable upon
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<PAGE>
the exercise or conversion of any Warrant in any manner which interferes with
the timely exercise or conversion of this Warrant.
18. No Rights or Liabilities as a Stockholder. This Warrant shall not
-----------------------------------------
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Common Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
19. Notice, etc. All notices and other communications from the Company to
-----------
the registered holder of this Warrant shall be mailed by first class registered
or certified mail, postage prepaid, at such address as shall have been furnished
to the Company in writing by such holder.
20. Investment Representations. The holder hereof (and each subsequent
--------------------------
holder) represents to the Company that this Warrant is being acquired for the
holder's own account and for the purpose of investment and not with a view to,
or for sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling the Warrant or the Common Stock issuable
upon exercise or conversion of the Warrant. The holder hereof acknowledges and
agrees that the Warrant and the Common Stock issuable upon exercise or
conversion of the Warrant (if any) have not been (and at the time of acquisition
by such holder, will not have been or will not be) registered under the
Securities Act or under the securities laws of any state, in reliance upon
certain exemptive provisions of such statutes. The holder hereof recognizes and
acknowledges that because the Warrant and the Common Stock issuable upon
exercise or conversion of the Warrant (if any) are unregistered, they are not
presently eligible for resale, and may only be resold in the future pursuant to
an effective registration statement under the Securities Act and any applicable
state securities laws, or pursuant to a valid exemption from such registration
requirements. Each subsequent holder hereof shall be required to make all of
the representations which are required by this Section 20 to be made by the
initial holder hereof, including without limitation the representations which
are contained in the Agreement. The Company shall not be required to register
the transfer of the Warrant or any Common Stock into which the Warrant may be
converted on the books of the Company unless the Company shall have been
provided at the transferor's expense with an opinion of counsel reasonably
satisfactory to the Company prior to such transfer to the effect that
registration under the Securities Act of 1933, as amended, or any applicable
state securities laws is not required in connection with the transaction
resulting in such transfer. The Warrant shall bear the restrictive legend set
forth at the beginning of this Warrant, and any share certificate issued upon
conversion shall bear a comparable legend, except that such restrictive legend
shall not be required if the opinion of counsel reasonably satisfactory to the
Company referred to above is to the further effect that such legend is not
required in order to establish compliance with the provisions of the Securities
Act of 1933, as amended, and any applicable state securities laws, or if the
transfer is made in accordance with the provisions of Rule 144 under such act.
- 13 -
<PAGE>
21. Binding Effect on Successors. This Warrant shall be binding upon any
----------------------------
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets (to the extent provided in
Section 4), and all of the obligations of the Company relating to the Common
Stock issuable upon the exercise or conversion of this Warrant shall survive the
exercise, conversion, and termination of this Warrant and all of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the holder hereof. The Company will, at the time of the exercise or
conversion of this Warrant, in whole or in part, upon request of the holder
hereof but at the Company's expense, acknowledge in writing its continuing
obligation to the holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Registrable Securities)
to which the holder hereof shall continue to be entitled after such exercise or
conversion in accordance with this Warrant; provided, that the failure of the
--------
holder hereof to make any such request shall not affect the continuing
obligation of the company to the holder hereof in respect of such rights.
22. Miscellaneous. This Warrant and any term hereof may be changed,
-------------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought, subject to the provisions of the Agreement. This Warrant shall be
construed and enforced in accordance with and governed by the internal laws of
the State of Delaware. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
This Warrant is being executed as an instrument under seal. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF the Company has executed this Warrant on the date set
forth below.
Dated: August 30, 1995
NOBEL EDUCATION DYNAMICS, INC.
By: _______________________________
Title: ______________________________
[Corporate Seal]
Attest:
____________________________
Secretary
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<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: NOBEL EDUCATION DYNAMICS, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder,
________________________ shares of _________________________ of NOBEL EDUCATION
DYNAMICS, INC. and herewith makes payment of $________________________ therefor
in cash, and requests that the certificates for such shares be issued in the
name of, and delivered to ______________________ _______________________ whose
address is _______________________________________
_____________________________.
Dated: ____________________________________________
(Signature must conform to name of
holder as specified on the face of the
Warrant)
___________________________________________
___________________________________________
(Address)
- 16 -
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto _________________________________ the right represented by the within NOBEL
EDUCATION DYNAMICS, INC. to which the within Warrant relates, and appoints
_____________________________ Attorney to transfer such right on the books of
NOBEL EDUCATION DYNAMICS, INC. with full power of substitution in the premises.
Dated: ____________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
____________________________________________
____________________________________________
(Address)
Signed in the presence of:
________________________________________
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<PAGE>
Exhibit 4D
REGISTRATION RIGHTS AGREEMENT
-----------------------------
August 30, 1995
Allied Capital Corporation
Allied Capital Corporation II
Allied Investment Corporation
Allied Investment Corporation II
1666 K Street, N.W.
Washington, DC 20006
Dear Sirs:
This will confirm that in consideration of your agreement on the date
hereof to purchase an aggregate of 1,063,830 shares (the "Preferred Shares") of
Series D Convertible Preferred Stock, $.001 par value, of Nobel Education
Dynamics, Inc., a Delaware corporation (the "Company") and warrants (the
"Warrants") for the purchase of up to an aggregate of 1,236,171 shares (the
"Warrant Shares") of the common stock, $.001 par value, of the Company (the
"Common Stock") pursuant to the Investment Agreement of even date herewith (the
"Investment Agreement") between the Company and you, and as an inducement to you
to consummate the transactions contemplated by the Investment Agreement, the
Company covenants and agrees with each of you as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean Common Stock, $.001 par value, of the Company, as
------------
constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued upon
-----------------
conversion of the Preferred Shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
------------
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
- 1 -
<PAGE>
"Registration Expenses" shall mean the expenses so described in Section 8.
---------------------
"Restricted Stock" shall mean the Conversion Shares and Warrant Shares,
----------------
excluding (a) shares which have been registered under the Securities Act
pursuant to an effective registration statement filed thereunder and disposed of
in accordance with the registration statement covering them, (b) shares which
have been publicly sold pursuant to Rule 144 under the Securities Act, or (c)
shares which are eligible to be publicly sold under paragraph (k) of Rule 144.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
--------------
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 8.
----------------
2. Restrictive Legend. Each certificate representing Preferred Shares,
------------------
Conversion Shares or Warrant Shares and each Warrant shall, except as otherwise
provided in this Section 2 or in Section 3, be stamped or otherwise imprinted
with a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate or Warrant shall not bear such legend if in the written opinion of
counsel satisfactory to the Company (it being agreed that Piper & Marbury,
L.L.P. shall be satisfactory) the securities being sold thereby may be publicly
sold without registration under the Securities Act.
3. Notice of Proposed Transfer. Prior to any proposed transfer of any
---------------------------
Preferred Shares, Conversion Shares, Warrants or Warrant Shares (other than
under the circumstances described in Sections 4, 5 or 6), the holder thereof
shall give written notice to the Company of its intention to effect such
transfer. Each such notice shall describe the manner of the proposed transfer
and, if requested by the Company, shall be accompanied by an opinion of counsel
satisfactory to the Company (it being agreed that Piper & Marbury, L.L.P. shall
be satisfactory) to the effect that the proposed transfer may be effected
without registration under the Securities Act, whereupon the holder thereof
shall be entitled to transfer such stock or Warrant in accordance with the terms
of its notice. Each certificate for Preferred Shares, Conversion Shares or
Warrant Shares and each Warrant transferred as above provided shall bear the
legend set forth in Section 2, except that such certificate or Warrant shall not
bear such legend if the opinion of counsel referred to above is to the effect
that the transferee and any subsequent transferee would be entitled to transfer
such securities in a public sale without registration under the Securities Act.
The restrictions provided for in this Section 3 shall not apply to securities
which are not
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<PAGE>
required to bear the legend prescribed by Section 2 in accordance with the
provisions of that Section.
4. Required Registration. (a) Subject to the limitation expressed in
---------------------
Section 5(b), at any time after the date of this Agreement that the Company is
ineligible to use a Form S-3 to effect the registrations contemplated by Section
6 below, the holders of Restricted Stock constituting at least 50% of the total
shares of Restricted Stock then outstanding may request the Company to register
under the Securities Act all or any portion of the shares of Restricted Stock
held by such requesting holder or holders for sale in the manner specified in
such notice, provided that the shares of Restricted Stock for which registration
--------
has been requested shall constitute at least 50% of the total shares of
Restricted Stock originally issued if such holder or holders shall request the
registration of less than all shares of Restricted Stock then held by such
holder or holders. For purposes of this Section 4 and Sections 5, 6, 13(a) and
13(d), the term "Restricted Stock," shall be deemed to include the number of
shares of Restricted Stock which would be issuable to a holder of Preferred
Shares upon conversion of all Preferred Shares held by such holder at such time
and the number of shares of Restricted Stock which would be issuable to a holder
of Warrants upon exercise of all Warrants held by such holder at such time,
provided, however, that the only securities which the Company shall be required
-------- -------
to register pursuant hereto shall be shares of Common Stock, and provided,
--------
further, however, that, in any underwritten public offering contemplated by this
------- -------
Section 4 or Sections 5 and 6, the holders of Preferred Shares shall be entitled
to sell such Preferred Shares to the underwriters for conversion and sale of the
shares of Common Stock issued upon conversion thereof. Notwithstanding anything
to the contrary contained herein, no request may be made under this Section 4 or
under Section 6 within 120 days after the effective date of a registration
statement filed by the Company covering a firm commitment underwritten public
offering in which the holders of Restricted Stock shall have been entitled to
join pursuant to Sections 5 or 6 and in which there shall have been effectively
registered all shares of Restricted Stock as to which registration shall have
been requested.
(b) Following receipt of any notice under this Section 4, the Company shall
immediately notify all holders of Restricted Stock from whom notice has not been
received and shall use its best efforts to register under the Securities Act,
for public sale in accordance with the method of disposition specified in such
notice from requesting holders, the number of shares of Restricted Stock
specified in such notice (and in all notices received by the Company from other
holders within 30 days after the giving of such notice by the Company). If such
method of disposition shall be an underwritten public offering, the holders of a
majority of the shares of Restricted Stock to be sold in such offering may
designate the managing underwriter of such offering, subject to the approval of
the Company, which approval shall not be unreasonably withheld or delayed. The
Company shall be obligated to register Restricted Stock pursuant to this Section
4 and pursuant to Section 6 on a total (for both sections) of two occasions
only, provided, however, that such obligation shall be deemed satisfied only
-------- -------
when a registration statement covering all shares of Restricted Stock specified
in notices received as aforesaid, for sale in accordance with the method of
disposition specified by the requesting holders, shall have
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<PAGE>
become effective and, if such method of disposition is a firm commitment
underwritten public offering, 75% of all such shares shall have been sold
pursuant thereto.
(c) The Company may not include in any registration statement referred to
in this Section 4 any shares of Common Stock to be sold for the account of any
person not entitled as of August 30, 1995 to registration rights with respect to
such shares. The Company may include in any registration statement referred to
in this Section 4 shares of Common Stock to be sold for its own account or for
the account of any other holders of Common Stock who as of August 30, 1995 are
entitled to "piggyback" or "incidental" rights to be included in the
registration statement, in which case such registration statement shall be
deemed to be a registration statement initiated by the Company and shall be
governed by the provisions of Section 5 below. Except for registration
statements on Form S-4, S-8 or any successor thereto, registration statements
registering securities to be issued by the Company to the seller or sellers in
connection with an acquisition by the Company and registration statements
required to be filed for holders of Common Stock who as of August 30, 1995 are
entitled to "demand" registration rights, the Company will not file with the
Commission any other registration statement with respect to its Common Stock,
whether for its own account or that of other stockholders, from the date of
receipt of a notice from requesting holders pursuant to this Section 4 until the
completion of the period of distribution of the registration contemplated
thereby, as described in Section 7.
5. Incidental Registration.
-----------------------
(a) If the Company at any time (other than pursuant to Section 4 or Section
6) proposes to register any of its securities under the Securities Act for sale
to the public, whether for its own account or for the account of other security
holders or both (except with respect to registration statements on Forms S-4, S-
8 or another form not available for registering the Restricted Stock for sale to
the public, and the registration statement to be filed by the Company to
register the shares of Common Stock to be issued to the stockholders of Educo,
Inc.), each such time it will give written notice to all holders of outstanding
Restricted Stock of its intention so to do. Upon the written request of any
such holder, received by the Company within 30 days after the giving of any such
notice by the Company, to register any of its Restricted Stock (which request
shall. state the intended method of disposition thereof), the Company will use
its best efforts to cause the Restricted Stock as to which registration shall
have been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
requisite to permit the sale or other disposition by the holder (in accordance
with its written request) of such Restricted Stock so registered. In the event
that any registration pursuant to this Section 5 shall be, in whole or in part,
an underwritten public offering of Common Stock, the number of shares of
Restricted Stock to be included in such an underwriting may be reduced (pro rata
among the requesting holders based upon the number of shares of Restricted Stock
owned by such holders) if and to the extent that the managing underwriter shall
be of the opinion that such inclusion would adversely affect the marketing of
the securities to be sold by the Company therein, provided, however, that such
-------- -------
number of shares of Restricted Stock shall not be reduced if any shares are to
be included in such underwriting for
- 4 -
<PAGE>
the account of any person other than (i) the Company, (ii) requesting holders of
Restricted Stock or (iii) any other holders of Common Stock who as of August 30,
1995 are entitled to contractual "piggyback" or "incidental" rights to be
included in the registration statement. Whenever a registration statement is
deemed (pursuant to the provisions of Section 4 or Section 6) to be a
registration statement initiated by the Company and therefore governed by the
provisions of this Section 5, such registration statement shall nevertheless be
deemed to count as one of the two registration statements required to be filed
by the Company under Section 6 and Section 4 if the registration statement
covers all shares of Restricted Stock specified in the notices from the
requesting holders thereof for sale in accordance with the method of disposition
specified in such notice, becomes effective and, if such method of disposition
is a firm commitment underwritten public offering, 75% of all such shares are
sold pursuant thereto.
(b) Notwithstanding anything herein to the contrary, the Company shall not
be required to file any registration statement registering the Restricted Stock
upon the demand of the holders of the Restricted Stock made under Section 4 or
Section 6 of this Agreement during the period beginning on the date of the
Company's receipt of a notice from requesting holders pursuant to Section 4 or
Section 6 of the Registration Rights Agreement by and among the Company, Edison
Venture Fund II, L.P. and Edison Venture Fund, II-Pa., L.P. and ending on the
date on which the distribution of the securities included in such registration
has been completed.
6. Registration on Form S-3. Subject to the limitation set forth in
------------------------
Section 5(b) and in the last sentence of Section 4(a), if at any time (i) a
holder or holders of Restricted Stock constituting at least 50% of the total
shares of Restricted Stock then outstanding request the Company to register
under the Securities Act all or any portion of the shares of Restricted Stock
held by such requesting holder or holders for sale in the manner specified in
such notice (provided that the shares of Restricted Stock for which registration
---------
has been requested shall constitute at least 50% of the total shares of
Restricted Stock originally issued if such holder or holders shall request the
registration of less than all shares of Restricted Stock then held by such
holder or holders) on Form S-3 or any successor thereto for a public offering of
shares of Restricted Stock held by such requesting holder or holders and (ii)
the Company is a registrant entitled to use Form S-3 or any successor thereto to
register such shares, then the Company shall use its best efforts to register
under the Securities Act on Form S-3 or any successor thereto, for public sale
in accordance with the method of disposition specified in such notice, the
number of shares of Restricted Stock specified in such request. Whenever the
Company is required by this Section 6 to use its best efforts to effect the
registration of Restricted Stock, each of the procedures and requirements of
section 4 (including but not limited to the requirement that the Company notify
all holders of Restricted Stock from whom notice has not been received and
provide them with the opportunity to participate in the offering) shall apply to
such registration, provided, however, that the requirements contained in the
first sentence of Section 4(a) shall not apply to any registration on Form S-3
which may be requested and obtained under this Section 6. The Company may not
include in any
- 5 -
<PAGE>
registration statement referred to in this Section 6 any shares of Common Stock
to be sold for the account of any person not entitled as of August 30 1995 to
registration rights with respect to such shares. The Company may include in any
registration statement referred to in this Section 6 shares of Common Stock to
be sold for its own account or for the account of any other holders of Common
Stock who as of August 30, 1995 are entitled to "piggyback" or "incidental"
rights to be included in the registration statement, in which case such
registration statement shall be deemed to be a registration-statement initiated
by the Company and shall be governed by the provisions of Section 5 above.
Except for registration statements on Form S-4, S-8 or any successor thereto,
registration statements registering securities to be issued by the Company to
the seller or sellers in connection with an acquisition by the Company and
registration statements required to be filed for holders of Common Stock who as
of August 30, 1995 are entitled to "demand" registration rights, the Company
will not file with the Commission any other registration statement with respect
to its Common Stock, whether for its own account or that of other stockholders,
from the date of receipt of a notice from requesting holders pursuant to this
Section 6 until the completion of the period of distribution of the registration
contemplated thereby, as described in Section 7.
7. Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of Sections 4, 5 or 6 to use its best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement (which,
in the case of an underwritten public offering pursuant to Section 4, shall be
on Form S-1 or other form of general applicability satisfactory to the managing
underwriter selected as therein provided) with respect to such securities and
use its best efforts to cause such registration statement to become and remain
effective for the period of the distribution contemplated thereby (determined as
hereinafter provided);
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for the period
specified in paragraph (a) above and comply with the provisions of the
Securities Act with respect to the disposition of all Restricted Stock covered
by such registration statement in accordance with the sellers' intended method
of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each underwriter
each number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or other disposition of the
Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request,
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
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<PAGE>
(e) use its best efforts to list the Restricted Stock covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, whereupon each such
seller shall refrain from making any sales of Restricted Stock until a
prospectus supplement describing such event has been forwarded to such seller by
the Company;
(g) if the offering is underwritten and at the request of any seller of
Restricted Stock, use its best efforts to furnish on the date that Restricted
Stock is delivered to the underwriters for sale pursuant to such registration:
(i) an opinion dated such date of counsel representing the Company for the
purposes of such registration, addressed to the underwriters and to such seller,
stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (B) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements contained therein) and (C) to such other
effects as reasonably may be requested by counsel for the underwriters or by
such seller or its counsel and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
and
(h) make available for inspection by each seller of Restricted Stock, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
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<PAGE>
For purposes of Section 7(a) and 7(b) and of Section 4(c), the period of
distribution of Restricted Stock in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Restricted Stock in any other registration shall be deemed to extend until
the earlier of the sale of all Restricted stock covered thereby and 120 days
after the effective date thereof.
In connection with each registration hereunder, the sellers of Restricted
Stock will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Sections 4, 5 or 6
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
8. Expenses. All expenses incurred by the Company in complying with
--------
Sections 4, 5 and 6, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, and costs of insurance for the sellers
of Restricted Stock, but excluding any Selling Expenses, are called
"Registration Expenses". All underwriting discounts, selling commissions and
fees of counsel to participating sellers applicable to the sale of Restricted
Stock are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 4, 5 or 6. All Selling Expenses in
connection with each registration statement under Sections 4, 5 or 6 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
9. Indemnification and Contribution. (a) In the event of a registration
--------------------------------
of any of the Restricted Stock under the Securities Act pursuant to Sections 4,
5 or 6, the Company will indemnify and hold harmless each seller of such
Restricted Stock thereunder, each underwriter of such Restricted Stock
thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
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<PAGE>
alleged untrue statement of any material fact contained in any registration
statement under which such Restricted Stock was registered under the Securities
Act pursuant to Sections 4, 5 or 6, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such seller, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action, provided, however, that the
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by any such seller, any such underwriter
or any such controlling person in writing specifically for use in such
registration statement or prospectus.
(b) In the event of a registration of any of the Restricted Stock under
the Securities Act pursuant to Sections 4, 5 or 6, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Sections 4, 5 or 6, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon, the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company and each such officer, director, underwriter and controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the shares
sold by such seller under such registration statement bears to the total public
offering price of all securities sold thereunder, but not in any event to exceed
the proceeds received by such seller from the sale of Restricted Stock covered
by such registration statement.
- 9 -
<PAGE>
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 9 and shall only relieve it
from any liability which it may have to such indemnified party under this
Section 9 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 9 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
9; then, and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning
- 10 -
<PAGE>
of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
10. Changes in Common Stock or Preferred Shares. If, and as often as,
-------------------------------------------
there is any change in the Common Stock or the Preferred Shares by way of a
stock split, stock dividend, combination or reclassification, or through a
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof so that the
rights and privileges granted hereby shall continue with respect to the Common
Stock or the Preferred Shares as so changed.
11. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, the Company
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon request a
written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as such holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Restricted Stock without
registration.
12. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms.
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<PAGE>
13. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including, without
limitation, transferees of any Preferred Shares, Warrants or Restricted Stock),
whether so expressed or not, provided, however, that registration rights
conferred herein on the holders of Preferred Shares, Warrants or Restricted
Stock shall only inure to the benefit of a transferee of Preferred Shares,
Warrants or Restricted Stock if (i) there is transferred to such transferee at
least 10% of the total shares of Restricted Stock originally issued pursuant to
the Investment Agreement to the direct or indirect transferor of such transferee
or (ii) such transferee is a partner, shareholder or affiliate of a party
hereto.
(b) All notices, requests, consents and other communications hereunder
shall be in writing and shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier or telex,
addressed as follows:
if to the Company or any other party hereto, at the address of such party
set forth in the Investment Agreement;
if to any subsequent holder of Preferred Shares, Warrants or Restricted
Stock, to it at such address as may have been furnished to the Company in
writing by such holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Preferred
Shares, Warrants or Restricted Stock) or to the holders of Preferred Shares,
Warrants or Restricted Stock (in the case of the Company) in accordance with
the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision hereof
may be waived, without the written consent of the Company and the holders of at
least two-thirds of the outstanding shares of Restricted Stock.
(e) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) The obligations of the Company to register shares of Restricted Stock
under Sections 4, 5 or 6 shall terminate on August 19, 2009.
(g) If requested in writing by the underwriters for an underwritten public
offering of securities of the Company, each holder of Restricted Stock who is a
party to this Agreement shall agree not to sell publicly any shares of
Restricted Stock or any other shares of Common Stock
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<PAGE>
(other than shares of Restricted Stock or other shares of Common Stock being
registered in such offering), without the consent of such underwriters, for a
period of not more than 180 days following the effective date of the
registration statement relating to such offering; provided, however, that all
persons entitled to registration rights with respect to shares of Common Stock
who are not parties to this Agreement, all other persons selling shares of
Common Stock in such offering, all persons holding in excess of 1% of the
capital stock of the Company on a fully diluted basis and all executive officers
and directors of the Company shall also have agreed not to sell publicly their
Common Stock under the circumstances and pursuant to the terms set forth in this
section 13(g).
(h) Notwithstanding the provisions of Section 7(a), the Company's
obligation to file a registration statement, or cause such registration
statement to become and remain effective, shall be suspended for a period not to
exceed 90 days in any 12-month period if there exists at the time material non-
public information relating to the Company which, in the reasonable opinion of
the Company, should not be disclosed, and no sales of Restricted Stock shall be
made by the holders during such period.
(i) The Company shall not grant to any third party any registration rights
more favorable than any of those contained herein, so long as any of the
registration rights under this Agreement remains in effect.
(j) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
Please indicate your acceptance of the foregoing by signing and
returning the enclosed counterpart of this letter, whereupon this Agreement
shall be a binding agreement between the Company and you.
Very truly yours,
NOBEL EDUCATION DYNAMICS, INC.
By: XXX
----------------------------
Title: President
-------------------------
AGREED TO AND ACCEPTED as of the
date first above written.
ALLIED CAPITAL CORPORATION
By: XXX
----------------------------
Its: Senior Vice President
---------------------------
ALLIED CAPITAL CORPORATION II
By: XXX
----------------------------
Its: Senior Vice President
---------------------------
ALLIED INVESTMENT CORPORATION
By: XXX
----------------------------
Its: Senior Vice President
---------------------------
ALLIED INVESTMENT CORPORATION II
By: XXX
----------------------------
Its: Senior Vice President
---------------------------
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<PAGE>
Exhibit 4E
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES D
CONVERTIBLE PREFERRED STOCK
OF
NOBEL EDUCATION DYNAMICS, INC.
Nobel Education Dynamics, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
A. That, pursuant to authority conferred upon the Board of Directors
by the Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), and pursuant to the provisions of Section 151 of Title 8 of the
Delaware Code of 1953, said Board of Directors, at a duly convened meeting of
the Board held on August 22, 1995, adopted a resolution providing for the
designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions of the
Series D Convertible Preferred Stock, which resolution is as follows:
WHEREAS, the Certificate of Incorporation of this Corporation provides
for two classes of shares known as Common Stock and Preferred Stock; and
WHEREAS, the Board of Directors of this Corporation is authorized by
the Certificate of Incorporation to provide for the issuance of the shares
of Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the
designation, preferences and rights of the shares of each such series and
the qualifications, limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors deems it
advisable to, and hereby does, designate a Series D Convertible Preferred
Stock and fixes and determines the preferences, rights, qualifications,
limitations and restrictions relating to the Series D Convertible Preferred
Stock as follows:
1. Designation. The shares of such series of Preferred Stock shall
-----------
be designated as "Series D Convertible Preferred Stock" (referred to herein as
the "Series D Convertible Preferred Stock").
2. Authorized Number. The number of shares constituting Series D
-----------------
Convertible Preferred Stock shall be 1,063,830.
3. Dividends. Holders of shares of Series D Convertible Preferred
---------
Stock shall not be entitled to dividends, except as provided below. If a
dividend on the Common Stock is declared by the Board of Directors, the Board of
Directors shall simultaneously declare a dividend on the Series D Convertible
Preferred Stock in an amount per share equal
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<PAGE>
to (a) the product of (i) the dividend per share of Common Stock, multiplied by
(ii) the number of shares of Common Stock into which all of the outstanding
Series D Convertible Preferred Stock could then be converted, divided by (b) the
number of Series D Convertible Preferred Stock then outstanding, and rounded to
the nearest cent, each such determination to be made as of the record date for
the determination of the dividend. The term "dividend," when used in this
Section 3, shall refer to any dividend which is not as stock dividend described
in Section 8(d) hereof.
4. Liquidation. Upon any liquidation, dissolution or winding up of
-----------
the Corporation, whether voluntary or involuntary, the holders of the shares of
Series D Convertible Preferred Stock shall be entitled, before any distribution
or payment is made upon any Common Stock or any other class or series of stock
ranking junior to the Series D Convertible Preferred Stock as to distribution of
assets upon liquidation, to be paid an amount equal to $1.88 per share plus an
amount equal to all unpaid dividends, without interest, which have been declared
on such outstanding shares of Series D Convertible Preferred Stock prior to the
date of the liquidation payment, such amounts being sometimes referred to as the
"Liquidation Payments", and the holders of Series D Convertible Preferred Stock
shall not be entitled to any further payment. If upon such liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Series D Convertible Preferred
Stock of the Corporation and any other class or series of stock ranking equal to
the Series D Convertible Preferred Stock as to distribution of assets upon
liquidation shall be insufficient to permit payment to the holders of Series D
Convertible Preferred Stock of the entire amount of the Liquidation Payment,
then the entire assets of the Corporation available for distribution to the
stockholders shall be distributed ratably among the holders of Series D
Convertible Preferred Stock and any other class or series of stock ranking equal
to the Series D Convertible Preferred Stock as to distribution of assets upon
liquidation in accordance with the sums that would be payable on such
distribution if all sums payable thereon to holders of all shares of such series
were paid in full. Upon any such liquidation, dissolution or winding up of the
Corporation, after the holders of Series D Convertible Preferred Stock and any
other class or series of stock ranking equal to the Series D Convertible
Preferred Stock as to distribution of assets upon liquidation shall have been
paid in full the amounts to which they shall be entitled, the remaining net
assets of the Corporation may be distributed to the holders of Common Stock and
any other class or series of stock ranking junior to the Series D Convertible
Preferred Stock as to the distribution of assets upon liquidation. Written
notice of such liquidation, dissolution or winding up, stating a payment date,
the amount of the Liquidation Payment and the place where said Liquidation
Payment shall be payable, shall be given by mail, postage prepaid, not less than
30 days prior to the payment date stated therein, to the holders of record of
Series D Convertible Preferred Stock, such notice to be addressed to each such
holder at his post office address as shown by the records of the Corporation. A
consolidation or merger of the Corporation into or with any other corporation or
corporations shall not be deemed to be a liquidation, dissolution or winding up
of the Corporation within the meaning of the provisions of this Section 4.
The Corporation's Series D Convertible Preferred Stock shall rank
equal to its Series A Convertible Preferred Stock, and Series C Convertible
Preferred Stock with respect
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<PAGE>
to payment upon liquidation.
5. Optional Conversion. Any or all of the shares of Series D
-------------------
Convertible Preferred Stock shall be convertible at any time and from time to
time until 5:00 p.m., Washington D.C. time, on August 31, 2003 (the "Expiration
Date")(provided however, that such Expiration Date shall not apply, and the
shares of Series D Convertible Preferred Stock shall continue to be convertible,
in the event of an Act of Bankruptcy, as defined in that certain Investment
Agreement dated on or about August 30, 1995 (the "Investment Agreement"), of the
Corporation or in the event of a payment default under the Investment Agreement)
at the option of each holder of record thereof, into fully paid and
nonassessable shares of Common Stock of the Corporation upon surrender to the
Corporation of the certificate or certificates representing the Series D
Convertible Preferred Stock to be converted; and, upon receipt by the
Corporation of such surrendered certificate or certificates with any appropriate
endorsement thereon as may be prescribed by the Board of Directors, such holder
shall be entitled to receive a certificate or certificates representing the
shares of Common Stock into which such shares of Series D Convertible Preferred
Stock are convertible. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series D Convertible Preferred Stock to be converted, and the person
or persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date. The basis for such conversion
shall be the "conversion rate" in effect at the time of conversion, which for
the purposes hereof shall mean the number of shares of Common Stock issuable for
each share of Series D Convertible Preferred Stock surrendered for conversion.
Initially, the conversion rate shall be 1, i.e., 1 share of Common Stock for
----
each share of Series D Convertible Preferred Stock being converted; and such
conversion rate shall be subject to adjustment as provided in Section 8 below.
In connection with effecting any transfer to the Corporation for cancellation of
any Series D Convertible Preferred Stock upon conversion of the same into Common
Stock, if any fractional interest in a share of Common Stock would be
deliverable upon such conversion of Series D Convertible Preferred Stock, the
Corporation shall pay in lieu of such fractional share an amount equal to the
"conversion price" (as defined in the following sentence) of such fractional
share (computed to the nearest one thousandth of a share) in effect at the close
of business on the date of conversion. As used herein, the term "conversion
price" shall be an amount computed by dividing $1.88 by the conversion rate then
in effect. Initially, the conversion price shall be $1.88 per share. The Board
of Directors of the Corporation shall at all times reserve a sufficient number
of authorized but unissued shares of Common Stock, which shall be issued only in
satisfaction of the conversion rights and privileges aforesaid.
6. Issue Taxes. The Corporation shall pay all issue taxes, if any,
-----------
incurred in respect of the issue of shares of Common Stock on conversion. If a
holder of shares surrendered for conversion specifies that the shares of Common
Stock to be issued on conversion are to be issued in a name or names other than
the name or names in which such surrendered shares stand, the Corporation shall
not be required to pay any transfer or other taxes incurred by reason of the
issuance of such shares of Common Stock to the name of another, and if the
appropriate transfer taxes shall not have been paid to the Corporation or
- 3 -
<PAGE>
the transfer agent for the Series D Convertible Preferred Stock at the time of
surrender of the shares involved, the shares of Common Stock issued upon
conversion thereof may be registered in the name or names in which the
surrendered shares were registered, despite the instructions to the contrary.
7. [Intentionally omitted]
8. Adjustment of Conversion Price and Conversion Rate. The number
--------------------------------------------------
and kind of securities issuable upon the conversion of the Series D Convertible
Preferred Stock, the conversion price and the conversion rate shall be subject
to adjustment from time to time upon the happening of certain events as follows:
(a) Reorganization, Reclassification. In the event of a
--------------------------------
reorganization, share exchange, or reclassification, other than a change in par
value, or from par value to no par value, or from no par value to par value or a
transaction described in subsection (b) or (c) below, each share of Series D
Convertible Preferred Stock shall, after such reorganization, share exchange or
reclassification, be convertible into the kind and number of shares of stock or
other securities or property of the Corporation to which the holder of Series D
Convertible Preferred Stock would have been entitled if the holder had held the
Common Stock issuable upon conversion of his Series D Convertible Preferred
Stock immediately prior to such reorganization, share exchange, or
reclassification.
(b) Consolidation, Merger. In the event of a merger or
---------------------
consolidation to which the Corporation is a party, each share of Series D
Convertible Preferred Stock shall, after such merger or consolidation, be
convertible into the kind and number of shares of stock and/or other securities,
cash or other property to which the holder of such share of Series D Convertible
Preferred Stock would have been entitled if the holder had held the Common Stock
issuable upon conversion of his share of Series D Convertible Preferred Stock
immediately prior to such consolidation or merger.
(c) Subdivision or Combination of Shares. In case outstanding
------------------------------------
shares of Common Stock shall be subdivided or combined, the conversion price
shall be proportionately reduced, in case of subdivision of such shares, as of
the effective date of such subdivision, or as of the date a record is taken of
the holders of Common Stock for the purpose of so subdividing, whichever is
earlier, or shall be proportionately increased, in case of combination of such
shares, as of the effective date of such combination, or as of the date a record
is taken of the holders of Common Stock for the purpose of so combining,
whichever is earlier.
(d) Stock Dividends. In case shares of Common Stock are issued
---------------
as a dividend or other distribution on the Common Stock, then the conversion
price shall be adjusted, as of the date a record is taken of the holders of
Common Stock for the purpose of receiving such dividend or other distribution
(or if no such record is taken, as at the date of such payment or other
distribution), to that price determined by multiplying the conversion price in
effect immediately prior to such payment or other distribution by a fraction (i)
the numerator of which shall be the number of shares of Common Stock outstanding
immediately
- 4 -
<PAGE>
prior to such dividend or other distribution, and (ii) the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
after such dividend or other distribution.
(e) Issuance of Additional Shares of Common Stock. If the
---------------------------------------------
Corporation shall issue any Additional Shares of Common Stock (as defined herein
and other than as provided in the foregoing subsections (a) through (d)) for a
consideration per share less than the conversion price in effect on the date of
and immediately prior to such issue, then and in such event, such conversion
price shall be reduced, concurrently with such issue, to a price equal to the
quotient obtained by dividing:
(i) an amount equal to (x) the total number of shares of Common
Stock outstanding immediately prior to such issuance or sale multiplied by
the conversion price in effect immediately prior to such issuance or sale,
plus (y) the consideration, if any, received or deemed to be received by
the Corporation upon such issuance or sale, by
(ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For purposes of this formula, all shares of Common Stock issuable upon the
exercise of outstanding warrants, options or other rights described in paragraph
(f) below or issuable upon the conversion of the Corporation's outstanding
Series A, Series C and Series D Preferred Stock and any other convertible
securities, shall be deemed outstanding shares of Common Stock.
No adjustment of the conversion price shall be made under this subsection 8(e)
upon the issuance of any Additional Shares of Common Stock which are issued
pursuant to the exercise of any warrants, options or other subscription or
purchase rights or pursuant to the exercise of any conversion or exchange rights
in any convertible securities if any such adjustments shall previously have been
made upon the issuance of any such warrants, options or other rights or upon the
issuance of any convertible securities (or upon the issuance of any warrants,
options or any rights therefor) pursuant to subsections 8(f) or 8(g) hereof.
(f) Issuance of Warrants, Options or Other Rights. If the
---------------------------------------------
Corporation at any time shall issue any warrants, options or other rights to
subscribe for or purchase any Additional Shares of Common Stock and the price
per share for which Additional Shares of Common Stock may at any time thereafter
be issuable pursuant to such warrants, options or other rights shall be less
than the conversion price per share in effect immediately prior to such
issuance, then upon such issuance the conversion price shall be adjusted as
provided in subsection 8(e) hereof on the basis that the aggregate consideration
for the Additional Shares of Common Stock issuable pursuant to such warrants,
options or other rights, shall be deemed to be the consideration received by the
Corporation for the issuance of such warrants, options, or other rights plus the
minimum consideration to be received by the Corporation for the issuance of
Additional Shares of Common Stock pursuant
- 5 -
<PAGE>
to such warrants, options, or other rights.
(g) Issuance of Convertible Securities. In case the Corporation
----------------------------------
shall issue any securities convertible into Common Stock and the consideration
per share for which Additional Shares of Common Stock may at any time thereafter
be issuable pursuant to the terms of such convertible securities shall be less
than the conversion price per share in effect immediately prior to such
issuance, then upon such issuance the conversion price shall be adjusted as
provided in subsection 8(e) hereof on the basis that (i) the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such convertible securities shall be deemed to have been issued as of the
date of issuance of such convertible securities, and (ii) the aggregate
consideration for such maximum number of Additional Shares of Common Stock shall
be deemed to be the consideration received by the Corporation for the issuance
of such convertible securities plus the minimum consideration received by the
Corporation for the issuance of such Additional Shares of Common Stock pursuant
to the terms of such convertible securities. No adjustment of the conversion
price shall be made under this subsection upon the issuance of any convertible
securities which are issued pursuant to the exercise of any warrants, options or
other subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants, options or other
rights pursuant to subsection 8(f) hereof.
(h) Adjustment of Conversion Rate. Upon each adjustment of the
-----------------------------
conversion price under the provisions of this Section 8, the conversion rate
shall be adjusted to an amount determined by dividing $1.88 by such adjusted
conversion price.
(i) Other Provisions Applicable to Adjustments Under this Section.
-------------------------------------------------------------
The following provisions will be applicable to the making of adjustments in
conversion price hereinabove provided in this Section 8:
(i) Computation of Consideration. To the extent that any
-----------------------------
Additional Shares of Common Stock or any convertible securities or any
warrants, options or other rights to subscribe for or purchase any
Additional Shares of Common Stock or any convertible securities shall be
issued for a cash consideration, the consideration received by the
Corporation therefor shall be deemed to be the amount of the cash received
by the Corporation therefor, or, if such Additional Shares of Common Stock
or convertible securities are offered by the Corporation for subscription,
the subscription price, or, if such Additional Shares of Common Stock or
convertible securities are sold to underwriters or dealers for public
offering without a subscription offering, or through underwriters or
dealers for public offering without a subscription offering, the initial
public offering price, in any such case excluding any amounts paid or
incurred by the Corporation for and in the underwriting of, or otherwise in
connection with the issue thereof. To the extent that such issuance shall
be for a consideration other than cash, then, the amount of such
consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Corporation's
board of directors. The consideration for any Additional Shares of Common
Stock issuable pursuant to any warrants, options or other rights to
subscribe for or purchase the same shall be the consideration
- 6 -
<PAGE>
received by the Corporation for issuing such warrants, options or other
rights, plus the additional consideration payable to the Corporation upon
the exercise of such warrants, options or other rights. The consideration
for any Additional Shares of Common Stock issuable pursuant to the terms of
any convertible securities shall be the consideration paid or payable to
the Corporation in respect of the subscription for or purchase of such
convertible securities, plus the additional consideration, if any, payable
to the Corporation upon the exercise of the right of conversion or exchange
of such convertible securities. In case of the issuance at any time of any
Additional Shares of Common Stock or convertible securities in payment or
satisfaction of any dividend upon any class of stock preferred as to
dividends in a fixed amount, the Corporation shall be deemed to have
received for such Additional Shares of Common Stock or convertible
securities a consideration equal to the amount of such dividend so paid or
satisfied.
(ii) Readjustment of Conversion Price. Upon the expiration of
--------------------------------
the right to convert or exchange any convertible securities, or upon the
expiration of any rights, options or warrants, without conversion, exchange
or exercise, the issuance of which convertible securities, rights, options
or warrants effected an adjustment in the conversion price, such conversion
price shall forthwith be readjusted and thereafter be the price which it
would have been (but reflecting any other adjustments in the conversion
price made pursuant to the provisions of this Section 8 after the issuance
of such convertible securities, rights, options or warrants) had the
adjustment of the conversion price made upon the issuance or sale of such
convertible securities or issuance of rights, options or warrants been made
on the basis of the issuance only of the number of Additional Shares of
Common Stock actually issued upon conversion or exchange of such
convertible securities, or upon the exercise of such rights, options or
warrants, and thereupon only the number of Additional Shares of Common
Stock actually so issued, if any, shall be deemed to have been issued and
only the consideration actually received by the Corporation (computed as
set forth in subsection (i) hereof) shall be deemed to have been received
by the Corporation. If the purchase price provided for in any rights,
options or warrants, or the additional consideration (if any) payable upon
the conversion or exchange of any convertible securities, or the rate at
which any convertible securities are convertible into or exchangeable for
shares of Common Stock changes at any time (other than under or by reason
of provisions designed to protect against dilution), the conversion price
in effect at the time of the change shall be adjusted to the conversion
price that would have been in effect at such time had such rights, options,
warrants or convertible securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold.
(iii) Treasury Shares. The number of shares of Common Stock at
---------------
any time outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the accounts of the Corporation.
(iv) Other Action Affecting Common Stock. In case the
-----------------------------------
- 7 -
<PAGE>
Corporation shall take any action affecting the outstanding number of
shares of Common Stock, other than an action described in any of the
foregoing subsections 8(a) to 8(g) hereof, inclusive, which in the opinion
of the Corporation's board of directors would have a materially adverse
effect upon the rights of the holders of the Series D Convertible Preferred
Stock, the conversion price shall be adjusted in such manner and at such
time as the board of directors on the advice of the Corporation's
independent public accountants may in good faith determine to be equitable
in the circumstances.
(v) Certain Definitions. For purposes of this Section 8:
-------------------
a) The term "Common Stock" shall be deemed to mean (i)
the Common Stock, $.001 par value, and (ii) the stock of the
Corporation of any other class, or series within such a class, whether
now or hereafter authorized, which is not convertible or exercisable
into or for Common Stock, $.001 par value, and has the right to
participate in the distribution of either earnings or assets of the
Corporation without limit as to the amount or percentage.
b) The term "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued by the Corporation after the
initial issuance of the Series D Convertible Preferred Stock, except:
(i) shares of Common Stock issuable upon
conversion of the Series D Convertible Preferred Stock, the Series C
Convertible Preferred Stock or the Series A Convertible Preferred
Stock;
(ii) shares of Common Stock, warrants, options
and other rights to purchase shares of Common Stock and securities
convertible into shares of Common Stock, issued to officers, directors
and employees of, and consultants to, the Corporation as compensation
for bona fide services provided to the Corporation by such persons;
(iii) shares of Common Stock issuable upon
exercise of warrants issued on or outstanding on the original issue
date of the Series D Convertible Preferred Stock; and
(iv) shares of Common Stock to be issued to the
stockholders of Educo, Inc.
No reduction of the conversion price shall be made if the amount
of any such reduction would be an amount less than $.05, but any such
amount shall be carried forward and reduction with respect thereof
shall be made at the time of and together with any subsequent
reduction which, together with such amount and any other amount or
amounts so carried forward, shall aggregate $.05 or more.
- 8 -
<PAGE>
(j) Special Adjustment. In the event that on
------------------
the seventh anniversary date (the "Determination Date") of the original issue
date of the Series D Convertible Preferred Stock, the Fair Market Value (as
defined below) of a share of Common Stock is less than the conversion price per
share, the Corporation shall adjust the conversion price to equal the Fair
Market Value of a share of Common Stock. This provision shall not affect the
conversion price and conversion rate applied to any conversions of the Series D
Convertible Preferred Stock prior to the Determination Date.
"Fair Market Value" of a share of Common
Stock as of the Determination date shall mean:
(i) If the Corporation's Common Stock is
traded on an exchange or is quoted on The Nasdaq National Market, then the
average of the sale prices reported for the 20 business days immediately
preceding the Determination Date.
(ii) If the Corporation's Common Stock is
not traded on an exchange or on The Nasdaq National Market but is traded in the
over-the-counter market, then the average of the means of the closing bid and
asked prices reported for the 20 business days immediately preceding the
Determination Date.
(iii) If the Corporation's Common Stock is
not publicly traded, then the Appraised Fair Market Value, pursuant to
subparagraph (iv) below.
(iv) Appraised Fair Market Value. The
"Appraised Fair Market Value" shall be determined by the following method:
(A) If the Corporation and the holders
of shares of Series D Convertible Preferred Stock agree on the selection of an
appraiser, such appraiser shall determine a value, and such value shall be the
Appraised Value;
(B) If the Corporation and the holders
shall not agree on the selection of an appraiser within 10 days, each of the
Company and the holders, as a group, shall select an appraiser who shall each
determine a value;
(C) If the values determined by such
two appraisers are the same (or the lower value determined by an appraiser is
within one percent of the value determined by the other), then such value (or
the average of such two values) shall be the Appraised Fair Market Value;
(D) If the foregoing two appraisals
are not the same and the lower value determined by an appraiser differs by more
than one percent of the value determined by the other, then the appraisers shall
together select a third appraiser to determine a value;
(E) If the determination of the third
appraiser
- 9 -
<PAGE>
is greater than the largest of the first two appraisals or less than the
smallest of the first two appraisals, then the average of the first two
appraisals shall be the Appraised Fair Market Value; and
(F) If the determination of the third
appraiser is between the first two appraisals, then the average of the third
appraisal and the closest of the first two appraisals shall be the Appraised
Fair Market Value.
Each party shall pay the fees and costs of the appraiser it selects, and the
fees and costs of the third appraiser, if any, shall be paid equally by Company
and the holders.
(k) Notices of Adjustments. Whenever the
----------------------
conversion rate and conversion price is adjusted as herein provided, an officer
of the Corporation shall compute the adjusted conversion rate and conversion
price in accordance with the foregoing provisions and shall prepare a written
instrument setting forth such adjusted conversion rate and conversion price and
showing in detail the facts upon which such adjustment is based, and such
written instrument shall promptly be delivered to the record holders of the
Series D Convertible Preferred Stock.
9. Notices of Record Dates and Effective Dates. In case at any time:
-------------------------------------------
(a) the Corporation shall declare a dividend (or any other distribution) on the
Common Stock payable otherwise than in shares of Common Stock; or (b) the
Corporation shall authorize the granting to the holders of Common Stock of
rights to subscribe for or purchase any shares of capital stock of any class or
any other rights; or (c) of any reorganization, share exchange or
reclassification of the capital stock of the Corporation (other than a
subdivision or combination of outstanding shares of Common Stock), or of any
consolidation or merger to which the Corporation is party or of the sale, lease
or exchange of all or substantially all of the property of the Corporation; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up of
the Corporation, then the Corporation shall cause to be mailed to the record
holders of the Series D Convertible Preferred Stock at least 20 days prior to
the applicable record date or effective date thereafter specified, a notice
stating (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights, or, if a record is not to be taken, the date
as of which the holders of record of Common Stock to be entitled to such
dividend, distribution or rights are to be determined or (ii) the date on which
such reclassification, reorganization, share exchange, consolidation, merger,
sale, lease, exchange, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of record
of Common Stock shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification,
reorganization, share exchange, consolidation, liquidation, merger, sale, lease,
exchange, dissolution, liquidation or winding up.
10. Voting Rights. Holders of Series D Convertible Preferred Stock
-------------
shall be entitled to notice of any stockholders' meeting. Except as otherwise
required by law, at any annual or special meeting of the Corporation's
stockholders, or in connection with any written consent in lieu of any such
meeting, each outstanding share of Series D
- 10 -
<PAGE>
Convertible Preferred Stock shall be entitled to the number of votes equal to
the number of full shares of Common Stock into which such share of Series D
Convertible Preferred Stock is then convertible (calculated by rounding any
fractional share down to the nearest whole number). Initially, each share of
Series D Convertible Preferred Stock shall have one vote. Except as otherwise
required by law, the Series D Convertible Preferred Stock, the Series C
Convertible Preferred Stock, the Series A Convertible Preferred Stock and the
Common Stock shall vote together on each matter submitted to the stockholders,
and not by separate class or series.
B. The recitals and resolutions contained herein have not been
modified, altered or amended and are presently in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
30th day of August, 1995.
NOBEL EDUCATION DYNAMICS, INC.
By: ____________________________________
John R. Frock, Executive Vice
President
Attest:
____________________________
Yvonne DeAngelo, Secretary
- 11 -
<PAGE>
Exhibit 4.F
LOAN AND SECURITY AGREEMENT
By and Between
NOBEL EDUCATION DYNAMICS, INC.
BLUEGRASS REAL ESTATE COMPANY, INC.
IMAGINE EDUCATIONAL PRODUCTS, INC.
CHILDRENS PARK, INCORPORATED
MERRYHILL SCHOOLS, INC.
ROCKING HORSE MANAGEMENT CORPORATION
AND
FIRST VALLEY BANK
_________________
Dated: August 30, 1995
__________________
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (the "AGREEMENT") is made effective the
30th day of August, 1995, by and between NOBEL EDUCATION DYNAMICS, INC.
("NOBEL"), BLUEGRASS REAL ESTATE COMPANY, INC., IMAGINE EDUCATIONAL PRODUCTS,
INC., CHILDRENS PARK, INCORPORATED, MERRYHILL SCHOOLS, INC., ROCKING HORSE
MANAGEMENT CORPORATION (collectively, together with Nobel, "OBLIGORS") and FIRST
VALLEY BANK ("BANK").
BACKGROUND
----------
A. Obligors have requested that Bank extend certain credit facilities to
Obligors, which Bank is willing to do on the terms set forth herein.
B. Capitalized terms not otherwise defined herein will have the meanings
set forth therefor in SECTION 14 of this Agreement.
----------
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any extensions of credit now or hereafter made to or for the
benefit of Obligors by Bank, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. THE LINE; TERM LOAN; USE OF PROCEEDS.
------------------------------------
1.1 LINE OF CREDIT. Bank will establish for Obligors for and during the
--------------
period from the date hereof and until September 1, 1998 (the "CONTRACT PERIOD"),
subject to the terms and conditions hereof, a revolving line of credit (the
"LINE") pursuant to which Bank will from time to time make loans or other
extensions of credit to Obligors in an aggregate amount not exceeding at any
time Seven Million Five Hundred Thousand Dollars ($7,500,000.00). Obligors may
borrow, repay and reborrow under the Line. The Line shall be subject to all
terms and conditions set forth in all of the Loan Documents (as hereafter
defined) which terms and conditions are incorporated herein. Obligors'
obligation to repay the loans and extensions of credit under the Line shall be
evidenced by Obligors' promissory note (the "LINE NOTE") in the face amount of
Seven Million Five Hundred Thousand Dollars ($7,500,000.00), which shall be in
the form attached hereto as EXHIBIT "A", with the blanks appropriately filled
-----------
in. The Line shall be subject to review and renewal after the expiration of the
Contract Period, at the sole discretion of Bank; provided, however, Obligors
-------- -------
shall have the right to request an extension of the Line prior to September 1,
1996 and Bank shall reply to such request on or before the later of (a) August
31, 1996 or (b) sixty (60) days after the date of such request.
1.2 TERM LOAN. Bank will lend to Obligors and Obligors will borrow from
---------
Bank the aggregate amount of Seven Million Five Hundred Thousand Dollars
($7,500,000.00) (the "TERM LOAN"). Obligors' obligation to repay the Term Loan
shall be evidenced by Obligors' promissory note (the "TERM NOTE") in the face
amount of Seven Million Five Hundred Thousand Dollars ($7,500,000.00), which
shall be in the form attached hereto as EXHIBIT "B", with the blanks
-----------
-1-
<PAGE>
appropriately filled in. The Line and the Term Loan are sometimes referred to
collectively as the "LOANS". The Line Note and the Term Note are sometimes
collectively referred to as the "NOTES".
1.3 USE OF PROCEEDS. Obligors agree to use advances under the Line and
---------------
the proceeds of the Term Loan as follows:
(A) USE OF PROCEEDS UNDER THE LINE. The proceeds advanced under the
------------------------------
Line shall be used for proper working capital purposes, to fund future
acquisitions of educational facilities or companies and construction of
educational facilities by the Obligors, and for the issuance of standby letters
of credit; provided, however, the sum of the outstanding amount of advances
-------- -------
under the Line for working capital purposes and the face amount under
outstanding standby letters of credit shall not at any time exceed One Million
Dollars ($1,000,000.00) in the aggregate.
(B) USE OF PROCEEDS OF THE TERM LOAN. The proceeds of the Term Loan
--------------------------------
shall be used by Borrower as follows:
(I) An amount up to Five Million Five Hundred Thousand Dollars
($5,500,000.00) (the "CORESTATES PROCEEDS") shall be used by Borrower to repay
existing indebtedness of Nobel to CoreStates Bank, N.A.; and
(II) An amount equal to Two Million Dollars ($2,000,000.00) (the
"EDUCO PROCEEDS") shall be used to fund the cash portion of the acquisition by
Nobel of the stock of Educo, Inc. ("EDUCO") pursuant to the terms of that
certain Stock Purchase Agreement (the "PURCHASE AGREEMENT") by and among Nobel,
Educo and the stockholders of Educo dated May 23, 1995.
1.4 DISBURSEMENT OF PROCEEDS OF THE TERM LOAN.
-----------------------------------------
(A) The CoreStates Proceeds shall be disbursed at Closing.
(B) Subject to the provisions of SECTION 1.4(D) below, the Educo
--------------
Proceeds shall be disbursed at the time of closing under the Purchase Agreement,
provided that:
(I) no Event of Default or event which with the giving of
notice or the passage of time on both would result in an
Event of Default shall have occurred;
(II) the transaction shall be on such price and payment terms
and pursuant to such other conditions as set forth in the
copy of the Purchase Agreement previously delivered to
Bank;
(III) Within two (2) Business Days following the date of closing
under the Purchase Agreement, Obligors shall deliver or
cause to be delivered to Bank, in form and content
satisfactory to Bank, an amendment to this Agreement and
an Allonge to each of the Notes adding Educo as an obligor
hereunder and thereunder and such mortgages, financing
-2-
<PAGE>
statements, opinions of counsel, title insurance, casualty
insurance, authorizing resolutions and other documents and
information required by Bank in connection with the
consummation of such transaction and to perfect Bank's
security interests and liens in and against the assets of
Educo; and
(IV) Obligors shall have paid to Bank all costs incurred by
Bank in connection with such transaction including,
without limitation, fees and costs of Bank's counsel,
search fees and recording fees.
(C) Upon disbursement of the Educo Proceeds, such amounts shall
become part of the Bank Indebtedness and the collateral delivered in connection
therewith shall become part of the Collateral.
(D) If the Educo Proceeds have not been advanced by Bank on or before
September 30, 1995, Bank shall have no further obligation to advance such
proceeds under the Term Loan, provided, however, if 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 shall have occurred, Bank shall increase the maximum amount
available under the Line by an amount equal to the Educo Proceeds not previously
advanced, as applicable. Upon any such increase in the maximum amount available
under the Line, Obligors shall deliver to Bank an amended and restated Line
Note, an amended and restated Term Note and such other documents as Bank shall
require in connection therewith. Obligors shall pay to Bank all costs incurred
by Bank in connection with any such increase of the Line. Notwithstanding
anything to the contrary contained herein, the Term Loan and the maximum
aggregate amount available and outstanding under the Line shall not exceed
Fifteen Million Dollars ($15,000,000.00).
1.5 METHOD OF ADVANCES. On any Business Day, Obligors may request an
------------------
advance under the Line by delivering to the bank officer designated by Bank no
later than 11:00 a.m. Philadelphia time on the Business Day such advance is
requested to be funded, such documentation as Bank may from time to time
require. Subject to the terms and conditions of this Agreement, Bank will make
the proceeds of an advance available to Obligors by crediting such proceeds to
any Obligor's deposit account with Bank or by advancing such proceeds to such
Persons as Obligors shall designate. Each request for an advance under the Line
shall be conclusively presumed to be made by a person authorized by Obligors to
do so. However, Bank may require that specified officers of Obligors sign each
borrowing base certificate.
1.6 CLOSING. Closing hereunder will take place at the offices of Lesser &
-------
Kaplin, P.C. at 350 Sentry Parkway, Bldg. 640, Blue Bell, Pennsylvania 19422
effective on the date of this Agreement.
1.7 LETTERS OF CREDIT. Bank, at its sole discretion, may issue for the
-----------------
account of any Obligor standby letters of credit in form and content
satisfactory to Bank, at its sole discretion, with a term not to exceed the
earlier to occur of (a) twelve (12) months, or (b) the expiration date of the
Contract Period of the Line.
-3-
<PAGE>
Obligors will execute a letter of credit application and letter of credit
agreement, and such other documents as may be required by Bank in connection
with the issuance of letters of credit hereunder. The outstanding face amount
of all letters of credit issued by Bank pursuant hereto will reduce Obligors'
ability to borrow under the Line as if such face amount were an advance under
the Line. In the event that Bank pays any sums due pursuant to such letters of
credit for any reason, such payment shall be deemed to be an advance under the
Line repayable by Obligors pursuant to the terms hereof.
In the event that the Line is terminated for any reason or demand is made
thereunder, Obligors will deposit with Bank an amount equal to the face amount
of all letters of credit then outstanding which have been issued hereunder, plus
all fees related thereto or to accrue thereunder. Such funds will be held by
Bank as cash collateral to secure Obligors' obligations hereunder.
2. INTEREST RATES.
--------------
2.1 INTEREST RATE OPTIONS ON THE LINE. Interest on the unpaid principal
---------------------------------
balance of the Line will accrue from the date of advance until final payment
thereof at a rate or rates selected by Obligors from one of the two (2) interest
rate options set forth below, subject to the restrictions and in accordance with
the procedures set forth in this Agreement:
(A) Floating Rate; or
(B) Line LIBOR Rate.
2.2 REQUEST FOR FLOATING RATE ON THE LINE. All advances under the Line
-------------------------------------
shall accrue interest at the Floating Rate, unless Obligors have requested the
Line LIBOR Rate. The Obligors shall be deemed to have requested the Floating
Rate unless the Line LIBOR Rate has been requested in accordance with the terms
of this Agreement.
If the Obligors desire to convert the interest rate applicable to all or
any part of the principal balance of the Line from the Line LIBOR Rate to the
Floating Rate, upon delivery by Obligors to Bank of a Floating Rate
Notification, that portion of the principal balance outstanding under the Line
identified in such Floating Rate Notification shall accrue interest at the
Floating Rate from the expiration of the then current Rate Period related to
such principal amount until the effective date of another interest rate option
chosen for such amount in accordance with the terms of this Agreement.
2.3 REQUEST FOR LINE LIBOR RATE. If the Obligors desire that all or part
---------------------------
of the outstanding principal balance under the Line accrue interest at the Line
LIBOR Rate, Obligors shall give Bank a LIBOR Rate Notification. Upon delivery
by Obligors to Bank of a LIBOR Rate Notification, that portion of the principal
balance outstanding under the Line identified in such LIBOR Rate Notification
shall accrue interest at the LIBOR Rate as follows: (a) with respect to the
principal amount of any new advance under the Line, from the date of such
advance until the end of the Rate Period specified in such LIBOR Rate
Notification; and/or (b) with respect to all or any portion of the principal
amount of the Line outstanding and accruing interest at another Line LIBOR
-4-
<PAGE>
Rate at the time of the LIBOR Rate Notification related to such principal
amount, from the expiration of the then current Rate Period related to such
principal amount until the end of the Rate Period specified in such LIBOR Rate
Notification; and/or (c) with respect to all or any portion of the principal
amount of the Line outstanding and accruing interest at the Floating Rate at the
time of the LIBOR Rate Notification related to such principal amount, from the
date set forth in such LIBOR Rate Notification (provided such date shall not be
earlier than the thirtieth (30th) day after the effective date of the Floating
Rate then in effect) until the end of the Rate Period specified in such LIBOR
Rate Notification.
2.4 CERTAIN PROVISIONS REGARDING LINE INTEREST RATES. Obligors understand
------------------------------------------------
and agree that: (a) subject to the provisions of this Agreement, the interest
rates set forth in SECTION 2.1 above may apply simultaneously to different
-----------
portions of the outstanding principal of the Line, (b) the Line LIBOR Rate may
apply simultaneously to various portions of the outstanding principal of the
Line for various Rate Periods, (c) the Rate Periods for the Line LIBOR Rate
shall be either one (1), two (2) or three (3) months, (d) the Line LIBOR Rate
applicable to any portion of the outstanding principal of the Line may be
different from the Line LIBOR Rate applicable to any other portion of the
outstanding principal of the Line, (e) individual portions of the Line accruing
interest at a Line LIBOR Rate must be in amounts of at least $1,000,000.00 each,
(f) the Floating Rate chosen for any portion of the Line shall remain in effect
for at least thirty (30) days from the effective date of such rate, and (g) Bank
shall have the right to terminate any Rate Period and the interest applicable
thereto, prior to the maturity of such Rate Period, if Bank determines in good
faith (which determination shall be conclusive) that continuance of such
interest rate has been made unlawful by any law, statute, rule or regulation to
which Bank may be subject, in which event the principal amount to which such
terminated Rate Period relates shall thereafter earn interest at the Floating
Rate.
2.5 FLOATING RATE FALL BACK FOR THE LINE. After expiration of any Rate
------------------------------------
Period, any principal portion of the Line corresponding to such Rate Period
which has not been converted or renewed in accordance with the terms of this
Agreement shall accrue interest automatically at the Floating Rate from the date
of expiration of such Rate Period until paid in full, unless and until Obligors
request another interest rate in accordance with the terms of this Agreement.
2.6 INTEREST RATE OPTIONS ON THE TERM LOAN. Interest on the unpaid
--------------------------------------
principal balance of the Term Loan will accrue from the date of advance until
final payment thereof, at a rate or rates selected by Obligors from the three
(3) interest rate options set forth below, subject to the restrictions and in
accordance with the procedures set forth in this Agreement:
(A) Floating Rate;
(B) Term LIBOR Rate; or
(C) Fixed Rate.
2.7 REQUEST FOR FLOATING RATE ON THE TERM LOAN. All advances under the
------------------------------------------
Term Loan shall accrue interest at the Floating Rate, unless the Obligors have
requested a Term LIBOR Rate
-5-
<PAGE>
or has requested and accepted a Fixed Rate. The Obligors shall be deemed to
have requested the Floating Rate unless a Term LIBOR Rate has been requested or
a Fixed Rate has been requested and accepted.
If Obligors desire to convert the interest rate applicable to all or part
of the principal balance of the Term Loan from the Term LIBOR Rate to the
Floating Rate, upon delivery by Obligors to Bank of a Floating Rate
Notification, that portion of the outstanding principal balance under the Term
Loan identified in such Floating Rate Notification shall accrue interest at the
Floating Rate from the expiration of the then current Rate Period related to
such principal amount until the effective date of another interest rate option
chosen for such amount in accordance with the terms of this Agreement.
2.8 REQUEST FOR TERM LIBOR RATE. If the Obligors desire that the Term
---------------------------
LIBOR Rate apply to all or part of the principal balance under the Term Loan,
Obligors shall give Bank a LIBOR Rate Notification. Upon delivery by Obligors
to Bank of a LIBOR Rate Notification, the principal balance under the Term Loan
identified in such LIBOR Rate Notification shall accrue interest at the Term
LIBOR Rate as follows: (a) with respect to the principal amount of any new
advance under the Term Loan, from the date of advance until the expiration of
the Rate Period specified in such LIBOR Rate Notification, and/or (b) with
respect to the principal amount of any portion of the Term Loan outstanding and
accruing interest at the Floating Rate at the time of the LIBOR Rate
Notification related to such principal amount, from the date set forth in such
LIBOR Rate Notification (provided such date shall not be earlier than the
ninetieth (90th) day after the effective date of the Floating Rate than in
effect) until the expiration of the Rate Period specified in such LIBOR Rate
Notification, and/or (c) with respect to the principal amount of any portion of
the Term Loan outstanding and accruing interest at another Term LIBOR Rate at
the time of the LIBOR Rate Notification related to such principal amount, from
the expiration of the then current Rate Period until the expiration of the Rate
Period specified in such LIBOR Rate Notification.
2.9 REQUEST FOR FIXED RATE FOR THE TERM LOAN. If Obligors desire that
----------------------------------------
the Fixed Rate shall apply to all or a part of the principal balance under the
Term Loan, Obligors shall give Bank a Fixed Rate Notification which notice shall
provide for commencement of the Fixed Rate on or before August 31, 1995. Upon
delivery by Obligors to Bank of the Fixed Rate Notification the principal
balance under the Term Loan identified in such Fixed Rate Notification shall
accrue interest at the Fixed Rate from the date set forth in such Fixed Rate
Notification until payment in full of the Term Loan.
2.10 CERTAIN PROVISIONS REGARDING TERM LOAN INTEREST RATES. Obligors
-----------------------------------------------------
understand and agree that: (a) subject to the provisions of this Agreement, the
interest rates set forth in SECTION 2.6 above may apply simultaneously to
-----------
different portions of the outstanding principal of the Term Loan, (b) the Term
LIBOR Rate may apply simultaneously to various portions of the outstanding
principal of the Term Loan for various Rate Periods, (c) the Rate Period for any
Term LIBOR Rate shall be three (3) months, (d) the Term LIBOR Rate and the Fixed
Rate applicable to any portion of the outstanding principal of the Term Loan may
be different from the Term LIBOR Rate or the Fixed Rate applicable to any other
portion of the outstanding principal balance of the Term Loan, (e) if the Fixed
Rate is chosen for all or any portion of the Term Loan, that rate shall remain
in effect with
-6-
<PAGE>
respect to such portion until the Term Loan is paid in full, (f) the Floating
Rate chosen for any portion of the Term Loan shall remain in effect for at least
ninety (90) days from the effective date of such rate, and (g) Bank shall have
the right to terminate any Rate Period and the interest applicable thereto,
prior to the maturity of such Rate Period, if Bank determines in good faith
(which determination shall be conclusive) that continuance of such interest rate
has been made unlawful by any law, statute, rule or regulations to which Bank
may be subject, in which event the principal amount to which such terminated
Rate Period rates shall thereafter earn interest at the Floating Rate.
2.11 LIBOR RATE BORROWINGS. No more than four (4) separate borrowings in
---------------------
the aggregate accruing interest at the Line LIBOR Rate and/or the Term LIBOR
Rate may be outstanding at any one time.
2.12 FLOATING RATE FALL BACK. After expiration of any Rate Period, any
-----------------------
principal portion of the Term Loan corresponding to such rate period which has
not been converted or renewed in accordance with the terms of this Agreement
shall accrue interest automatically at the Floating Rate from the date of
expiration of such Rate Period until paid in full, unless and until Obligors
request a conversion to another interest rate in accordance with the terms of
this Agreement.
2.13 DEFAULT RATE. Upon the occurrence and during the continuance of an
------------
Event of Default, at the option of Bank after ten (10) days notice to Obligors,
interest will accrue on the outstanding principal balance of the Line and the
Term Loan at a per annum rate which is three percent (3%) in excess of the
highest rate in effect for the Line and the Term Loan, respectively, at the
time the Event of Default occurs. During the continuance of any Event of
Default, Obligors shall no longer have the ability to elect interest rate
options.
2.14 POST JUDGMENT INTEREST. Any judgment obtained for sums due hereunder
----------------------
or under the Loan Documents will accrue interest at the applicable default rate
set forth above until paid.
2.15 CALCULATION. Interest will be computed on the basis of a year of 360
-----------
days and paid for the actual number of days elapsed.
2.16 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 Obligors.
Such refund will be made by application of the excessive amount of interest paid
against any sums 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
Obligors. Obligors agree, however, that in determining whether or not any
interest payable hereunder exceeds the highest rate permitted by law, any non-
principal payment, 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.
2.17 REQUEST BY ONE OBLIGOR. Any requests to be made by Obligors under
----------------------
this ARTICLE 2 and any documents to be executed in connection therewith may be
---------
made or executed by any
-7-
<PAGE>
Obligor individually and any such request and documents delivered by any such
Obligor shall be binding upon all Obligors.
3. PAYMENTS AND FEES.
-----------------
3.1 TERM LOAN. Principal and interest on the Term Loan shall be paid as
---------
follows:
(A) INTEREST PAYMENTS ON THE TERM LOAN. Obligors will pay interest
----------------------------------
in arrears on the principal balance on the Term Loan monthly at
the applicable rate set forth in SECTION 2.6 above, on the first
-----------
day of each calendar month commencing on the first day of the
first calendar month following the date of Closing.
(B) PRINCIPAL PAYMENTS ON THE TERM LOAN. If the entire balance of
-----------------------------------
the Term Loan, including the Educo Proceeds are advanced by the
Bank, Obligors will pay the principal balance of the Term Loan
in: (i) four (4) equal and consecutive quarterly installments of
Two Hundred Thousand Dollars ($200,000.00) each, on the first day
of each calendar quarter commencing on December 1, 1995 and
continuing through and including September 1, 1996; (ii) twelve
(12) equal and consecutive quarterly installments of Two Hundred
Fifty Thousand Dollars ($250,000.00) each, on the first day of
each calendar quarter commencing on December 1, 1996 and
continuing through and including September 1, 1999; (iii) three
(3) equal and consecutive quarterly installments of Three Hundred
Thousand Dollars ($300,000.00) each, on the first day of each
calendar quarter commencing on December 1, 1999 and continuing
through and including June 1, 2000; and (iv) one (1) final
payment of the remaining principal balance of the Term Loan, plus
all accrued and unpaid interest thereon and all other sums due
and owing in connection therewith on September 1, 2000.
If the Educo Proceeds are not advanced by the Bank, the principal
amount of each quarterly payment set forth in SECTIONS 3.1(B)(I)-
------------------
(IV) above shall be in the respective amounts determined by the
----
following formula:
(A) quarterly payments 1-4 = (.2 / 7.5) x principal balance of
the Term Loan as of September 30, 1995;
(B) quarterly payments 5-16 = (.25 / 7.5) x principal balance of
the Term Loan as of September 30, 1995; and
(C) quarterly payments 17-19 = (.3 / 7.5) x principal balance of
the Term Loan as of September 30, 1995.
-8-
<PAGE>
The final payment on the Term Loan due on September 1, 2000 shall
include the remaining principal advance of the Term Loan, all accrued
and unpaid interest thereon and all other sums due and owing in
connection therewith.
3.2 LINE.
----
(A) INTEREST PAYMENTS ON THE LINE. Obligors will pay interest on the
-----------------------------
principal balance of the Line monthly in arrears at the
applicable rate set forth in SECTION 2.1 above, on the first day
-----------
of each calendar month commencing on the first day of the first
calendar month following the date of Closing.
(B) PRINCIPAL PAYMENTS ON THE LINE. Obligors will pay the
------------------------------
outstanding principal balance of the Line, together with any
accrued and unpaid interest thereon, and all other sums due and
owing in connection therewith on the earlier to occur of: (i) the
occurrence of an Event of Default; or (ii) September 1, 1998
(unless the Contract Period is extended by Bank in its sole
discretion).
3.3 LETTER OF CREDIT FEES. For each issuance or renewal of a standby
---------------------
letter of credit hereunder, Obligors will pay to Bank an issuance or renewal fee
in an amount equal to one and one-quarter percent (1-1/4%) per annum of the face
amount of such standby letter of credit, payable coincident with and as a
condition of the issuance or renewal of such standby letter of credit. In
addition, Obligors shall pay such other fees and charges in connection with the
negotiation or cancellation of each standby letter of credit as may be
customarily charged by Bank. Such fees shall be computed on the basis of a year
of 360 days.
3.4 TERM LOAN FEE. Obligors shall pay to Bank a loan fee for the Term
-------------
Loan in an amount equal to Thirty Seven Thousand Five Hundred Dollars
($37,500.00). An amount equal to Twelve Thousand Five Hundred Dollars
($12,500.00) has previously been paid to Bank on account of such fee. The
balance of such fee, Twenty Five Thousand Dollars ($25,000.00), shall be paid to
Bank on the date of Closing.
3.5 LINE FEE. Obligors shall pay to Bank a loan fee for the Line in an
--------
amount equal to Thirty Seven Thousand Five Hundred Dollars ($37,500.00). An
amount equal to Twelve Thousand Five Hundred Dollars ($12,500.00) has previously
been paid to Bank on account of such fee. The balance of such fee, Twenty Five
Thousand Dollars ($25,000.00), shall be paid to Bank on the date of Closing.
3.6 USAGE FEE. So long as the Line is outstanding and has not been
---------
terminated, and the Bank Indebtedness not satisfied in full, Obligors shall
unconditionally pay to Bank a fee equal to one quarter of one percent (1/4%)
per annum of the average daily unused portion of the Line (which shall be Seven
Million Five Hundred Thousand Dollars ($7,500,000.00) (or such greater amount if
the maximum committed amount for the Line is ever increased), minus the average
daily outstanding principal balance of cash advances under the Line for such
period, minus the average outstanding undrawn face amount of all standby letters
of credit issued and outstanding under the Line during
-9-
<PAGE>
such period), which fee shall be computed on a quarterly basis in arrears and
shall be due and payable on the first day of each calendar quarter commencing on
September 1, 1995.
3.7 LATE CHARGE. In the event that Obligors fail to pay any principal,
-----------
interest or other fees or expenses payable hereunder for a period of at least
fifteen (15) days past the applicable due date, in addition to paying such sums,
Obligors shall pay a late charge equal to the lesser of: (a) five percent (5%)
of such past due payment, or (b) Two Thousand Five Hundred Dollars ($2,500.00),
as compensation for the expenses incident to such past due payment.
3.8 TERMINATION OF LINE AND TERMINATION FEE. Obligors may terminate the
---------------------------------------
Line upon thirty (30) days' written notice to Bank. In the event that (a) the
Line is terminated by Obligors for any reason, including without limitation
prepayment or refinancing of the Line with another lender, or (b) an Event of
Default occurs and the Line is terminated, Obligors shall pay to Bank a
termination fee calculated as follows:
(I) if the termination date is on or prior to September 1, 1996,
the termination fee will be equal to two percent (2%) of the maximum committed
amount of the Line;
(II) if the termination date is after September 1, 1996, but on or
prior to September 1, 1997, the termination fee will be equal to one percent
(1%) of the maximum committed amount of the Line; and
(III) if the termination date is after September 1, 1997, but on or
prior to August 10, 1998, the termination fee will be equal to one-half percent
(1/2%) of the maximum committed amount of the Line.
In addition to the foregoing fees, if any portion of the outstanding
principal balance of the Line is accruing interest at the Line LIBOR Rate at the
time of such termination, Obligors shall pay to Bank an additional termination
fee on such portion equal to the economic loss suffered by Bank as determined by
Bank in accordance with its customary practices, which determination shall be
conclusive.
Notwithstanding the foregoing, if prior to September 1, 1996, Obligors
request a one-year extension of the Line and Bank (A) denies such request, (B)
approves such request conditioned upon an increase in the interest rates, a
decrease in the maximum amount available under the Line or a change in the
financial covenants set forth in ARTICLE 7 below, which change is not reasonably
---------
based on projections delivered by Obligors or Obligors' past performance, or (C)
fails to respond to such request within the time period provided for in SECTION
-------
1.1 above, and provided that no Event of Default and no event which with the
---
giving of notice or the passage of time or would be an Event of Default shall
have occurred, Obligors shall not be required to pay the termination fee set
forth in SECTIONS 3.8(II) AND 3.8(III) above.
-----------------------------
In the event the Contract Period is extended by mutual agreement
between Bank and Obligors, the termination fee during each one-year extension
will be equal to that set forth in
-10-
<PAGE>
SUBSECTION 3.8(III). Notwithstanding the foregoing, Bank reserves the right to
-------------------
amend the termination fees for subsequent periods as a condition of any
extension.
In the event the Line is terminated as a result of an Event of
Default, the outstanding balance of the Line and the Term Loan, together with
any accrued and unpaid interest thereon and any other sums due pursuant to the
terms hereof shall be due and payable immediately.
3.9 PREPAYMENT OF THE TERM LOAN. Obligors may prepay all or any part of
---------------------------
the principal balance of the Term Loan at any time, following delivery of not
less than thirty (30) days prior written notice to Bank and upon payment of the
applicable premium set forth below. All prepayments will be applied to the
regularly scheduled payments in the inverse order in which they are due.
(A) For sums outstanding under the Term Loan and accruing interest
at the Fixed Rate, the following prepayment premiums shall be applicable:
(I) Each prepayment made on or prior to September 1, 1996 will
be accompanied by a prepayment premium equal to five (5%) of the principal
amount prepaid.
(II) Each prepayment made after September 1, 1996 but on or
prior to September 1, 1997 will be accompanied by a prepayment premium equal to
four percent (4%) of the principal amount prepaid.
(III) Each prepayment made after September 1, 1997 but on or
prior to September 1, 1998 will be accompanied by a prepayment premium equal to
three percent (3%) of the principal amount prepaid.
(IV) Each prepayment made after September 1, 1998 but on or
prior to September 1, 1999 will be accompanied by a prepayment premium equal to
two percent (2%) of the principal amount prepaid.
(V) Each prepayment made after September 1, 1999 but on or
prior to August 10, 2000 will be accompanied by a prepayment premium equal to
one percent (1%) of the principal amount prepaid.
Notwithstanding the foregoing to the contrary, within any fiscal year
if Obligors sell any of the Mortgaged Properties (as defined below) as permitted
under SECTION 6.5 below and apply any portion of the proceeds thereof (not in
-----------
excess of One Million Five Hundred Thousand Dollars ($1,500,000.00) per year) to
the outstanding principal balance of the Term Loan accruing interest at the
Fixed Rate, Obligors shall not be required to pay the prepayment premium set
forth in SECTION 3.9(A) with respect to that portion of the Term Loan (not
--------------
exceeding One Million Five Hundred Thousand Dollars ($1,500,000.00) per year)
accruing interest at the Fixed Rate and prepaid from such proceeds.
-11-
<PAGE>
(B) For sums outstanding under the Term Loan and accruing interest at
the Term Loan LIBOR Rate, Obligors shall pay to Bank a prepayment premium equal
to the economic loss (which shall include only the loss resulting from breaking
a LIBOR Rate Period) suffered by Bank as determined by Bank in accordance with
its customary practices, which determination shall be conclusive. In addition
to the foregoing, with respect to those sums outstanding under the Term Loan and
accruing interest at the Term LIBOR Rate which are prepaid with borrowed money,
equity infusions or other funds not obtained from Obligors' operations (which
operations shall include sales of assets permitted under SECTION 6.5 below),
-----------
Obligors shall pay to Bank the following prepayment premium:
(I) Each prepayment made on or prior to September 1, 1996 will
be accompanied by a prepayment premium equal to three (3%) of the principal
amount prepaid.
(II) Each prepayment made after September 1, 1996 but on or
prior to September 1, 1997 will be accompanied by a prepayment premium equal to
two percent (2%) of the principal amount prepaid.
(III) Each prepayment made after September 1, 1997 but on or
prior to August 10, 2000 will be accompanied by a prepayment premium equal to
one percent (1%) of the principal amount prepaid.
Notwithstanding the foregoing, if prior to September 1, 1996, Obligors
request a one-year extension of the Line and Bank (A) denies such request in its
sole discretion, (B) approves such request conditioned upon an increase in the
interest rate, a decrease in the maximum amount available under the Line or a
change in the financial covenants set forth in ARTICLE 7 below, which change is
---------
not reasonably based on projections delivered by Obligors or Obligors' past
performance, or (C) fails to respond to such request within the time period
provided for in SECTION 1.1 above, 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, Borrower shall not be required
to pay the prepayment premiums set forth in SECTIONS 3.9(B)(II) AND 3.9(B)(III)
-----------------------------------
above.
(C) For sums outstanding under the Term Loan and accruing interest at
the Floating Rate, Obligors may prepay all or any part thereof without any
prepayment premium, provided such prepayment is from funds generated by
Obligors' operations (which operations shall include sales of Collateral
permitted under SECTION 6.5 below). With respect to those sums outstanding
-----------
under the Term Loan and accruing interest at the Floating Rate which are prepaid
with borrowed money, equity infusions or other funds not obtained from Obligors'
operations (which operations shall include sales of assets permitted under
SECTION 6.5 below), Obligors shall pay to Bank the following prepayment premium:
-----------
(I) Each prepayment made on or prior to September 1, 1996 will
be accompanied by a prepayment premium equal to three (3%) of the principal
amount prepaid.
-12-
<PAGE>
(II) Each prepayment made after September 1, 1996 but on or
prior to September 1, 1997 will be accompanied by a prepayment premium equal to
two percent (2%) of the principal amount prepaid.
(III) Each prepayment made after September 1, 1997 but on or
prior to August 10, 2000 will be accompanied by a prepayment premium equal to
one percent (1%) of the principal amount prepaid.
Notwithstanding the foregoing, if prior to September 1, 1996, Obligors
request a one-year extension of the Line and Bank (A) denies such request in its
sole discretion, (B) approves such request conditioned upon an increase in the
interest rates, a decrease in the maximum amount available under the Line or a
change in the financial covenants set forth in ARTICLE 7 below, which change is
---------
not reasonably based on projections delivered by Obligors or Obligors' past
performance, or (C) fails to respond to such request within the time period
provided for in SECTION 1.1 above 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, Obligors shall not be required to pay the
prepayment premiums set forth in SECTIONS 3.9(C)(II) AND 3.9(C)(III) above.
-----------------------------------
In the event Bank exercises its right to accelerate payments under the Term
Loan following an Event of Default, any tender of payment of the amount
necessary to repay all or part of the Term Loan made thereafter at any time by
Obligors, their successors or assigns or by anyone on behalf of Obligors and any
receipt by Bank of proceeds of Collateral in payment of the Term Loan shall be
deemed to be a voluntary prepayment and in connection therewith Bank shall be
entitled to receive the premium required to be paid under the foregoing
prepayment restrictions.
3.10 PAYMENT METHOD. Obligors irrevocably authorize Bank to debit all
--------------
payments required to be made by Obligors hereunder, under the Line or the Term
Loan, on the date due, from any deposit account maintained by Obligors or any of
them, with Bank; provided, however, prior to the occurrence of an Event of
-------- -------
Default or an event which with the giving of notice or the passage of time or
both would become an Event of Default, Obligors may designate which accounts
maintained with Bank shall be so debited. Otherwise, Obligors will be obligated
to make such payments directly to Bank. All payments 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.
3.11 APPLICATION OF PAYMENTS. Any and all payments on account of the Bank
-----------------------
Indebtedness will be applied to accrued and unpaid interest, outstanding
principal and other sums due hereunder or under the Loan Documents, in such
order as Bank, in its discretion, elects. If Obligors make 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.
-13-
<PAGE>
3.12 LOAN ACCOUNT. Bank will open and maintain on its books a loan account
------------
(the "LOAN ACCOUNT") with respect to advances made, repayments, prepayments, the
computation and payment of interest and fees and the computation and final
payment of all other amounts due and sums paid to Bank under this Agreement.
Except in the case of manifest error in computation, the Loan Account will be
conclusive and binding on the Obligors as to the amount at any time due to Bank
from Obligors under this Agreement or the Notes.
3.13 INDEMNITY; LOSS OF MARGIN. Obligors will indemnify Bank against any
-------------------------
direct loss or expense which Bank sustains or incurs as a consequence of an
Event of Default, including, without limitation, any failure of Obligors 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 Obligors 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 Obligors 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 Line from the due date until
paid, both before and after judgment.
In the event that any present or future law, rule, regulation, treaty or
official directive or the interpretation or application thereof by any central
bank, monetary authority or governmental authority, or the compliance with any
guideline or request of any central bank, monetary authority or governmental
authority (whether or not having the force of law):
(A) subjects Bank to any tax with respect to any amounts payable
under this Agreement or the other Loan Documents by Obligors or otherwise with
respect to the transactions contemplated under this Agreement or the other Loan
Documents (except for taxes on the overall net income of Bank imposed by the
United States of America or any political subdivision thereof); or
(B) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit, capital maintenance, capital adequacy, or similar
requirement against assets held by, or deposits in or for the account of, or
loans or advances or commitment to make loans or advances by, or letters of
credit issued or commitment to issue letters of credit by, the Bank; or
(C) imposes upon Bank any other condition with respect to advances or
extensions of credit or the commitment to make advances or extensions of credit
under this Agreement,
and the result of any of the foregoing is to increase the costs of Bank, reduce
the income receivable by or return on equity of Bank or impose any expense upon
Bank with respect to any advances or extensions of credit or commitments to make
advances or extensions of credit under this Agreement, Bank shall so notify
Obligors in writing. Obligors agree to pay Bank the amount of such increase in
cost, reduction in income, reduced return on equity or capital, or additional
expense (such amount being the "REIMBURSEMENT AMOUNT") suffered or incurred by
Bank within thirty (30) days after presentation by Bank of a statement
concerning such increase in cost, reduction in income, reduced
-14-
<PAGE>
return on equity or capital, or additional expense. Such statement shall set
forth a brief explanation of the Reimbursement Amount and Bank's calculation of
the Reimbursement Amount (in determining such Reimbursement Amount the Bank may
use any reasonable averaging and attribution methods), which statement shall be
conclusively deemed correct absent manifest error. Notwithstanding the
foregoing, if an event of the nature described in SECTION 3.13(A), (B) OR (C)
---------------------------
above occurs, Obligors shall have the right to repay in full all Bank
Indebtedness without any prepayment premium (other than an amount equal to the
economic loss suffered by Bank with respect to that portion of the Bank
Indebtedness accruing interest at the Line LIBOR Rate or the Term LIBOR Rate at
the time of such prepayment), provided that, (i) within thirty (30) days of the
presentation of such statement to Obligors, Obligors pay to Bank the
Reimbursement Amount then due Bank through such date, (ii) such repayment to
Bank is made on or before the one hundred twentieth (120th) day following the
presentation of such statement to Obligors, and (iii) at the time of such
repayment, Obligors shall also pay to Bank the Reimbursement Amount then due
Bank through the date of such repayment.
If the amount set forth in such statement is not paid in full as set forth
above within thirty (30) days after such presentation of such statement, or the
amount due in connection with a repayment of the Bank Indebtedness as described
above is not paid in full within one hundred twenty (120) days after such
presentation of such statement, interest will be payable on the unpaid amount at
the default rate payable under the Line from the due date until paid, both
before and after judgment.
4. SECURITY; COLLECTION OF RECEIVABLES AND PROCEEDS OF COLLATERAL.
--------------------------------------------------------------
4.1 PERSONAL PROPERTY. As security for the full and timely payment and
-----------------
performance of all Bank Indebtedness, each Obligor hereby grants to Bank a
security interest in all of the following:
(A) All of such Obligor's present and future accounts, contract
rights, chattel paper, instruments and documents and all other rights to the
payment of money whether or not yet earned, for services rendered or goods sold,
consigned, leased or furnished by such Obligor or otherwise, together with (i)
all goods (including any returned, rejected, repossessed or consigned goods),
the sale, consignment, lease or other furnishings of which shall be given or may
give rise to any of the foregoing, (ii) all of such Obligor's rights as a
consignor, consignee, unpaid vendor or other lienor in connection therewith,
including stoppage in transit, set-off, detinue, replevin and reclamation, (iii)
all general intangibles related thereto, (iv) all guaranties, mortgages,
security interests, assignments, and other encumbrances on real or personal
property, leases and other agreements or property securing or relating to any
accounts, (v) choses-in-action, claims and judgments, (vi) any return or
unearned premiums, which may be due upon cancellation of any insurance policies,
and (vii) all products and proceeds of any of the foregoing.
(B) All of such Obligor's present and future inventory (including but
not limited to goods held for sale or lease or furnished or to be furnished
under contracts for service, raw materials, work-in-process, finished goods and
goods used or consumed in such Obligor's business) whether owned, consigned or
held on consignment, together with all merchandise, component materials,
supplies, packing, packaging and shipping materials, and all returned, rejected
or
-15-
<PAGE>
repossessed goods sold, consigned, leased or otherwise furnished by such Obligor
and all products and proceeds of any of the foregoing.
(C) All of such Obligor's present and future general intangibles
(including but not limited to tax refunds and rebates, manufacturing and
processing rights, designs, patent rights and applications therefor, trademarks
and registration or applications therefor, tradenames, brand names, logos,
inventions, copyrights and all applications and registrations therefor),
licenses, permits, approvals, software and computer programs, license rights,
royalties, trade secrets, methods, processes, know-how, formulas, drawings,
specifications, descriptions, label designs, plans, blueprints, patterns and all
memoranda, notes and records with respect to any research and development, and
all products and proceeds of any of the foregoing.
(D) All of such Obligor's present and future machinery, equipment,
furniture, fixtures, motor vehicles, tools, dies, jigs, molds and other articles
of tangible personal property of every type together with all parts,
substitutions, accretions, accessions, attachments, accessories, additions,
components and replacements thereof, and all manuals of operation, maintenance
or repair, and all products and proceeds of any of the foregoing.
(E) All of such Obligor's present and future general ledger sheets,
files, records, customer lists, books of account, invoices, bills, certificates
or documents of ownership, bills of sale, business papers, correspondence,
credit files, tapes, cards, computer runs and all other data and data storage
systems whether in the possession of such Obligor or any service bureau.
(F) All letters of credit now existing or hereafter issued naming
such Obligor as a beneficiary or assigned to such Obligor, including the right
to receive payment thereunder, and all documents and records associated
therewith.
(G) All deposits, funds, instruments, documents, policies and
evidence and certificates of insurance, securities, chattel paper and other
assets of such Obligor or in which such Obligor 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 such Obligor or in transit by mail or
carrier to Bank or in the possession of any other Person acting on Bank's
behalf, 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 such Obligor in which Bank
now has or may at any time hereafter obtain a lien, mortgage, or security
interest for any reason.
(H) All of Nobel's right, title and interest in and to the stock of
each of the other Obligors, together with all cash, stock or other dividends
paid in connection therewith; all securities received in addition to or in
exchange for such stock; all subscription rights with respect to such
securities; any other distribution in respect of such securities in any form;
and the proceeds thereof. All such securities shall be freely assignable and
transferrable to Bank, and shall be accompanied by such stock pledge agreements
and blank stock powers with signatures guaranteed as Bank may require.
-16-
<PAGE>
4.2 REAL PROPERTY. As further security for the Bank Indebtedness, the
-------------
applicable Obligors shall grant to Bank a mortgage lien encumbering each of the
properties described on SCHEDULE 4.2 attached hereto. As further security for
------------
the Bank Indebtedness, the applicable Obligors shall grant to Bank a mortgage
lien encumbering all real property acquired by such Obligor after the date
hereof on terms and conditions acceptable to Bank, unless Bank shall inform
Obligors that Bank does not require a mortgage lien against such property. All
of the real property referred to in this SECTION 4.2 upon which Bank is now or
-----------
hereafter granted a mortgage lien shall be referred to collectively as the
"MORTGAGED PROPERTIES".
4.3 INSURANCE. As further security for the Bank Indebtedness, Obligors
---------
(and all owners and beneficiaries applicable thereto) shall assign and grant to
Bank a security interest in a life insurance policy and the proceeds payable
thereunder issued by and maintained with an insurance company acceptable to
Bank, insuring the life of A.J. Clegg in an amount at least equal to One Million
Dollars ($1,000,000.00).
4.4 GENERAL. The collateral described above in SECTIONS 4.1, 4.2 AND 4.3
------- -------------------------
is collectively referred to herein as the "COLLATERAL". The above-described
security interests, assignments, liens and guarantees shall not be rendered void
by the fact that no Bank Indebtedness exists as of any particular date, but
shall continue in full force and effect until the Bank Indebtedness has been
repaid, Bank has no agreement or commitment outstanding pursuant to which Bank
may extend credit to or on behalf of any Obligor and Bank has executed
termination statements or releases with respect thereto. IT IS THE EXPRESS
INTENT OF THE OBLIGORS THAT ALL OF THE COLLATERAL SHALL SECURE NOT ONLY THE
OBLIGATIONS UNDER THE LOAN DOCUMENTS, BUT ALSO ALL OTHER PRESENT AND FUTURE
OBLIGATIONS OF ANY OBLIGOR TO BANK.
4.5 COLLECTION OF RECEIVABLES; PROCEEDS OF COLLATERAL.
-------------------------------------------------
(A) Obligors will collect their accounts receivable only in the
ordinary course of business. Upon request by Bank after the occurrence of any
Event of Default, Obligors will notify all of their account debtors to forward
all accounts receivable collections owed to such Obligor to a lockbox maintained
by Bank and will forward all other checks, drafts and monies received by such
Obligor which are proceeds of the Collateral to such lockbox. After the
occurrence of any Event of Default, Obligors will execute such lockbox
agreements as may be required by Bank and will pay to Bank all customary fees in
connection with any lockbox arrangement.
(B) Obligors agree that all monies, checks, notes, instruments,
drafts or other payments relating to or constituting proceeds of any accounts
receivable or other Collateral of Obligors which come into the possession or
under the control of Obligors or any employees, agents or other persons acting
for or in concert with Obligors, shall be received and held in trust for Bank
and such items shall be the sole and exclusive property of Bank, subject to the
right of Obligors to use such funds prior to the occurrence of an Event of
Default. After the occurrence of an Event of Default, immediately upon receipt
thereof, Obligors and such other persons shall remit the same or cause the same
to be remitted, in kind, to Bank. Obligors shall deliver or cause to be
delivered to Bank, with appropriate endorsement and assignment to Bank with full
recourse to Obligors, all
-17-
<PAGE>
instruments, notes and chattel paper constituting an account receivable or
proceeds thereof or other Collateral. After the occurrence of an Event of
Default, Bank is hereby authorized to open all mail addressed to Obligors and
endorse all checks, drafts or other items for payment on behalf of Obligors.
Bank is granted a power of attorney by Obligors with full power of substitution
to, after the occurrence of an Event of Default, execute on behalf of Obligors
and in Obligors' name or to endorse Obligors' name on any check, draft,
instrument, note or other item of payment or to take any other action or sign
any document in order to effectuate the foregoing. Such power of attorney being
coupled with an interest is irrevocable.
5. REPRESENTATIONS AND WARRANTIES. Obligors represent and warrant as follows:
------------------------------
5.1 VALID ORGANIZATION, GOOD STANDING AND QUALIFICATION. Except as shown
---------------------------------------------------
on SCHEDULE 5.1, each Obligor is a corporation duly incorporated, validly
------------
existing and in good standing under the laws of the applicable jurisdiction
listed for such Obligor on SCHEDULE 5.1 attached hereto, 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 and is duly licensed or qualified
as a foreign corporation in good standing under each other jurisdiction in which
the character or location of the properties owned by it or the business
transacted by it requires such licensing or qualification.
5.2 LICENSES. Except as set forth on SCHEDULE 5.2 attached hereto, each
-------- ------------
Obligor 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 it has 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 Obligors (other than
Nobel) and all pledges (other than to Bank), 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.
------------
5.4 SUBSIDIARIES. Except as set forth on SCHEDULE 5.4 attached hereto, no
------------ ------------
Obligor owns any shares of stock or other equity interests in any Person,
directly or indirectly (by any Subsidiary or otherwise).
5.5 FINANCIAL STATEMENTS. Obligors have furnished to Bank the audited
--------------------
consolidated financial statements of Obligors certified without qualification by
independent public accountants as of December 31, 1994 and all management and
comment letters from such accountants in connection therewith, and its
internally prepared interim financial statements as of March 31, 1995. Such
financial statements of Obligors (together with the related notes and comments),
are correct and complete, fairly present the financial condition and the assets
and liabilities of Obligors at such date, and have been prepared in accordance
with GAAP. With respect to the interim statements, such statements are subject
to year-end adjustment and any accompanying footnotes.
5.6 NO MATERIAL ADVERSE CHANGE IN FINANCIAL CONDITION. There has been no
-------------------------------------------------
material adverse change in the financial condition of any Obligor since March
31, 1995.
-18-
<PAGE>
5.7 PENDING LITIGATION OR PROCEEDINGS. Except as set forth on SCHEDULE
--------------------------------- --------
5.7 attached hereto, there are no judgments outstanding or actions, suits or
---
proceedings pending or, to the best of the knowledge of the corporate officers
of Obligors, threatened against or affecting any Obligor, 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.
5.8 DUE AUTHORIZATION; NO LEGAL RESTRICTIONS. The execution and delivery
----------------------------------------
by Obligors 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 each Obligor, (b) will not
conflict with or result in a breach of, or constitute a default (or might, upon
the passage of time or 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 any Obligor's Certificates or Articles of
Incorporation or By-Laws or any indenture, mortgage, loan or credit agreement or
instrument to which any Obligor is a party or by which any of them 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 any
Obligor under the terms or provisions of any such agreement or instrument,
except liens in favor of Bank.
5.9 ENFORCEABILITY. The Loan Documents have been duly executed by
--------------
Obligors and delivered to Bank and constitute legal, valid and binding
obligations of Obligors, enforceable in accordance with their terms.
5.10 NO DEFAULT UNDER OTHER OBLIGATIONS, ORDERS OR GOVERNMENTAL
----------------------------------------------------------
REGULATIONS. Except as set forth on SCHEDULE 5.10 attached hereto, no Obligor
-------------
is 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 no
Obligor is 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.
5.11 GOVERNMENTAL CONSENTS. No consent, approval or authorization of or
---------------------
designation, declaration or filing with any governmental authority on the part
of any Obligor is required in connection with the execution, delivery or
performance by any Obligor of the Loan Documents or the consummation of the
transactions contemplated thereby.
5.12 TAXES. Obligors have filed all tax returns which they are required to
-----
file and have 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 them. Such tax returns are complete and accurate in all respects.
No Obligor knows of any proposed additional assessment or basis for any
assessment of additional taxes.
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<PAGE>
5.13 TITLE TO COLLATERAL. Except for that portion of the Collateral sold
-------------------
as permitted under SECTION 6.5 below, the Collateral is and will be owned by the
-----------
respective Obligor 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 6.8 below. Obligors will defend the Collateral against
-----------
any claims of all persons or entities other than the Bank.
5.14 ADDRESSES. During the past five (5) years, no Obligor has been known
---------
by any names (including tradenames) other than those set forth in SCHEDULE 5.14
-------------
attached hereto and has been located at any addresses other than those set forth
on SCHEDULE 5.14 attached hereto. The portions of the Collateral which are
-------------
tangible property and each Obligor's books and records pertaining thereto will
at all times be located at the addresses set forth on SCHEDULE 5.14; or such
-------------
other location determined by Obligors 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 Obligors' books and records. SCHEDULE
--------
5.14 identifies the chief executive office of each Obligor.
----
5.15 CURRENT COMPLIANCE. Obligors are currently in compliance with all of
------------------
the terms and conditions of the Loan Documents.
5.16 PENSION PLANS. Except as disclosed on SCHEDULE 5.16 hereto, (a) no
------------- -------------
Obligor has any 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 any Obligor 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
Obligors' Plans meet with the minimum funding standards of Section 302 of ERISA,
and (d) no Obligor has any existing liability to the PBGC. No Obligor is
subject to or bound to make contributions to any "multi-employer plan" as such
term is defined in Section 4001(a)(3) of ERISA.
5.17 LEASES AND CONTRACTS. Except as described on SCHEDULE 5.10 attached
-------------------- -------------
hereto, Obligors have complied with the provisions of all material leases,
contracts or commitments of any kind (such as employment agreements, collective
bargaining agreements, powers of attorney, distribution agreements, patent
license agreements, contracts for future purchase or delivery of goods or
rendering of services, bonus, pension and retirement plans or accrued vacation
pay, insurance and welfare agreements) to which they are a party and are not in
default thereunder. 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.
5.18 INTELLECTUAL PROPERTY. Obligors own or possess the irrevocable right
---------------------
to use all of the patents, trademarks, service marks, trade names, copyrights,
licenses, franchises and permits and rights with respect to the foregoing
necessary to own and operate the Obligors' properties and to
-20-
<PAGE>
carry on their business as presently conducted and presently planned to be
conducted without conflict with the rights of others. SCHEDULE 5.18 sets forth
-------------
an accurate list and description of each such patent, trademark, service mark,
trade name, copyright, license, franchise and permit and right with respect to
the foregoing.
5.19 BUSINESS INTERRUPTIONS. Except as set forth on SCHEDULE 5.19 hereto,
---------------------- -------------
within five (5) years prior to the date hereof, neither the business, Collateral
nor operations of any Obligor have been materially and adversely affected in any
way by any casualty, strike, lockout, combination of workers, order of the
United States of America, or any state or local government, or any political
subdivision or agency thereof, directed against that Obligor. There are no
pending or threatened labor disputes, strikes, lockouts or similar occurrences
or grievances against the business being operated by any Obligor.
5.20 PURCHASE AGREEMENT. Obligors have delivered to Bank a true and
------------------
complete copy of the Purchase Agreement.
5.21 ACCURACY OF REPRESENTATIONS AND WARRANTIES. No representation or
------------------------------------------
warranty by Obligors contained herein or in any certificate or other document
furnished by Obligors 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 any Obligor knows or should know and has not disclosed to Bank,
which does or may materially and adversely affect any Obligor, or any of their
operations.
6. GENERAL COVENANTS. Except with the prior written consent of Bank, Obligors
-----------------
will comply with the following:
6.1 PAYMENT OF PRINCIPAL, INTEREST AND OTHER AMOUNTS DUE. Obligors will
----------------------------------------------------
pay when due all Bank Indebtedness and all other amounts payable by them
hereunder.
6.2 LIMITATION ON INDEBTEDNESS. No Obligor will have at any time
---------------------------
outstanding to any Person other than Bank, any Indebtedness for borrowed money
or any Indebtedness under Capitalized Leases, or any outstanding letters of
credit, except:
(A) current accounts payable incurred in the ordinary course of that
Obligor's business, accrued expenses and other current items arising out of
transactions (other than borrowings) in the ordinary course of that Obligor's
business;
(B) existing Indebtedness for borrowed money and Capitalized Lease
Obligations described on SCHEDULE 6.2; and
------------
(C) Indebtedness incurred in connection with any Permitted
Acquisition, which Indebtedness shall be subordinate to the Bank Indebtedness on
terms and conditions satisfactory to Bank.
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<PAGE>
Any of such existing permitted Indebtedness may not be refinanced or
replaced without the consent of the Bank, except for refinancing or replacement
which does not cause an Event of Default and which does not result in an
increase in the principal amount of such Indebtedness being refinanced or
replaced.
Bank is aware that notwithstanding the provisions of this SECTION 6.2 and
-----------
SECTION 6.8 below, Obligors may, from time to time, request that Bank agree to
-----------
permit Obligors to (i) incur Indebtedness to a seller in connection with a
Permitted Acquisition, and (ii) secure Obligors' obligations to such seller in
connection with such Indebtedness by granting liens to such seller against the
assets being acquired from such seller, which Indebtedness and liens will not be
subordinated to the Bank Indebtedness or Bank's liens against such assets.
Obligors acknowledge and agree that Bank shall have no obligation to agree to
any such request by Obligors.
6.3 INVESTMENTS AND LOANS No Obligor will have or make any investments
----------------------
in, or loans, advances or extensions of credit to any Person (other than another
Obligor), 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;
(C) Certificates of deposit maturing within twelve (12) months from
the date of acquisition issued by the Bank;
(D) Investments and loans listed on SCHEDULE 6.3 attached hereto;
------------
(E) Investments in connection with Permitted Acquisitions;
(F) Investments in Subsidiaries created in accordance with SECTION
-------
6.6 below; and
---
(G) Purchase money loans to purchasers of Obligors' assets permitted
to be sold under SECTION 6.5 below, provided no such purchase money loan shall
-----------
exceed an amount equal to twenty-five percent (25%) of the purchase price of
such assets. All notes, instruments and other evidences of such purchase money
loans shall be immediately endorsed with recourse and delivered to Bank.
6.4 GUARANTIES. No Obligor will 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,
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<PAGE>
any Indebtedness, obligations or liabilities of any Person, except for the
guaranty by Nobel of (a) certain obligations of Child Care Investors, Inc. to
First Fidelity Bank, National Association, pursuant to that certain guaranty
agreement dated October 1, 1986, a true and complete copy of which has been
delivered to Bank and (b) the obligations of another Obligor in connection with
a Permitted Acquisition or the lease by such other Obligor of a facility.
6.5 DISPOSITION OF ASSETS. No Obligor will sell, lease, transfer or
---------------------
otherwise dispose of all, substantially all, or any material portion of its
property or assets, except for sales (a) of inventory in the ordinary course for
fair consideration, (b) by Obligors to bona-fide third party purchasers for fair
consideration of any real property acquired by such Obligor after the date
hereof and all furniture, fixtures and equipment related thereto, (c) of those
properties listed on SCHEDULE 6.5 attached hereto to the tenant under the leases
------------
for such properties and pursuant to the terms of such leases or to any other
Person, (d) of that certain property owned by Bluegrass Real Estate Company in
Audubon, Pennsylvania, and (e) of that certain property owned by Nobel in
Folsom, California, and (f) those properties currently owned by Bluegrass Real
Estate Company, Inc. provided that in all cases no Event of Default and no event
which with the giving of notice or the passage of time or both would result in
an Event of Default shall have occurred. Bank agrees, at the sole cost and
expense of Obligors, to release Bank's lien against any assets sold by Obligors
as permitted under this SECTION 6.5. All net proceeds received by Obligors from
-----------
the sales of any of the properties described on SCHEDULE 6.5 hereto shall be
------------
paid to Bank and applied first to that portion of the Bank Indebtedness
evidenced by the Notes or otherwise due pursuant to the terms of this Agreement.
6.6 MERGER; CONSOLIDATION; BUSINESS ACQUISITIONS; SUBSIDIARIES. Except
----------------------------------------------------------
for Permitted Acquisitions and those solely between Obligors, no Obligor will
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. Obligors shall not form any new Subsidiaries unless Obligors
give Bank thirty (30) days prior written notice thereof and such new subsidiary
executes and delivers or causes to be executed and delivered to Bank (a) an
amendment to this Agreement and an Allonge to each of the Notes pursuant to
which such subsidiary shall agree to be an obligor hereunder and thereunder and
be bound by the terms and conditions hereof and thereof, and (b) such mortgages,
financing statements, resolutions, opinions of counsel and other documents as
Bank shall request in connection with the formation of such Subsidiary and the
perfection by Bank of its lien against the assets of such subsidiary. All fees
incurred by Bank in connection with any of the foregoing shall be paid by
Obligors on demand.
6.7 TAXES; CLAIMS FOR LABOR AND MATERIALS. Each Obligor 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. No Obligor will file or consent to the filing of,
any consolidated income tax return with any Person other than a Subsidiary.
6.8 LIENS. No Obligor will create, incur or permit to exist any mortgage,
-----
pledge, encumbrance, lien, security interest or charge of any kind (including
liens or charges upon properties
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<PAGE>
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 or arising by operation of law for obligations not yet due
and payable, 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 that Obligor in the
operation of its business;
(D) Liens and security interests listed on SCHEDULE 6.8 attached
------------
hereto;
(E) Purchase money liens or Capitalized Leases, provided that:
(I) the property subject to any of the foregoing is acquired
or leased by that Obligor in the ordinary course of its business and the lien on
any such property is created contemporaneously with such acquisition;
(II) purchase money Indebtedness or Capitalized Lease
Obligations so created shall not exceed one hundred percent (100%) of the lesser
of cost or fair market value as of the time of acquisition or lease of the
property covered thereby;
(III) the purchase money Indebtedness or Capitalized Lease
Obligations shall only be secured by the property so acquired or leased;
(IV) the purchase money Indebtedness or Capitalized Lease
Obligations are permitted by the provisions of SECTION 6.3; and
-----------
(F) Liens in favor of a seller in connection with a Permitted
Acquisition, provided that:
(I) such liens shall be subordinate to Bank's liens on terms
and conditions satisfactory to Bank;
(II) such liens shall extend only to those assets being
purchased from such seller; and
(III) such liens shall secure only that Indebtedness of the
respective Obligor to such seller incurred in connection with such Permitted
Acquisition.
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<PAGE>
Except as provided for under that certain Investment Agreement of even date
herewith among Obligors (other than Rocking Horse Management Corporation),
Allied Investment Corporation, Allied Investment Corporation II, Allied Capital
Corporation and Allied Capital Corporation II, no Obligor shall enter into any
agreement with any other Person which shall prohibit such Obligor 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 that Obligor 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.
No Obligor will 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
that Obligor, except letters of credit issued by Bank, at its discretion.
6.9 EXISTENCE; APPROVALS; QUALIFICATION; BUSINESS OPERATIONS; COMPLIANCE
--------------------------------------------------------------------
WITH LAWS. Each Obligor (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; (c) will 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. Notwithstanding anything contained in this SECTION 6.9 to
-----------
the contrary, upon prior written notice to Bank, Obligors may merge into each
other.
6.10 MAINTENANCE OF PROPERTIES, INTELLECTUAL PROPERTY. Each Obligor will
------------------------------------------------
maintain, preserve, protect and keep or cause to be maintained, preserved,
protected and kept its real and personal property (except for obsolete personal
property) used or useful in the conduct of its business in good working order
and condition, reasonable wear and tear excepted, and will pay and discharge
when due the cost of repairs to and maintenance of the same.
With respect to any and all trademarks, registrations, copyrights, patents,
patent rights and applications for any of the foregoing, each Obligor shall
maintain and protect the same and shall take and assert any and all remedies
available to that Obligor to prevent any other Person from infringing upon or
claiming any interest in any such trademarks, registrations, copyrights,
patents, patent rights or application for any of the foregoing.
Obligors will notify Bank immediately of (a) the creation by any Obligor or
any of its employees (during the course of employment with such Obligor) of any
inventions; (b) any changes or improvements made to an invention created or
owned by any Obligor or any of its employees (during the course of employment
with such Obligor); (c) the filing of any patent or trademark application,
whether domestic or foreign, by any Obligor or any of its employees (during the
course of employment with such Obligor); (d) the grant of any patent or
trademark, whether domestic or foreign, to any Obligor or any of its employees
(during the course of employment with such Obligor); or (e) any Obligor's intent
to abandon a patent or trademark.
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<PAGE>
Obligors will, if requested by Bank, (i) execute and deliver to Bank
assignments, financing statements, patent mortgages or such other documents, in
form and substance acceptable to Bank, necessary to perfect and maintain Bank's
security interest in all existing and future patents, patent applications,
trademarks, trademark applications, and other general intangibles owned by any
Obligor; (ii) furnish Bank with evidence satisfactory to Bank, in its sole
discretion, that all actions necessary to maintain and protect each trademark
and patent owned by any Obligor or its employees (during the course of
employment with such Obligor) have been taken in a timely manner; and (iii)
execute and deliver to Bank an agreement permitting Bank to exercise all of any
Obligor's rights in, to and under any patent or trademark owned by any Obligor
or any of its employees (during the course of employment with such Obligor).
6.11 INSURANCE. Each Obligor will carry adequate insurance issued by an
---------
insurer acceptable to Bank, in amounts acceptable to Bank (at least adequate to
comply with any co-insurance provisions) and against all such liability and
hazards as are usually carried by entities engaged in the same or a similar
business similarly situated or as may be required by Bank, and in addition, will
carry business interruption insurance in such amounts as may be required by
Bank. In the case of insurance on any of the Collateral, Obligors shall carry
insurance in the full insurable value thereof and cause Bank to be named as
insured mortgagee with respect to all real property, loss payee (with a lender's
loss payable endorsement) with respect to all personal property, and additional
insured with respect to all liability insurance, as its interests may appear
with thirty (30) days' notice to be given Bank by the insurance carrier prior to
cancellation or material modification of such insurance coverage.
Obligors shall cause to be delivered to Bank the insurance policies
therefor or in the alternative, evidence of insurance and at least five (5)
business days prior to the expiration of any such insurance, additional policies
or duplicates thereof or in the alternative, evidence of insurance evidencing
the renewal of such insurance and payment of the premiums therefor. Obligors
shall direct all insurers that in the event of any loss thereunder or the
cancellation of any insurance policy, the insurers shall make payments for such
loss and pay all return or unearned premiums directly to Bank and not to
Obligors, or any of them, and Bank jointly.
In the event of any loss, Obligors will give Bank immediate notice thereof
and Bank may make proof of loss whether the same is done by Obligors. Bank is
granted a power of attorney by each Obligor with full power of substitution to
file any proof of loss in any Obligor's or Bank's name, to endorse any Obligor's
name on any check, draft or other instrument evidencing insurance proceeds, and
to take any action or sign any document to pursue any insurance loss claim.
Such power being coupled with an interest is irrevocable.
In the event of any loss, Bank, at its option, may (a) retain and apply all
or any part of the insurance proceeds to reduce, in such order and amounts as
Bank may elect, the Bank Indebtedness, or (b) disburse all or any part of such
insurance proceeds to or for the benefit of any Obligor for the purpose of
repairing or replacing Collateral after receiving proof satisfactory to Bank of
such repair or replacement, in either case without waiving or impairing the Bank
Indebtedness or any provision of this Agreement. Any deficiency thereon shall
be paid by Obligors to Bank upon demand. No Obligor shall take out any
insurance without having Bank named as loss payee or additional insured
-26-
<PAGE>
thereon. Obligors shall bear the full risk of loss from any loss of any nature
whatsoever with respect to the Collateral.
Notwithstanding the foregoing, in the event that Obligors suffer a casualty
loss and desire to use the proceeds of casualty loss insurance to repair or
replace the damaged Collateral, Bank will permit Obligors to utilize the
proceeds of such insurance solely to repair or replace such damaged Collateral
provided that: (a) Obligors confirm to Bank in writing that they intend to
continue their business operations and have business interruption insurance in
effect providing for the payment of proceeds in amounts acceptable to Bank, (b)
Obligors submit to Bank their plan for operations after such casualty loss,
which plan must be in form and content satisfactory to Bank, (c) Bank will hold
such insurance proceeds and will disburse such proceeds upon receipt by Bank of
evidence satisfactory to Bank that such proceeds will be used to repair or
replace such damaged Collateral as required above, (d) disbursement of proceeds
will be in compliance with such procedures as Bank may reasonably require, (e)
the amount of such proceeds is sufficient to complete the repair or replacement
of the Collateral or Obligors shall have deposited with Bank the amount of any
deficiency and (f) no Event of Default, or event which would with the giving of
notice or passage of time, or both, would constitute an Event of Default has
occurred.
6.12 INSPECTIONS; EXAMINATIONS. Obligors hereby irrevocably authorize and
-------------------------
direct all accountants and auditors employed by any Obligor at any time to
exhibit and deliver to Bank copies of any and all of Obligors' 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
Obligors by such accountants or auditors, including management letters,
"comment" letters and audit reports, and to disclose to Bank any information
they may have concerning Obligors' financial status and business operations.
Obligors further authorize all federal, state and municipal authorities to
furnish to Bank copies of reports or examinations relating to any Obligor,
whether made by any Obligor or otherwise.
The officers of Bank, or such Persons as any of them may designate, may
visit and inspect any of the properties of Obligors, examine (either by Bank's
employees or by independent accountants) any of the Collateral or other assets
of Obligors, including the books of account of Obligors, and discuss the
affairs, finances and accounts of Obligors with its officers and with its
independent accountants, at such times as Bank may desire. Prior to the
occurrence of an Event of Default, any such visit or inspection shall only be
after prior notice to Obligors and the representatives of Bank may be
accompanied by representatives of Obligors.
The Bank may, at its discretion upon reasonable prior notice, make periodic
audits of the books and records of the Obligors and periodically inspect the
Mortgaged Properties. Prior to the occurrence of a default under the Loan
Documents, Bank will not charge Obligors for the costs of such audits or
inspections.
6.13 DEFAULT UNDER OTHER INDEBTEDNESS. No Obligor will permit any of its
--------------------------------
Indebtedness to be in default. If any Indebtedness of any Obligor is declared
or becomes due and payable before its expressed maturity by reason of default or
otherwise or to the knowledge of any Obligor, the holder of any such
Indebtedness shall have the right (or upon the giving of notice or the passage
of
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<PAGE>
time, or both, shall have the right) to declare such Indebtedness to be so due
and payable, Obligors will immediately give Bank written notice of such
declaration, acceleration or right of declaration.
6.14 PENSION PLANS. Obligors shall (a) keep in full force and effect any
-------------
and 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 any Obligor in connection with such termination (as distinguished
from any continuing funding obligation); (b) make contributions to all of
Obligors' 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 any Obligor
of any notice of the institution of any proceeding or other action which may
result in the termination of any Plan and deliver to Bank, promptly after the
filing or receipt thereof, copies of all reports or notices which any Obligor
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. Obligors will maintain Bank as their principal bank
---------------
of account, unless otherwise agreed by Bank in writing.
6.16 MAINTENANCE OF MANAGEMENT. Nobel shall at all times maintain A.J.
-------------------------
Clegg as its Chief Executive Officer and other executive officers reasonably
satisfactory to Bank. In the event of the death of A. J. Clegg, Nobel shall
appoint a new Chief Executive Officer satisfactory to Bank in its reasonable
discretion. Obligors 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
proposed amendments to its Articles of Incorporation or By-Laws, prior to
adoption. Obligors shall not make any amendment to its Articles of
Incorporation or By-Laws which will in any way effect any Obligor's operations
or ability to comply with the terms and conditions of the Loan Documents without
the prior written consent of Bank.
6.17 CAPITAL STOCK; DIVIDENDS. No Obligor will redeem, repurchase or
------------------------
otherwise make any payment or distribution to acquire any of its capital stock.
No Obligor will pay dividends or make other distributions on account of its
capital stock, except that if 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
shall have occurred, Nobel may pay dividends on account of its preferred stock
issued and outstanding prior to the date hereof in an aggregate amount not to
exceed Two Hundred Thousand Dollars ($200,000.00) during any fiscal year of
Nobel.
6.18 TRANSACTIONS WITH AFFILIATES. No Obligor shall enter into or conduct
----------------------------
any transaction with any Affiliate (other than another Obligor) 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. No Obligor will
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. Each Obligor 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.
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<PAGE>
6.19 NAME OR ADDRESS CHANGE. No Obligor shall 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 Obligors' books and records.
6.20 NOTICES. Obligors will promptly notify Bank of (a) any material,
-------
uninsured action or proceeding brought against any Obligor wherein such action
or proceeding would, if determined adversely to any Obligor result in liability
of such Obligor, (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 any Obligor 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 any
Obligor.
6.21 ADDITIONAL DOCUMENTS AND FUTURE ACTIONS. Obligors will, at their 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 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. Obligors hereby authorize and appoint Bank as their
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 such Obligor's behalf and file at such Obligor'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 the Collateral, and to execute on
such Obligor'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. Obligors
irrevocably authorize 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.
6.22 MATERIAL ADVERSE CONTRACTS. No Obligor will become or be a party to
--------------------------
any contract or agreement which has a materially adverse impact on that
Obligor's ability to perform under this Agreement or any other agreement with
Bank to which that Obligor is a party.
6.23 RESTRICTIONS ON USE OF PROCEEDS. No Obligor will carry or purchase
-------------------------------
with the proceeds of the Line or the Term 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 INDEBTEDNESS. Obligors will not make payments on account
-------------------------
of any Subordinated Indebtedness, except in accordance with the terms and
conditions of the applicable Subordination Agreement or other documents between
Borrower and the respective creditors and delivered to and approved by Bank.
6.25 LIFE INSURANCE. Obligors will cause to be maintained the life
--------------
insurance coverage required under SECTION 4.3 and will deliver to Bank evidence
-----------
of such coverage showing all premiums
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<PAGE>
paid for the subsequent 12-month period at least thirty (30) days prior to the
expiration of such insurance policy.
6.26 APPRAISALS. Obligors shall, on demand, reimburse Bank for all costs
----------
and expenses incurred by Bank in connection with the appraisals for the
Mortgaged Properties, which appraisals shall be in form, content and performed
by an appraiser satisfactory to Bank. Bank estimates that the cost of each such
appraisal shall not exceed $2,500.00. Provided that no Event of Default shall
have occurred, Bank shall not require more than one (1) appraisal for each
Mortgaged Property during any year.
6.27 NEW FACILITIES. During any fiscal year, Obligors shall not establish
--------------
more than three (3) newly constructed educational facilities which they, or any
of them, will own or which will otherwise appear as an asset on any Obligor's
balance sheet ("OWNED FACILITIES"). Notwithstanding the foregoing, if any
Obligor enters into an agreement whereby a third party agrees to build and lease
to such Obligor five (5) or more newly constructed educational facilities during
any fiscal year, Obligors shall not be permitted to establish more than two (2)
Owned Facilities during such fiscal year. For the purposes of this SECTION
-------
6.27, the facilities owned by Bluegrass Real Estate Company in Audubon,
Pennsylvania and Nobel in Folsom, California shall not be considered Owned
Facilities.
6.28 CERTAIN PAYMENTS UNDER THE PURCHASE AGREEMENT. Obligors shall not
---------------------------------------------
make any payments to Educo pursuant to SECTION 11.5 of the Purchase Agreement
------------
without the prior written consent of Bank, which consent Bank may withhold in
its absolute discretion; provided, however, Bank's consent to such payments
-------- -------
shall not be required if such payments (a) are made with funds generated by
Obligors' operations or obtained from equity infusions or other borrowed money
(the repayment of which shall be subordinated to all Bank Indebtedness on terms
and conditions satisfactory to Bank), (b) aggregate less than $250,000.00 in any
fiscal year, and (c) are not made with proceeds advanced by Bank under the Line.
6.29 CREDITORS UNDER SUBORDINATION AGREEMENTS. In the event any creditor
----------------------------------------
of any or all of the Obligors in connection with any of the Subordinated
Indebtedness fails to comply with the terms of the respective subordination
agreement in connection with such Subordinated Indebtedness, Obligors shall
cause such creditor to comply with such terms as soon as possible but in any
event within forty (40) days after Obligors, or any of them, become aware of a
breach by any such creditor thereunder.
7. FINANCIAL COVENANTS. Except with the prior written consent of Bank,
-------------------
Obligors will comply with the following:
7.1 ADJUSTED TANGIBLE NET WORTH. Obligors and Rocking Horse One, Inc.
---------------------------
("ROCKING HORSE") will maintain on a consolidated basis Adjusted Tangible Net
Worth of not less than (i) Four Million Two Hundred Fifty Thousand Dollars
($4,250,000.00) as of the date of Closing and at all times thereafter through
December 30, 1995; (ii) Five Million Three Hundred Thousand Dollars
($5,300,000.00) as of December 31, 1995 and at all times thereafter through
December 30, 1996; (iii) Five Million Seven Hundred Thousand Dollars
($5,700,000.00) as of December 31, 1996 and
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<PAGE>
at all times thereafter through December 30, 1997; (iv) Six Million Nine Hundred
Thousand Dollars ($6,900,000.00) as of December 31, 1997 and at all times
thereafter through December 30, 1998; (v) Eight Million Two Hundred Thousand
Dollars ($8,200,000.00) as of December 31, 1998 and at all times thereafter
through December 30, 1999; and (vi) Nine Million Five Hundred Thousand Dollars
($9,500,000.00) as of December 31, 1999 and at all times thereafter. The
foregoing covenant shall be tested by Bank on a quarterly basis.
7.2 ADJUSTED DEBT TO ADJUSTED TANGIBLE NET WORTH. Obligors and Rocking
--------------------------------------------
Horse will maintain on a consolidated basis a ratio of Adjusted Debt to Adjusted
Tangible Net Worth of not more than (i) 4.5 to 1.0 as of the date of Closing and
at all times thereafter through December 30, 1995; (ii) 3.75 to 1.0 as of
December 31, 1995 and at all times thereafter through December 30, 1996; (iii)
3.25 to 1.0 as of December 31, 1996 and at all times thereafter through December
30, 1997; (iv) 2.75 to 1.0 as of December 31, 1997 and at all times thereafter
through December 30, 1998; (v) 2.25 to 1.0 as of December 31, 1998 and at all
times thereafter through December 30, 1999; and (vi) 1.85 to 1.0 as of December
31, 1999 and at all times thereafter. The foregoing covenant shall be tested by
Bank on a quarterly basis.
7.3 CURRENT RATIO. Obligors and Rocking Horse will maintain on a
-------------
consolidated basis a ratio of Current Assets to Current Liabilities of not less
than (i) .42 to 1.0 as of December 31, 1995 and at all times thereafter through
December 30, 1996; (ii) .48 to 1.0 as of December 31, 1996 and at all times
thereafter through December 30, 1997; and (iii) .55 to 1.0 as of December 31,
1997 and at all times thereafter. The foregoing covenant shall be tested by
Bank on a quarterly basis.
7.4 DEBT SERVICE COVERAGE RATIO. Obligors and Rocking Horse will maintain
---------------------------
on a consolidated and rolling twelve (12) month basis a Debt Service Coverage
Ratio of not less than 1.5 to 1.0 as of the date of Closing and as of each
calendar quarter thereafter.
7.5 CHANGES TO FINANCIAL COVENANTS. The Bank may condition extension of
------------------------------
the Line after the Contract Period upon revision of the foregoing financial
covenants, including without limitation revisions for periods after September 1,
1998, as Bank in its sole discretion may require.
7.6 ROCKING HORSE ONE, INC. Obligors' compliance with the financial
----------------------
covenants in this ARTICLE 7 shall be determined on a consolidated basis for
---------
Obligors and Rocking Horse. Bank has the right, in its sole discretion, in
determining compliance with the financial covenants in this ARTICLE 7, to
---------
exclude that portion of cash flow, profitability or value attributable to
Rocking Horse which is in amounts substantially in excess of the cash flow,
profitability or value attributable to Rocking Horse, as of the date hereof.
7.7 ACQUISITIONS. In the event Bank consents to an acquisition by
------------
Obligors, or any of them, and such acquisition would result in the failure by
Obligors to comply with any of the financial covenants in this ARTICLE 7, Bank
---------
agrees that as part of such consent, Bank will amend such covenant or covenants
so that Obligors will be in compliance therewith after giving effect to such
acquisition.
8. ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS. Obligors will
----------------------------------------------------
maintain books of record and account in which full, correct and current entries
in accordance
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<PAGE>
with GAAP will be made of all of their dealings, business and affairs, and
Obligors will deliver to Bank the following:
8.1 ANNUAL STATEMENTS. As soon as available and in any event within
-----------------
ninety (90) days after the end of each fiscal year of Obligors:
(A) the audited consolidated and consolidating income and retained
earnings statements of Obligors and their Subsidiaries for such fiscal year,
(B) the audited consolidated and consolidating balance sheet of
Obligors and their Subsidiaries as at the end of such fiscal year, and
(C) the audited consolidated and consolidating statement of cash flow
of Obligors and their Subsidiaries for such fiscal year,
setting forth in comparative form the corresponding figures as at the end of the
previous fiscal year, all in reasonable detail, including all supporting
schedules and comments. The foregoing statements and balance sheets shall be
prepared in accordance with GAAP and shall be audited by independent certified
public accountants of recognized standing acceptable to Bank in the reasonable
exercise of its discretion with respect to which such accountants shall deliver
their unqualified opinion.
8.2 PROJECTIONS AND CASH FLOW. As soon as available and in any event
-------------------------
prior to December 15 of each fiscal year of Obligors, projections and cash flows
on a month-by-month basis for the next succeeding twelve (12) months, prepared
by the controller or chief financial officer of Obligors. Obligors have
furnished to Bank initial projections dated as of the date hereof and attached
hereto as SCHEDULE 8.2 containing the information required by this SECTION 8.2.
------------ -----------
Obligors represent and covenant that (a) the initial projections attached hereto
have been and all projections required by this SECTION 8.2 shall be prepared by
-----------
the controller or chief financial officer of Obligors and represent, and in the
future shall represent, the best available good faith estimate of Obligors
regarding the course of Obligors' business for the periods covered thereby; (b)
the assumptions set forth in the initial projections are and the assumptions set
forth in the future projections delivered hereafter shall be reasonable and
realistic based on then current economic conditions; (c) Obligors know of no
reason why Obligors should not be able to achieve the performance levels set
forth in the initial projections and Obligors shall have no knowledge at the
time of delivery of future projections of any reason why Obligors shall not be
able to meet the performance levels set forth in said projections; and (d)
Obligors has sufficient capital as may be required for its ongoing business and
to pay its existing and anticipated debts as they mature.
8.3 QUARTERLY STATEMENTS. As soon as available and in any event within
--------------------
forty-five (45) days after the close of each fiscal quarter of Obligors:
(A) the consolidated and consolidating income and retained earnings
statements of Obligors and their Subsidiaries for such quarter,
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(B) the consolidated and consolidating balance sheet of Obligors and
their Subsidiaries as of the end of such quarter, and
(C) the consolidated and consolidating statement of cash flow of
Obligors and their Subsidiaries for such quarter,
setting forth in comparative form the corresponding figures as at the end of the
corresponding quarter of the previous fiscal year (if applicable), all in
reasonable detail, subject to year end adjustments and certified by the
controller or chief financial officer of Obligors to be accurate and to have
been prepared in accordance with GAAP.
8.4 10K AND 10Q STATEMENTS. Copies of Nobel's 10K and 10Q statements
----------------------
filed with the Securities Exchange Commission contemporaneously with the filing
of such statements.
8.5 REAL ESTATE TAX RECEIPTS. As soon as available, copies of receipts
------------------------
evidencing payment of all real estate taxes due on the Mortgages Properties.
8.6 AUDIT REPORTS. Promptly upon receipt thereof, one copy of each other
-------------
report submitted to any Obligor 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 any Obligor.
8.7 REPORTS TO GOVERNMENTAL AGENCIES AND OTHER CREDITORS. With reasonable
----------------------------------------------------
promptness, copies of all such material financial reports, statements and, upon
request of Bank, returns which any Obligor shall file with any federal or state
department, commission, board, bureau, agency or instrumentality and any
material report or statement delivered by any Obligor to any supplier or other
creditor in connection with any payment restructuring.
8.8 REQUESTED INFORMATION. With reasonable promptness, all such other
---------------------
data and information in respect of the condition, operation and affairs of any
Obligor as Bank may reasonably request from time to time.
8.9 COMPLIANCE CERTIFICATES. Within the period provided in SECTIONS 8.1
----------------------- ------------
AND 8.3 above, a certificate of the controller or chief financial officer of
-------
Obligors: (a) stating that Obligors have observed, performed and complied with
each and every undertaking contained herein, (b) setting forth the information
and computations (in sufficient detail) required in order to establish whether
Obligors were operating in compliance with the financial covenants in SECTION 7
---------
of this Agreement, and (c) certifying that as of the date of 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 "C". attached
------------
hereto.
8.10 ACCOUNTANT'S CERTIFICATE. Within the period provided in SECTION 8.1,
------------------------ -----------
a report of the independent public accountants who render an opinion with
respect to the financial statements referred to therein, stating that they have
reviewed the terms of this Agreement and that in making the examinations
necessary to their certification mentioned in SECTION 8.1, they have reviewed
-----------
the
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accounts and condition of Obligors during the accounting period covered by their
certificate and that such review did not disclose the existence of any failure
by Obligors to comply with the financial covenants set forth in SECTION 7 above.
---------
9. ENVIRONMENTAL REPRESENTATIONS AND COVENANTS.
-------------------------------------------
9.1 REPRESENTATIONS. Obligors represent to Bank as follows: (a) the
---------------
Environmental Affiliates are in compliance with all Environmental Requirements
and Obligors have no knowledge of any circumstances which may prevent or
interfere with such compliance in the future; (b) 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 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 Environmental
Affiliate is an Environmental Cleanup Site; (e) except as set forth on SCHEDULE
--------
9.1 hereof, no 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 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 Environmental Affiliate.
9.2 REAL PROPERTY. Obligors represent and warrant 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 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. Obligors represent to Bank that
Obligors are not now using the Real Property nor, to the best of Obligors'
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 any Obligor's knowledge, have they 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. Obligors shall take or cause all
-----------------------------
Environmental Affiliates to take, at Obligors' and such Environmental
Affiliate's sole expense, such actions as may be necessary to comply with all
Environmental Requirements, as hereinafter defined. If 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
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fees, fines, or other penalty payments, shall be at once repayable by Obligors
and all sums so advanced or paid shall become a part of the Bank Indebtedness.
The Environmental Affiliates 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 Environmental Affiliates will conduct such
activities only at facilities and with carriers who they reasonably believe
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 any Obligor becomes aware of any past, present
-------
or future facts or circumstances which have given rise or could give rise to a
claim against any Environmental Affiliate related to a failure to comply with
any Environmental Requirements, such Obligor will promptly give Bank notice
thereof, together with a written statement of an officer of such Obligor setting
forth the details thereof and the action with respect thereto taken or proposed
to be taken by the Environmental Affiliates.
9.5 INDEMNITY. Obligors agree 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 Obligor
or any of their Subsidiaries, (b) the release of any Special Materials treated,
stored, transported, handled, generated or disposed of by or on behalf of any
Obligor or any of their Subsidiaries at any third party owned site, (c) any
claim against any Environmental Affiliate that they have failed to comply with
all Environmental Requirements, and (d) the breach by any Obligor 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 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. Obligors will permit, and will 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 Environmental Affiliates with all
Environmental Requirements. Obligors will supply, and will 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 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 Environmental
Affiliates having knowledge of such matters.
Provided that an Event of Default has occurred or Bank has a good faith
belief that any Environmental Affiliate has failed to comply with all
Environmental Requirements, the cost of such
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<PAGE>
visits, inspections, examination and tests shall be borne by the Obligors. In
the event Bank pays such costs, such sums shall be at once repayable by Obligors
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 the
Environmental Affiliates' compliance with all Environmental Requirements.
9.7 SURVIVAL. The representations and covenants of Obligors contained in
--------
this SECTION 9, including without limitation the indemnification obligation of
---------
Obligors, shall survive the occurrence of any event whatsoever, including the
payment of the Bank Indebtedness or any investigation by or knowledge of Bank.
10. CONDITIONS OF CLOSING. The obligation of Bank to make available the Line
---------------------
and the Term Loan is subject to the performance by Obligors of all of their
agreements to be performed hereunder and to the following further conditions
(any of which may be waived by Bank):
10.1 LOAN DOCUMENTS. Obligors 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 Obligors 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 (or would, upon the giving of notice or the
passage of time or both, constitute an Event of Default).
10.4 PROCEEDINGS AND DOCUMENTS. All proceedings taken by Obligors 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. Each Obligor shall have delivered to Bank a
certificate, in form and substance satisfactory to Bank, dated the date hereof
and signed on behalf of that Obligor by an officer of that Obligor, certifying
(a) true copies of the Articles of Incorporation and bylaws of that Obligor in
effect on such date, (b) true copies of all corporate actions taken by that
Obligor relative to the Loan Documents, and (c) the names, true signatures and
incumbency of the officers of that Obligor 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.
10.5 DELIVERY OF OTHER DOCUMENTS. The following documents shall have been
---------------------------
delivered by or on behalf of Obligors to Bank:
(A) GOOD STANDING AND TAX LIEN CERTIFICATES. A good standing
---------------------------------------
certificate of the applicable governmental authority certifying to the good
standing and corporate status of each Obligor, good standing/foreign
qualification certificates from all other jurisdictions in which each
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<PAGE>
Obligor is required to be qualified to do business, and tax lien certificates
for each Obligor from each jurisdiction in which such Obligor is required to be
qualified to do business.
(B) AUTHORIZATION DOCUMENTS. Evidence of authorization of each
-----------------------
Obligor'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 Obligors in form
------------------
and content satisfactory to Bank.
(E) LIFE INSURANCE. Evidence of the life insurance coverage and the
--------------
assignment thereof as required under SECTION 4.3.
-----------
(F) LIEN SEARCH. Copies of record searches (including UCC searches
-----------
and judgments, suits, tax and other lien searches) confirming that Bank has a
first priority security interest in the Collateral, except as otherwise provided
in this Agreement, acceptable to Bank.
(G) LICENSES AND APPROVALS. Copies of all licenses, approvals,
----------------------
consents, authorizations and filings of Obligors, required or necessary for the
operation by Obligors of their business.
(H) SUBORDINATION AGREEMENTS. Subordination Agreements or
------------------------
subordination provisions in other documents satisfactory to Bank from all
holders of existing Subordinated Debt.
(I) OTHER DOCUMENTS. Such other documents as may be required to be
---------------
submitted to Bank by the terms hereof or of any Loan Document.
11. CERTAIN CONDITIONS TO SUBSEQUENT ADVANCES. Subsequent advances under the
-----------------------------------------
Line and the Term Loan shall be conditioned upon the following conditions and
each request by Obligors for an advance shall constitute a representation by
Obligors to Bank that each condition has been met or satisfied:
11.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties
------------------------------
of Obligors contained herein or in the Loan Documents shall be true at and as of
the date of such advance as if made on such date, and each request for an
advance shall constitute reaffirmation by Obligors that such representations and
warranties are then true, or to the extent any such representations or
warranties are not true as of the date of such advance, the events which render
any such representations or warranties untrue were either permitted under the
terms of the Loan Documents or have been disclosed to and consented to by Bank
in writing prior to such advance being made.
11.2 NO DEFAULT. No condition or event shall exist or have occurred at or
----------
as of the date of such advance 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).
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<PAGE>
11.3 OTHER REQUIREMENTS. Bank shall have received all certificates,
------------------
authorizations, affidavits, schedules and other documents which are provided for
hereunder or under the Loan Documents, or which Bank may reasonably request.
12. DEFAULT AND REMEDIES.
--------------------
12.1 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 Ob ligors to pay any amount of principal or
interest on the Line Note, or the Term 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) days after notice
from Bank to Obligors of such failure;
(B) The failure of any Obligor to duly perform or observe any
obligation, covenant or agreement on its part contained herein or in any other
Loan Documents not otherwise specifically constituting an Event of Default under
this SECTION 12.1 and such failure continues unremedied for a period of twenty
------------
(20) days after the earlier of (i) notice from Bank to Obligors of the existence
of such failure, or (ii) any officer of an Obligor knows or should have known of
the existence of such failure, provided that, in the event such failure is
incapable of remedy or consists of a default of any of the financial covenants
in SECTION 7, or was wilfully caused or permitted by such Obligor, Obligors
---------
shall not be entitled to any notice or grace hereunder;
(C) The failure of any Obligor to pay any Indebtedness for borrowed
money due to any third Person with an original principal balance in excess of
$50,000.00 or the existence of any other event of default under any loan,
security agreement, mortgage or other agreement pertaining thereto binding such
Obligor after the expiration of any notice and/or grace periods permitted in
such documents;
(D) The failure of any Obligor 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;
(E) The adjudication of any Obligor as a bankrupt or insolvent, or
the entry of an Order for Relief of any Obligor or the entry of an order
appointing a receiver or trustee for any Obligor 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;
(F) A proceeding under any bankruptcy, reorganization, arrangement of
debt, insolvency, readjustment of debt or receivership law is filed by or
(unless dismissed within forty-five (45) days, provided that during such forty-
five (45) day period Bank shall have no obligation to make
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<PAGE>
any advances under the Line) against any Obligor or any Obligor makes an
assignment for the benefit of creditors, or any Obligor takes any action to
authorize any of the foregoing;
(G) The suspension of the operation of any material portion of
Obligors' present business, or any Obligor becoming unable to meet its debts as
they mature, or the admission in writing by any Obligor to such effect, or any
Obligor calling any meeting of all or any material portion of its creditors for
the purpose of debt restructure; provided that the suspension of any of the
operations listed on SCHEDULE 12.1(G) attached hereto shall not be an Event of
----------------
Default;
(H) All or any part of the Collateral or the assets of any Obligor
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;
(I) The entry of a final judgment for the payment of money against
any Obligor which, within ten (10) days after notice of 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;
(J) Any representation or warranty of any Obligor in any of the Loan
Documents is discovered to be untrue in any material respect or any statement,
certificate or data furnished by any Obligor 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;
(K) Except as permitted under this Agreement, any Obligor voluntarily
or involuntarily dissolves or is dissolved, terminates or is terminated, except
for those involving Imagine Educational Products, Inc. or Rocking Horse
Management Corporation, provided Obligors shall give Bank thirty (30) days prior
written notice of such event;
(L) Any Obligor 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 such Obligor from conducting all or any material part of
its business for a period of twenty (20) consecutive days;
(M) A breach by any Obligor occurs under any material agreement,
document or instrument, whether heretofore, now or hereafter existing between
such Obligor and any other Person as a result of which any enforcement or
termination action is taken by such other Person;
(N) A material and adverse change occurs in any Obligor's operations,
management or financial condition of the Obligors on a consolidated basis or in
the value of the Collateral;
(O) Any material uninsured damage to, or loss, theft, or destruction
of, any material portion of the Collateral occurs;
(P) Any strike, lockout, labor dispute, embargo, condemnation, act of
God or public enemy, or other casualty loss occurs resulting in the cessation or
substantial curtailment of
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<PAGE>
production or other revenue producing activities at any material number of the
facilities of Obligors for more than thirty (30) consecutive days;
(Q) The loss, suspension, revocation or failure to renew any license
or permit now held or hereafter acquired by any Obligor, which loss, suspension,
revocation or failure to renew is not remedied within thirty (30) days from the
date of such loss, suspension, revocation or failure and has a material adverse
effect on the business profits, assets or financial condition of Obligors in the
aggregate;
(R) Any projection delivered to Bank pursuant hereto indicates that
an Event of Default will occur, unless (i) Bank agrees within twenty (20) days
from the date of delivery of such projections to amend those provisions which
such projections indicate will not be complied with, or (ii) in the event such
projections give effect to an acquisition not consented to by Bank, Obligors
deliver revised projections to Bank which do not give effect to such acquisition
and which do not otherwise indicate that an Event of Default will occur;
(S) Any breach by any Obligor of its obligations under any
subordination agreement now or hereafter executed in favor of Bank; or
(T) The validity or enforceability of this Agreement, or any of the
Loan Documents, is contested by any Obligor; any stockholder of any Obligor
(other than a stockholder of Nobel) or any Obligor denies that it has any or any
further liability or obligation hereunder or thereunder.
12.2 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 Line, the Term Loan, all other
Bank Indebtedness, or any part thereof, all interest accrued thereon, all fees
due hereunder and all other obligations of Obligors 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) The Line will immediately terminate and the Borrower will receive
no further extensions of credit thereunder;
(C) Bank may increase the interest rate on the Line and the Term Loan
to the applicable default rate set forth herein;
(D) Bank may enter the premises occupied by any Obligor and take
possession of the Collateral and any records relating thereto; and/or
(E) 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.
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If an Event of Default occurs under SECTION 12.1(E) or (F), all Bank
--------------- ---
Indebtedness shall become immediately due and payable.
12.3 SALE OR OTHER DISPOSITION OF COLLATERAL. The sale, lease or other
---------------------------------------
disposition of the Collateral, or any part thereof, by Bank after an Event of
Default may be for cash, credit or any combination thereof, and Bank may
purchase all or any part of the Collateral at public or, if permitted by law,
private sale, and in lieu of actual payment of such purchase price, may set-off
the amount of such purchase price against the Bank Indebtedness then owing. Any
sales of the Collateral may be adjourned from time to time with or without
notice. The Bank may cause the Collateral to remain on any Obligor's premises
or otherwise or to be removed and stored at premises owned by other persons, at
Borrower's expense, pending sale or other disposition of the Collateral.
Obligors, at Bank's request, shall assemble the Collateral consisting of
inventory and tangible assets and make such assets available to Bank at a place
to be designated by Bank. Bank shall have the right to conduct such sales on
any Obligor's premises, at Obligors' expense, or elsewhere, on such occasion or
occasions as Bank may see fit. Any notice required to be given by Bank of a
sale, lease or other disposition or other intended action by Bank with respect
to any of the Collateral which is deposited in the United States mail, or sent
by overnight mail, postage prepaid and duly addressed to Borrower at the address
specified in SECTION 13.1 below, at least five (5) Business Days prior to such
------------
proposed action if sent by overnight mail or ten (10) Business Days prior to
such proposed action if sent by regular mail, shall constitute fair and
reasonable notice to Obligors of any such action. The net proceeds realized by
Bank upon any such sale or other disposition, after deduction for the expenses
of retaking, holding, storing, transporting, preparing for sale, selling or
otherwise disposing of the Collateral incurred by Bank in connection therewith
and all other costs and expenses related thereto including attorney fees, shall
be applied in such order as Bank, in its sole discretion, elects, toward
satisfaction of the Bank Indebtedness. Bank shall account to Obligors for any
surplus realized upon such sale or other disposition, and Obligors shall remain
liable for any deficiency. The commencement of any action, legal or equitable,
or the rendering of any judgment or decree for any deficiency shall not affect
Bank's security interest in the Collateral. Obligors agree that Bank has no
obligation to preserve rights to the Collateral against any other parties. Bank
is hereby granted a license or other right to use, after an Event of Default,
without charge, any Obligor's labels, general intangibles, intellectual
property, equipment, real estate, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale and selling any inventory or
other Collateral and any Obligors' rights under all contracts, licenses,
approvals, permits, leases and franchise agreements shall inure to Bank's
benefit. Bank shall be under no obligation to marshall any assets in favor of
any Obligor or any other party or against or in payment of any or all of the
Bank Indebtedness.
12.4 ACTIONS WITH RESPECT TO ACCOUNTS. Obligors hereby irrevocably make,
--------------------------------
constitute and appoint Bank (and any of Bank's designated officers, employees or
agents) as their true and lawful attorney-in-fact, with full power of
substitution, with power to sign its name and to take any of the following
actions, (which with respect to (B) through (H) below shall only be taken after
--- ---
the occurrence of an Event of Default) in its name or the name of Bank, as Bank
may determine, without notice to Obligors and at Obligors' expense:
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(A) Verify the validity and amount of or any other matter relating to
the Collateral or Mortgaged Property by mail, telephone, telecopy or otherwise;
provided that prior to the occurrence of an Event of Default,Bank will not
contact individuals concerning amounts due from such individuals to Obligors;
(B) Notify all account debtors that Obligors' accounts have been
assigned to Bank and that Bank has a security interest therein;
(C) Direct all account debtors to make payment of all Obligors'
accounts directly to Bank and forward invoices directly to such account debtors;
(D) Take control in any manner of any cash or non-cash items of
payment or proceeds of such accounts;
(E) Notify the United States Postal Service to change the address for
delivery of mail addressed to Obligors to such address as Bank may designate;
(F) Have access to any lockbox or postal boxes into which Borrower's
mail is deposited and receive, open and dispose of all mail addressed to
Obligors; provided that Bank shall turn over to Obligors all mail not related to
the Collateral or any Obligor's operations;
(G) Take control in any manner of any rejected, returned, stopped in
transit or repossessed goods relating to any accounts;
(H) Enforce payment of and collect any accounts, by legal proceedings
or otherwise, and for such purpose Bank may:
(I) Demand payment of any accounts or direct any account
debtors to make payment of accounts directly to Bank;
(II) Receive and collect all monies due or to become due to
Obligors;
(III) Exercise all of Obligors' rights and remedies with respect
to the collection of accounts;
(IV) Settle, adjust, compromise, extend, renew, discharge or
release the accounts;
(V) Sell or assign the accounts on such terms, for such amount
and at such times as Bank deems advisable;
(VI) Prepare, file and sign Obligors's name or names on any
Proof of Claim or similar document in any proceeding filed under federal or
state bankruptcy, insolvency, reorganization or other similar law as to any
account debtor;
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(VII) Prepare, file and sign Obligors's name or names on any
Notice of Lien, Claim of Mechanic's Lien, Assignment or Satisfaction of Lien or
Mechanic's Lien or similar document in connection with the Collateral;
(VIII) Endorse the name of Obligors upon any chattel papers,
documents, instruments, invoices, freight bills, bills of lading or similar
documents or agreements relating to the accounts or goods pertaining thereto or
upon any checks or other media of payment or evidences of a security interest
that may come into Bank's possession;
(IX) Sign the name of Obligors to verifications of accounts
and notices thereof sent by account debtors to Obligors; or
(X) Take all other actions necessary or desirable to protect
Obligors' or Bank's interest in the accounts.
Obligors ratify and approve all acts of said attorneys and agree that said
attorneys shall not be liable for any acts of commission or omission, nor for
any error of judgment or mistake of fact or law, except willful misconduct.
This power, being coupled with an interest, is irrevocable. Obligors agree to
assist the Bank in the collection and enforcement of their accounts and not to
hinder, delay or impede the Bank in its collection or enforcement of said
accounts.
12.5 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 any Obligor 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 any Obligor
against any or all of the Bank Indebtedness and each Obligor's respective
obligations under the Loan Documents.
12.6 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 any
Obligor 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 such Obligor.
12.7 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. Whenever
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<PAGE>
the Bank's consent or approval is required or permitted, such consent or
approval shall be at the sole and absolute discretion of Bank.
12.8 CERTAIN FEES, COSTS, EXPENSES AND EXPENDITURES. Obligors agree 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, 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, 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 any Obligor 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 (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 attorney's fees and expenses, filing fees and other charges) shall be
payable by Obligors on demand and shall constitute part of the Bank
Indebtedness. Bank will use its best efforts to give Obligors notice of any
such expenditures by Bank, provided that Bank's failure to give Obligors such
notice will not effect or impair Bank's rights or Obligors' obligations under
this Agreement.
With respect to any amount required to be paid by Obligors under this
Section, in the event Obligors fail to pay such amount on demand, Obligors shall
also pay to Bank interest thereon at the highest default rate set forth in
SECTION 2.12 above. Obligors' obligations under this Section shall survive
------------
termination of this Agreement.
12.9 TIME IS OF THE ESSENCE. Time is of the essence in Obligors'
-----------------------
performance of their obligations under the Loan Documents.
12.10 ACKNOWLEDGEMENT OF CONFESSION OF JUDGMENT PROVISIONS. OBLIGORS
----------------------------------------------------
ACKNOWLEDGE AND AGREE THAT THE NOTES AND THE LOAN DOCUMENTS CONTAIN PROVISIONS
WHEREBY BANK MAY ENTER JUDGMENT BY CONFESSION AGAINST OBLIGORS. BEING FULLY
AWARE OF THEIR RIGHTS TO PRIOR NOTICE AND
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<PAGE>
HEARING ON THE QUESTION OF THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED
AGAINST THEM BY BANK UNDER THE NOTES AND LOAN DOCUMENTS, BEFORE JUDGMENT CAN BE
ENTERED, OBLIGORS HEREBY WAIVE THESE RIGHTS AND AGREE AND CONSENT TO BANK
ENTERING JUDGMENT AGAINST OBLIGORS 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 OBLIGORS' 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.
13. COMMUNICATIONS AND NOTICES.
--------------------------
13.1 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
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 Obligors:
c/o Nobel Education Dynamics, Inc.
Rose Tree Corporate Center II
1400 North Providence Road, Suite 3055
Media, PA 19063
Attention: A. J. Clegg, Chief Executive Officer
With a copy to:
Drinker Biddle & Reath
Suite 300, 1000 Westlakes Drive
Berwyn, PA 19312-2409
Attention: Robert H. Strouse, Esquire
To Bank:
First Valley Bank
300 Berwyn Park, Suite 211
Berwyn, PA 19312
Attention: Stephen P. Keiser, Assistant Vice President
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<PAGE>
With a copy to:
LESSER & KAPLIN, P.C.
350 Sentry Parkway, Building 640
Blue Bell, Pennsylvania 19422
Attention: Richard M. Zucker, Esquire
14. 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:
14.1 "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.
14.2 "ADJUSTED DEBT" means, at any time, the (a) Indebtedness of Obligors,
---------------
minus (b) outstanding principal amount of the Subordinated Indebtedness.
14.3 "ADJUSTED EBIT" for any period, means earnings of a Person for such
---------------
period, plus the aggregate amounts deducted in determining such earnings in
respect of (a) interest paid on Indebtedness of such Person for such period, and
(b) income taxes for such period, each determined in accordance with GAAP,
subject to such adjustments determined by Obligors in accordance with their
normal practice and satisfactory to Bank in Bank's reasonable discretion.
14.4 "ADJUSTED TANGIBLE NET WORTH" means, at any time (a) Obligors'
-----------------------------
Tangible Net Worth, plus (b) the outstanding principal amount of the
Subordinated Indebtedness, all as determined in accordance with GAAP.
14.5 "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.
14.6 "BANK INDEBTEDNESS" shall mean all obligations and Indebtedness of
-------------------
each Obligor 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 any Obligor by Bank, all other obligations or
undertakings now or hereafter made by or for the benefit of any Obligor to or
for the benefit of Bank under any other agreement, promissory note or
undertaking now existing or hereafter entered into by any Obligor with Bank,
including, without limitation, all obligations of any Obligor to Bank under any
guaranty or surety agreement and all obligations of any Obligor 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.
14.7 "BASE RATE" means the floating rate of interest that is designated
-----------
from time to time by Bank or its successor or survivor in the event of a bank
merger as its Base Rate. The Base Rate
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<PAGE>
of Bank is used merely as a pricing index and is not and should not be deemed to
represent the lowest or best rate available to a borrower.
14.8 "BUSINESS DAY" means any day except a Saturday, Sunday or other day
--------------
on which commercial banks in Philadelphia, Pennsylvania are authorized by law to
close.
14.9 "CAPITALIZED LEASES" means all lease obligations which have been or
--------------------
should be, in accordance with GAAP, capitalized on the books of the lessee.
14.10 "CAPITALIZED LEASE OBLIGATIONS" means all amounts payable with
-------------------------------
respect to a Capitalized Lease.
14.11 "CASH FLOW" for any period, means the sum of Obligors' (a) EBIT,
-----------
plus (b) depreciation and amortization expenses and all other non-cash charges
which were deducted in determining EBIT, all determined in accordance with GAAP.
14.12 "CORPORATION" means a corporation, partnership, trust,
-------------
unincorporated organization, association or joint stock company.
14.13 "CURRENT ASSETS" at a particular date means the aggregate amount of
----------------
all assets of Obligors which would be classified as current assets on a balance
sheet at such date, in accordance with GAAP.
14.14 "CURRENT LIABILITIES" at a particular date means the liabilities
---------------------
(including tax and other proper accruals) of Obligors which would be included as
current liabilities on a balance sheet of Obligors at such date, in accordance
with GAAP.
14.15 "DEBT SERVICE COVERAGE RATIO" shall mean, for any period, the ratio
----------------------------
of (a) the consolidated Net Income of Obligors, plus depreciation, amortization
and all other non-cash charges, to (b) the current maturities of Obligors'
consolidated long-term Indebtedness for such period.
14.16 "ENVIRONMENTAL AFFILIATE" means each Obligor and any other Person
-------------------------
for whom such Obligor at any time has any liability (contingent or otherwise)
with respect to any claims arising out of the failure of such Obligor or such
Person to comply with all applicable Environmental Requirements.
14.17 "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.
14.18 "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,
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<PAGE>
(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, approval or authorization of the
manufacture, generation, use, formulation, packaging, labeling, transporting,
distributing, handling, storing or disposing of any Special Materials.
14.19 "EVENT OF DEFAULT" means each of the events specified in SECTION
------------------ -------
12.1.
----
14.20 "FIXED RATE" shall mean a fixed per annum rate of interest equal to
------------
eight and one-half percent (8 1/2%).
14.21 "FIXED RATE NOTIFICATION" shall mean a written notice provided to
-------------------------
Bank requesting that Bank quote a Fixed Rate, which must be provided to Bank on
a Business Day which is at least two (2) Business Days prior to the date on
which such rate is requested to take effect, specifying:
(a) the principal amount which is to accrue interest at such rate;
(b) the date on which such rate is to take effect; and
(c) whether such principal amount is a new advance or a conversion
from another interest rate.
14.22 "FLOATING RATE" shall mean a definite and certain but variable per
---------------
annum rate of interest equal to the Base Rate of Bank in effect from time to
time (such rate to change immediately upon any change in the Base Rate), plus or
minus the applicable Floating Rate Margin.
14.23 "FLOATING RATE MARGIN" shall initially mean three-quarters of one
----------------------
percent (3/4%). The Floating Rate Margin shall change on a quarterly basis
based on the ratio of Borrower's Adjusted Debt to Adjusted Tangible Net Worth as
of the end of each fiscal quarter commencing with Borrower's fiscal quarter
ending June 30, 1995, and effective upon receipt, review and approval of
Borrower's financial statements for each such fiscal quarter, as follows:
<TABLE>
<CAPTION>
Ratio of Adjusted Debt to
Adjusted Tangible Net Worth Floating Rate Margin
--------------------------- --------------------
<S> <C>
greater than 3.0 to 1.0 3/4%
3.0 to 1.0 1/2%
2.5 to 1.0 1/4%
2.0 to 1.0 0
1.5 to 1.0 -1/4%
1.0 to 1.0 -1/2%
</TABLE>
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<PAGE>
14.24 "FLOATING RATE NOTIFICATION" shall mean a written notice requesting
----------------------------
the Floating Rate, which must be provided to Bank on a Business Day which is at
least two (2) Business Days prior to the date on which such rate is requested to
take effect, specifying:
(A) the principal amount which is to accrue interest at such rate;
and
(B) the date on which such rate is to take effect.
14.25 "GAAP" means generally accepted accounting principles in the United
------
States of America, in effect from time to time, consistently applied and
maintained.
14.26 "GOOD BUSINESS DAY" shall mean any day on which banks in
-------------------
Pennsylvania and London, England are open for business.
14.27 "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 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.
Notwithstanding the foregoing, the obligations of Nobel under (i) the
guaranty agreement described in SECTION 6.4 above and (ii) those certain leases
-----------
described on SCHEDULE 14.27 attached hereto shall not be included in determining
--------------
the Indebtedness of Obligors.
14.28 "INTEREST EXPENSE" means, for any period, the amount of interest
------------------
paid on Indebtedness by Obligors for such period, determined in accordance with
GAAP.
14.29 "LIBOR RATE" shall mean for any proposed or existing portion of the
------------
Line or the Term Loan, that rate of interest for the applicable Rate Period
which is determined by Bank to be the rate per annum obtained by dividing (the
resulting quotient to be rounded upward to the nearest 1/100 of 1%) (a) the rate
of interest estimated in good faith by Bank in accordance with its usual
procedures (which determination shall be conclusive) to the average of the rates
per annum for
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<PAGE>
deposits in United States dollars offered to major money center banks in the
London interbank marked at approximately 11:00 a.m., London time, two (2) Good
Business Days prior to the first day of such Rate Period in amounts comparable
to such portion (or, if there are no such comparable amounts actively traded,
the smallest amounts actively traded) and have maturities comparable to such
Rate Period, by (b) a number equal to 1.00 minus the LIBOR Rate Reserve
Percentage for such day.
14.30 "LIBOR RATE MARGIN" shall initially mean 275 basis points. The
-------------------
LIBOR Rate Margin shall change on a quarterly basis based on the ratio of
Borrower's Adjusted Debt to Adjusted Tangible Net Worth as of the end of each
fiscal quarter of Borrower commencing with Borrower's fiscal quarter ending June
30, 1995, and effect upon receipt, review and approval of Borrower's financial
statements for each such fiscal quarter as follows:
<TABLE>
<CAPTION>
Ratio of Adjusted Debt to
Adjusted Tangible Net Worth LIBOR Rate Margin
--------------------------- -----------------
<S> <C>
greater than 3.0 to 1.0 275 basis points
3.0 to 1.0 250 basis points
2.5 to 1.0 225 basis points
2.0 to 1.0 200 basis points
1.5 to 1.0 175 basis points
1.0 to 1.0 150 basis points
</TABLE>
14.31 "LIBOR RATE NOTIFICATION" shall mean an irrevocable written notice
-------------------------
requesting the Line LIBOR Rate or the Term LIBOR Rate, which must be provided to
Bank prior to 2:00 p.m. Philadelphia time on a Business Day which is at least
two (2) Good Business Days prior to the date on which such rate is requested to
take effect, specifying:
(a) the principal amount which is to accrue interest at such rate;
(b) the date on which such rate is to take effect; and
(c) whether such principal amount is a new advance, a conversion from
another interest rate or a renewal of another interest rate.
14.32 "LIBOR RATE RESERVE PERCENTAGE" for any day shall mean the
-------------------------------
percentage (rounded upward to the nearest 1/100 of 1%), as determined in good
faith by Bank (which determination shall be conclusive) as representing for such
day the maximum effective reserve requirement (including without limitation
supplemental, marginal and emergency requirements) for member banks of the
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<PAGE>
federal reserve system with respect to eurocurrency funding (currently referred
to as "Eurocurrency liabilities") of any maturity. Each LIBOR Rate shall be
adjusted automatically as of the effective date of any change in the LIBOR Rate
Reserve Percentage.
14.33 "LINE LIBOR RATE" shall mean the LIBOR Rate for a one (1), two (2)
-----------------
or three (3) month Rate Period, as applicable, plus the applicable LIBOR Rate
Margin.
14.34 "LOAN DOCUMENTS" means this Agreement, the Line Note, Term Note,
----------------
Surety Agreement, Subordination Agreements and all other documents, executed or
delivered by any Obligor pursuant to this Agreement, as they may be amended from
time to time.
14.35 "NET INCOME" means income (or loss) of Obligors 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 (other than another
Obligor) in which any Obligor or Rocking Horse has an ownership interest, unless
received by such Obligor in a cash distribution, and (c) any gains arising from
extraordinary items, as defined by GAAP.
14.36 "PERMITTED ACQUISITIONS". An acquisition by Obligors, or any of
------------------------
them, shall be a "PERMITTED ACQUISITION" only if all of the following criteria
are met:
(a) the assets of the entity being acquired are located solely in the
United States of America;
(b) that portion of the business being acquired is either an
educational or day-care facility;
(c) the acquisition price does not exceed the lesser of (i) an amount
equal to six (6) times the Adjusted EBIT of the entity being acquired, or (ii)
Two Million Five Hundred Thousand Dollars ($2,500,000.00);
(d) for those acquisitions where the total purchase price exceeds One
Million Dollars ($1,000,000.00), the cash portion paid on account of such
purchase price does not exceed seventy percent (70%) of the total purchase
price;
(e) if the acquisition involves Obligors acquiring the stock of the
entity being acquired, such entity shall merge into an Obligor with such Obligor
being the surviving entity or, if not merged, such entity being acquired shall
execute and deliver to Bank, in form and content satisfactory to Bank, an
amendment to this Agreement and Allonges to each of the Notes pursuant to which
such entity shall agree to be bound by the terms and conditions hereof and
thereof;
(f) such acquisition shall not result in any Indebtedness of any
Obligor for borrowed money, other than Indebtedness incurred by such Obligor to
finance the cost of such acquisition and permitted under SECTION 6.2 above,
-----------
which Indebtedness shall be subordinate to the Bank Indebtedness on terms and
conditions satisfactory to Bank;
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<PAGE>
(g) Obligors shall deliver to Bank at least fifteen (15) days prior
to the date of closing such acquisition, a certificate stating that after the
consolidation of the operations of Obligors and the acquired entity, Obligors
shall continue to be in compliance with the terms and conditions of the Loan
Documents for the next succeeding twelve (12) month period (or other period
designated by Bank), together with copies of Obligors' projections for such
twelve (12) month period (or other period designated by Bank) in form and
content acceptable to Bank;
(h) Obligors shall deliver to Bank at least thirty (30) days written
notice prior to the date of closing such acquisition, which notice shall be
accompanied by copies of all acquisition documents and a summary of the terms of
such acquisition; and
(i) Obligors shall deliver to Bank all mortgages, security
agreements, financing statements, insurance, opinions of counsel and such other
documents and information as Bank shall require in connection with the
acquisition and the assets acquired in connection therewith.
14.37 "PERSON" means an individual, a Corporation or a government or any
--------
agency or subdivision thereof, or any other entity.
14.38 "RATE PERIOD" shall mean for any portion of the Line or the Term
-------------
Loan for which the Borrower elects the Line LIBOR Rate or the Term LIBOR Rate,
the period of time for which such rate shall apply to such principal portions.
14.39 "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, polycholorinated
biphenyls, radon, urea formaldehyde and lead-containing materials.
14.40 "SUBORDINATED INDEBTEDNESS" means Indebtedness of the Obligors, or
---------------------------
any of them, owed to Allied Capital Corporation, Allied Capital Corporation II,
Allied Investment Corporation, Allied Investment Corporation II, Corydon,
Pennsylvania Blue Shield and any seller in connection with a Permitted
Acquisition or any renewal, refinance or other replacement of such Indebtedness,
which Indebtedness must at all times be fully subordinated to all Bank
Indebtedness on terms acceptable to Bank in its sole discretion.
14.41 "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
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<PAGE>
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 any Obligor or one or more of its Subsidiaries.
14.42 "TANGIBLE NET WORTH", as applied to Obligors 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 Obligors prepared in accordance with GAAP, the
following:
(A) all Indebtedness of Obligors other than Indebtedness elimination
as an asset under SECTION 14.42(B)(VI) below; and
--------------------
(B) to the extent reflected as an asset in such balance sheet, (i)
the book amount of all assets which would be treated as intangibles under GAAP,
including without limitation such items as organizational costs (as currently
reflected on Obligors's financial statements), goodwill, trademarks, trade
names, service marks, brand names, franchises, copyrights, patents, licenses,
rights with respect to the foregoing, leasehold improvements and unamortized
debt discount and expense, (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 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 Obligors or
to the extent that the amount of such obligation or indemnity cannot be
ascertained and (vi) loans and notes payable due to Obligors from Affiliates,
directors or officers of Obligors.
14.43 "TERM LIBOR RATE" shall mean the LIBOR Rate for a three (3) month
-----------------
Rate Period, plus the applicable LIBOR Rate Margin.
15. WAIVERS.
-------
15.1 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,
OBLIGORS WAIVE:
(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,
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<PAGE>
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 NOTES;
(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
(G) ALL RIGHTS TO CLAIM OR RECOVER ATTORNEY'S FEES AND COSTS IN THE
EVENT THAT ANY OBLIGOR IS SUCCESSFUL IN ANY ACTION TO REMOVE, SUSPEND OR PREVENT
THE ENFORCEMENT OF A JUDGMENT ENTERED BY CONFESSION.
15.2 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 any Obligor.
15.3 LIMITATION ON LIABILITY. Obligors 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.
Bank shall only be liable for any act or omission on its part constituting
gross negligence or wilful misconduct. In the event that Bank breaches its
required standard of conduct, Obligors agree that Bank's liability shall be only
for direct damages suffered and shall not extend to consequential or incidental
damages. In the event any Obligor brings suit against Bank in connection with
the transactions contemplated hereunder and Bank is found not to be liable,
Obligors 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 any
Obligor.
-54-
<PAGE>
16. SUBMISSION TO JURISDICTION.
--------------------------
16.1 SUBMISSION TO JURISDICTION. Obligors hereby consent to the exclusive
--------------------------
jurisdiction of any state or federal court located within the Commonwealth of
Pennsylvania, and irrevocably agree 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 Obligors waive any
objection which they 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 waive personal service of any and all process upon them, and consent that
all such service of process be made by mail or messenger directed to them at the
address set forth in SECTION 13.1. Nothing contained in this SECTION 16.1 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 any
Obligor or their property in the courts of any other jurisdiction.
17. MISCELLANEOUS.
-------------
17.1 BROKERS. The transaction contemplated hereunder was brought about
-------
and entered into by Bank and Obligors acting as principals and without any
brokers, agents or finders being the effective procuring cause hereof, except
for Legg Mason Wood Walker, Incorporated (the "BROKER"). Obligors represent to
Bank that Obligors have not committed Bank to the payment of any brokerage fee
or commission in connection with this transaction. Whether any such claim is
made against Bank by the Broker, any other broker, finder or agent or any other
Person, Obligors agree to indemnify, defend and hold Bank harmless against any
such claim, at Obligors' own cost and expense, including Bank's attorneys' fees.
Obligors further agree 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.
17.2 USE OF BANK'S NAME. No Obligor shall 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.
17.3 NO JOINT VENTURE. Nothing contained herein is intended to permit or
----------------
authorize any Obligor 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 any Obligor.
17.4 SURVIVAL. All covenants, agreements, representations and warranties
--------
made by Obligors in the Loan Documents or made by or on their 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 Obligors. All statements
contained in any certificate, statement or other document delivered by or on
behalf of any Obligor pursuant hereto or in connection with the transactions
contemplated hereunder shall be deemed representations and warranties by
Obligors.
-55-
<PAGE>
17.5 NO ASSIGNMENT BY OBLIGORS. No Obligor may assign any of its rights
-------------------------
hereunder without the prior written consent of Bank, and Bank shall not be
required to lend hereunder except to Obligors as it presently exists.
17.6 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 any Obligor in its possession.
17.7 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.
17.8 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.
17.9 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.
17.10 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.
17.11 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.
17.12 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.
17.13 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.
17.14 EXHIBITS AND SCHEDULES. All exhibits and schedules attached hereto
----------------------
are hereby made a part of this Agreement.
-56-
<PAGE>
17.15 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.
17.16 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.
17.17 WAIVER OF RIGHT TO TRIAL BY JURY. OBLIGORS 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 OBLIGORS 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. OBLIGORS 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 OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF OBLIGORS AND BANK TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
OBLIGORS ACKNOWLEDGE THAT THEY HAVE HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL
REGARDING THIS SECTION, THAT THEY FULLY UNDERSTAND ITS TERMS, CONTENT AND
EFFECT, AND THAT THEY VOLUNTARILY AND KNOWINGLY AGREE TO THE TERMS OF THIS
SECTION.
17.18 JOINT AND SEVERAL. The agreements, conditions, covenants and
-----------------
provisions of this Agreement shall be the joint and several obligations of each
Obligor.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
NOBEL EDUCATION DYNAMICS, INC.
By: XXX
------------------------------------------------
Name/Title: XXX
----------------------------------------
(CORPORATE SEAL)
Attest: XXX
--------------------------------------------
Name/Title: XXX
----------------------------------------
(SIGNATURES CONTINUED ON NEXT PAGE)
-57-
<PAGE>
(SIGNATURES CONTINUED FROM PREVIOUS PAGE)
BLUEGRASS REAL ESTATE COMPANY, INC.
By: XXX
-----------------------------------------------
Name/Title: XXX
----------------------------------------
(CORPORATE SEAL)
Attest: XXX
--------------------------------------------
Name/Title: XXX
----------------------------------------
IMAGINE EDUCATIONAL PRODUCTS, INC.
By: XXX
------------------------------------------------
Name/Title: XXX
----------------------------------------
(CORPORATE SEAL)
Attest: XXX
--------------------------------------------
Name/Title: XXX
----------------------------------------
CHILDRENS PARK, INCORPORATED
By: XXX
------------------------------------------------
Name/Title: XXX
----------------------------------------
(CORPORATE SEAL)
Attest: XXX
--------------------------------------------
Name/Title: XXX
----------------------------------------
MERRYHILL SCHOOLS, INC.
By: XXX
------------------------------------------------
Name/Title: XXX
----------------------------------------
(CORPORATE SEAL)
Attest: XXX
--------------------------------------------
Name/Title: XXX
----------------------------------------
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
-58-
<PAGE>
(SIGNATURES CONTINUED FROM PRECEDING PAGE)
ROCKING HORSE MANAGEMENT CORPORATION
By: XXX
------------------------------------------------
Name/Title: XXX
----------------------------------------
(CORPORATE SEAL)
Attest: XXX
--------------------------------------------
Name/Title: XXX
----------------------------------------
FIRST VALLEY BANK
By: XXX
------------------------------------------------
Stephen P. Keiser, Assistant Vice President
-59-
<PAGE>
EXHIBITS
--------
Exhibit "A" - Line Note
Exhibit "B" - Term Note
Exhibit "C" - Form of Compliance Certificate
-60-
<PAGE>
EXHIBIT 4G
TERM NOTE
---------
Blue Bell, Pennsylvania
Dated: August 30, 1995
$7,500,000.00
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 Seven Million Five Hundred Thousand Dollars
($7,500,000.00), together with interest thereon upon the following terms:
1. TERM NOTE. This Note is the "TERM NOTE" as defined in that certain
---------
Loan and Security Agreement of even date herewith among Borrower and Bank (such
Loan and Security 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 applicable
rates per annum described in SECTION 2.6 of the Loan Agreement.
-----------
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 the applicable per annum rate described in
SECTION 2.13 of the Loan Agreement.
------------
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.
<PAGE>
6. PRINCIPAL AND INTEREST PAYMENTS.
-------------------------------
(a) Interest which accrues on the outstanding principal balance
hereof at the applicable rate set forth above shall be due and payable monthly,
on the first day of each calendar month commencing on the first day of the first
calendar month after the date hereof.
(b) If the entire balance of the Term Loan, including the Educo
Proceeds are advanced by Bank, Borrower will pay the principal balance hereunder
in (i) four (4) equal and consecutive quarterly installments of Two Hundred
Thousand Dollars ($200,000.00) each, on the first day of each calendar quarter
commencing on December 1, 1995 and continuing through and including September 1,
1996, (ii) twelve (12) equal and consecutive quarterly installments of Two
Hundred Fifty Thousand Dollars ($250,000.00) each, on the first day of each
calendar quarter commencing December 1, 1996 and continuing through and
including September 1, 1999, (iii) three (3) equal and consecutive installments
of Three Hundred Thousand Dollars ($300,000.00) each, on the first day of each
calendar quarter commencing on December 1, 1999 and continuing through and
including June 1, 2000, and (iv) one final payment of the remaining principal
balance hereof, all accrued and unpaid interest thereon and all other sums due
and owing in connection herewith on September 1, 2000.
If the Educo Proceeds are not advanced by Bank, the principal amount
of each quarterly payment set forth in SECTIONS 6(B)(I) - (IV) above shall be in
-----------------------
the respective amounts determined by the following formula:
(A) quarterly payments 1 - 4 = (.2 / 7.5) x principal balance
hereunder as of September 30, 1995;
(B) quarterly payments 5 - 6 = (.25 / 7.5) x principal balance
hereunder as of September 30, 1995; and
(C) quarterly payments 17 - 19 = (.3 / 7.5) x principal balance
hereunder as of September 30, 1995.
The final payment hereunder due on September 1, 2000 shall include the
remaining principal balance hereof, all accrued and unpaid interest thereon and
all other sums due and owing in connection therewith.
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
2
<PAGE>
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, JOINTLY AND SEVERALLY, WAIVE
-------
PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF DEMAND, NOTICE OF NONPAYMENT OR
DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE, AND ALL OTHER NOTICES IN
CONNECTION WITH THE DELIVERY, ACCEPTANCE, PERFORMANCE, DEFAULT OR ENFORCEMENT OF
THE PAYMENT OF THIS NOTE, EXCEPT FOR NOTICES, IF ANY, AS ARE EXPRESSLY REQUIRED
TO BE DELIVERED BY BANK TO BORROWER UNDER THE LOAN AGREEMENT.
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. CONFESSION 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 CONFESSION, 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 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 FIFTEEN PERCENT (15%)
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
3
<PAGE>
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.
NOBEL EDUCATION DYNAMICS, INC.
By: XXX
---------------------------------------
Name/Title: XXX
-----------------------------
(CORPORATE SEAL) Attest: XXX
-----------------------------------
Name/Title: XXX
-----------------------------
BLUEGRASS REAL ESTATE COMPANY, INC.
By: XXX
---------------------------------------
Name/Title: XXX
-----------------------------
(CORPORATE SEAL)
Attest: XXX
-----------------------------------
Name/Title: XXX
-----------------------------
IMAGINE EDUCATIONAL PRODUCTS, INC.
By: XXX
---------------------------------------
Name/Title: XXX
-----------------------------
(CORPORATE SEAL)
Attest: XXX
-----------------------------------
Name/Title: XXX
-----------------------------
4
<PAGE>
CHILDRENS PARK, INCORPORATED
By: XXX
---------------------------------------
Name/Title: XXX
-----------------------------
(CORPORATE SEAL)
Attest: XXX
-----------------------------------
Name/Title: XXX
-----------------------------
MERRYHILL SCHOOLS, INC.
By: XXX
---------------------------------------
Name/Title: XXX
-----------------------------
(CORPORATE SEAL)
Attest: XXX
-----------------------------------
Name/Title: XXX
-----------------------------
ROCKING HORSE MANAGEMENT CORPORATION
By: XXX
---------------------------------------
Name/Title: XXX
-----------------------------
(CORPORATE SEAL)
Attest: XXX
-----------------------------------
Name/Title: XXX
-----------------------------
5
<PAGE>
EXHIBIT 4H
LINE NOTE
---------
Blue Bell, Pennsylvania
Dated: August 30, 1995
$7,500,000.00
FOR VALUE RECEIVED AND INTENDING TO BE LEGALLY BOUND, the undersigned
("BORROWER"), hereby promises to pay to the order of FIRST VALLEY BANK ("BANK"),
ON DEMAND after the occurrence of an Event of Default or after expiration of the
Contract Period, the principal sum of Seven Million Five Hundred Thousand
Dollars ($7,500,000.00), or such greater or lesser principal amount as may be
outstanding from time to time under the line of credit established by Bank for
the benefit of Borrower pursuant to the terms of that certain Loan and Security
Agreement of even date herewith between Borrower and Bank (such Loan and
Security Agreement, as the same may be amended, supplemented or restated from
time to time, being the "LOAN AGREEMENT"), together with interest thereon, upon
the following terms:
1. LINE NOTE. This Note is the "LINE NOTE" as defined in 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 applicable
rates per annum described in SECTION 2.1 of the Loan Agreement.
-----------
3. DEFAULT INTEREST. Interest will accrue on the outstanding principal
----------------
amount hereof, following the occurrence of an Event of Default, until paid at
the applicable rate per annum described in SECTION 2.13 of the Loan Agreement
------------
(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. INTEREST PAYMENTS. Interest which accrues on the outstanding
-----------------
principal balance hereof at the applicable rate set forth above shall be due and
payable monthly, on the first day of each calendar month, commencing on the
first day of the first calendar month following the date hereof.
-1-
<PAGE>
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 or
-----------------
expiration of the Contract Period, 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 or under the Loan
Documents, together with interest accrued thereon at the applicable rate
specified above. 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, JOINTLY AND SEVERALLY, WAIVE
-------
PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF DEMAND, NOTICE OF NONPAYMENT OR
DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE, AND ALL OTHER NOTICES IN
CONNECTION WITH THE DELIVERY, ACCEPTANCE, PERFORMANCE, DEFAULT OR ENFORCEMENT OF
THE PAYMENT OF THIS NOTE, EXCEPT FOR SUCH NOTICES, IF ANY, AS ARE EXPRESSLY
REQUIRED TO BE DELIVERED BY BANK TO BORROWER UNDER THE LOAN AGREEMENT.
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. CONFESSION 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 CONFESSION, TO APPEAR FOR BORROWER AT ANY TIME AFTER THE OCCURRENCE OF AN
EVENT OF DEFAULT UNDER THE LOAN AGREEMENT OR EXPIRATION OF THE CONTRACT PERIOD
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 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 FIFTEEN PERCENT (15%) OF THE AGGREGATE AMOUNT OF THE FOREGOING
SUMS, BUT IN NO EVENT
-2-
<PAGE>
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.
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.
NOBEL EDUCATION DYNAMICS, INC.
By: xxx
------------------------------------
Name/Title: xxx
--------------------------
(CORPORATE SEAL)
Attest: xxx
--------------------------------
Name/Title: xxx
--------------------------
BLUEGRASS REAL ESTATE COMPANY, INC.
By: xxx
------------------------------------
Name/Title: xxx
--------------------------
(CORPORATE SEAL)
Attest: xxx
--------------------------------
Name/Title: xxx
--------------------------
-3-
<PAGE>
IMAGINE EDUCATIONAL PRODUCTS, INC.
By:xxx
------------------------------------
Name/Title:xxx
--------------------------
(CORPORATE SEAL)
Attest:xxx
--------------------------------
Name/Title:xxx
--------------------------
CHILDRENS PARK, INCORPORATED
By:xxx
------------------------------------
Name/Title:xxx
(CORPORATE SEAL) --------------------------
Attest: xxx
--------------------------------
Name/Title: xxx
--------------------------
MERRYHILL SCHOOLS, INC.
By: xxx
------------------------------------
Name/Title: xxx
(CORPORATE SEAL) --------------------------
Attest: xxx
--------------------------------
Name/Title: xxx
--------------------------
ROCKING HORSE MANAGEMENT CORPORATION
By: xxx
------------------------------------
Name/Title: xxx
(CORPORATE SEAL) --------------------------
Attest: xxx
--------------------------------
Name/Title: xxx
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-4-
