AMENDMENT NO. 1 TO CREDIT AGREEMENT
Exhibit 10.3
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS
AMENDMENT NO. 1 TO CREDIT AGREEMENT is dated as of the 3rd day of
July,
2007, by and between NEW HORIZONS WORLDWIDE, INC., a Delaware corporation (“Borrower”),
each lender whose name is set forth on the signature pages of this Agreement (each a
“Lender” and collectively, “Lenders”), and CAMDEN PARTNERS STRATEGIC III, LLC, as
Administrative Agent (the “Administrative Agent”).
RECITALS
Reference is made to that certain Credit Agreement dated July 19, 2006, among Borrower, the
Lenders and the Administrative Agent (the “Credit Agreement”), pursuant to which the Lenders have
made Advances to Borrower in the aggregate principal amount of Four Million Dollars ($4,000,000).
In order to amend the Credit Agreement to provide, inter alia, for certain adjustments to be made
in connection with the issuance of the Series C Stock (as hereinafter defined), the parties hereto
have entered into this Amendment No. 1.
NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein,
and such other consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. All capitalized terms not otherwise defined herein which are defined in the Credit
Agreement shall have the same meanings assigned to them in the Credit Agreement.
2. All references herein, in the Credit Agreement and in the other Loan Documents to “this
Agreement” and “the Credit Agreement” shall mean and include the Credit Agreement as amended by
this Amendment No. 1.
3. Section 1.1 of the Credit Agreement is hereby amended by amending the definition of
“Adjusted EBITDA” to read in its entirety as follows:
“Adjusted EBITDA” means, with respect to any fiscal period, the sum
of, without duplication, (a) EBITDA for such fiscal period, plus (b) to the
extent deducted in determining Net Income for such fiscal period, non-cash charges
of Borrower and
its Subsidiaries during such fiscal period relating to Borrower’s and its
Subsidiaries’ compliance with Financial Accounting Standards Board Statement No.
142, plus (c) to the extent deducted in determining Net Income for such
fiscal period, (i) non-cash charges recorded against earnings in Borrower’s and its
Subsidiaries’ financial statements for such fiscal period with respect to the
write-down of leasehold estates as a result of the sublease of such leasehold
estates, and (ii) the amount of litigation settlements approved by the Board of
Directors of Borrower, plus (d) non-cash charges associated with stock
options.
4. Section 1.1 of the Credit Agreement is hereby amended by amending the definition of “Change
of Control” to revise and restate the sentence at the conclusion thereof to read in its entirety as
follows:
Notwithstanding the foregoing, no Change of Control shall be deemed to have
occurred as a result of the consummation of the transactions which are the subject
of the Preferred Stock Exchange Agreement, the Series C Stock Purchase Agreement or
the issuance or exercise of the Warrants.
5. Section 1.1 of the Credit Agreement is hereby amended by amending the definition of
“Maturity Date” to read in its entirety as follows:
“Maturity Date” means July 19, 2009.
6. Section 1.1 of the Credit Agreement is hereby amended by amending the definition of
“Series A Warrants” to read in its entirety as follows:
“Series A Warrants” means, collectively, the Series A-1 Warrants and
the Series A-2 Warrants.
7. Section 1.1 of the Credit Agreement is hereby amended by amending the definition of
“Series B Warrants” to read in its entirety as follows:
“Series B Warrants” means, collectively, the Series B-1 Warrants and
the Series B-2 Warrants.
8. Section 1.1 of the Credit Agreement is hereby amended by amending the definition of
“Warrants” to read in its entirety as follows:
-2-
“Warrants” means, collectively, the Series A Warrants, the Series B Warrants and the
Series C Warrants.
9. Section 1.1 of the Credit Agreement is hereby amended by adding the following new defined
terms in the alphabetically correct sequence:
“Amendment No. 1” means that certain Amendment No. 1 to Credit
Agreement dated as of July 3, 2007, among Borrower, the Lenders and
the Administrative Agent.
“Charter Amendment” means the amendment of Borrower’s Certificate of
Incorporation to be authorized pursuant to the Shareholder Approval.
“Edusoft Contract” means the License Agreement dated September 23,
2004, as amended, between Borrower and Edusoft Ltd. relating to Borrower’s English
Language Program.
“Series A-1 Warrants” means warrants to purchase in the aggregate
2,000,000 shares of Borrower’s common stock, each of which shall be in the form of
Exhibit E-3 attached hereto and incorporated herein.
“Series A-2 Warrants” means warrants to purchase in the aggregate
984,335 shares of Borrower’s common stock, each of which shall be in the form of
Exhibit E-4 attached hereto and incorporated herein.
“Series B-1 Warrants” means warrants to purchase in the aggregate
666,667 shares of Borrower’s common stock, each of which shall be in the form of
Exhibit E-5 attached hereto and incorporated herein.
“Series B-2 Warrants” means warrants to purchase in the aggregate
150,818 shares of Borrower’s common stock, each of which shall be in the form of
Exhibit E-6 attached hereto and incorporated herein.
“Series C Certificate of Designation” means the Certificate of
Designation, Preferences and Rights of Series C Convertible Preferred Stock of New
Horizons Worldwide, Inc. dated July 2, 2007, as the same may
from time to time be amended, restated, extended or otherwise modified.
-3-
“Series C Investor” and “Series C Investors” mean,
respectively, each “Investor” as defined in the Series C Stock Purchase Agreement
and all such Investors.
“Series C Stock” means 172,043 shares of Borrower’s Series C
Convertible Preferred Stock which are convertible into 5,333,333 shares of the
Company’s common stock and which are issued pursuant to the Series C Stock Purchase
Agreement, the terms of which are further described in the Series C Certificate of
Designation.
“Series C Stock Purchase Agreement” means that certain Series C Stock
and Warrant Purchase Agreement dated as of July 3, 2007, by and between
Borrower and the Series C Investors.
“Series C Warrants” means warrants to purchase in the aggregate
1,066,667 shares of Borrower’s common stock, each of which shall be in the form of
Exhibit E-7 attached hereto and incorporated herein.
“Shareholder Approval” means the approval of the shareholders of
Borrower to amend Borrower’s Certificate of Incorporation to increase in the
authorized common shares of Borrower to 30,000,000.
“Shareholder Meeting” means the meeting of the shareholders of
Borrower at which the Shareholder Approval will be sought.
10. Article 4 of the Credit Agreement is hereby amended by adding the following new Section
4.23:
4.23 Series C Documents.
True, accurate and complete copies of the Series C Stock Purchase Agreement,
the Series C Certificate of Designation and the Series C Warrants have been
provided to the Administrative Agent and the Lenders.
11. Section 5.8 of the Credit Agreement is hereby amended by adding the following sentence at
the conclusion thereof:
Notwithstanding the foregoing, the failure of Borrower to fully comply with its
Contractual Obligations under the Edusoft
Contract shall not represent a breach of this Section 5.8 for a
-4-
period of nine
months following date of Amendment No. 1; provided, however, that if (a) at any
time during such nine-month period Borrower shall admit liability or settle any
dispute under the Edusoft Contract for an amount in excess of $500,000, or (b) at
any time following such nine-month period a good faith determination is made by the
Administrative Agent that the liability of Borrower under the Edusoft Contract
could reasonably be expected to exceed $500,000, at such time Borrower shall be in
breach of this Section 5.8.
12. Section 6.5 of the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
6.5 Other Indebtedness.
Create, incur, assume or permit to exist any Indebtedness resulting from
borrowings, loans or advances, whether secured or unsecured, matured or unmatured,
liquidated or unliquidated, joint or several, except (a) the Obligations, (b)
Indebtedness owed to Borrower or any of its Subsidiaries, subject to the
limitations on such Indebtedness set forth in Section 6.7(b), (c)
Indebtedness existing on the Closing Date and disclosed in Schedule 6.5,
and refinancings, renewals, extensions or amendments that do not increase the
amount thereof, (d) Indebtedness which arises from Earnout Payments provided such
Earnout Payments are treated as Subordinated Obligations, and (e) Indebtedness
secured by Permitted Purchase Money Liens and/or Indebtedness incurred with respect
to Capital Lease Obligations (as determined by GAAP) in an aggregate amount not to
exceed $1,000,000 at any time outstanding.
13. Section 6.6 of the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
6.6 Guaranties.
Guarantee or become liable in any way as surety, endorser (other than as
endorser of negotiable instruments for deposit or collection in the ordinary course
of business), accommodation endorser or otherwise for, nor pledge or hypothecate
any assets of Borrower or any of its Subsidiaries as security for, any liabilities
or obligations of any other Person, except (a) any of the foregoing existing on the
Closing Date and
disclosed on Schedule 6.6, (b) any of the foregoing in favor of the
-5-
Administrative Agent (on behalf of the Lenders), (c) endorsements for collection or
deposit in the ordinary course of business, (d) under surety bonds for an amount
not in excess of $500,000, (e) Interest Rate Protection Agreements approved by the
Administrative Agent, and (f) contingent obligations with respect to the minimum
aggregate license fees to the extent of $15,000,000 as payable pursuant to Exhibit
C of the Content License and Distribution Agreement between New Horizons Computer
Learning Centers, Inc. and Element K LLC.
14. Section 6.8 of the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
6.8 Distributions.
Declare or pay or make any Distribution, whether from capital, income or otherwise,
and whether in Cash or other Property; provided, however, that so long as no
Default or Event of Default shall have occurred and be continuing (without waiver
or cure), Borrower shall be permitted to make Distributions payable pursuant to
Section 3 of the Series B Certificate of Designation, Section 3 of
the Series C Certificate of Designation and Section 9 of the Series C
Certificate of Designation, in each case subject to legal limitations, if any.
15. Section 6.18 of the Credit Agreement is hereby amended and restated to read in its
entirety as follows:
6.18 Capital Expenditures.
Make any investment in fixed assets in any Fiscal Year in excess of an
aggregate amount of $1,000,000; provided, however, that with the express approval
of Borrower’s Board of Directors (a) from the date of the Amendment No. 1 to
December 31, 2007 Borrower may make an investment in fixed assets in an amount not
to exceed $1,000,000, and (b) in any Fiscal Year after 2007, Borrower may make an
investment in fixed assets in an amount not to exceed $2,000,000; provided,
further, that the following shall be excluded for purposes of compliance with this
Section 6.18: expenditures which are made in connection with the
replacement or restoration of assets to the extent financed (to the extent such
financing is permitted hereunder) either (a) from insurance proceeds paid on
account of the loss of or damage to the assets being replaced or restored, or (b)
with proceeds
from the sale or other disposition of an asset which is replaced
-6-
within 90 days
from such sale or other disposition with another asset performing the same or a
similar function.
16. Section 6.19 of the Credit Agreement is hereby amended to read in its entirety as follows:
6.19 Amendments.
Amend or modify any term or provision of (a) any indenture, agreement or instrument
evidencing or governing any Subordinated Obligation, (b) any material provision of
any Material Contract, if in any such case such amendment or modification in any
respect will or may adversely affect the interest of the Lenders in any material
respect, or (c) any provision of the Series B Certificate of Designation, the
Series C Stock Purchase Agreement, the Series C Certificate of Designation or the
Series C Warrants, if in any such case such amendment or modification in any
respect will or may adversely affect the interest of the Lenders (including in
their capacities as holders of the Series A Warrants and/or the Series B Warrants)
in any material respect.
17. Section 6.22 of the Credit Agreement is hereby amended to read in its entirety as
follows:
6.22 Change of Fiscal Periods.
Change its Fiscal Year or any other fiscal period with respect to which it
reports financial results hereunder or otherwise without the financial covenants
and reporting obligations of Borrower hereunder which would be affected thereby
having been amended in a manner acceptable to the Administrative Agent in its
reasonable business judgment.
18. Section 7.1(a) of the Credit Agreement is hereby amended to read in its entirety as
follows:
(a) Within thirty (30) days after the end of each calendar month commencing
with the calendar month ending June 30, 2006 (other than the calendar months ending
each Fiscal Quarter, for which the period shall be forty-five (45) days, and
excluding the Fiscal Quarter ending December 31, for which the period shall be
sixty (60) days), the consolidated balance sheet of Borrower and its Subsidiaries
as at the end of such
calendar month and the consolidated statements of income and operations for such
calendar month, and the portion of the
-7-
Fiscal Year ended with such calendar month,
all in reasonable detail. Such financial statements shall be certified by the
president or chief financial officer of Borrower as fairly presenting the financial
condition and results of operations of Borrower and its Subsidiaries in accordance
with GAAP (other than footnote disclosures), consistently applied, as at such date
and for such periods, subject only to normal year-end accruals and audit
adjustments.
19. Section 7.1(b) of the Credit Agreement is hereby amended to read in its entirety as
follows:
(b) With respect to the Fiscal Year ending December 31, 2006, concurrently
with any filing by or on behalf of Borrower with the Securities and Exchange
Commission which contains Borrower’s financial statements for such Fiscal Year, but
in no event later than June 30, 2007, and within ninety (90) days after the end of
each Fiscal Year thereafter, the consolidated balance sheet of Borrower and its
Subsidiaries as at the end of such Fiscal Year and the consolidated statements of
income, operations, stockholders’ equity and cash flows, in each case of Borrower
and its Subsidiaries for such Fiscal Year, all in reasonable detail. Such financial
statements shall be prepared in accordance with GAAP, consistently applied, and
such consolidated financial statements shall be accompanied by a report of
independent public accountants of recognized standing selected by Borrower and
reasonably satisfactory to the Requisite Lenders, which report shall be prepared in
accordance with generally accepted auditing standards as at such date, and shall
not be subject to any qualifications or exceptions other than qualifications,
exceptions or disclaimers relating to internal controls.
20. A new Section 5.14 is hereby added to the Loan Agreement to read in its entirety as
follows:
5.14 Shareholder Approval.
(a) Within thirty (30) days following the later to occur of (i) the sale of
the Series C Shares to the Series C Investors, and (ii) the filing with the United
States Securities and Exchange Commission (the “SEC”) of Borrower’s Form 10-Q for
the quarterly period ending March 31, 2007, file or cause to be
filed with the SEC preliminary proxy materials (the “Proxy
-8-
Materials”) for the
purpose of holding the Shareholder Meeting; and
(b) Diligently respond to all SEC comments to its Proxy Materials and take all
such other actions as may be required to cause the Shareholder Meeting to occur,
and the Charter Amendment to become effective, as soon as is practicable.
21. Section 9.1(d) of the Credit Agreement is hereby amended to read in its entirety as
follows:
(d) Borrower (i) is in breach of Section 5.8 as provided in the final
sentence thereof, or (ii) fails to comply (A) with Section 5.14,
Section 7.1(i) or Section 7.3 in the manner stated therein, (B)
with Section 7.1(a), Section 7.1(b), Section 7.1(c),
Section 7.1(d), Section 7.1(f) or Section 7.2 within ten
(10) Banking Days of the date specified for performance therein, or (C) with any
other reporting requirement set forth in Article 7 within five (5) Banking
Days of the date specified for performance therein; or
22. Section 9.1 of the Loan Agreement is hereby amended by (a) replacing the “.” at the end of
clause (q) with “; or” and (b) adding the following new clause (r) thereto:
(r) Any or all of the Series C Investors shall have elected to redeem any or
all of their Series C Stock as provided in Section 9 of the Series C Certificate of
Designation.
23. Schedules 4.1, 4.7, 4.8, 4.10 and 4.12 to the Credit Agreement are hereby amended,
restated and replaced by Schedules 4.1, 4.7, 4.8, 4.10 and 4.12 attached hereto. The Credit
Agreement is further amended by the addition of Exhibit E-3 through Exhibit E-7
thereto in the forms attached hereto as Exhibit E-3 through Exhibit E-7,
respectively.
24. All notices, requests, demands, directions and other communications to Borrower provided
for under the Credit Agreement or under any other Loan Document shall be mailed, telegraphed,
telecopied, dispatched by commercial courier or delivered to the Borrower at the address set forth
on the signature pages of this Amendment No. 1 or at any other address as may be designated by it
in a written notice sent to all other parties to such Loan Document in accordance with Section 11.6
of the Credit Agreement.
-9-
25. To induce the Administrative Agent and the Lenders to enter into this Amendment No. 1,
Borrower hereby represents and warrants to the Administrative Agent and the Lenders that (a) the
representations and warranties made by Borrower in Sections 3.2, 3.3 and 3.4 of the Series C Stock
Purchase Agreement are true and correct on the date hereof and are deemed made to the
Administrative Agent and to the Lenders on the date hereof, (b) except as specifically provided
herein, the representations and warranties of Borrower set forth in Article 4 of the Credit
Agreement (including all representations and warranties made in such Article after giving effect to
this Amendment No. 1, but excluding the representations and warranties made in Sections 4.5, 4.6
and 4.17 thereof), and the representations and warranties of Borrower set forth in each of the
other Loan Documents, are true and correct in all material respects with the same effect as if made
on the date hereof (unless stated to relate solely to an earlier date, in which case they were true
and correct as of such earlier date; provided, however, that notwithstanding any such statement
relating to an earlier date, the representations and warranties made in Section 4.4 of the Credit
Agreement shall be deemed to have been restated as of the date hereof), and (c) after giving effect
to the terms of this Amendment No. 1, the Series C Stock Purchase Agreement and that certain letter
dated June 15, 2007 from the Lenders to Borrower waiving certain enumerated Defaults as set forth
therein, Borrower and each of the other Obligors is in compliance with all the terms and conditions
of the Credit Agreement and the other Loan Documents, and no Default or Event of Default has
occurred and is continuing.
26. This Amendment No. 1 shall become effective on the date upon which the following shall all
have occurred:
(a) The Administrative Agent shall have received each of the following, in form and substance
satisfactory to the Administrative Agent and its legal counsel:
(i) at least one (1) duly executed counterpart of this Amendment No. 1, together with
arrangements satisfactory to the Administrative Agent for additional executed counterparts,
sufficient in number for distribution to the Lenders and Borrower;
(ii) at least one (1) executed counterpart of a Consent to this Amendment No.1 (the
“Consent”), duly executed by each of the Obligors (other than Borrower), together with
arrangements satisfactory to the Administrative Agent for additional executed counterparts,
sufficient in number for distribution to the Lenders and Borrower;
-10-
(iii) a pro forma Capital Summary for Borrower, after giving effect to the transactions which
are the subject of this Amendment No. 1 and the Series C Stock Purchase Agreement; and
(iv) such other and further documents, certificates, opinions of counsel and other papers,
duly executed and delivered by the Obligors, as the Administrative Agent shall reasonably request;
and Borrower shall have paid all fees due to the Administrative Agent and the Lenders.
(b) The Series C Stock shall have been purchased by the Series C Investors in accordance with
the provisions of the Series C Stock Purchase Agreement (or with such deviations from the
provisions thereof as shall have been approved in writing by the Administrative Agent).
(c) Xxxxxx Xxxxx and Xxxxx Xxxxxxxxxx shall have resigned as members of Borrower’s Board of
Directors and two nominees selected by the Series C Investors shall have been elected as
replacement Directors.
(d) The Stockholders’ Agreement shall have been amended and/or restated in a manner acceptable
to the Administrative Agent and the Lenders pursuant to which, among other things (i) the Series C
Investors shall be added as parties thereto, (ii) the size of the Board of Directors of Borrower
shall be fixed at nine (9) members, and (iii) each of the holders of the Series B Stock and the
Series C Investors shall agree to vote their shares for the election of Xxxxxx Xxx Xxxxx, Xx.,
Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxxx to the Board of Directors of Borrower for terms ending at
Borrower’s annual meeting in 2009.
(e) The Amended and Restated Registration Rights Agreement dated July 19, 2006, among Borrower
and the Closing Date Lenders shall have been amended and/or amended and restated in a manner
acceptable to the Administrative Agent and the Lenders to, among other things, add the Series C
Investors as “Holders” thereunder.
(f) A notice from the Company relating to the adjustment of the conversion features of the
Series B Stock in connection with the issuance of the Series C Stock and the Series C Warrants.
27. Borrower agrees to pay all out-of-pocket expenses incurred by the Administrative Agent in
connection with the review, preparation, negotiation, execution and delivery of this Amendment No.
1 and all other documents executed or to be executed in connection herewith, including, without
limitation, the expenses and reasonable fees of counsel to
-11-
the Administrative Agent; provided, however, that Borrower shall not be required to pay any
such counsel fees in excess of $50,000.
28. Except as amended hereby, the Credit Agreement shall remain unchanged, and the Credit
Agreement, as so amended, shall continue in full force and effect in accordance with its terms.
29. This Amendment No. 1 may be executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which, when so executed and delivered, shall be an
original, but all such counterparts shall together constitute one and the same instrument.
30. The recitals hereto and all of the terms of the Credit Agreement are hereby incorporated
into and made a part hereof as though fully set forth herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-12-
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to Credit Agreement to be
duly executed under seal by their duly authorized respective officers as of the day and year first
above written.
| NEW HORIZONS WORLDWIDE, INC., a Delaware corporation |
||||||
| By: | /s/ Xxxx X. Xxxxxx | |||||
| Xxxx X. Xxxxxx, President, CEO | ||||||
| [Printed Name and Title] | ||||||
| Address for notices: | ||||||
| New Horizons Worldwide, Inc. 0000 X. Xxxxx Xxxxxxx Xxxx. Xxxxx 000 |
||||||
| Xxxxxxx, Xxxxxxxxxx 00000 Attn: Xxxxxxx X. Xxxxxxxx, Senior Vice President and Chief Financial Officer |
||||||
| Telecopier: (000) 000-0000 Telephone: (000) 000-0000 |
||||||
| With a copy to: | ||||||
| Xxxxxx, Xxxxxx & Xxxxxxxx XXX 0000 XxxXxxx Center 000 Xxxxxxxx Xxxxxx X. Xxxxxxxxx, Xxxx 00000 Attn: Xxxxx X. XxXxxxx, Esq. |
||||||
| Telecopier: (000) 000-0000 Telephone: (000) 000-0000 |
||||||
-13-
| CAMDEN PARTNERS STRATEGIC III, LLC, as Administrative Agent |
||||
| By: | /s/ Xxxxx X. Xxxxxxx | |||
| Xxxxx X. Xxxxxxx, Managing | ||||
| Member | ||||
| CAMDEN PARTNERS STRATEGIC FUND III, L.P., as
a Lender By: CAMDEN PARTNERS STRATEGIC III, LLC, its General Partner |
||||
| By: | /s/ Xxxxx X. Xxxxxxx | |||
| Xxxxx X. Xxxxxxx, Managing | ||||
| Member | ||||
|
CAMDEN PARTNERS STRATEGIC FUND III-A, L.P.,
as a Lender By: CAMDEN PARTNERS STRATEGIC III, LLC, its General Partner |
||||
| By: | /s/ Xxxxx X. Xxxxxxx | |||
| Xxxxx X. Xxxxxxx, Managing | ||||
| Member | ||||
-14-
| ALKHALEEJ TRAINING AND EDUCATION CORPORATION,
as a Lender |
||||
| By: | /s/ Awaleed Aldryaan | |||
| Awaleed Aldryaan, President | ||||
| [Printed Name and Title] | ||||
-00-
| XXXXXX X. XXXX, as a Lender | ||||
| /s/ Xxxxxx X. Xxxx | ||||
| Xxxxxx X. Xxxx | ||||
-16-
