<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: JUNE 30, 1996
Commission File Number 1-1003
NOBEL EDUCATION DYNAMICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2465204
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1400 N. PROVIDENCE ROAD, SUITE 3055, MEDIA, PA 19063
(Address of principal executive offices) (Zip Code)
(610)891-8200
(Registrant's telephone number,including area code)
Indicate by check whether the registrant (1) has filed all report(s) required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_____
-----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 5,732,815 shares of Common
Stock outstanding at August 2, 1996
<PAGE>
INDEX TO FORM 10-Q
Nobel Education Dynamics, Inc.
<TABLE>
<CAPTION>
Page
PART 1. FINANCIAL INFORMATION Number
------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets,
June 30, 1996 (unaudited) and
December 31, 1995................................................ 1
Consolidated Statements of Income for the
six months ended June 30, 1996 (unaudited)
and 1995 (unaudited)............................................. 2
Consolidated Statements of Income for the
three months ended June 30, 1996 (unaudited)
and 1995 (unaudited)............................................. 3
Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 (unaudited)
and 1995 (unaudited)............................................. 4
Notes to Consolidated Interim Financial Statements............... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................... 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders................ 12
Item 6. Exhibits and Reports on Form 8-K................................... 15
</TABLE>
<PAGE>
NOBEL EDUCATION DYNAMICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS June 30, 1996 December 31, 1995
- ------ ------------- -----------------
(unaudited)
<S> <C> <C>
Cash and cash equivalents $11,527,215 $3,714,560
Accounts receivable, less allowance for doubtful accounts of $103,009 in 1996 764,502 727,097
and 1995
Other accounts receivable - 573,237
Prepaid assets 1,474,063 1,223,185
Deferred taxes 873,962 873,962
------------ -----------
Total Current Assets 14,639,742 7,112,041
------------ -----------
Property and equipment, net 13,147,371 15,864,305
Property and equipment held for sale (Southeast), net 1,351,619 1,307,497
Goodwill, net 22,202,268 17,273,626
Deposits and other assets 2,829,876 2,262,871
Deferred taxes 497,613 1,117,000
------------ -----------
Total Assets $54,668,489 $44,937,340
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current portion of long-term debt $2,532,576 $1,421,559
Accounts payable and other current liabilities 5,607,233 6,521,524
----------- ----------
Total Current Liabilities 8,139,799 7,943,083
----------- ----------
Long Term Debt 12,482,129 11,715,559
Deferred gain on sale/leaseback 51,317 55,312
Minority interest in consolidated subsidiary 272,653 223,881
Long-term subordinated debt 2,822,355 8,878,605
----------- -----------
Total Liabilities 23,768,253 28,816,670
=========== ===========
Stockholders' Equity:
Preferred stock, $.001 par value; 10,000,000 shares authorized, issued and
outstanding 4,841,150 in 1996 and 5,505,150 in 1995 4,841 5,505
Common stock, $.001 par value, 50,000,000 shares authorized, issued and
outstanding 5,732,815 shares in 1996 and 4,095,094 in 1995
5,733 4,095
Additional paid-in capital 37,073,936 21,818,344
Common Stock issuable, 312,500 shares - 2,000,000
Accumulated deficit (6,184,274) (7,707,274)
----------- ------------
Total Stockholders' Equity 30,900,236 16,120,670
----------- ------------
Total Liabilities and Stockholders' Equity $54,668,489 $44,937,340
=========== ============
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrants' Annual Report on Form 10K are an integral part of
these financial statements.
1
<PAGE>
NOBEL EDUCATION DYNAMICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the six months ended June 30, 1996 and 1995
-----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Revenues $29,489,013 $20,193,058
Operating Expenses 23,871,757 15,938,529
---------- ----------
School operating profit 5,617,256 4,254,529
General and administrative expenses 2,118,492 2,095,565
---------- ----------
Operating Profit 3,498,764 2,158,964
Interest Expense 1,107,905 702,331
Other Income (250,797) (11,381)
Minority interest in earnings
of consolidated subsidiary 48,772 42,829
---------- ----------
Income before income taxes 2,592,884 1,425,185
Income tax expense (credit) 992,271 (1,704,900)
Net income $ 1,600,613 $ 3,130,085
=========== ===========
Preferred stock dividends $ 77,652 $ 99,372
----------- -----------
Net income available to common stockholders $ 1,522,961 $ 3,030,713
=========== ===========
Primary earnings per share $ 0.23 $ 0.73
=========== ===========
Fully diluted earnings per share $ 0.22 $ 0.57
=========== ===========
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrants' Annual Report on Form 10-K are an integral part of these financial
statements.
2
<PAGE>
NOBEL EDUCATION DYNAMICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the three months ended June 30, 1996 and 1995
-------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Revenues $14,920,744 $10,509,606
Operating Expenses 12,281,920 8,360,994
---------- ----------
School operating profit 2,638,824 2,148,612
General and administrative expenses 1,087,295 1,310,171
---------- ----------
Operating Profit 1,551,529 838,441
Interest Expense 476,664 416,190
Other Income (134,186) (21,704)
Minority interest in earnings
of consolidated subsidiary 24,907 22,135
----------- -----------
Income before income taxes 1,184,144 421,820
----------- -----------
Income tax expense (credit) 449,957 (1,955,900)
Net income $ 734,187 $ 2,377,720
=========== ===========
Preferred stock dividends $ 38,826 $ 49,686
----------- -----------
Net income available to common stockholders $ 695,361 $ 2,328,034
=========== ===========
Primary earnings per share $ 0.10 $ 0.54
=========== ===========
Fully diluted earnings per share $ 0.10 $ 0.43
=========== ===========
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrants' Annual Report on Form 10-K are an integral part of these financial
statements.
3
<PAGE>
NOBEL EDUCATION DYNAMICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1996 and 1995
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 1,822,619 $ 1,864,250
Cash flows from Investing Activities:
Capital expenditures (1,695,655) (1,339,142)
Proceeds from the sale of real estate 6,148,490 ---
Payment for acquisitions and land for development (6,041,048) (5,138,603)
Deposit for acquisition --- (250,000)
Cash received from note receivable 373,237 ---
------------- --------------
Net Cash used in investing activities: (1,214,976) (6,727,745)
------------- --------------
Cash Flows from Financing Activities:
Issuance of common stock 11,497,634 ---
Repayment of long-term debt (5,851,123) (348,333)
Cash proceeds from the line of credit 1,500,000 ---
Repayment of subordinated debt (6,000,000) ---
Repayment of capital lease obligation (23,948) (35,107)
Payments of dividends on preferred stock (77,606) (99,374)
Proceeds from exercise of stock options 160,055 137,500
Cash proceeds from real estate mortgage --- 3,567,300
Note payable --- 5,422
Proceeds from the second Term Loan 6,000,000 ---
Proceeds from line of credit --- 2,000,000
------------- --------------
Net Cash provided by financing activities: 7,205,012 5,227,408
------------- --------------
Net increase in cash and
cash equivalents: 7,812,655 363,913
Cash and cash equivalents at
the beginning of year: 3,714,560 853,866
Cash and cash equivalents at end of the period: $ 11,527,215 $ 1,217,779
============= ==============
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrants' Annual Report From 10-K are an integral part of these consolidated
financial statements.
4
<PAGE>
NOBEL EDUCATION DYNAMICS, INC. AND SUBSIDIARIES
Notes to Consolidated Interim Financial Statements
for the six months ended June 30, 1996 and 1995
(unaudited)
Note 1 - Basis of Presentation
- ------------------------------
The consolidated financial statements have been prepared by the Registrant
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC") and, in the opinion of management, include all adjustments, consisting
of normal recurring adjustments, necessary to present fairly the financial
position and results of operations. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with the
generally accepted accounting principals have been condensed or omitted pursuant
to such SEC rules and regulations. It is suggested that these financial
statements be read in conjunction with the consolidated financial statements and
notes thereto included in the Registrants' Annual Report on Form 10-K for the
year ended December 31, 1995.
Due to the inherent seasonal nature of the education and child care businesses,
annualization of amounts in these interim financial statements may not be
indicative of the actual operating results for the full year.
Note 2 - Earnings Per Share
- ---------------------------
The earnings per share is based upon the weighted average number of common and
common share equivalents outstanding as follows:
<TABLE>
<CAPTION>
3 months ended 3 months ended Percentage
June 30, 1996 June 30, 1995 Increase
------------- ------------- --------
<S> <C> <C> <C>
Primary 7,174,674 4,147,719 73.0%
Fully Diluted 7,551,282 5,509,927 37.0%
6 months ended 6 months ended
June 30, 1996 June 30, 1995
------------- -------------
Primary 6,768,932 4,154,538 63.0%
Fully Diluted 7,145,640 5,503,102 29.8%
</TABLE>
5
<PAGE>
Note 3 - Sale/Leaseback of Carefree Properties
- ----------------------------------------------
In transactions on May 16, 1996, the Company completed the sale/leaseback
arrangements of six pre-school properties originally acquired in connection with
the acquisition of Carefree Learning Centers which occurred in May of 1995. The
Company sold the land buildings of the six pre-schools for a total of $6.1
million and simultaneously entered into operating leases for these pre-schools.
Of the $6.1 million in proceeds, $4.3 million was used to pay down the
properties' respective mortgages and approximately $1.8 million was used for
working capital purposes. There was no gain or loss on the transaction.
The minimum lease payments in relation to the leases entered into described
above total $454,125 in 1996, $778,500 in 1997, $778,500 in 1998, $808,740 in
1999, $808,740 in 2000 and $8,051,518 thereafter.
Note 4 - Commitments and Contingencies
- --------------------------------------
The Company is engaged in other legal actions arising in the ordinary course of
its business. The Company believes that the ultimate outcome of all such matters
above will not have a material adverse effect on the Company's consolidated
financial position. The significance of these matters on the Company's future
operating results and cash flows depends on the level of the future results of
operations and cash flows as well as on the timing and amounts, if any, of the
ultimate outcome.
The Company carries fire and other casualty insurance on its centers and
liability insurance in amounts which management believes is adequate for its
operations. As is the case with other entities in the education and preschool
industry, the Company cannot effectively insure itself against certain risks
inherent in its operations. Some forms of child abuse have sublimits per claim
in the general liability coverage.
Note 5 - Refinancing of Subordinated Debt
- -----------------------------------------
On April 4, 1996, the Company retired existing $6 million subordinated
debentures, that bore interest at 14%, with the proceeds of a second term loan
whose principal amount was originally $6 million. The second term loan bears
interest at 8% and requires quarterly principal payments to be made through
September 1, 2000 at which time the remaining balance of $1,190,000 is due.
Note 6 - Business Acquisitions
- ------------------------------
Pursuant to an acquisition agreement dated February 2, 1996, the Company
acquired all the assets of four Virginia corporations, each of which operates a
learning center in Virginia. The purchase price consisted of (i) $3,200,000 in
cash, and (ii) a five-year note in the principal amount of $336,680 bearing
interest at the rate of 7% per annum. The agreement will also require the
Company to pay an earn out, based on the results of the four centers for the
twelve month period following the closing date. The Company also entered into a
five year non-compete agreement that requires monthly
6
<PAGE>
payments of $1,667 through February, 2001. Also on February 2, 1996, the
assets of a fifth Virginia learning center for 96,192 shares of the Company's
common stock (valued at $1,500,000 for financial statement purposes). In
addition, the Company will be required to pay a formula based earn out should
profits exceed an agreed upon goal. As a result of the combined transactions the
Company recorded goodwill in the amount of approximately $4,935,000, which will
be amortized over forty years.
Unaudited Pro Forma Information:
- -------------------------------
The operating results of the Virginia acquisition are included in the company's
consolidated results of operations form the date of acquisition. The following
pro forma financial information assumes the acquisition occurred at the
beginning of each year. These results have been prepared for comparative
purposes only and do not purport to be indicative of what would have occurred
had the acquisitions been made at the beginning of 1996, or of the results which
may occur in the future.
Pro Forma Financials
- --------------------
<TABLE>
<CAPTION>
3 MONTHS ENDED 3 MONTHS ENDED 6 MONTHS ENDED 6 MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES $14,920,744 $11,198,779 $29,700,431 $21,549,238
NET INCOME
BEFORE DIVIDENDS 734,187 2,444,717 1,675,266 3,363,457
DIVIDENDS 38,826 49,686 77,652 99,372
EARNINGS PER SHARE
PRIMARY $ 0.10 $ 0.56 $ 0.24 $ 0.77
FULLY DILUTED $ 0.10 $ 0.44 $ 0.23 $ 0.60
</TABLE>
7
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
- -------
Nobel Education Dynamics, Inc. is in the business of providing affordable,
quality education to over 14,000 children primarily from middle income families
from preschool through the eighth grade. The Company operates 109 for-profit
facilities in eleven states and employs 2,700 people; 2,000 are teachers.
On June 18, 1996 the Company received formal approval to be listed on the NASDAQ
National Market. Prior to this date, Nobel traded on the NASDAQ Small Cap
Market.
Results of Operations
- ---------------------
Revenues increased 42% to $14,920,744 and 46% to $29,489,013 for the three and
six month periods ended June 30, 1996, respectively, as compared to the same
periods in 1995. The increase in net revenues for both the three and six month
periods was due primarily to several acquisitions which occurred throughout 1995
and in February 1996 and to a lesser extent the opening of new schools.
School operating profits increased 22.8% to $2,638,824 and 32.03% to $5,617,256
for the three and six month periods ended June 30, 1996, respectively, as
compared to the same periods in 1995. This dollar increase for both the three
and six month periods was primarily attributable to the acquisitions and to a
lesser extent with the greater profits generated from the Company's revenues for
elementary education. As a percentage of revenue, school operating profit
margins decreased 2.75% to 17.7% and 2.02% to 19.05% for the three and six month
periods ended June 30, 1996 as compared to the comparable period in 1995. The
margin decrease was due to lower margins in the newly acquired schools and the
opening of two new schools in April 1996. The Company recognizes that a period
of time is required to bring both its newly acquired and opened schools to the
operating efficiencies of its existing centers.
General and administrative expenses increased by $277,124 to $1,087,295 and by
$522,927 to $2,118,492 for the three and six month periods ended June 30, 1996
as compared to the same periods ended June 30, 1995 prior to taking into
consideration the one time litigation expense of $500,000 incurred during the
second quarter of 1995. However, as a percentage of revenues and exclusive of
the litigation expense, general and administrative expenses decreased from 7.71%
to 7.29% and from 7.9% to 7.18% for the three and six month periods,
respectively. The dollar increase was primarily attributable to the necessary
increases in the Company's corporate infrastructure to support its revenue
growth and future operations, coupled with increased expenditures in corporate
marketing and the amortization of certain non-compete agreements entered into
subsequent to June 30, 1995. However, the reduction of general and
administrative expenses as a percentage of sales was due to the economies of
scale as the Company continues to grow its revenue base.
Interest expense increased by 14.5% to $476,664 and by 57.7% to $1,107,905 for
the three six month periods ended June 30, 1996 as compared to the same periods
ended June 30, 1995. The
8
<PAGE>
$60,474 increase in interest expense during the three months ended June 30,
1996 was primarily attributable to a $6 million subordinated debt instruments,
which the Company entered into during August 1995, bearing interest at 14%
which was subsequently refinanced on April 5, 1996 bearing interest at 8%.
This increase in debt was partially offset by the retirement of $4.3 million
mortgages relating to certain properties, acquired in May 1995, which were
subsequently sold and leased back in May 1996. The $405,574 increase in
interest expense for the six months ended June 30, 1996 was attributable
to both the $6 million subordinated debt instruments and the real estate
mortgages which were not outstanding for the entire six months ended June
30, 1995.
Other income, which includes interest income, increased by $112,482 and $239,416
for the three and six month period period ended June 30, 1996, respectively.
This increase is attributable to the income earned on the $11.7 million net
proceeds generated from the private placement of one million shares of the
Company's common stock.
Income before income taxes increase 181% to $1,184,144 and 82% to $2,592,884 for
the three and six months ended June 30, 1996, respectively as compared to the
same periods in 1995. For the three months ended June 30, 1996, the increase is
attributable to the elimination, within general and administrative expenses, of
the 1995 non-recurring litigation charge coupled with the additional profits
generated by both the newly acquired schools and those internally developed. For
the six months ended June 30, 1996, the increase is more attributable to the
additional profits generated by both the newly acquired schools and those
internally developed.
Income tax expense increased by $2,405,857 to $449,957 and by $2,697,171 to
$992,271 for the three and six month periods ended June 30, 1996, respectively.
The increase is primarily attributable to the Company's method of accounting
for income taxes in 1995 and the corresponding $2,105,400 credit to income
tax expense recorded in the second quarter of that year. This credit was
based upon the adoption of SFAS 109 in 1992 and the subsequent reduction
of the Company's valuation allowance due to its more recent historical
profitable operating performance and its projections for the future.
Consequently, 1996 is the first year the Company will be in a fully taxable
position and going forward the Company anticipates this trend to continue.
Solely as a result of this one time income tax benefit recorded in 1995, net
income decreased for the three and six month periods ended June 30, 1996 by
69.1% to $734,187 and 48.8% to $1,600,613, respectively, as compared to the
comparable periods in 1995.
As shown below in the table, on a pro forma basis, 1995 income before income
taxes would have been reduced by income taxes of $160,297 and $545,404, for
the three and six month periods ended June 30, 1995, assuming comparable tax
rates in 1995 and 1996, and net income would have increased 180.7% to
$734,187 and 81.9% to $1,600,613 for the three and six month periods ended
June 30, 1996, respectively. This increase is attributable to additional
profits generated by both the newly acquired schools and certain savings
in general and administrative expense.
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
(unaudited) (unaudited)
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income before income taxes $ 1,184,144 $ 421,820 $2,592,884 $ 1,425,185
------------ ---------- ---------- -----------
Income tax expense
(pro forma 1995) 449,957 160,297 992,271 545,404
------------ ---------- ---------- -----------
Net Income
(pro forma 1995) $ 734,187 $ 261,523 $1,600,613 $ 879,781
============= ========== ========== ===========
</TABLE>
10
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company has historically funded its growth and cash needs through its
existing bank borrowings, cash flow from operations and periodically from the
proceeds of various equity private placements. To further fund its growth
strategy of both acquisitions and the development of new schools, the Company
raised net proceeds of $11.7 million through the private placement of one
million shares of the Company's common stock which was completed on March 5,
1996. In addition to utilizing these proceeds to pay down existing debt or for
general working capital purposes.
The Company's existing loan and security agreements consist of a $7,500,000 term
loan, of which $6,900,000 is currently outstanding, and a $7,500,000 line of
credit. The term loan bears interest at 8-1/2% and principal payments are due
quarterly, $200,000 each quarter from December 1, 1995 through September 1,
1996. Thereafter, quarterly payments of $250,000 are due each quarter from
December 1, 1996 through September 1, 1999 and $300,000 each quarter from
December 1, 1999 through June 1, 2000. The revolving line of credit bears
interest at a LIBOR based performance rate and matures September 1, 1998. As of
June 30, 1996, $7.5 million was available to the Company under this line of
credit.
On April 6, 1996, the Company amended its existing loan and security agreements
with its principal lender. As a result of this amendment, the Company entered
into a second term loan in the principal amount of $6 million, and immediately
used the proceeds to retire an existing $6 million subordinated debenture that
bore interest at 14%. The second term loan bears interest at 8% and requires
quarterly principal payments of $200,000 through September 1, 1996. Thereafter,
quarterly principal payments of $280,000 are due through September 1, 1999, at
which time the quarterly payments increase to $350,000 through June 1, 2000 with
the remaining balance due on September 1, 2000.
The Company anticipates that the existing principal credit facilities, cash
generated from operations and the proceeds from the $11.7 private placement will
be sufficient to satisfy its working capital needs and to fund expansion for the
foreseeable future.
Net cash provided by operations was $1,822,619 during the first six months of
1996, compared to $1,864,250 during the same period in 1995. The net cash
provided by operations in the 1996 period reflected the Company's net income for
the period increased by depreciation and amortization and then reduced by the
net changes between all current assets and liabilities. The cash provided by
operations was $1,864,250 during the first six months of 1995 and reflected the
Company's net income adjusted by a $2.1 million income tax credit partially
offset by an increase in accounts payable of approximately $836,000. At June 30,
1996, the Company had working capital of $6,499,943 as compared to negative
working capital of $831,042 as of June 30, 1995. The change in working
capital is primarily attributable to the common stock private placement
as described above.
11
<PAGE>
Part II
-------
Other Information
ITEM 4 SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
A. An annual meeting of the stockholders of the Company was held on June 18,
1996. The total shares eligible to vote on the record date included
5,697,390 shares of Common Stock,1,282,802 shares of Series A preferred
Stock, 2,500,000 shares of Series C Preferred Stock and 1,063,830 shares
of Series D Preferred Stock. Each shares of Series A Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock is convertible into
.2940, 0.25 and 0.25 series of Common Stock, respectively. Each share of
preferred stock is entitled to the number of votes on each matter equal to
the number of full shares of Common stock into which such share of
Preferred Stock is convertible. Accordingly, the total number of votes
entitled to be cast by holders of Common Stock and Preferred Stock at the
meeting equaled 6,965,490.
B. At the meeting:
1. Election of Directors.
---------------------
Eight directors, consisting of the entire Board of Directors of the
Company, were elected for the terms described below:
Directors elected to serve until the 1997 Annual Meeting:
<TABLE>
Votes Number Withheld Total Votes
----- --------------- -----------
<S> <C> <C> <C>
John R.Frock 6,795,289 170,201 6,965,490
Janet Katz 6,795,289 170,201 6,965,490
Eugene E.Monaco 6,795,004 170,486 6,965,490
</TABLE>
Directors elected to serve until the 1998 Annual Meeting:
<TABLE>
Votes Number Withheld Total Votes
----- --------------- -----------
<S> <C> <C> <C>
Morgan Jones 6,795,004 170,486 6,965,490
John Martinson 6,795,869 170,621 6,965,490
</TABLE>
Directors elected to serve until the 1999 Annual Meeting:
<TABLE>
Votes Number Withheld Total Votes
----- --------------- -----------
<S> <C> <C> <C>
Edward Chambers 6,794,939 170,551 6,965,490
A.J.Clegg 6,795,184 170,306 6,965,490
Peter Havens 6,794,904 170,586 6,965,490
</TABLE>
12
<PAGE>
2. Ratification of Independent Auditors.
-------------------------------------
The selection of Coopers & Lybrand as the Company's independent auditors for
fiscal 1996 was approved by the affirmative vote holders of shares representing
a majority of the votes represented by the shares present in person or
represented by proxy at the meeting and entitled to vote thereon, the votes cast
on this proposal are as follows:
<TABLE>
<S> <C>
Voted For 6,773,385
Voted Against ---
Broker Non-Votes 192,105
---------
Total Shares Eligible to Vote on the Record Date 6,965,490
</TABLE>
3. 1995 Stock Incentive Plan for California Residents.
---------------------------------------------------
The adoption of the 1995 Stock Incentive Plan for California Residents was
approved by the affirmative vote of holders of shares representing a majority of
the votes represented by the shares entitled to vote thereon, the votes cast
being as follows:
<TABLE>
<S> <C>
Voted For 5,967,484
Voted Against 103,051
Broker Non-Votes 894,955
---------
Total Shares Eligible to Vote on the Record Date 6,965,490
</TABLE>
4. Amendment of the Company's Amended and Restated Certificate of
--------------------------------------------------------------
Incorporation.
--------------
The approval (a) to amend the Company's Amended and Restated Certificate of
Incorporation to provide (i) for the classification of the Board of Directors
into three classes of directors, and (ii) that a director may be removed only by
the holders of a majority of the shares and only for cause, and (b) to amend the
Company's By-Laws to make certain related changes was approved by the holders of
shares representing a majority of the votes represented by all shares of stock
of the Company, the votes cast being as follows:
<TABLE>
<S> <C>
Voted For 3,678,387
Voted Against 262,773
Broker Non-Votes 3,024,330
---------
Total Shares Eligible to Vote on the Record Date 6,965,490
</TABLE>
5. Amendment of the Company's Amended and Restated Certificate of
--------------------------------------------------------------
Incorporation to add a New Article Eleventh.
--------------------------------------------
The approval to amend the Company's Amended and Restated Certificate of
Incorporation to add a new Article Eleventh to the Certificate of Incorporation
that would require all
13
<PAGE>
stockholder action to be taken at a stockholder's meeting was approved by
holders of shares representing a majority of the votes represented by all shares
of stock of the Company, the votes cast being as follows:
<TABLE>
<S> <C>
Voted For 3,861,371
Voted Against 164,531
Broker Non-Votes 2,939,588
---------
Total Shares Eligible to Vote on the Record Date 6,965,490
</TABLE>
6. Amendment of the Company's Amended and Restated Certificate of
--------------------------------------------------------------
Incorporation to add a New Article Twelfth.
-------------------------------------------
The approval to amend the Company's Amended and Restated Certificate Twelfth to
the Certificate of Incorporation that would establish procedures with respect to
the nomination of persons for election as director was approved by holders of
shares representing a majority of the votes represented by all shares of stock
of the Company, the votes cast being as follows:
<TABLE>
<S> <C>
Voted For 3,950,874
Voted Against 160,117
Broker Non-Votes 2,854,499
---------
Total Shares Eligible to Vote on the Record Date 6,965,490
</TABLE>
7. Amendment of the Company's Amended and Restated Certificate of
--------------------------------------------------------------
Incorporation to add a New Article Thirteenth.
----------------------------------------------
The approval to amend the Company's Amended and Restated Certificate of
Incorporation to add a new Article Thirteenth to the Certificate of
Incorporation that would establish procedures with respect to the making of
substantive motions by stockholders at an annual or special meeting of
stockholders was approved by holders of shares representing a majority of the
votes represented by all shares of stock of the Company, the votes cast being as
follows:
<TABLE>
<S> <C>
Voted For 3,788,384
Voted Against 163,193
Broker Non-Votes 3,013,913
---------
Total Shares Eligible to Vote on the Record Date 6,965,490
</TABLE>
8. Amendment of the Company's Amended and Restated Certificate of
--------------------------------------------------------------
Incorporation to add a New Article Fourteenth.
----------------------------------------------
The approval to amend the Company's Amended and Restated Certificate of
Incorporation to add a new Article Fourteenth to the Certificate of
Incorporation that would require a two-thirds stockholder vote to amend or
repeal certain provisions of the Certificate of Incorporation approved by
holders of shares representing a majority of the votes represented by all shares
of stock of the Company, the votes cast being as follows:
14
<PAGE>
<TABLE>
<S> <C>
Voted For 4,592,001
Voted Against 315,293
Broker Non-Votes 2,058,196
---------
Total Shares Eligible to Vote on the Record Date 6,965,490
</TABLE>
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS REQUIRED TO BE FILED BY ITEM 601 REGULATION S-K.
Exhibit
Number Description of Exhibit
3.1 Certificate of Amendment of Certificate of Incorporation of registrant
filed on July 23, 1996
3.2 Certificate of Incorporation of Registrant, as amended.
3.3 Amended to Bylaws of Registrant adopted on June 18, 1996.
3.4 Bylaws of the Registrant, as amended.
4.1 Second Amendment and Modification dated April 4, 1996 and Third
Amendment and Modification dated July 2, 1996 to the Loan and Security
Agreement dated August 30, 1995 among the Registrant, certain
subsidiaries of the Registrant and First Valley Bank.
11 Statement re computation of per share earnings.
27 Financial Data Schedule.
(B) REPORTS ON FORM 8-K.
On April 15, 1996, the Company filed a Form 8-K/A (Amendment No. 1 to its
Current Report on Form 8-K (date of earliest event reported February 2, 1996).
Such amendment included the financial statements of Schools Out, Inc. and
Affiliates for the year ended December 31, 1995, and Pro Forma Combined
Statements of Operations of Registrant and Schools Out, Inc. and
Affiliates for the year ended December 31, 1995 (Unaudited).
On May 15, 1996, the Company filed a Form 8-K/A (Amendment No.3 to its
Current Report on Form 8-K (date of earliest event reported September 1, 1995).
Such amendment included the balance sheet and income statement for Educo, Inc.
for the years ended August 31, 1995 and 1994.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOBEL EDUCATION DYNAMICS, INC.
Dated: August 12, 1996 By:___________________________________
A.J. Clegg
Chairman
Dated: August 12, 1996 By:___________________________________
Richard C. Altus
Chief Financial Officer
16
<PAGE>
EXHIBITS
Exhibit
Number Description of Exhibit
3.1 Certificate of Amendment of Certificate of Incorporation of
Registrant filed on July 23, 1996.
3.2 Certificate of Incorporation of Registrant, as amended.
3.3 Amended to Bylaws of Registrant adopted on June 18, 1996.
3.4 Bylaws of the Registrant, as amended.
4.1 Second Amendment and Modification dated April 4, 1996 and
Third Amendment and Modification dated July 2, 1996 to the
Loan and Security Agreement dated August 30, 1995 among
the Registrant, certain subsidiaries of the Registrant and
First Valley Bank.
11 Statement re computation of per share earnings.
27 Financial Data Schedule.
17
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NOBEL EDUCATION DYNAMICS, INC.
______________________________
NOBEL EDUCATION DYNAMICS, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"CORPORATION"), does hereby certify:
FIRST: That the board of directors of the Corporation, by the unanimous
written consent of its members executed in accordance with
Section 141(f) of the General Corporation Law of the State of
Delaware and filed with the minutes of the board of directors,
adopted resolutions setting forth proposed amendments to the
Certificate of Incorporation of the Corporation, declaring said
amendments to be advisable and calling for consideration of said
proposed amendments by the stockholders of the Corporation. The
resolutions setting forth the amendments are attached hereto as
Exhibit A.
SECOND: That thereafter, pursuant to the resolutions of the board of
directors, each of the proposed amendments was approved by the
stockholders of the Corporation at the 1996 Annual Meeting of
Stockholders held on June 18, 1996.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by A. J. Clegg, its Chairman and President, and attested by Yvonne
DeAngelo, its Secretary, this 17th day of July, 1996.
NOBEL EDUCATION DYNAMICS, INC.
By:_____________________________
A. J. Clegg
Chairman and President
Attest:
____________________________
Yvonne DeAngelo
Secretary
<PAGE>
EXHIBIT A
AMENDMENT OF ARTICLE EIGHTH
- ---------------------------
Resolved, that the Restated Certificate of Incorporation of the
Corporation, as amended, be further amended by the deletion of existing Article
Eighth and the substitution of the following text, so that Article Eighth shall
be and read in its entirety as follows:
"EIGHTH:
1. The directors of the Corporation shall be elected at the annual
meeting of stockholders, except as provided in Section 3 of this Article Eighth.
The directors shall be divided into three (3) classes, as nearly equal in number
as possible, designated Class I, Class II and Class III. Class I directors shall
initially serve until the 1997 annual meeting of stockholders; Class II
directors shall initially serve until the 1998 annual meeting of stockholders;
and Class III directors shall initially serve until the 1999 annual meeting of
stockholders. At each annual meeting of stockholders beginning with the 1997
annual meeting, successors to the class of directors whose term expires at that
annual meeting shall be elected for a term expiring at the third succeeding
annual meeting of stockholders after their election. Except as otherwise
provided by law, if the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible. In no case shall a decrease in the
number of directors shorten the term of any incumbent director. Notwithstanding
the foregoing, whenever the holders of any one or more classes or series of
preferred stock of the Corporation shall have the right to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies, and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation applicable thereto, or the resolution
or resolutions of the Board of Directors relating to the issuance of such shares
of preferred stock, and such directors so elected shall not be divided into
classes pursuant to this Article Eighth unless expressly provided by such terms
or such resolution or resolutions.
2. A director shall hold office until the annual meeting of
stockholders for the year in which his or her term expires and until his or her
successor shall be elected. Directors may be removed only by the holders of at
least a majority of the outstanding Common Stock and only for cause at a meeting
called for such purpose. Except as may otherwise be provided by law, cause for
removal shall be construed to exist only if (i) the director whose removal is
proposed has been convicted of a felony by a court of competent jurisdiction and
the conviction is no longer subject to direct appeal, (ii) the director has been
adjudged by a court of competent jurisdiction to be liable for negligence or
misconduct in the performance of his or her duty to the corporation in a matter
of substantial importance to the Corporation and the adjudication is no longer
subject to direct appeal or (iii) any other situation exists which at least
eighty percent (80%) of the other directors, in their sole discretion, agree
constitutes cause for removal.
3. If any vacancy occurs on the Board of Directors or any new
directorship is created by an increase in the authorized number of directors, a
majority of the directors in office, though less than a quorum, may fill the
vacancy or fill the newly created directorship. Any director elected to fill a
vacancy shall have the same term as that of his or her predecessor, or, if
<PAGE>
such vacancy is a result of an increase in the number of directors, as that of
the other directors of the class of which he or she shall be a member.
4. Notwithstanding any other provision of this Certificate of
Incorporation or the Bylaws of the Corporation (and in addition to any other
vote that may be required by law, the Certificate of Incorporation or the Bylaws
of the Corporation), the affirmative vote of the holders of shares entitled to
cast at least two-thirds of the votes represented by the shares of all classes
of stock of the Corporation entitled to vote generally in elections of
directors, considered for purposes of this Article EIGHTH as one class, shall be
required to amend, alter, change, repeal or adopt any provision inconsistent
with this Article EIGHTH.
ADDITION OF NEW ARTICLE ELEVENTH
- --------------------------------
Resolved, that the Restated Certificate of Incorporation of the
Corporation, as amended, be further amended by the addition of a new Article
Eleventh which shall be and read in its entirety as follows:
ELEVENTH: Subject to the special rights, if any, of the holders of any
class or series of preferred stock established in or pursuant to the provisions
of the Certificate of Incorporation, any action required or permitted to be
taken by the stockholders of the Corporation must be effected at a duly called
annual or special meeting of such holders and may not be effected by any consent
in writing by such holders.
ADDITION OF NEW ARTICLE TWELFTH
- -------------------------------
RESOLVED, that the Restated Certificate of Incorporation of the
Corporation, as amended, be further amended by the addition of a new Article
Twelfth which shall be and read in its entirety as follows:
TWELFTH: Nominations for the Board.
1. Subject to the special rights, if any, of the holders of any
class or series of preferred stock then outstanding, nominations for the
election of directors may be made by the Board of Directors or a committee
appointed by the Board of Directors or by a stockholder entitled to vote in the
election of directors. However, a stockholder entitled to vote in the election
of directors may make such a nomination only if such stockholder has given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to, or mailed by United States
mail, postage prepaid and received at, the principal executive offices of the
Corporation (a) with respect to an election to be held at an annual meeting of
stockholders, not later than seventy-five (75) days prior to the first
anniversary of the preceding year's annual meeting (or, if the date of the
annual meeting is changed by more than twenty (20) days from such anniversary
date, not later than ten (10) days after the date the Corporation first mails to
stockholders of the Corporation notice of the date of the annual meeting), and
(b) with respect to an election to be held at a special meeting of stockholders
called for that purpose, not
2
<PAGE>
later than ten (10) days after the date the Corporation first mails to
stockholders of the Corporation notice of the date of the special meeting.
2. Each stockholder's notice of intent to make a nomination must set
forth: (a) the name(s) and address(es) of the stockholder who intends to make
the nomination; (b) a representation that the stockholder (i) is a holder of
record of stock of the Corporation entitled to vote at such meeting, (ii) will
continue to hold such stock through the date on which the meeting is held, and
(iii) intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) the name, age, business and
residence address(es) and principal occupation or employment of each nominee;
(d) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination is to be made by the stockholder; (e) such
other information regarding each nominee proposed by such stockholder as would
be required to be included in a proxy statement filed pursuant to Regulation 14A
promulgated under Section 14 of the Securities Exchange Act of 1934, as amended,
as now in effect or hereafter modified, had the nominee been nominated by the
Board of Directors; and (f) the consent of each nominee to serve as a director
of the Corporation if so elected. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the qualifications of such person to serve as a
director.
3. The presiding officer of the stockholders' meeting shall
determine and declare at the stockholders' meeting whether the nomination was
made in accordance with the terms of this Article Twelfth. If the presiding
officer determines that a stockholder proposal was not made in accordance with
the terms of this Article Twelfth, he or she shall so declare at the
stockholders' meeting and any such defective nomination shall be disregarded.
ADDITION OF NEW ARTICLE THIRTEENTH
- ----------------------------------
Resolved, that the Restated Certificate of Incorporation of the
Corporation, as amended, be further amended by the addition of a new Article
Thirteenth which shall be and read in its entirety as follows:
THIRTEENTH: Proposals.
1. At an annual or special meeting of stockholders (other than a
special meeting called at the written request of stockholders of the Corporation
in accordance with the Corporation's Bylaws) only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been
brought before the meeting (a) by, or at the direction of, a majority of the
directors, or (b) by any stockholder the Corporation who complies with the
notice procedures set forth in this Article Thirteenth. For a proposal to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered to, or mailed by United
States mail, postage prepaid and received at, the principal executive offices of
the
3
<PAGE>
Corporation (i) with respect to a proposal to be considered at an annual meeting
of stockholders, not later than seventy-five (75) days prior to the first
anniversary of the preceding year's annual meeting (or, if the date of the
annual meeting is changed by more than twenty (20) days from such anniversary
date, not later than ten (10) days after the date the Corporation first mails to
stockholders of the Corporation notice of the date of the annual meeting), and
(ii) with respect to a proposal to be considered at a special meeting of
stockholders, not later than ten (10) days after the date the Corporation first
mails to stockholders of the Corporation notice of the date of the special
meeting.
2. A stockholder's notice to the Secretary must set forth as to each
proposal the stockholder desires to bring before the stockholders' meeting (a) a
brief description of such proposal and the reasons supporting such proposal, (b)
a representation that the stockholder (i) is a holder of record of stock of the
Corporation entitled to vote at such meeting, (ii) will continue to hold such
stock through the date on which the meeting is held, (iii) intends to appear in
person or by proxy at the meeting to make such proposal, and (c) any financial
interest of the stockholder in such proposal.
3. The presiding officer of the stockholders' meeting shall determine
and declare at the stockholders' meeting whether the stockholder proposal was
made in accordance with the terms of this Article Thirteenth. If the presiding
officer determines that a stockholder proposal was not made in accordance with
the terms of this Article Thirteenth, he or she shall so declare at the
stockholders' meeting and any such proposal shall not be acted upon at the
stockholder's meeting.
ADDITION OF NEW ARTICLE FOURTEENTH
- ----------------------------------
Resolved, that the Restated Certificate of Incorporation of the
Corporation, as amended, be further amended by the addition of a new Article
Fourteenth which shall be and read in its entirety as follows:
"FOURTEENTH: Notwithstanding any other provision of this Certificate
of Incorporation or the Bylaws of the Corporation (and in addition to any other
vote that may be required by law, the Certificate of Incorporation or the Bylaws
of the Corporation), the affirmative vote of the holders of shares entitled to
cast at least two-thirds of the votes represented by the shares of all classes
of stock of the Corporation entitled to vote generally in elections of
directors, considered for purposes of this Article FOURTEENTH as one class,
shall be required to amend, alter, change, repeal or adopt any provision
inconsistent with Article TENTH, ELEVENTH, TWELFTH, THIRTEENTH or this Article
FOURTEENTH.
4
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NOBEL EDUCATION DYNAMICS, INC.
FIRST: The name of the Corporation is Nobel Education Dynamics, Inc.
SECOND: The address of the Corporation's registered office in the State of
Delaware is the Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware 19801. The name of the Corporation's registered agent at such address
is Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The amount of total authorized capital stock of the Corporation is
Sixty Million (60,000,000) shares, divided into Fifty Million (50,000,000)
shares of Common Stock, par value $.001 per share, and Ten Million (10,000,000)
shares of undesignated Preferred Stock, par value $.001 per share.
No stockholder shall have any preemptive right to subscribe to or
purchase any issue of stock or other securities of the Corporation, or any
treasury stock or other treasury securities.
The powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights are as follows:
PART 1
UNDESIGNATED PREFERRED STOCK
1. Issuance in Series. Shares of Preferred Stock may be issued in
------------------
one or more series at such time or times, and for such consideration or
considerations as the Board of Directors may determine. All shares of any one
series of any such Preferred Stock will be identical with each other in all
respects, except that shares of one series issued at different times may differ
as to dates from which dividends thereon may be cumulative. All series will rank
equally and be identical in all respects, except as permitted by the following
provisions of Section 2.
2. Authority of the Board with Respect to Series. The Board of
---------------------------------------------
Directors is authorized at any time and from time to time, subject to
limitations prescribed by law and the provisions of this Article FOURTH, to
provide for the issuance of shares of Preferred Stock in one or more series and
by filing a certificate pursuant to the applicable law of the State of
<PAGE>
Delaware to establish the number of shares to be included in each such series,
and to fix the powers, designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof as are stated and expressed in the resolution or resolutions providing
for the issue thereof adopted by the Board of Directors, and as are not stated
and expressed in the Certificate of Incorporation including, but not limited to,
determination of any of the following:
(a) the distinctive serial designation and the number of shares
constituting a series;
(b) the dividend rate or rates of the shares of a series, whether
dividends are cumulative and, if so, from which date, the payment date or dates
for dividends, the relative rights of priority, if any, and the participating or
other special rights, if any, with respect to dividends;
(c) the voting powers, full or limited, if any, of the shares of the
series;
(d) whether the shares of the series are redeemable and, if so, the
terms and conditions on which the shares may be redeemed, including the date or
dates upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different conditions
and at different redemption dates;
(e) the amount or amounts pa yable upon the shares of a series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation prior to any payment or distribution of the assets of the
Corporation to any other class or series of the same or any other class or
classes of stock of the Corporation ranking junior to that series of Preferred
Stock;
(f) whether the shares of a series are entitled to the benefit of a
sinking or retirement fund to be applied to the purchase or redemption of shares
of that series and, if so entitled, the amount of the fund and the manner of its
application, including the price or prices at which the shares may be redeemed
or purchased through the application of the fund;
(g) whether the shares of a series are convertible into, or
exchangeable for, shares of any other class or series of the same or any other
class or classes of stock of the Corporation and, if so convertible or
exchangeable, the conversion price or prices, or the rates of exchange, and the
adjustments thereof, if any, at which the conversion or exchange may be made,
and any other terms and conditions of the conversion or exchange; and
(h) any other preferences, privileges and powers, and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions of a series, as the Board of Directors may deem advisable and as
are not inconsistent with the provisions of this Certificate of Incorporation.
2
<PAGE>
3. Dividends. Before any dividends on any class or classes of stock
---------
of the Corporation ranking junior to the Preferred Stock (other than dividends
payable in shares of any class or classes of stock of the Corporation ranking
junior to the Preferred Stock) may be declared or paid or set apart for payment,
the holders of shares of Preferred Stock of each series are entitled to such
cash dividends, but only when and as declared by the Board of Directors out of
funds legally available therefor, as they may be entitled to in accordance with
the resolution or resolutions adopted by the Board of Directors providing for
the issue of the series, payable on such dates in each year as may be fixed in
the resolution or resolutions. The term "class or classes of stock of the
Corporation ranking junior to the Preferred Stock" means the Common Stock and
any other class or classes of stock of the Corporation hereafter authorized
which rank junior to the Preferred Stock as to dividends or upon liquidation,
dissolution or winding up of the Corporation.
4. Reacquired Shares. Shares of Preferred Stock which have been
-----------------
issued and reacquired in any manner by the Corporation (excluding, until the
Corporation elects to retire them, shares which are held as treasury shares but
including shares redeemed, shares purchased and retired and shares which gave
been converted into shares of Common Stock) will have the status of authorized
and unissued shares of Preferred Stock and may be reissued.
5. Voting Rights. Unless and except to the extent otherwise required
-------------
by law or provided in the resolution or resolutions of the Board of Directors
creating any series of Preferred Stock pursuant to this Part I, the holders of
Preferred Stock shall have no voting power with respect to any matter
whatsoever.
PART II
COMMON STOCK
1. Junior to Preferred Stock. The Common Stock shall rank junior to
-------------------------
the Preferred Stock with respect to payment of dividends and distribution on
liquidation, dissolution or winding up of the Corporation.
2. Voting Rights. Except as expressly provided by law, or as
-------------
otherwise provided in Part I above, all voting rights shall be vested in the
holders of the Common Stock. At each meeting of stockholders of the Corporation,
each holder of Common Stock shall be entitled to one vote for each such share on
each matter to come before the meeting, except as otherwise provided in this
Certificate of Incorporation or by law.
3. Dividends. After all accumulated and unpaid dividends upon all
---------
shares of Preferred Stock for all previous dividend periods shall have been paid
and full dividends on all shares of Preferred Stock for the then current
dividend period shall have been declared and a sum
3
<PAGE>
sufficient for the payment thereof set apart therefor, and after or concurrently
with the setting aside of any and all amounts then or theretofore required to be
set aside for any sinking fund obligation or obligation of a similar nature in
respect of any class or series of Preferred Stock or any other class or series
of stock having preferential dividend rights, then and not otherwise, dividends
may be declared upon and paid to the holders of the Common Stock to the
exclusion of the holders of the Preferred Stock.
4. Rights Upon Liquidation. In the event of voluntary or involuntary
------------------------
liquidation or dissolution or winding up of the Corporation, after payment in
full of amounts, if any, required to be paid to the holders of shares of stock
having preferential liquidation rights, including without limitation the holders
of the Preferred Stock, the holders of the Common Stock shall be entitled, to
the exclusion of the holders of shares of stock having preferential liquidation
rights, including without limitation the holders of the Preferred Stock, to
share ratably in all remaining assets of the Corporation.
FIFTH: In furtherance and not in limitation of the general powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized to make, alter or repeal the By-Laws of the Corporation,
except as specifically stated therein.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of $291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of $279 of Title 8 of the Delaware Code, order
a meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, to be summoned in
such manner as the said Court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the Court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of this Corporation, as the case may be, and also on this
Corporation.
SEVENTH: The term of existence of the Corporation shall be perpetual.
EIGHTH:
1. The directors of the Corporation shall be elected at the annual
meeting of stockholders, except as provided in Section 3 of this Article Eighth.
The directors shall be
4
<PAGE>
divided into three (3) classes, as nearly equal in number as possible,
designated Class I, Class II and Class III. Class I directors shall initially
serve until the 1997 annual meeting of stockholders; Class II directors shall
initially serve until the 1998 annual meeting of stockholders; and Class III
directors shall initially serve until the 1999 annual meeting of stockholders.
At each annual meeting of stockholders beginning with the 1997 annual meeting,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a term expiring at the third succeeding annual meeting of
stockholders after their election. Except as otherwise provided by law, if the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible. In no case shall a decrease in the number of
directors shorten the term of any incumbent director. Notwithstanding the
foregoing, whenever the holders of any one or more classes or series of
preferred stock of the Corporation shall have the right to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies, and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation applicable thereto, or the resolution
or resolutions of the Board of Directors relating to the issuance of such shares
of preferred stock, and such directors so elected shall not be divided into
classes pursuant to this Article Eighth unless expressly provided by such terms
or such resolution or resolutions.
2. A director shall hold office until the annual meeting of
stockholders for the year in which his or her term expires and until his or her
successor shall be elected. Directors may be removed only by the holders of at
least a majority of the outstanding Common Stock and only for cause at a meeting
called for such purpose. Except as may otherwise be provided by law, cause for
removal shall be construed to exist only if (i) the director whose removal is
proposed has been convicted of a felony by a court of competent jurisdiction and
the conviction is no longer subject to direct appeal, (ii) the director has been
adjudged by a court of competent jurisdiction to be liable for negligence or
misconduct in the performance of his or her duty to the corporation in a matter
of substantial importance to the Corporation and the adjudication is no longer
subject to direct appeal or (iii) any other situation exists which at least
eighty percent (80%) of the other directors, in their sole discretion, agree
constitutes cause for removal.
3. If any vacancy occurs on the Board of Directors or any new
directorship is created by an increase in the authorized number of directors, a
majority of the directors in office, though less than a quorum, may fill the
vacancy or fill the newly created directorship. Any director elected to fill a
vacancy shall have the same term as that of his or her predecessor, or, if such
vacancy is a result of an increase in the number of directors, as that of the
other directors of the class of which he or she shall be a member.
4. Notwithstanding any other provision of this Certificate of
Incorporation or the Bylaws of the Corporation (and in addition to any other
vote that may be required by law, the Certificate of Incorporation or the Bylaws
of the Corporation), the affirmative vote of the holders of shares entitled to
cast at least two-thirds of the votes represented by the shares of
5
<PAGE>
all classes of stock of the Corporation entitled to vote generally in elections
of directors, considered for purposes of this Article EIGHTH as one class, shall
be required to amend, alter, change, repeal or adopt any provision inconsistent
with this Article EIGHTH.
NINTH: The election of directors shall be conducted in the manner
prescribed in the By-Laws of the Corporation and need not be by ballot.
TENTH: A director of the Corporation shall have no personal liability to
the Corporation or to its stockholders for monetary damages for breach of
fiduciary duty as a director except to the extent that Section 102 (b) (7) (or
any successor provision) of the Delaware General Corporation Law, as amended
from time to time, expressly provides that the liability of a director may not
be eliminated or limited.
ELEVENTH: Subject to the special rights, if any, of the holders of any
class or series of preferred stock established in or pursuant to the provisions
of the Certificate of Incorporation, any action required or permitted to be
taken by the stockholders of the Corporation must be effected at a duly called
annual or special meeting of such holders and may not be effected by any consent
in writing by such holders.
TWELFTH: Nominations for the Board.
1. Subject to the special rights, if any, of the holders of any class
or series of preferred stock then outstanding, nominations for the election of
directors may be made by the Board of Directors or a committee appointed by the
Board of Directors or by a stockholder entitled to vote in the election of
directors. However, a stockholder entitled to vote in the election of directors
may make such a nomination only if such stockholder has given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to, or mailed by United States mail,
postage prepaid and received at, the principal executive offices of the
Corporation (a) with respect to an election to be held at an annual meeting of
stockholders, not later than seventy-five (75) days prior to the first
anniversary of the preceding year's annual meeting (or, if the date of the
annual meeting is changed by more than twenty (20) days from such anniversary
date, not later than ten (10) days after the date the Corporation first mails to
stockholders of the Corporation notice of the date of the annual meeting), and
(b) with respect to an election to be held at a special meeting of stockholders
called for that purpose, not later than ten (10) days after the date the
Corporation first mails to stockholders of the Corporation notice of the date of
the special meeting.
2. Each stockholder's notice of intent to make a nomination must set
forth: (a) the name(s) and address(es) of the stockholder who intends to make
the nomination; (b) a representation that the stockholder (i) is a holder of
record of stock of the Corporation entitled to vote at such meeting, (ii) will
continue to hold such stock through the date on which the meeting is held, and
(iii) intends to appear in person or by proxy at the meeting to nominate
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<PAGE>
the person or persons specified in the notice; (c) the name, age, business and
residence address(es) and principal occupation or employment of each nominee;
(d) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination is to be made by the stockholder; (e) such
other information regarding each nominee proposed by such stockholder as would
be required to be included in a proxy statement filed pursuant to Regulation 14A
promulgated under Section 14 of the Securities Exchange Act of 1934, as amended,
as now in effect or hereafter modified, had the nominee been nominated by the
Board of Directors; and (f) the consent of each nominee to serve as a director
of the Corporation if so elected. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the qualifications of such person to serve as a
director.
3. The presiding officer of the stockholders' meeting shall determine
and declare at the stockholders' meeting whether the nomination was made in
accordance with the terms of this Article Twelfth. If the presiding officer
determines that a stockholder proposal was not made in accordance with the terms
of this Article Twelfth, he or she shall so declare at the stockholders' meeting
and any such defective nomination shall be disregarded.
THIRTEENTH: Proposals.
1. At an annual or special meeting of stockholders (other than a special
meeting called at the written request of stockholders of the Corporation in
accordance with the Corporation's Bylaws) only such business shall be conducted,
and only such proposals shall be acted upon, as shall have been brought before
the meeting (a) by, or at the direction of, a majority of the directors, or (b)
by any stockholder the Corporation who complies with the notice procedures set
forth in this Article Thirteenth. For a proposal to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to, or mailed by United States mail,
postage prepaid and received at, the principal executive offices of the
Corporation (i) with respect to a proposal to be considered at an annual meeting
of stockholders, not later than seventy-five (75) days prior to the first
anniversary of the preceding year's annual meeting (or, if the date of the
annual meeting is changed by more than twenty (20) days from such anniversary
date, not later than ten (10) days after the date the Corporation first mails to
stockholders of the Corporation notice of the date of the annual meeting), and
(ii) with respect to a proposal to be considered at a special meeting of
stockholders, not later than ten (10) days after the date the Corporation first
mails to stockholders of the Corporation notice of the date of the special
meeting.
2. A stockholder's notice to the Secretary must set forth as to each
proposal the stockholder desires to bring before the stockholders' meeting (a) a
brief description of such proposal and the reasons supporting such proposal, (b)
a representation that the stockholder (i) is a holder of record of stock of the
Corporation entitled to vote at such meeting, (ii) will
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<PAGE>
continue to hold such stock through the date on which the meeting is held, (iii)
intends to appear in person or by proxy at the meeting to make such proposal,
and (c) any financial interest of the stockholder in such proposal.
3. The presiding officer of the stockholders' meeting shall determine and
declare at the stockholders' meeting whether the stockholder proposal was made
in accordance with the terms of this Article Thirteenth. If the presiding
officer determines that a stockholder proposal was not made in accordance with
the terms of this Article Thirteenth, he or she shall so declare at the
stockholders' meeting and any such proposal shall not be acted upon at the
stockholder's meeting.
FOURTEENTH: Notwithstanding any other provision of this Certificate of
Incorporation or the Bylaws of the Corporation (and in addition to any other
vote that may be required by law, the Certificate of Incorporation or the Bylaws
of the Corporation), the affirmative vote of the holders of shares entitled to
cast at least two-thirds of the votes represented by the shares of all classes
of stock of the Corporation entitled to vote generally in elections of
directors, considered for purposes of this Article FOURTEENTH as one class,
shall be required to amend, alter, change, repeal or adopt any provision
inconsistent with Article TENTH, ELEVENTH, TWELFTH, THIRTEENTH or this Article
FOURTEENTH.
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AMENDMENTS OF BYLAWS OF NOBEL EDUCATION DYNAMICS, INC.
ADOPTED ON JUNE 18, 1996
Resolved, that the Bylaws of the Corporation, as amended, be further
amended by the deletion of the final sentence of Section 2.01, and the
substitution of new text, so that Section 2.01 shall be and read in its entirety
as follows:
Section 2.01. Number and Term of Office. The number of directors of the
-------------------------
Corporation shall be fixed by the Board of Directors but in no event shall be
less than three, or more than nine. If no number is fixed by the Board, the
number of directors shall be three. Directors shall hold office as provided in
Article Eighth of the CompanyAEs Certificate of Incorporation.
Resolved, that the Bylaws of the Corporation, as amended, be further
amended by the deletion of existing Section 6.01, and the substitution of the
following text, so that Section 6.01 shall be and read in its entirety as
follows:
Section 6.01. By Stockholders or Directors. These Bylaws may be amended
----------------------------
or repealed at any regular meeting of the stockholders or directors, or at any
special meeting thereof if notice of such amendment or repeal be contained in
the notice of such special meeting; provided that Sectiona2.01 and this Section
6.01 of these Bylaws may only be amended by (i) the directors of the Corporation
or (ii)aby the affirmative vote of the holders of shares entitled to cast at
least two-thirds of the votes represented by the shares of all classes of stock
of the Corporation entitled to vote generally in elections of directors,
considered for purposes of this Section 6.01 as one class.
<PAGE>
BY-LAWS
(AS AMENDED JUNE 18, 1996)
OF
NOBEL EDUCATION DYNAMICS, INC..
(A DELAWARE CORPORATION)
Article 1. MEETING OF STOCKHOLDERS
Section 1.01. Place, Date and Time of Meeting. Meetings of the
-------------------------------
stockholders of the Corporation shall be held at such place, date and time as
may be fixed by the Board of Directors. If no place is so fixed, they shall be
held at the office of the Corporation in Cherry Hill, New Jersey.
Section 1.02. Annual Meeting. The annual meeting of stockholders, for the
--------------
election of directors and the transaction of any other business which may be
brought before the meeting, shall, unless the Board of Directors shall determine
otherwise, be held at 1:00 PM on the 25th day of June of each year, if not a
legal holiday under the laws of the State of Delaware and, if a legal holiday,
then on the next secular day following.
Section 1.03. Special Meetings. Special Meetings of the stockholders, for
----------------
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation may be called by the President and shall be called
by the President or Secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of the holders of a majority of
the entire capital stock of the Corporation issued and outstanding and entitled
to vote. Any such request shall state the purpose or purposes of the proposed
meeting.
Section 1.04. Organization. At every meeting of the stockholders, the
------------
President, or in his absence, a Vice President, or in the absence of the
President and all the Vice Presidents, a chairman chosen by the stockholders,
shall act as chairman; and the Secretary, or in his absence, a person appointed
by the chairman, shall act as Secretary.
Section 1.05. Quorum; Voting. Except as otherwise specified herein or in
--------------
the Certificate of Incorporation or provided by law, (a) a quorum shall consist
of the holders of a majority of the stock issued and outstanding and entitled to
vote, and (b) when a quorum is present, all matters shall be decided by the vote
of the holders of a majority of the stock having power present in person or by
proxy.
In each election of directors, the candidate receiving the highest number
of votes, up to the number of directors to be elected in such election, shall be
elected.
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Article 2. DIRECTORS
Section 2.01. Number and Term of Office. The number of directors of the
-------------------------
Corporation shall be fixed by the Board of Directors but in no event shall be
less than three, or more than nine. If no number is fixed by the Board, the
number of directors shall be three. Directors shall hold office as provided in
Article Eighth of the Company's Certificate of Incorporation.
Section 2.02. Resignations. Any director may resign at any time by giving
------------
written notice to the Board of Directors, to the President, or to the Secretary.
Such resignation shall take effect at the time of the receipt of such notice or
at any later time sp.,ecified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Any vacancy in the Board of Directors, resulting from death, resignation,
increase in the authorized number of directors or otherwise, may be filled for
the unexpired term by a majority vote of the remaining directors in office,
though less than a quorum. If the board of Directors has not acted to fill a
vacancy within 60 days of its occurrence, the Secretary of the Corporation shall
call a special meeting of stockholders for the purpose of filling such vacancy.
Section 2.03. Annual Meeting. Immediately after each annual election of
--------------
directors, the Board of Directors shall meet for the purpose of organization,
election of officers, and the transaction of other business, at the place where
such election of directors was held. Notice of such meeting need not be given.
In the absence of a quorum at said meeting, the same may be held at any other
time and place which shall be specified in a a notice given as hereinafter
provided for special meetings of the Board of Directors.
Section 2.04. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 2.05. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by the President, by a Vice President, or by two or more
of the directors, and shall be held at such time and place a shall be designated
in the call for the meeting.
Notice of each special meeting shall be given by mail, telegram, telephone,
or orally, by or at the direction of the person or persons authorized to call
such meeting, to each director, at least one day prior to the day named for the
meeting.
Section 2.06. Organization. Every meeting of the Board of Directors shall
------------
be presided over by the Chairman of the Board, if one has been selected and is
present, and, if not, the President, or in the absence of the Chairman of the
Board and the President, A Vice President, or in the absence of the Chairman of
the Board, the President and all the Vice Presidents, a chairman chosen by a
majority of the directors present. The Secretary, or in his absence, a person
appointed by the Chairman, shall act as Secretary.
Section 2.07. Quorum; Voting. A majority of the directors in office shall
--------------
constitute a quorum for the transaction of business and the vote of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be
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<PAGE>
otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 2.08. Committees. The Board of Directors may, by resolution
----------
passed by a majority of the entire Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation, which,
to the extent provided in the resolution, shall have and may exercise the powers
of the board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
Section 2.09. Compensation of Directors. Each director shall be entitled
-------------------------
to receive such compensation, if any, as may from time to time be fixed by the
Board. Directors may also be reimbursed by the Corporation for all reasonable
expenses incurred in traveling to and from the place of each meeting of the
Board or any such committee.
Article 3. OFFICERS
Section 3.01. Number. The officers of the Corporation shall be a
------
President, a Secretary, a Treasurer, and may include a Chairman of the Board and
one or more Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers as the Board of Directors may from
time to time determine.
Section 3.02. Election and Term of Office. The officers of the
---------------------------
Corporation shall be elected by the Board of Directors at its annual meeting,
but the Board may elect officers or fill vacancies among the officers at any
other meeting. Subject to earlier termination of office, each officer shall hold
office for one year and until his successor shall have been elected and
qualified.
Section 3.03. Resignations. Any officer may resign at any time by giving
------------
written notice to the Board of Directors, or to the President, or to the
Secretary of the Corporation. Any such resignation shall take effect at the time
of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 3.04. Removal. Any officer elected by the Board of Directors may
-------
be removed at any time by the vote of a majority of the Board of Directors.
Section 3.05. Chairman of the Board. If there is a Chairman of the Board
---------------------
he shall preside at the meetings of the Board. Such Chairman shall also perform
such other duties as may be specified by the Board from time to time and as do
not conflict with the duties of the President.
Section 3.06. The President. The President shall be the chief executive
-------------
officer of the Corporation and shall have general supervision over the business
and operations of the
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Corporation, subject, however, to the control of the Board of Directors. He
shall sign, execute, and acknowledge, in the name of the Corporation, deeds,
mortgages, bonds, contracts, and other instruments authorized by the Board,
except in cases where the signing and execution thereof shall be delegated by
the Board to some other officer or agent of the Corporation; and, in general, he
shall perform all duties incident to the office of President, and such other
duties as from time to time may be assigned to him by the Board.
Section 3.07. The Vice Presidents. In the absence or disability of the
-------------------
President or when so directed by the President, any Vice President designated by
the Board of Directors may perform all the duties of the President, and, when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the President; provided, however, that no Vice President shall act as a
--------
member of or as Chairman of any special committee of which the President is a
member or chairman by designation or ex-officio, except when designated by the
Board. The Vice Presidents shall perform such other duties as from time to time
may be assigned to them respectively by the Board or the President.
Section 3.08. The Secretary. The Secretary shall record all the votes of
-------------
the stockholders and of the directors and the minutes of the meetings of the
stockholders and of the Board of Directors in a book or books to be kept for
that purpose; he shall see that notices of meetings of the stockholders and the
Board are given and that all records and reports are properly kept and filed by
the Corporation as required by law; he shall be the custodian of the seal of the
Corporation and shall see that it is affixed to all documents to be executed on
behalf of the Corporation under its seal; and, in general, he shall perform all
duties incident to the office of Secretary and such other duties as may from
time to time be assigned to him by the Board or the President.
Section 3.09. Assistant Secretaries. In the absence or disability of the
---------------------
Secretary or when so directed by the Secretary, any Assistant Secretary may
perform all the duties of the Secretary, and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the Secretary. The
Assistant Secretaries shall perform such other duties as from time to time may
be assigned to them by the Board of Directors, the President, or the Secretary.
Section 3.10. The Treasurer. The Treasurer shall have charge of all
-------------
receipts and disbursements of the Corporation and shall have or provide for the
custody of its funds and securities; he shall have full authority to receive and
give receipts for all money due and payable to the Corporation, and to endorse
checks, drafts, and warrants in its name and on its behalf and to give full
discharge for the same; he shall deposit all funds of the Corporation, except
such as may be required for current use, in such banks or other places of
deposit as the Board of Directors may from time to time designate; and, in
general, he shall perform all duties incident to the office of Treasurer and
such other duties as may from time to time be assigned to him by the Board or
the President.
Section 3.11 Assistant Treasurers. In the absence or disability of the
--------------------
Treasurer or when so directed by the Treasurer, any Assistant Treasurer may
perform all the duties of the Treasurer, and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the
4
<PAGE>
Treasurer. The Assistant Treasurers shall perform such other duties as from time
to time may be assigned to them respectively by the Board of Directors, the
President or the Treasurer.
Section 3.12 Compensation of Officers and Others. The compensation of all
-----------------------------------
officers shall be fixed from time to time by the Board of Directors, or any
committee or officer authorized by the Board so to do. No officer shall be
precluded from receiving such compensation by reason of the fact he is also a
director of the Corporation.
Article 4. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 4.01. Indemnification. Any person who was or is a party or is
---------------
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was serving while a director or officer of the Corporation
at the request of the Corporation as a director, officer, employee, agent,
fiduciary or other representative of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, shall be indemnified
by the Corporation against expenses (including attorney's fees), judgments,
fines, excise taxes and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding to
the full extent permissible under Delaware law.
Section 4.02. Advances. Any person claiming indemnification within the
--------
scope of Section 4.01 shall be entitled to advances from the Corporation for
payment of the expenses of defending actions against such person in the manner
and to the full extent permissible under Delaware law.
Section 4.03. Procedure. On the request of any person requesting
---------
indemnification under Section 4.01, the Board of Directors or a committee
thereof shall determine whether such indemnification is permissible or such
determination shall be made by independent legal counsel if the Board or
committee so directs or if the Board or committee is not empowered by statute to
make such determination.
Section 4.04. Other Rights. The indemnification and advancement of
------------
expenses provided by this Article 4 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any insurance or other agreement, vote of shareholders or
disinterested directors or otherwise, both as to actions in their official
capacity and as to actions in another capacity while holding an office, and
shall continue as to a person who has ceased to be director or officer and shall
inure to the benefit of the heirs, executors and administrators of such person.
Section 4.05. Insurance. The Corporation shall have power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee, agent, fiduciary or other
representative of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the
5
<PAGE>
Corporation would have the power to indemnify him against such liability under
the provisions of these By-laws.
Section 4.06. Modification. The duties of the Corporation to indemnify
------------
and to advance expenses to a director or officer provided in this Article 4
shall be in the nature of a contract between the Corporation and each such
director or officer, and no amendment or repeal of any provision of this Article
4 shall alter, to the detriment of such director or officer, the right of such
person to the advancement of expenses or indemnification related to a claim
based on an act or failure to act which took place prior to such amendment,
repeal or termination.
Article 5. STOCK CERTIFICATES; TRANSFERS
Section 5.01. Stock Certificates. Stock Certificates shall be issued upon
------------------
the request of any stockholder and shall be signed by the President and the
Chairman of the Board or by the President or a Vice President and by the
Secretary, the Treasurer, or an Assistant Secretary or an Assistant Treasurer of
the Corporation, but, to the extent permitted by law, such signatures may be
facsimiles, engraved or printed.
Section 5.02. Transfer of Stocks. Transfers of stock shall be made only
------------------
on the books of the Corporation by the owner thereof or by his attorney
thereunto authorized.
Section 5.03. Closing of Transfer Books. The Board of Directors may close
-------------------------
the stock transfer books of the Corporation for a period not exceeding fifty
days preceding the date of any meeting of stockholders or the date for payment
of any dividend or other distribution or the date for any allotment of rights or
the date when any change or conversion or exchange of capital stock shall go
into effect or for a period not exceeding fifty days in connection with
obtaining the consent of stockholders for any purpose. In lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date, which shall not be more than sixty or less than ten days before the date
of any meeting of stockholders, nor more than sixty days prior to any other
action, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting, and any adjournment thereof, or
entitled to receive payment of any dividend or other distribution, or any
allotment of rights, or to exercise the rights in respect of any change or
conversion or exchange of capital stock, or to give any consent of stockholders
for any purpose, and in such case such stockholders and only such stockholders
as shall be stockholders of record on the date so fixed shall be entitled to
such notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend or other distribution, or to receive such
allotment of rights, or to exercise such rights, or to give such consent, as the
case may be, notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as aforesaid.
Section 5.04. Registered Stockholders. The Corporation shall be entitled
-----------------------
to recognize the exclusive right of a person registered on its books as the
owner of stock to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of stock, and shall not be bound to recognize any equitable or other claim to or
interest in such stock on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
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<PAGE>
Section 5.05. Transfer Agent and Registrar; Regulations. The Corporation
-----------------------------------------
may, if and whenever the Board of Directors so determines, maintain, in the
State of Delaware, or any other state of the United States, one or more transfer
offices or agencies, each in charge of a Transfer Agent designated by the Board,
where the stock of the Corporation shall be transferable. If the Corporation
maintains one or more such transfer offices or agencies, it also may, if and
whenever the Board of Directors so determines, maintain one or more registry
offices each in charge of a Registrar designated by the Board, where such stock
shall be registered. No certificates for stock of the Corporation in respect of
which a Transfer Agent shall have been designated shall be valid unless
countersigned by such Transfer Agent, and no certificates for stock of the
Corporation in respect of which both a Transfer Agent and a Registrar shall have
been designated shall be valid unless countersigned by such Transfer Agent and
registered by such Registrar. The Board may also make such additional rules and
regulations as it may deem expedient concerning the issue, transfer and
registration of stock certificates.
Section 5.06. Lost, Destroyed and Mutilated Certificates. The Board of
------------------------------------------
Directors, by standing resolution or by resolutions with respect to particular
cases, may authorize the issue of new stock certificates in lieu of stock
certificates lost, destroyed or mutilated, upon such terms and conditions as the
Board may direct.
Article 6. AMENDMENTS
Section 6.01. By Stockholders or Directors. These Bylaws may be amended
----------------------------
or repealed at any regular meeting of the stockholders or directors, or at any
special meeting thereof if notice of such amendment or repeal be contained in
the notice of such special meeting; provided that Section 2.01 and this Section
6.01 of these Bylaws may only be amended by (i) the directors of the Corporation
or (ii) by the affirmative vote of the holders of shares entitled to cast at
least two-thirds of the votes represented by the shares of all classes of stock
of the Corporation entitled to vote generally in elections of directors,
considered for purposes of this Section 6.01 as one class.
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<PAGE>
SECOND AMENDMENT AND MODIFICATION
TO LOAN AND SECURITY AGREEMENT
------------------------------
THIS SECOND AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT (the
"AMENDMENT") is made effective as of the 4th day of April, 1996, by and among
NOBEL EDUCATION DYNAMICS, INC., BLUEGRASS REAL ESTATE COMPANY, INC., IMAGINE
EDUCATIONAL PRODUCTS, INC., CHILDREN'S PARK, INCORPORATED, MERRYHILL SCHOOLS,
INC., ROCKING HORSE MANAGEMENT CORPORATION, EDUCO, INC. (collectively, the
"OBLIGORS") and FIRST VALLEY BANK ("BANK").
BACKGROUND
----------
A. By a Loan and Security Agreement dated August 30, 1995 (as amended by
that certain Amendment and Modification to Loan and Security Agreement dated as
of September 1, 1995, the "LOAN AGREEMENT"), among Obligors and Bank, Bank
agreed, inter alia, to extend to Obligors a (i) revolving line of credit in the
----- ----
principal amount of up to Seven Million Five Hundred Thousand Dollars
($7,500,000.00), and (ii) term loan in the original principal amount of Seven
Million Five Hundred Thousand Dollars ($7,500,000.00).
B. Capitalized terms not otherwise defined herein shall have the meanings
set forth therefor in the Loan Agreement.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. NEW TERM LOAN. Contemporaneously with the execution hereof, Bank will
-------------
lend to Obligors and Obligors will borrow from Bank an amount equal to Six
Million Dollars ($6,000,000.00) (the "NEW TERM LOAN"). Obligors obligation to
repay the New Term Loan shall be evidenced by Obligors' promissory note (the
"NEW TERM NOTE") in the face amount of Six Million Dollars ($6,000,000.00),
which shall be in the form attached hereto as EXHIBIT "A" with the blanks
-----------
appropriately filled in.
2. USE OF PROCEEDS. The proceeds of the New Term Loan shall be used by
---------------
Obligors to pay in full all indebtedness of Obligors to Allied Capital
Corporation, Allied Capital Corporation II, Allied Investment Corporation and
Allied Investment Corporation II.
3. INTEREST RATE ON THE NEW TERM LOAN. Interest on the unpaid principal
----------------------------------
balance of the New Term Loan will accrue from the date of advance until final
payment thereof at a fixed, per annum rate equal to eight percent (8%).
4. 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 New Term Loan
at a per annum rate which is three percent (3%) in excess of the otherwise
applicable non-default rate of interest for the New Term Loan.
<PAGE>
5. PAYMENTS. Principal and interest on the New Term Loan shall be paid
--------
as follows:
(A) INTEREST. Obligors will pay interest in arrears on the principal
--------
balance of the New Term Loan monthly at the applicable rate set forth in SECTION
-------
3 above, on the first day of each calendar month commencing on May 1, 1996.
- -
(B) PRINCIPAL. Obligors will pay the principal balance of the New
---------
Term Loan in:
(I) two (2) installments of Two Hundred Thousand Dollars
($200,000.00) each, on June 1, 1996 and September 1, 1996;
(II) twelve (12) equal and consecutive quarterly installments
of Two Hundred Eighty Thousand Dollars ($280,000.00) each, on the first day of
each calendar quarter commencing on December 1, 1996 and continuing through and
ending September 1, 1999;
(III) three (3) equal and consecutive quarterly installments of
Three Hundred Fifty Thousand Dollars ($350,000.00) each, on the first day of
each calendar quarter commencing on December 1, 1999 and continuing through and
ending June 1, 2000; and
(IV) one (1) final payment of the remaining principal balance
of the New Term Loan, plus all accrued and unpaid interest thereon and all other
sums due and owing in connection therewith on September 1, 2000.
6. FEE. Contemporaneously with the execution hereof, Obligors shall pay
---
to Bank a loan fee for the New Term Loan in an amount equal to Sixty Thousand
Dollars ($60,000.00). Bank may deduct such fee from any deposit account of
Obligors, or any of them, maintained with Bank.
7. LATE CHARGE. In the event that Obligors fail to pay any principal,
-----------
interest or other fees or expenses due in connection with the New Term Loan 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.
8. PREPAYMENT OF THE NEW TERM LOAN. Obligors may prepay all or any part
-------------------------------
of the principal balance of the New 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) 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.
(B) 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.
-2-
<PAGE>
(C) 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.
(D) 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.
(E) 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 permitted under SECTION 6.5
-----------
of the Loan Agreement 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 New Term Loan, Obligors shall not be
required to pay the prepayment premium set forth in this SECTION 8 with respect
---------
to that portion of the New Term Loan (not exceeding One Million Five Hundred
Thousand Dollars ($1,500,000.00) per year) prepaid from such proceeds.
9. PAYMENT METHOD. Obligors irrevocably authorize Bank to debit all
--------------
payments required to be made by Obligors under the New 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.
10. BANK INDEBTEDNESS; COLLATERAL. The sums due Bank under and in
-----------------------------
connection with the New Term Loan shall be deemed to be part of the Bank
Indebtedness and all references in the Loan Agreement and all of the other Loan
Documents to the term "Bank Indebtedness" shall hereinafter be deemed to include
the New Term Loan. All sums due under and in connection with the New Term Loan
shall be secured by all of the Collateral.
11. SUBORDINATED DEBT. Contemporaneously with the execution hereof,
-----------------
Obligors shall deliver to Bank evidence satisfactory to Bank that Obligors have
notified Pennsylvania Blue Shield of the New Term Loan and have confirmed to
Pennsylvania Blue Shield that after the incurrence of the indebtedness under the
New Term Loan, Obligors' debt to equity ratio does not exceed 4.5 to 1.0 and,
therefore, the New Term Loan constitutes "permitted additional senior
indebtedness" under the notes evidencing the Subordinated Indebtedness of
Obligors to Pennsylvania Blue Shield.
12. DEBT SERVICE COVERAGE RATIO. SECTION 14.15 of the Loan Agreement is
--------------------------- -------------
amended to read, in its entirety, as follows:
-3-
<PAGE>
"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 of Obligors for the period being tested, to (b)
the current maturities of Obligors' consolidated long-term
Indebtedness for the period being tested."
13. PAY-OFF LETTER. Contemporaneously with the execution hereof, Obligors
--------------
shall cause to be delivered to Bank a pay-off letter from the applicable Allied
entities referenced in SECTION 2 above, which shall be in form and content
---------
satisfactory to Bank.
14. SCHEDULES. Certain of the Schedules to the Loan Agreement are updated
---------
in accordance with the Schedules attached hereto.
15. ADDITIONAL DOCUMENTS. Obligors covenant and agree to execute and
--------------------
deliver or cause to be executed and delivered to Bank any and all documents,
agreements, corporate resolutions, certificates and opinions as Bank shall
request in connection with the execution and delivery of this Amendment or any
other documents in connection herewith, including, without limitation, the New
Term Note.
16. FURTHER AGREEMENTS AND REPRESENTATIONS. Obligors do hereby:
--------------------------------------
(A) ratify, confirm and acknowledge that the Loan Agreement, as
amended, and the other Loan Documents continue to be and are valid, binding and
in full force and effect;
(B) covenant and agree to perform all obligations of Obligors
contained herein and under the Loan Agreement, as amended, and the other Loan
Documents;
(C) acknowledge and agree that Obligors have no defense, set-off,
counterclaim or challenge against the payment of any sums owing under Loan
Documents, the enforcement of any of the terms of the Loan Agreement, as
amended, or the other Loan Documents;
(D) acknowledge and agree that all representations and warranties of
Obligors contained in the Loan Agreement and/or the other Loan Documents, as
amended, are true, accurate and correct on and as of the date hereof as if made
on and as of the date hereof;
(E) represent and warrant that no Event of Default (as defined in the
Loan Agreement or any of the other Loan Documents) or event which with the
giving of notice or passage of time or both would constitute such an Event of
Default exists and all information described in the foregoing Background is
true, accurate and complete;
(F) acknowledge and agree that nothing contained herein and no
actions taken pursuant to the terms hereof is intended to constitute a novation
of the Loan Agreement or any of the other Loan Documents, and does not
constitute a release, termination or waiver of any of the rights or remedies
granted to the Bank therein, which rights and remedies are hereby ratified,
confirmed,
-4-
<PAGE>
extended and continued as security for the obligations of Obligors to Bank under
the Loan Agreement and the other Loan Documents, including, without limitation,
this Amendment; and
(G) acknowledge and agree that any Obligor's failure to comply with
or perform any of its covenants, agreements or obligations contained in this
Amendment shall constitute an Event of Default under the Loan Agreement and each
of the Loan Documents.
17. COSTS AND EXPENSES. Upon execution of this Amendment, Obligors shall
------------------
pay to Bank, all costs and expenses incurred by Bank in connection with the
review, preparation and negotiation of this Amendment and all documents in
connection therewith, including, without limitation, all of Bank's attorneys'
fees and costs.
18. INCONSISTENCIES. To the extent of any inconsistency between the
---------------
terms, conditions and provisions of this Amendment and the terms, conditions and
provisions of the Loan Agreement or the other Loan Documents, the terms,
conditions and provisions of this Amendment shall prevail. All terms,
conditions and provisions of the Loan Agreement and the other Loan Documents not
inconsistent herewith shall remain in full force and effect and are hereby
ratified and confirmed by Obligors.
19. CONSTRUCTION. All references to the Loan Agreement therein or in
------------
any other Loan Documents shall be deemed to be a reference to the Loan Agreement
as amended hereby.
20. NO WAIVER. Nothing contained herein and no actions taken pursuant to
---------
the terms hereof are intended to nor shall they constitute a waiver by the Bank
of any rights or remedies available to Bank at law or in equity or as provided
in the Loan Agreement or the other Loan Documents.
21. BINDING EFFECT. This Amendment shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective successors and assigns.
22. GOVERNING LAW. This Amendment shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania.
23. HEADINGS. The headings of the sections of this Amendment are inserted
--------
for convenience only and shall not be deemed to constitute a part of this
Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written.
NOBEL EDUCATION DYNAMICS, INC.
By:_________________________________________
John R. Frock, Executive Vice President
-5-
<PAGE>
BLUEGRASS REAL ESTATE COMPANY, INC.
By:___________________________________________
John R. Frock, Executive Vice President
IMAGINE EDUCATIONAL PRODUCTS, INC.
By:___________________________________________
John R. Frock, Executive Vice President
CHILDREN'S PARK, INCORPORATED
By:___________________________________________
John R. Frock, Executive Vice President
MERRYHILL SCHOOLS, INC.
By:___________________________________________
John R. Frock, Executive Vice President
ROCKING HORSE MANAGEMENT CORPORATION
By:___________________________________________
John R. Frock, Executive Vice President
EDUCO, INC.
By:___________________________________________
John R. Frock, Executive Vice President
-6-
<PAGE>
FIRST VALLEY BANK
By:___________________________________________
Brian C. Zwann,
Senior Vice President
-7-
<PAGE>
THIRD AMENDMENT AND MODIFICATION
TO LOAN AND SECURITY AGREEMENT
------------------------------
THIS THIRD AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT (the
"AMENDMENT") is made effective as of the 2nd day of July, 1996, by and among
NOBEL EDUCATION DYNAMICS, INC. ("NOBEL"), BLUEGRASS REAL ESTATE COMPANY, INC.
("BLUEGRASS"), IMAGINE EDUCATIONAL PRODUCTS, INC. ("IMAGINE"), CHILDREN'S PARK,
INCORPORATED ("CHILDREN'S"), MERRYHILL SCHOOLS, INC. ("MERRYHILL"), ROCKING
HORSE MANAGEMENT CORPORATION ("ROCKING"), EDUCO, INC. ("EDUCO"), NEDI, INC.
("NEDI") (collectively, the "OBLIGORS") and FIRST VALLEY BANK ("BANK").
BACKGROUND
----------
A. By a Loan and Security Agreement dated August 30, 1995 (as amended by
those certain amendments dated September 1, 1995 and April 4, 1996, the "LOAN
AGREEMENT"), among Nobel, Bluegrass, Imagine, Children's, Merryhill, Rocking,
Educo (collectively, the "ORIGINAL OBLIGORS") and Bank, Bank agreed, inter alia,
----- ----
to extend to the Original Obligors a (i) revolving Line of Credit in the
principal amount of up to Seven Million Five Hundred Thousand Dollars
($7,500,000.00) (the "LINE"), (ii) term loan in the original principal amount of
Seven Million Five Hundred Thousand Dollars ($7,500,000.00) (the "TERM LOAN")
and (iii) term loan in the original principal amount of Six Million Dollars
($6,000,000.00) (the "NEW TERM LOAN").
B. The Original Obligors' obligations to repay the sums advanced under the
(i) Line is evidenced by that certain Line Note from the Original Obligors to
Bank dated August 30, 1995 in the face amount of Seven Million Five Hundred
Thousand Dollars ($7,500,000.00) (the "LINE NOTE"), and (ii) Term Loan is
evidenced by that certain Term Note from the Original Obligors to Bank dated
August 30, 1995 in the original principal amount of Seven Million Five Hundred
Thousand Dollars ($7,500,000.00) (the "TERM NOTE") and (iii) New Term Loan is
evidenced by that certain New Term Note from the original Obligors to Bank dated
April 14, 1996 in the original principal amount of Six Million Dollars
($6,000,000.00) (the "NEW TERM NOTE").
C. Obligors and Bank desire to further amend the Loan Agreement in
accordance with the terms and conditions hereof.
D. Capitalized terms not otherwise defined herein will have the meanings
set forth therefor in the Loan Agreement.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1
<PAGE>
1. CREATION OF SUBSIDIARY. NEDI, a California corporation, has been
----------------------
created as a wholly owned subsidiary of Nobel. NEDI has been capitalized with a
cash contribution of Fifteen Million Dollars ($15,000,000) from Nobel. NEDI
intends to make a loan to Nobel in the amount of Fifteen Million Dollars
($15,000,000). Bank consents to the creation of NEDI as a wholly owned
subsidiary of Nobel and to the capitalization and inter-company loan referred to
above.
2. ADDITIONAL OBLIGOR. From and after the date hereof, NEDI shall be an
------------------
"Obligor" under the Loan Agreement and shall be bound by all the terms and
conditions thereof. Unless otherwise specifically restated for NEDI hereunder,
all representations, warranties and covenants under the Loan Agreement shall be
deemed to be the representations, warranties and covenants of NEDI as if NEDI
were originally named as an "Obligor" under the Loan Agreement. All references
to Obligors in the Loan Agreement and the other Loan Documents shall hereafter
be deemed a reference to the Original Obligors and NEDI, collectively.
3. SECURITY. As security for the full and timely payment and performance
--------
of all Bank Indebtedness, NEDI hereby grants to Bank a security interest in all
of the following:
(A) All of NEDI'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 NEDI 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 NEDI'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 NEDI'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 NEDI'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
repossessed goods sold, consigned, leased or otherwise furnished by NEDI and all
products and proceeds of any of the foregoing.
(C) All of NEDI'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
2
<PAGE>
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 NEDI'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 NEDI'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 NEDI or any service bureau.
(F) All letters of credit now existing or hereafter issued naming
NEDI as a beneficiary or assigned to NEDI, 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 NEDI or in which NEDI 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 NEDI 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 NEDI in which Bank now has or may at any time hereafter
obtain a lien, mortgage, or security interest for any reason.
(H) All stocks, bonds, treasury securities, commercial paper, mutual
funds and other investments or securities of any nature now or hereafter
acquired by NEDI, and all interest, dividends and other proceeds thereof
(collectively, the "SECURITIES") including, without limitation, all Securities
now or hereafter held for NEDI in an account with Smith Barney, and all
replacements and substitutions thereof.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. NEDI hereby joins in and
-----------------------------------------
ratifies and confirms all of the representations and warranties in the Loan
Agreement and agrees to be bound by and to comply with all of the covenants set
forth therein.
5. ADDITIONAL DOCUMENTS. NEDI and the other Obligors, as applicable,
--------------------
covenant and agree to execute and deliver or cause to be executed and delivered
to Bank any and all documents, agreements, corporate resolutions, certificates
and opinions as Bank shall request in connection with the execution and delivery
of this Amendment or any other documents in connection herewith, including,
without limitation, an Allonge to the Line Note, an Allonge to the Term Note, an
Allonge to the New Term Note, UCC-1 Financing Statements, a Securities Pledge
Agreement, a Stock Pledge
3
<PAGE>
Agreement, Stock Powers, and an agreement with SmithBarney concerning the
disposition of the Securities held for NEDI by Smith Barney.
6. FURTHER AGREEMENTS AND REPRESENTATIONS. Obligors do hereby:
--------------------------------------
(A) ratify, confirm and acknowledge that the Loan Agreement, as
amended, and the other Loan Documents continue to be and are valid, binding and
in full force and effect;
(B) covenant and agree to perform all obligations of Obligors
contained herein and under the Loan Agreement, as amended, and the other Loan
Documents;
(C) acknowledge and agree that Obligors have no defense, set-off,
counterclaim or challenge against the payment of any sums owing under Loan
Documents, the enforcement of any of the terms of the Loan Agreement, as
amended, or the other Loan Documents;
(D) represent and warrant that no Event of Default (as defined in the
Loan Agreement or any of the other Loan Documents) or event which with the
giving of notice or passage of time or both would constitute such an Event of
Default exists and all information described in the foregoing Background is
true, accurate and complete;
(E) acknowledge and agree that nothing contained herein and no
actions taken pursuant to the terms hereof is intended to constitute a novation
of the Loan Agreement or any of the other Loan Documents, and does not
constitute a release, termination or waiver of any of the rights or remedies
granted to the Bank therein, which rights and remedies are hereby ratified,
confirmed, extended and continued as security for the obligations of Obligors to
Bank under the Loan Agreement and the other Loan Documents, including, without
limitation, this Amendment; and
(F) acknowledge and agree that any Obligor's failure to comply with
or perform any of its covenants, agreements or obligations contained in this
Amendment shall constitute an Event of Default under the Loan Agreement and each
of the Loan Documents.
7. COSTS AND EXPENSES. Upon execution of this Amendment, Obligors shall
------------------
pay to Bank, all costs and expenses incurred by Bank in connection with the
review, preparation and negotiation of this Amendment and all documents in
connection therewith, including, without limitation, all of Bank's attorneys'
fees and costs.
8. INCONSISTENCIES. To the extent of any inconsistency between the terms,
---------------
conditions and provisions of this Amendment and the terms, conditions and
provisions of the Loan Agreement or the other Loan Documents, the terms,
conditions and provisions of this Amendment shall prevail. All terms, conditions
and provisions of the Loan Agreement and the other Loan Documents not
inconsistent herewith shall remain in full force and effect and are hereby
ratified and confirmed by Obligors.
4
<PAGE>
9. CONSTRUCTION. All references to the Loan Agreement therein or in any
------------
other Loan Documents shall be deemed to be a reference to the Loan Agreement as
amended hereby.
10. NO WAIVER. Nothing contained herein and no actions taken pursuant
---------
to the terms hereof are intended to nor shall they constitute a waiver by the
Bank of any rights or remedies available to Bank at law or in equity or as
provided in the Loan Agreement or the other Loan Documents.
11. BINDING EFFECT. This Amendment shall be binding upon and inure to
--------------
the benefit of the parties hereto and their respective successors and assigns.
12. GOVERNING LAW. This Amendment shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania.
13. HEADINGS. The headings of the sections of this Amendment are
--------
inserted for convenience only and shall not be deemed to constitute a part of
this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written.
NOBEL EDUCATION DYNAMICS, INC.
By:____________________________________
Name/Title:____________________________
[CORPORATE SEAL]
Attest:________________________________
Name/Title:____________________________
BLUEGRASS REAL ESTATE
COMPANY, INC.
By:____________________________________
Name/Title:____________________________
[CORPORATE SEAL]
Attest:________________________________
Name/Title:____________________________
IMAGINE EDUCATIONAL PRODUCTS, INC.
By:____________________________________
Name/Title:____________________________
[CORPORATE SEAL]
Attest:________________________________
5
<PAGE>
Name/Title:____________________________
CHILDREN'S PARK, INCORPORATED
By:____________________________________
Name/Title:____________________________
[CORPORATE SEAL]
Attest:________________________________
Name/Title:____________________________
MERRYHILL SCHOOLS, INC.
By:____________________________________
Name/Title:____________________________
[CORPORATE SEAL]
Attest:________________________________
Name/Title:____________________________
ROCKING HORSE MANAGEMENT
CORPORATION
By:____________________________________
Name/Title:____________________________
[CORPORATE SEAL]
Attest:________________________________
Name/Title:____________________________
EDUCO, INC.
By:____________________________________
Name/Title:____________________________
[CORPORATE SEAL]
Attest:________________________________
Name/Title:____________________________
NEDI, INC.
By:____________________________________
Name/Title:____________________________
6
<PAGE>
[CORPORATE SEAL]
Attest:________________________________
Name/Title:____________________________
FIRST VALLEY BANK
By:_______________________________
Brian C. Zwaan, Senior Vice President
7
<PAGE>
Exhibit 11
Net Income Per Common Share
- ---------------------------
for the six months ended June 30, 1996
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Net Income Per Common Share Primary:
- -----------------------------------
Net income $1,600,613 $ 3,130,085
Less preferred dividends 77,652 99,372
---------- -----------
Net Income available to common stockholders 1,522,961 3,030,713
Average shares outstanding 5,314,031 3,901,512
Common stock equivalents-convertible preferred 1,454,901 253,026
---------- -----------
Adjusted average shares outstanding 6,768,932 4,154,538
Primary earnings per common share $ 0.23 $ 0.73
---------- -----------
Net Income Per Common Share Fully Diluted:
- -----------------------------------------
Net income $1,600,613 $ 3,130,085
Average shares outstanding 5,314,031 3,901,512
Common Stock equivalents 1,831,609 1,601,590
---------- -----------
Average Shares outstanding assuming full dilution 7,145,640 5,503,102
Fully diluted earnings per share $ 0.22 $ 0.57
---------- -----------
</TABLE>
18
<PAGE>
Exhibit 11
Net Income Per Common Share
- ---------------------------
for the six months ended June 30, 1996
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Net Income Per Common Share Primary:
- -----------------------------------
Net income $ 734,187 $ 2,377,720
Less preferred dividends 38,826 49,686
---------- -----------
Net Income available to common shareholders 695,361 2,328,034
Average shares outstanding 5,719,773 3,894,694
Common stock equivalents-convertible preferred 1,454,901 253,025
---------- -----------
Adjusted average shares outstanding 7,174,674 4,147,719
Primary earnings per common share $ 0.10 $ 0.54
---------- -----------
Net Income Per Common Share Fully Diluted:
- -----------------------------------------
Net income $ 734,187 $ 2,377,720
Average shares outstanding 5,719,773 3,894,694
Common Stock equivalents 1,831,609 1,615,233
---------- -----------
Average Shares outstanding assuming full dilution 7,551,382 5,509,927
Fully diluted earnings per share $ 0.10 $ 0.43
---------- -----------
</TABLE>
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> JUN-30-1996 JUN-30-1995
<CASH> 11,527 3,714
<SECURITIES> 0 0
<RECEIVABLES> 764 727
<ALLOWANCES> 103 103
<INVENTORY> 0 0
<CURRENT-ASSETS> 14,640 7,112
<PP&E> 13,147 15,864
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 54,668 44,937
<CURRENT-LIABILITIES> 8,194 7,943
<BONDS> 0 0
0 0
5,000 6,000
<COMMON> 6,000 4,000
<OTHER-SE> 37,074 21,818
<TOTAL-LIABILITY-AND-EQUITY> 54,668 44,937
<SALES> 29,489 20,193
<TOTAL-REVENUES> 29,489 20,193
<CGS> 0 0
<TOTAL-COSTS> 25,489 18,034
<OTHER-EXPENSES> (250) (11)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,107 702
<INCOME-PRETAX> 2,593 1,425
<INCOME-TAX> 992 (1,705)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,600 3,130
<EPS-PRIMARY> $0.23 $0.73
<EPS-DILUTED> $0.22 $0.52
</TABLE>
