THIRD AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
---------------------------
THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(the "Amendment") is made effective as of the 24th day of May, 2001, by and
among NOBEL LEARNING COMMUNITIES, INC. ("Nobel"), MERRYHILL SCHOOLS, INC.
("Merryhill"), NEDI, INC. ("NEDI"), MERRYHILL SCHOOLS NEVADA, INC. ("Merryhill
Nevada"), PALADIN ACADEMY, L.L.C., formerly known as Nobel Learning Solutions,
L.L.C. ("Paladin"), NOBEL EDUCATION DYNAMICS FLORIDA, INC. ("Nobel Florida"),
THE ACTIVITIES CLUB, INC. ("TAC"), HOUSTON LEARNING ACADEMY, INC. ("Houston"),
NOBEL SCHOOL MANAGEMENT SERVICES, INC. ("Nobel Management"), NOBEL LEARNING
TECHNOLOGIES, INC. ("Nobel Technologies") (jointly and severally, the
"Borrowers"), FLEET NATIONAL BANK, as successor by merger to Summit Bank, as
Agent ("Agent") and the Lenders named on the signature pages hereto
(collectively, the "Lenders").
BACKGROUND
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A. Nobel, Merryhill, NEDI, Merryhill Nevada, Paladin, Nobel Florida, TAC
and Agent are parties to that certain Amended and Restated Loan and Security
Agreement dated March 9, 1999, as amended by (i) that certain First Amendment to
Amended and Restated Loan and Security Agreement dated December 17, 1999, and
(ii) that certain Second Amendment to Amended and Restated Loan and Security
Agreement dated May 24, 2000 (as amended, the "Loan Agreement").
B. Pursuant to that certain Stock Purchase Agreement dated as of September
9, 1999 by and among the Xxxxxx and Xxxxxx X. Xxxxxxxx Charitable Remainder
Unitrust and Xxxxxx Xxxxxxxx (being the sole shareholders of Houston), Stresa,
Inc. (d/b/a Educational Options), and Nobel, Nobel acquired the stock of
Houston.
C. Pursuant to a Certificate of Dissolution of Imagine Educational
Products, Inc., filed with the State of Delaware on March 24, 2000, Imagine
Educational Products, Inc. was dissolved and no longer conducts business.
D. Pursuant to (i) Articles of Merger of Lake Forest Park Montessori
School, Inc. into Merryhill School, Inc., filed with the State of Washington and
(ii) a Certificate of Ownership and Merger merging Lake Forest Park Montessori
School, Inc. (subsidiary corporation) into Merryhill Schools, Inc., filed with
the State of California, each of which was effective on December 29, 0000, Xxxx
Xxxxxx Xxxx Montessori School, Inc. was merged with and into Merryhill, with
Merryhill being the surviving corporation.
E. On April 20, 2000, Nobel Management was formed as an additional
subsidiary of Nobel.
F. On December 27, 1999, Nobel Technologies was formed as an additional
subsidiary of Nobel.
G. Borrowers, Agent and Lenders desire to further amend the Loan Agreement
in accordance with the terms and conditions hereof.
H. Capitalized terms used herein and not otherwise defined shall have the
meanings provided for such terms in the Loan Agreement.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Assignment to Lenders. Contemporaneously with the execution of this
Amendment, Agent, Fleet National Bank, as a Lender, and each of the other
Lenders have entered into certain Assignment and Acceptance Agreements pursuant
to which Fleet National Bank, as a Lender, has assigned to each other Lender,
and each such other Lender has accepted, a Pro Rata Share of each of the Loans,
all as more fully described in the respective Assignment and Acceptance
Agreements.
2. Additional Borrowers. From and after the date hereof, Houston, Nobel
Management and Nobel Technologies shall each be a "Borrower" under the Loan
Agreement and shall be bound by all the representations, warranties, terms,
conditions, covenants, agreements and waivers thereof and thereunder with the
same force and effect as if each were originally a party thereto. All references
to Borrower or Borrowers in the Loan Agreement and the other Loan Documents
shall hereafter be deemed to include, without limitation, Houston, Nobel
Management and Nobel Technologies.
3. Security. As security for the full and timely payment and performance of
all Lender Indebtedness, Houston, Nobel Management and Nobel Technologies each
hereby grants to Agent, for the pro rata benefit of Lenders, a security interest
in all of the following:
a. All of such Borrower's present and future accounts, contract
rights, chattel paper, instruments and documents and all other rights to
the payment of money whether or not yet earned, for services rendered or
goods sold, consigned, leased or furnished by such Borrower or otherwise,
together with (i) all goods (including any returned, rejected, repossessed
or consigned goods), the sale, consignment, lease or other furnishings of
which shall be given or may give rise to any of the foregoing, (ii) all of
such Borrower's rights as a consignor, consignee, unpaid vendor or other
lien or 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
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personal property, leases and other agreements or property securing or
relating to any accounts, (v) choses-in-action, claims and judgments, (vi)
any return or unearned premiums, which may be due upon cancellation of any
insurance policies, and (vii) all products and proceeds of any of the
foregoing.
b. All of such Borrower's present and future inventory (including but
not limited to goods held for sale or lease or furnished or to be furnished
under contracts for service, raw materials, work-in-process, finished goods
and goods used or consumed in such Borrower'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 such Borrower and all products and proceeds of any
of the foregoing.
c. All of such Borrower's present and future general intangibles
(including but not limited to tax refunds and rebates, manufacturing and
processing rights, designs, patent rights and application therefor,
trademarks and registration or applications therefor, tradenames, brand
names, logos, inventions, copyrights and all applications and registrations
therefor), licenses, permits, approvals, software and computer programs,
license rights, royalties, trade secrets, methods, processes, know-how,
formulas, drawings, specifications, descriptions, label designs, plans,
blueprints, patterns and all memoranda, notes and records with respect to
any research and development, and all products and proceeds of any of the
foregoing.
d. All of such Borrower's present and future machinery, equipment,
furniture, fixtures, motor vehicles, tools, dies, jigs, molds and other
articles of tangible personal property of every type together with all
parts, substitutions, accretions, accessions, attachments, accessories,
additions, components and replacements thereof, and all manuals of
operation, maintenance, or repair, and all products and proceeds of any of
the foregoing.
e. All of such Borrower's present and future general ledger sheets,
files, records, customer lists, books of account, invoices, bills,
certificates or documents of ownership, bills of sale, business papers,
correspondence, credit files, tapes, cards, computer runs and all other
data and data storage systems whether in the possession of such Borrower or
any service bureau.
f. All letters of credit now existing or hereafter issued naming such
Borrower as a beneficiary or assigned to such Borrower, including the right
to receive payment thereunder, and all documents and records associated
therewith.
g. All deposits, funds, instruments, documents, policies and evidence
and certificates of insurance, securities, chattel paper and other assets
of such Borrower
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or in which such Borrower has an interest and all proceeds thereof, now, or
at any time hereafter on deposit with or in the possession or control of
any Lender or owing by any Lender to such Borrower or in transit by mail or
carrier to any Lender or in the possession of any other Person acting on
any Lender's behalf, without regard to whether such Lender received the
same in pledge, for safekeeping, as agent for collection or otherwise or
whether such Lender has conditionally released the same, and in all assets
of such borrower in which any Lender now has or may at any time hereafter
obtain a lien, mortgage, or security interest for any reason.
h. All of such Borrower's right, title and interest in and to the
ownership interest of any other Borrower owned by such Borrower, together
with all cash, stock, dividends, distributions or other property paid in
connection therewith; all securities received in addition to or in exchange
for such ownership interest; all subscription rights with respect to such
securities; any other distribution in respect of such securities in any
form; and the proceeds thereof. All such securities shall be freely
assignable and transferrable to Agent (subject to any applicable securities
laws), and shall be accompanied by such pledge agreements and blank
transfer powers with signatures guaranteed as Agent may require.
i. All of such Borrower's investment property and financial assets and
all proceeds thereof.
4. Pledge of Interest. As further security for the full and timely payment
of all Lender Indebtedness, Nobel shall grant to Agent for the pro rata benefit
of Lenders a security interest in all stock of Houston, Nobel Management and
Nobel Technologies held by Nobel. In connection therewith, Nobel shall execute
and deliver to Agent all such documents as Agent may require including, without
limitation, the original of all certificates evidencing such stock. The term
"Collateral", as used in the Loan Agreement, shall hereafter be deemed to
include, without limitation, all of the additional security described in this
Amendment.
5. Definitions.
(a) The following Sections of Article 1 of the Loan Agreement are
amended to read, in their entirety, as follows:
(i) "Floating Rate Margin" shall mean one of the following
margins determined based on the ratio of Borrowers' Total Funded
Indebtedness to EBITDA from time to time:
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Ratio of Total Funded Indebtedness Floating Rate
to EBITDA Margin
----------------------------------------------- ------
greater than or equal to 3.5 to 1.0 100 basis points
less than 3.5 to 1.0, but greater than or equal
to 3.0 to 1.0 75 basis points
less than 3.0 to 1.0, but greater than or equal
to 2.50 to 1.0 50 basis points
less than 2.5 to 1.0, but greater than or equal
to 2.0 to 1.0 25 basis points
less than 2.0 to 1.0, but greater than or equal
to 1.5 to 1.0 0 basis points
less than 1.5 to 1.0 -25 basis points
The Floating Rate Margin shall be determined on a quarterly basis
upon the receipt, review and approval by Agent of Borrowers' financial
statements for such quarter, which financial statements shall include,
inter alia, a calculation of Borrowers' Total Funded Indebtedness to
EBITDA as of the end of such quarter. Any change in the Floating Rate
Margin shall be effective on the date of receipt of the foregoing
financial statements. If Borrowers fail to deliver to Agent the
foregoing financial statements, the Floating Rate Margin shall be
highest margin set forth above.
(ii) "Lender Indebtedness" shall mean all obligations and
Indebtedness of each Borrower to Agent or any Lender, whether now or
hereafter owing or existing, including, without limitation, all
obligations under the Loan Documents, all obligations to reimburse
Agent or any Lender for payments made by such party pursuant to any
letter of credit issued for the account or benefit of any Borrower,
all obligations of any Borrower to any Lender in connection with any
hedge, rate swap or similar agreement, all other obligations or
undertakings now or hereafter made by or for the benefit of any
Borrower to or for the benefit of Agent or any Lender under any other
agreement, promissory note or undertaking now existing or hereafter
entered into by any Borrower with Agent or any Lender, including,
without limitation, all obligations of any Borrower to Agent or any
Lender under any guaranty or surety agreement and all obligations of
any Borrower to immediately pay to Agent or any Lender the amount of
any overdraft on any deposit account maintained with Agent or any
Lender, together with all interest and other sums payable in
connection with any of the foregoing.
(iii) "LIBOR Rate" shall mean for any proposed or existing
portion of the Loans, the sum of (a) that rate of interest for the
applicable Rate Period which is determined by Agent to be the rate per
annum obtained by dividing (the resulting quotient to be rounded
upward to the nearest 1/100 of 1%) (i) the rate of interest estimated
in good faith by Agent in accordance with its usual procedures (which
determination shall be conclusive) to be the average of the rates per
annum for deposits in United States dollars offered to major money
center banks in the London interbank marked at approximately 11:00
a.m., London time, two (2) Good Business Days prior to the first day
of such Rate Period in amounts comparable to such portion (or, if
there are no such
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comparable amounts actively traded, the smallest amounts actively
traded) and have maturities comparable to such Rate Period, by (ii) a
number equal to 1.00 minus the LIBOR Rate Reserve Percentage for such
day, plus (b) the LIBOR Rate Margin.
(iv) "LIBOR Rate Margin" shall mean one of the following margins
determined based on the ratio of Borrowers' Total Funded Indebtedness
to EBITDA from time to time:
Ratio of Total Funded Indebtedness LIBOR Rate
to EBITDA Margin
----------------------------------------------- ------
greater than or equal to 3.5 to 1.0 275 basis points
less than 3.5 to 1.0, but greater than or equal
to 3.0 to 1.0 250 basis points
less than 3.0 to 1.0, but greater than or equal
to 2.50 to 1.0 225 basis points
less than 2.5 to 1.0, but greater than or equal
to 2.0 to 1.0 200 basis points
less than 2.0 to 1.0, but greater than or equal
to 1.5 to 1.0 175 basis points
less than 1.5 to 1.0 150 basis points
The LIBOR Rate Margin shall be determined on a quarterly basis
upon the receipt, review and approval by Agent of Borrowers' financial
statements for such quarter, which financial statements shall include,
inter alia, a calculation of Borrowers' Total Funded Indebtedness to
EBITDA as of the end of such quarter. Any change in the LIBOR Rate
Margin shall be effective on the date of receipt of the foregoing
financial statements. If Borrowers fail to deliver to Agent the
foregoing financial statements, the LIBOR Rate Margin shall be highest
margin set forth above.
(v) "Permitted Acquisitions" shall mean (i) an acquisition by any
Borrower in which the purchase price or assets (personal or real)
being acquired is less than Two Million Five Hundred Thousand Dollars
($2,500,000.00); provided that, the purchase price or assets (personal
or real) will not exceed $5,000,000 in the aggregate during any fiscal
year, and provided further that, Borrowers shall have given Agent
prior written notice of such acquisition, containing such detail as
Agent may reasonably require, including without limitation, evidence,
in form and content acceptable to Agent, that the consummation of such
acquisition will not result in an Event of Default, and (ii) such
other acquisitions which have otherwise been consented to by the
Required Lenders in writing. Notwithstanding the foregoing, no
Borrower will be permitted to consummate a Permitted Acquisition after
the occurrence and during the continuance of an Event of Default.
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(vi) "Rate Period" shall mean, for any portion of the Loans for
which the Borrowers elect the LIBOR Rate, the period of time for which
such rate shall apply to such principal portions.
(vii) "Required Lenders" means, at any time, Lenders holding
Pro Rata Percentages aggregating at least 66-2/3% of the total Pro
Rata Percentages at such time, provided however, at such time as the
Lenders are comprised of only two financial institutions the term
"Required Lenders" shall mean the consent and agreement of both
Lenders.
(b) The following defined terms are added to Article 1 of the Loan
Agreement in their proper alphabetical order:
"Adjusted Leverage Ratio" means the ratio of (a) the sum of (i) Lender
Indebtedness, plus (ii) Subordinated Indebtedness, plus (iii) the Rent
Load, to (b) the sum of (i) EBITDA, plus (ii) the Annual Rent Expense.
For purposes of calculating the Adjusted Leverage Ratio, (i) the
defined term "Rent Load" shall equal, as of any date, the present
value, discounted at an interest rate of 10%, of eight annual payments
(commencing one year after such date), each equal to the Annual Rent
Expense for the twelve month period ended on such date, and (ii) the
defined term "Annual Rent Expense" shall mean, for any twelve month
period, the aggregate rent expense of Borrowers for such period with
respect to the real estate leased by Borrowers.
"Applicable Percentage" shall mean one of the following margins
determined based on the ratio of Borrowers' Total Funded Indebtedness
to EBITDA from time to time:
Ratio of Total Funded Indebtedness Applicable
to EBITDA Margin
----------------------------------------------- ------
greater than or equal to 3.5 to 1.0 50 basis points
less than 3.5 to 1.0, but greater than or equal
to 3.0 to 1.0 50 basis points
less than 3.0 to 1.0, but greater than or equal
to 2.50 to 1.0 37.5 basis points
less than 2.5 to 1.0, but greater than or equal
to 2.0 to 1.0 37.5 basis points
less than 2.0 to 1.0, but greater than or equal
to 1.5 to 1.0 25 basis points
less than 1.5 to 1.0 25 basis points
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The Applicable Percentage shall be determined on a quarterly
basis upon the receipt, review and approval by Agent of Borrowers'
financial statements for such quarter, which financial statements
shall include, inter alia, a calculation of Borrowers' Total Funded
Indebtedness to EBITDA as of the end of such quarter. Any change to
the Applicable Percentage shall be effective on the date of receipt of
the foregoing financial statements. If Borrowers fail to deliver to
Agent the foregoing financial statements, the Applicable Percentage
shall be the highest such level set forth above.
6. Working Capital Contract Period. Section 3.1 of the Loan Agreement is
amended as follows:
(a) By amending the term "Working Capital Contract Period" to mean the
period through May 1, 2004.
(b) By adding the following as Section 3.1(c):
"3.1(c) Provided that no Event of Default (or an event which
would, upon the giving of notice or passage of time or both,
constitute an Event of Default) shall have occurred, Borrowers shall
have the option, exercisable one time, to extend the Working Capital
Contract Period through and including May 1, 2005 (the "Extension
Option") if agreed to by Lenders at their sole discretion. If
Borrowers desire to exercise the Extension Option, Borrowers must
deliver written notice thereof to Agent and Lenders on or before May
1, 2002, which notice, once delivered, shall be irrevocable."
7. Acquisition Credit Facility. Section 3.3 of the Loan Agreement is
amended to read, in its entirety, as follows:
"3.3 Acquisition Credit Facility.
(a) Each Lender shall establish for Borrowers for and during the
period from the date hereof and until May 1, 2003 ("Acquisition Credit
Facility Advance Period"), subject to the terms and conditions hereof,
a revolving acquisition credit facility, pursuant to which Lenders
will from time to time in accordance with their respective Pro Rata
Percentage, severally and not jointly, make advances to Borrowers in
an aggregate amount not exceeding at any time Fifteen Million Dollars
($15,000,000.00) (the "Acquisition Credit Facility"). Within the
limitations set forth in this Agreement, Borrowers may borrow, repay
and reborrow under the Acquisition Credit Facility. The Acquisition
Credit Facility shall be subject to all the terms and conditions set
forth in the Loan Documents, which terms and conditions are
incorporated herein. Borrowers' obligation to repay the loans and
other
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extensions of credit under the Acquisition Credit Facility shall be
evidenced by Borrowers' promissory notes delivered to each Lender,
which shall be in the respective principal amounts of each Lenders'
Pro Rata Share of the Acquisition Credit Facility and which shall be
in the form attached hereto as Exhibit "D" (collectively, the
"Acquisition Credit Facility Notes").
(b) Subject to the terms and conditions of this Agreement, each
Lender agrees to lend to Borrowers the amount equal to such Lender's
respective Pro Rata Percentage of each advance requested by Borrowers
under the Acquisition Credit Facility. The outstanding amount of
advances by each Lender shall not exceed such Lenders' Pro Rata Share
of the Acquisition Credit Facility (as such amount may change from
time to time in accordance with the terms of this Agreement).
(c) On or before May 1, 2002, Borrowers may, by written notice to
Agent not less than thirty (30) days prior to such date, elect,
exercisable one time, to convert any or all of the then outstanding
principal balance under the Acquisition Credit Facility to an
Acquisition Credit Facility Term Loan. If Borrowers elect an
Acquisition Credit Facility Term Loan, the amount available to be
borrowed under the Acquisition Credit Facility during the balance of
the Acquisition Credit Facility Advance Period shall be permanently
reduced by an amount equal to such Acquisition Credit Facility Term
Loan. On or before May 1, 2003, all sums outstanding under the
Acquisition Credit Facility which have not previously been converted
to an Acquisition Credit Facility Term Loan shall, on such date, be
converted to an Acquisition Credit Facility Term Loan and, thereafter,
no further advances shall be permitted under the Acquisition Credit
Facility."
8. Letters of Credit. Section 3.8(a) of the Loan Agreement is amended to
read, in its entirety, as follows:
"(a) Issuing Bank may issue for the account of Borrowers under the
Working Capital Credit Facility A commercial, documentary, automatically
renewable or standby letters of credit in form and content satisfactory to
Issuing Bank, at its sole discretion, with a term not to exceed the earlier
to occur of (i) twenty-four (24) months, or (ii) the expiration date of the
Working Capital Contract Period. Notwithstanding the foregoing, at no time
shall the (x) aggregate face amount of all outstanding letters of credit
issued under Working Capital Credit Facility A exceed the amount of Three
Million Dollars ($3,000,000.00); and (y) principal balance of Working
Capital Credit Facility A, plus the aggregate face amount of all
outstanding letters of credit issued under Working Capital Credit Facility
A exceed the amount of the loans and extensions of credit then available to
Borrowers under Working Capital Credit Facility A pursuant to Section 3.1
above."
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9. Term Loan.
(a) The outstanding principal balance under the Term Loan as of the
date hereof is Eight Million Four Hundred Thirty-Seven Thousand Five
Hundred Dollars ($8,437,500.00) (the "Current Term Loan Balance"). The
outstanding principal balance as of the date hereof under Working Capital
Credit Facility A is Five Million Four Hundred Sixty-Two Thousand Seven
Hundred Fifty-Six Dollars ($5,462,756.00) and under Working Capital Credit
Facility B is Two Million Two Hundred Sixty-Five Thousand Seven Hundred
Eighty and 12/100 Dollars ($2,265,780.12) (collectively, the "Working
Capital Loan Balances"). Borrowers have requested that Lenders term-out a
portion of the Working Capital Loan Balances in an aggregate amount equal
to Six Million Five Hundred Sixty-Two Thousand Five Hundred Dollars
($6,562,500.00) (the "Additional Term-Out Loan"). The Additional Term-Out
Loan shall constitute a term-out of a portion of the currently existing
outstanding principal balance of Working Capital Credit Facility A and
Working Capital Credit Facility B. After extension of the Additional
Term-Out Loan, the existing outstanding principal balance of Working
Capital Credit Facility A shall equal $337,244.00 and Working Capital
Credit Facility B shall equal $1,166,036.12, respectively. From and after
the date hereof, the term "Term Loan" as defined in the Loan Agreement
shall mean a loan from Lenders to Borrowers inclusive of the Current Term
Loan Balance and the Additional Term-Out Loan.
(b) Upon full execution and delivery of this Agreement and each of the
other documents required to be executed and delivered hereunder, each
Lender shall, severally and not jointly, convert the applicable portions of
the Working Capital Loan Balances to such Lender's Pro Rata Share of the
Additional Term-Out Loan.
(c) Contemporaneously with the execution hereof, Borrowers shall
deliver to each Lender a Term Note (or an Amended and Restated Term Note)
in the respective principal amount of each such Lender's Pro Rata Share of
the Term Loan.
10. Interest on Working Capital Credit Facility B. Section 5.2 of the Loan
Agreement is amended to read, in its entirety, as follows:
"5.2 Working Capital Credit Facility B. Interest on the unpaid
principal balance of Working Capital Credit Facility B will accrue at one
of the two (2) interest rate options set forth below, subject to the
restrictions and in accordance with the procedures set forth in this
Agreement:
(a) LIBOR Rate; or
(b) Floating Rate."
11. Interest on Acquisition Credit Facility. Section 5.3 of the Loan
Agreement is amended to read, in its entirety, as follows:
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"5.3 Acquisition Credit Facility. Interest on the unpaid principal
balance of the Acquisition Credit Facility will accrue at one of the two
(2) interest rate options set forth below, subject to the restrictions and
in accordance with the procedures set forth in this Agreement:
(a) LIBOR Rate; or
(b) Floating Rate."
12. Interest on Term Loan. Section 5.4 of the Loan Agreement is amended to
read, in its entirety, as follows:
"5.4 Term Loan. Interest on the unpaid principal balance of the Term
Loan will accrue at one of the two (2) interest rate options set forth
below, subject to the restrictions and in accordance with the procedures
set forth in this Agreement:
(a) LIBOR Rate; or
(b) Floating Rate."
13. Request for LIBOR Rate. Section 5.5 of the Loan Agreement is amended to
read, in its entirety, as follows:
"5.5 Request for LIBOR Rate. If the Borrowers desire that all or part
of the outstanding principal balance under the Loans accrue interest at the
LIBOR Rate, Borrowers shall give Agent a LIBOR Rate Notification. Upon
delivery by Borrowers to Agent of a LIBOR Rate Notification, that portion
of the principal balance outstanding under the Loans identified in such
LIBOR Rate Notification shall accrue interest at the LIBOR Rate as follows:
(a) with respect to the principal amount of any new advance under the
Loans, from the date of such advance until the end of the Rate Period
specified in such LIBOR Rate Notification; and/or (b) with respect to all
or any portion outstanding and accruing interest at another LIBOR Rate at
the time of the LIBOR Rate Notification related to such principal amount,
from the expiration of the then current Rate Period related to such
principal amount until the end of the Rate Period specified in such LIBOR
Rate Notification; and/or (c) with respect to all or any portion of the
principal amount outstanding and accruing interest at the Floating Rate at
the time of the LIBOR Rate Notification related to such principal amount,
from the date set forth in such LIBOR Rate Notification until the end of
the Rate Period specified in such LIBOR Rate Notification."
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14. Certain Provisions Regarding LIBOR. Section 5.6 of the Loan Agreement
is amended to read, in its entirety, as follows:
"5.6 Certain Provisions Regarding LIBOR Rates. Borrowers understand
and agree that: (a) subject to the provisions of this Agreement, the LIBOR
Rate may apply simultaneously to different portions of the outstanding
principal of the Loans; (b) the LIBOR Rate may apply simultaneously to
various portions of the outstanding principal of the Loans for various Rate
Periods; (c) the Rate Periods for the LIBOR Rate shall be either one (1),
two (2) or three (3) months; (d) the LIBOR Rate applicable to any portion
of the outstanding principal of the Loans may be different from the LIBOR
Rate applicable to any other portion of the outstanding principal of the
Loans; and (e) individual portions of the Loans accruing interest at the
LIBOR Rate must be in amounts of at least Two Hundred Fifty Thousand
Dollars ($250,000.00) each."
15. Fall Back Rate. Section 5.7 of the Loan Agreement is amended to read,
in its entirety, as follows:
"5.7 Floating Rate Fall Back. After expiration of any Rate Period, any
principal portion of the Loans corresponding to such Rate Period which has
not been converted or renewed in accordance with the terms of this
Agreement shall accrue interest automatically at the Floating Rate from the
date of expiration of such Rate Period until paid in full, unless and until
Borrowers request another interest rate in accordance with the terms of
this Agreement."
16. LIBOR Rate Unavailable. Section 5.14 of the Loan Agreement is amended
to read, in its entirety, as follows:
"5.14 LIBOR Rate Unascertainable or Unavailable. If, at any time,
Agent shall determine (which determination shall be conclusive) that the
LIBOR Rate is unavailable or adequate means for ascertaining the LIBOR Rate
do not exist, Agent shall promptly notify Borrowers and Lenders of such
determination. Upon such determination, the right of Borrowers to select,
maintain and/or convert to the LIBOR Rate shall be suspended until notice
from Agent to Borrowers and Lenders that the LIBOR Rate is again available
or ascertainable and, until such time, the outstanding balance under the
Loans shall accrue interest at the Floating Rate."
17. Payments on Acquisition Credit Facility. Section 6.3 of the Loan
Agreement is amended to read, in its entirety, as follows:
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"6.3 Principal and Interest Payments on the Acquisition Credit
Facility.
(a) During the Acquisition Credit Facility Advance Period,
Borrowers will pay interest on that portion of the principal advanced
under the Acquisition Credit Facility which has not previously been
converted to an Acquisition Credit Facility Term Loan monthly, on the
first day of each calendar month, commencing on the first day of the
first calendar month following the initial advance thereunder and on
the last day of each Rate Period, as applicable.
(b) Borrowers shall repay the outstanding principal balance of
any Acquisition Credit Facility Term Loan selected by Borrowers on or
before May 1, 2002 in accordance with Section 3.3(c) above, in
quarterly installments, each in an amount equal to the amount of such
Acquisition Credit Facility Term Loan divided by twenty (20), plus
accrued and unpaid interest on such Acquisition Credit Facility Term
Loan to the date of such payment at the applicable rate set forth in
Section 5.3(b) above. Such quarterly installments shall commence on
the first day of the first calendar quarter following Borrowers'
election of such Acquisition Credit Facility Term Loan.
(c) Upon the expiration of the Acquisition Credit Facility
Advance Period, Borrowers shall repay the remaining portion of the
outstanding principal balance of the Acquisition Credit Facility which
has not previously been converted to an Acquisition Credit Facility
Term Loan in accordance with Section 3.3(c) above, in quarterly
installments each in an amount equal to such remaining portion,
divided by sixteen (16), plus accrued and unpaid interest on such
Acquisition Credit Facility Term Loan to the date of such payment at
the rate set forth in Section 5.3(b) above. Such quarterly
installments shall commence on the first day of the first calendar
quarter following the expiration of the Acquisition Credit Facility
Advance Period.
(d) On April 1, 2007, Borrowers shall pay in full the outstanding
principal balance of the Acquisition Credit Facility (including,
without limitation, any Acquisition Credit Facility Term Loan),
together with all accrued and unpaid interest thereon and all other
sums due in connection therewith."
18. Payments on the Term Loan. Section 6.4 of the Loan Agreement is amended
to read, in its entirety, as follows:
"6.4 Principal and Interest Payment on the Term Loan.
(a) Borrowers shall pay interest on the outstanding principal
balance of the Term Loan on the first day of each calendar quarter,
commencing on April 1, 1999.
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(b) Borrowers shall pay the outstanding principal balance under
the Term Loan in quarterly installments on the first day of each
calendar quarter, each in the following amounts:
Dates Payments
----- --------
7/1/2001; 10/1/2001; 1/1/2002 and 4/1/2002 $535,714.29
7/1/2002; 10/1/2002; 1/1/2003 and 4/1/2003 $535,714.29
7/1/2003; 10/1/2003; 1/1/2004 and 4/1/2004 $535,714.29
7/1/2004; 10/1/2004; 1/1/2005 and 4/1/2005 $535,714.29
7/1/2005; 10/1/2005; and 1/1/2006 $535,714.29
(c) On April 1, 2006, Borrowers shall pay in full the outstanding
principal balance of the Term Loan, together with all accrued and
unpaid interest thereon and all other sums due in connection
therewith."
19. Excess Cash Flow Payments. Section 6.5 of the Loan Agreement is amended
to read, in its entirety, as follows:
"6.5 Excess Cash Flow Payments. In addition to all other payments
required under the Loans, Borrowers shall pay to Agent for the pro rata
benefit of Lenders an amount equal to fifty percent (50%) of the Excess
Cash Flow for each fiscal year of Borrowers if the Leverage Ratio as of the
close of such fiscal year is equal to or greater than 3.0 to 1.0, which
amount shall be paid within sixty (60) days after the end of each such
fiscal year, commencing with Borrowers' fiscal year ending June 30, 1999.
Excess Cash Flow payments shall be applied first to payments due under the
Term Loan, then to payments due under any Acquisition Credit Facility Term
Loan, all in the inverse order of their maturity, with the balance, if any,
applied to such other Lender Indebtedness as determined by Agent. Together
with each such Excess Cash Flow payment, Borrowers shall deliver to Agent a
calculation of such payment in such detail as Agent shall reasonably
require or, in lieu thereof, Borrowers shall deliver to Agent, within sixty
(60) days of the end of such fiscal year, Borrowers' determination as to
why no such payment is due, all of which shall be certified as to accuracy
by the chief financial officer of Borrowers."
20. Letter of Credit Fees. Section 6.8 of the Loan Agreement is amended to
read, in its entirety, as follows:
"6.8 Letter of Credit Fees. In connection with each letter of credit
issued under this Agreement, Borrowers shall pay to (a) Agent, for the pro
rata benefit of Lenders, a per annum fee, payable quarterly in advance on
the first Business Day of each calendar quarter, equal to the product
obtained by multiplying (i) the face amount of all letters of credit
outstanding on the first day of each calendar quarter
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and (ii) the LIBOR Rate Margin in effect as of such date; and (b) Agent, as
Issuing Bank, a fronting fee in an amount equal to .25% per annum of the
aggregate face amount of all letters of credit issued under this Agreement,
payable quarterly in arrears on the first Business Day of each calendar
quarter. Notwithstanding the foregoing, upon the occurrence of an Event of
Default and the continuance thereof, such letter of credit fees will equal
the product obtained by multiplying (i) the face amount of all letters of
credit then outstanding and (ii) the highest applicable LIBOR Rate Margin.
In addition, Borrowers shall pay such other fees and charges in connection
with the negotiation or cancellation of each letter of credit as may be
customarily charged by Issuing Bank. Such fees shall be computed on the
basis of a year of three hundred sixty (360) days for the number of days
actually elapsed."
21. Usage Fee. Section 6.9 of the Loan Agreement is amended to read, in its
entirety, as follows:
"6.9 Usage Fee. Borrowers shall unconditionally pay to Agent for the
pro rata benefit of Lenders a fee equal to the Applicable Percentage of the
average daily unused portion of the Working Capital Credit Facilities and
the Acquisition Credit Facility (which shall be calculated based on the
maximum amount available under such Loans, taking into account any
reductions of the Acquisition Credit Facility permitted under this
Agreement, minus the average daily outstanding principal balance of cash
advances under the Working Capital Credit Facilities and the Acquisition
Credit Facility for such period, minus the average outstanding undrawn face
amount of all letters of credit issued and outstanding under Working
Capital Credit Facility A during such period), which fee shall be computed
on a quarterly basis in arrears and shall be due and payable on the first
day of each calendar quarter. Such fee shall be computed on the basis of a
year of 360 days for the number of days actually elapsed."
22. FINANCIAL COVENANTS. Article 10 of the Loan Agreements is amended to
read, in its entirety, as follows:
"10. FINANCIAL COVENANTS. Except with the prior written consent of the
Required Lenders, Borrowers will comply with the following:
10.1 Leverage Ratio. Borrowers shall maintain a Leverage Ratio of
not greater than (a) 3.75 to 1.0 as of June 30, 2001 at all times
thereafter through June 29, 2002, (b) 3.50 to 1.0 as of June 30, 2002
and at all times thereafter through June 29, 2003, (c) 3.25 to 1.0 as
of June 30, 2003 and at all times thereafter through June 29, 2004,
and (d) 3.00 to 1.00 as of June 30, 2004 and at all times thereafter.
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10.2 Interest Coverage Ratio. Borrowers shall maintain an
Interest Coverage Ratio as of the end of each fiscal quarter,
determined on a rolling four quarter basis, of not less than (a) 3.5
to 1.0 as of the end of each fiscal quarter through the fiscal quarter
ending March 31, 2002; and (b) 4.0 to 1.0 as of the fiscal quarter
ending June 30, 2002 and as of the end of each fiscal quarter
thereafter.
10.3 Fixed Charge Coverage Ratio. Borrowers shall maintain a
Fixed Charge Coverage Ratio as of the end of each fiscal quarter,
determined on a rolling four quarter basis, of not less than 1.1 to
1.0 as of the fiscal quarter ending June 30, 2001 and as of the end of
each fiscal quarter thereafter.
10.4 Capital Expenditures. Borrowers shall not cause, suffer or
permit their aggregate annual Capital Expenditures to exceed the
following amounts for the applicable fiscal years of Borrower:
Fiscal Year Ending Amount
------------------ ------
June 30, 2001 $16,000,000
June 30, 2002 $18,000,000
June 30, 2003 $20,000,000
June 30, 2004 $22,000,000
June 30, 2005 $24,000,000
The foregoing covenant shall be on a non-cumulative basis as to any
unused sums during any fiscal year.
10.5 Adjusted Leverage Ratio. Borrower shall maintain an Adjusted
Leverage Ratio as of the end of each fiscal quarter, determined on a
rolling four quarter basis, of not greater than (a) 4.5 to 1.0 as of
the fiscal quarter ending June 30, 2001 and as of each fiscal quarter
thereafter through and including the fiscal quarter ending Xxxxx 00,
0000, (x) 4.25 to 1.0 as of the fiscal quarter ending June 30, 2002
and as of each fiscal quarter thereafter through and including the
fiscal quarter ending March 31, 2003, (c) 3.75 to 1.0 as of the fiscal
quarter ending June 30, 2003 and as of each fiscal quarter thereafter
through and including the fiscal quarter ending March 31, 2004, and
(d) 3.5 to 1.0 as of the fiscal quarter ending June 30, 2004 and as of
the end of each fiscal quarter thereafter.
10.6 Acquisitions. In the event Lenders consent to an acquisition
by Borrowers, or any of them, that constitutes a Permitted Acquisition
under subsection (ii) of the defined term "Permitted Acquisition" and
such acquisition would result in the failure by Borrowers to comply
with any of the financial covenants in this Article 10, Lenders agree
that as part of such consent, Lenders will
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amend such covenant or covenants so that Borrowers will be in
compliance therewith after giving effect to such acquisition."
23. Yield Protection. Borrowers shall hedge the floating interest expense
of the Acquisition Credit Facility and the Term Loan by maintaining one or more
interest rate swap transactions with the Agent or any Lender (or with another
financial institution approved by Agent in writing) in an aggregate amount equal
to (a) one hundred percent (100%) of the outstanding principal balance of the
Term Loan and (b) a minimum of fifty percent (50%) of the aggregate outstanding
principal balance of the Acquisition Credit Facility Term Loans, respectively,
with the Borrowers making fixed rate payments and receiving floating rate
payments to offset changes in the variable interest expense thereof, all upon
terms and conditions as shall be acceptable to Agent. Borrowers shall enter into
such hedge transactions (and if entered into with a Person other than Agent,
deliver evidence thereof to Agent) (i) with respect to the Term Loan, on or
before 90 days from the date hereof and (ii) with respect to the Acquisition
Credit Facility, on or before the 90th day following the establishment of the
applicable Acquisition Credit Facility Term Loan.
24. Proceeds of Capital Raise. Nobel has informed Agent and the Lenders
that it may desire to raise additional capital by issuing preferred equity
securities (a "Capital Raising Event"). Nobel will give Lenders written notice
of any Capital Raise Event and copies of all subscription and other disclosure
materials in connection therewith. Nobel agrees that any additional capital
raised as a result of a Capital Raising Event will be applied as Nobel elects to
(i) repay the outstanding principal balance and accrued interest thereon of the
Acquisition Credit Facility, (ii) repay the outstanding principal balance and
accrued interest thereon of the Working Capital Credit Facilities, and (iii) for
general corporate purposes. Notwithstanding the foregoing, in the event that the
Capital Raising Event raises in excess of $15,000,000 of additional capital, the
utilization of any capital in excess of $15,000,000 will be mutually agreed to
by Nobel, Agent and Lenders.
25. Sale of Real Estate. Nobel has represented and warranted to Agent and
the Lenders that it has undertaken and is diligently pursuing the sale of its
properties situate at 000 Xxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx (the "Manalapan
Property") and 0000 X. Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx (the "Arizona Property").
Borrowers agree that the net proceeds received by Borrowers as a result of the
consummation of the sale of the Manalapan Property or the Arizona Property will
be delivered to Agent and will be applied to reduce the outstanding principal
balance of the Acquisition Credit Facility.
Notwithstanding anything contained in the Loan Agreement, this Amendment or
the other Loan Documents to the contrary, Borrowers agree that Borrowers will
not request and Lenders will not be obligated to make after the date hereof (i)
any advance to Borrowers under the Acquisition Credit Facility, and (ii) any
advance to Borrowers under the Working Capital Credit Facilities which advance
will be applied by Borrowers to reduce the outstanding principal balance of the
Acquisition Credit Facility.
-17-
Notwithstanding the foregoing, Agent and Lenders agree that in the event
that Borrowers reduce the outstanding principal balance of the Acquisition
Credit Facility by applying certain proceeds realized by Borrowers or other
income generated by Borrowers resulting from (i) the sale of the Manalapan
Property or the Arizona Property, (ii) additional capital raised by Borrowers as
a result of the issuance of preferred or common equity securities or
subordinated indebtedness, or (iii) Excess Cash Flow not otherwise paid to Agent
for the pro rata benefit of the Lenders in accordance with Section 6.5 of the
Loan Agreement; Borrowers may request an advance under the Acquisition Credit
Facility up to an aggregate amount of such reduction. In the event that
Borrowers reduce the outstanding principal balance of the Acquisition Credit
Facility by applying Excess Cash Flow, Borrowers agree that such payments will
only be permitted within ninety (90) days after the end of each fiscal year of
Borrowers commencing with the fiscal year ending June 30, 2001 and delivery to
Agent of a calculation of such payments in such detail as Agent shall require.
Agent and Lenders further agree that the limitations set forth in this Section
25 shall be null and void and of no further force or effect at such time as the
sale of the Manalapan Property and the Arizona Property are consummated and the
proceeds realized by Borrowers as a result of such sale are applied by Borrowers
to reduce the outstanding principal balance of the Acquisition Credit Facility.
26. Title Insurance. Within thirty (30) days of the date hereof, Borrowers
covenant and agree to deliver to Agent, at no cost to Agent and in form and
content acceptable to Agent, endorsements to the existing loan title insurance
policies previously delivered to and in favor of Agent, which endorsements will
(i) evidence the "date-down" of such loan policies to the date hereof, and (ii)
add the Amendments, Confirmations and Ratifications of Mortgages and Deeds of
Trust referenced in Section 28(e) below to the insured estates under such loan
policies.
27. Stock Pledge. Nobel and Merryhill covenant and agree to execute and
deliver to Agent, in form and content acceptable to Agent, stock pledge
agreements evidencing the pledge of and grant of a security interest in certain
stock of the other Borrowers held by Nobel and Merryhill, together with UCC-1
Financing Statements, blank stock powers and such other agreements the Agent may
require.
28. Documents to be Delivered. As a condition of closing the transactions
contemplated under this Amendment, Borrowers shall deliver to Agent or Agent
shall have received all of the following which must be in form and content
acceptable to Agent in Agent's sole discretion:
(a) This Amendment and all other documents collateral thereto, duly
executed on behalf of Borrowers and all other parties thereto;
(b) Amended and Restated Acquisition Credit Facility Notes and Amended
and Restated Term Notes which shall be in the respective principal amounts
of each Lenders' Pro Rata Share of the Acquisition Credit Facility and Term
Loan, respectively;
(c) An amended Schedule A to Loan Agreement evidencing the respective
principal amounts of each Lenders' Pro Rata Share of the Loans;
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(d) An Amendment to Amended and Restated Securities Pledge Agreement
executed by Nobel Learning Communities, Inc.;
(e) Amendment, Confirmations and Ratifications of Mortgages and Deeds
of Trust confirming that all obligations of Mortgagor (as defined therein)
to Agent and Lenders under and in connection with the Loans;
(f) Assignment and Acceptance Agreement fully executed by Commerce
Bank, N.A.;
(g) A certified copy of resolutions of Borrowers certified by their
secretary as of the Closing Date, authorizing the transactions contemplated
hereunder and the execution of documents on behalf of Borrowers by one or
more their corporate officers; and
(h) A current Good Standing Certificate for Nobel and Merryhill.
29. Additional Documents. Nobel covenants and agrees to execute and deliver
or cause to be executed and delivered to Agent any and all documents,
agreements, corporate resolutions, certificates and opinions as Agent shall
request in connection with the execution and delivery of this Amendment or any
other documents in connection herewith.
30. Further Agreements and Representations. Borrowers 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 Borrowers
contained herein and under the Loan Agreement, as amended, and the other
Loan Documents;
(c) acknowledge and agree that Borrowers 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 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 Agent therein, which rights and remedies are hereby
ratified, confirmed,
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extended and continued as security for the obligations of Borrowers to
Agent under the Loan Agreement and the other Loan Documents, including,
without limitation, this Amendment; and
(f) acknowledge and agree that any Borrower'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.
31. Costs and Expenses. Upon execution of this Amendment, Borrowers shall
pay to Agent and each Lender, all costs and expenses incurred by Agent and such
Lender in connection with the review, preparation and negotiation of this
Amendment and all documents in connection therewith, including, without
limitation, all of Agent's and such Lender's attorneys' fees and out-of-pocket
expenses.
32. Notices Notwithstanding anything to the contrary contained in Section
17.1 of the Loan Agreement, copies of all notices to Agent shall be forwarded to
the following address:
White and Xxxxxxxx LLP
0000 Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esquire
33. 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 Borrowers.
34. 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.
35. No Waiver. Nothing contained herein and no actions taken pursuant to
the terms hereof are intended to nor shall they constitute a waiver by Agent of
any rights or remedies available to Agent at law or in equity or as provided in
the Loan Agreement or the other Loan Documents.
36. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
37. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
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38. 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.
-21-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written.
BORROWERS:
NOBEL LEARNING COMMUNITIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx, Executive Vice
President
MERRYHILL SCHOOLS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx, Executive Vice
President
NEDI, INC.
By: /s/ S. Good
-------------------------------------
S. Good, President
MERRYHILL SCHOOLS NEVADA, INC.
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx, Treasurer
HOUSTON LEARNING ACADEMY, INC.
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx, Vice President
PALADIN ACADEMY, L.L.C.
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx, Vice President
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
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NOBEL SCHOOL MANAGEMENT SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx, Treasurer
NOBEL LEARNING TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx, Treasurer
NOBEL EDUCATION DYNAMICS FLORIDA, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx, Vice President
THE ACTIVITIES CLUB, INC.
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx, President
AGENT:
FLEET NATIONAL BANK, as successor by
merger to Summit Bank, as Agent
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Xxxxx X. Xxxxx, Senior Vice President
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
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LENDERS:
FLEET NATIONAL BANK, as successor by
merger to Summit Bank
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Xxxxx X. Xxxxx, Senior Vice President
COMMERCE BANK, N.A.
By: /s/ Xxxxx Xxxxx
-------------------------------------
Name/Title: Xxxxx Xxxxx, Senior Vice
President
-----------------------------
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