EXHIBIT 4.1
FIRST AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
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THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(the "AMENDMENT") is made effective as of the 17th day of December, 1999, by and
among NOBEL LEARNING COMMUNITIES, INC. ("NOBEL"), IMAGINE EDUCATIONAL PRODUCTS,
INC. ("IMAGINE"), MERRYHILL SCHOOLS, INC. ("MERRYHILL"), NEDI, INC. ("NEDI"),
MERRYHILL SCHOOLS NEVADA, INC. ("MERRYHILL NEVADA"), LAKE FOREST PARK MONTESSORI
SCHOOL, INC. ("LAKE FOREST"), 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") (jointly and severally, the
"BORROWERS") and SUMMIT BANK, as Agent and Lender ("AGENT").
BACKGROUND
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A. Nobel, Imagine, Merryhill, NEDI, Merryhill Nevada, Lake Forest,
Paladin, Nobel Florida and Agent are parties to that certain Amended and
Restated Loan and Security Agreement dated March 9, 1999 (the "LOAN AGREEMENT").
B. Borrowers and Agent desire to amend the Loan Agreement in accordance
with the terms and conditions hereof.
C. 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. COST TRANSACTION.
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a. Nobel has entered into that certain Agreement and Plan of
Organization dated December 17, 1999 ("AGREEMENT OF ORGANIZATION") with
Children's Out-of-School Time, Inc. ("COST"), Joan Bergstrom, Craig
Bergstrom and William D. Putt pursuant to which, inter alia, (i) Nobel and
COST will acquire 80% and 20%, respectively, of the issued and outstanding
shares of common stock of TAC and (ii) TAC has agreed to pay to COST the
Earn-Out Payment, if any, in accordance with the terms of SECTION 1.2(G)
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thereof (the "EARN-OUT PAYMENT").
b. Nobel, COST and TAC have entered into that certain Stockholders
Agreement dated December 17, 1999 (the "STOCKHOLDERS AGREEMENT") pursuant
to which, inter alia, (i) COST has a "put right" with respect to the COST
Shares (as defined in the Stockholders Agreement), as more fully described
in SECTION 3 thereof (the "PUT") and (ii) it is anticipated that, in
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connection with the hiring of the President/COO (as defined in the
Stockholders Agreement), Nobel will sell to the President/COO a portion of
Nobel's shares of common stock of TAC, as more fully described in SECTION
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1.1 thereof (the "SHARE TRANSFER").
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c. Agent consents to Nobel's and TAC's compliance with their
respective obligations in respect of the Earn-Out Payment, the Put and the
Share Transfer; provided that (i) in each case no Event of Default (or
event which with the giving of notice or the passage of time or both would
result in an Event of Default) shall have occurred and be continuing nor
shall be caused thereby and (ii) with respect to the Share Transfer, the
interests transferred by Nobel shall not exceed ten percent (10%) of
Nobel's total interest in the common stock of TAC existing immediately
prior to the Share Transfer. If the Share Transfer shall occur, the pledge
by Nobel to Agent of the ownership interests
of Nobel in TAC shall be deemed released and satisfied with respect to the
portion of such interest being sold to the President/COO and Agent shall
deliver at Nobel's direction that portion of the certificates evidencing
Nobel's ownership interest in TAC previously delivered to Agent which are
being sold to the President/COO (or, if necessary, Agent shall accept a
substitute certificate evidencing the ownership interest in TAC being
retained by Nobel).
d. Borrowers have delivered to Agent true and complete copies of the
Agreement of Organization and Stockholders Agreement.
2. ADDITIONAL BORROWER.
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a. From and after the date hereof, TAC shall 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 TAC 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, TAC.
b. Notwithstanding anything in this Amendment or the Loan Agreement
to the contrary, Borrowers shall be permitted to cause or permit to occur
(i) an initial public offering of the stock of TAC (an "IPO"), (ii) a sale
of all or a material portion of the assets of TAC (an "ASSET SALE"), or
(iii) a sale of all or a material portion of the issued and outstanding
stock of TAC (a "STOCK SALE"), provided that (A) in the event of an Asset
Sale or a Stock Sale, Agent shall receive from the proceeds thereof
immediately available funds in an amount equal to the Release Price, and
(B) in any event no Event of Default (or event which with the giving of
notice or the passage of time or both would result in an Event of Default)
shall have occurred and be continuing nor shall be caused thereby. In the
event of any IPO, Asset Sale or Stock Sale (but, in the case of an Asset
Sale or Stock Sale, conditioned upon receipt by Agent of the Release Price
as required above), TAC shall no longer be a "Borrower" under the Loan
Agreement or any of the other Loan Documents and shall be fully and forever
released from all Lender Indebtedness and all liens and security interests
in favor of Agent against the assets of TAC shall be deemed released and
satisfied. In addition, in the event of any Stock Sale, the pledge by
Nobel to Agent of Nobel's ownership interest in TAC shall be deemed
released and satisfied with respect to that portion of such ownership
interest being sold and Agent shall deliver at Nobel's direction all
certificates evidencing Nobel's ownership interests in TAC previously
delivered to Agent and being sold in connection therewith (or, if
necessary, Agent shall accept a substitute certificate evidencing the
ownership interest in TAC being retained by Nobel, if any). All sums
received by Agent in connection with this SECTION 2(B) shall be applied
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one-half (1/2) to the outstanding principal balance of the Working Capital
Credit Facilities and one-half (1/2) to the Acquisition Credit Facility.
c. The release of TAC as a "Borrower" and the release and
satisfaction of the liens and security interests in favor of Agent in the
assets of TAC in accordance with the terms and conditions of SECTION 2(B)
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above shall be automatic and without any further action being required of
Agent or any other Lender and Agent shall, at the sole cost and expense of
Borrowers, execute and deliver such release statements regarding TAC's
assets as Borrowers shall request.
d. The occurrence of an IPO, an Asset Sale or a Stock Sale in
accordance with the terms and conditions of this SECTION 2 shall not
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affect or impair (i) the obligations of any of the other Borrowers to the
Agent or Lenders or any of the Agent's or Lender's rights or remedies with
respect to such other Borrowers or (ii) the amounts available to such other
Borrowers under the Loans or any other rights of such Borrowers in
connection therewith, all of which shall remain as set forth under the Loan
Documents.
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e. In the event of any IPO, (i) Borrower shall cause the annual
audited financial statements and quarterly financial statements thereafter
delivered to Agent pursuant to SECTIONS 11.1 AND 11.3 of the Loan Agreement
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to be stated such that TAC is not consolidated with the other Borrowers,
and the assets, liabilities, income and expenses of TAC shall not be
included in the calculation of any of the financial covenants set forth in
ARTICLE 10 of the Loan Agreement and (ii) without in any way limiting the
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generality of the applicable provisions of the Loan Agreement, except for
Nobel's equity interests in TAC existing immediately after the IPO, no
Borrower shall make any investments in, or loans, advances or extensions of
credit to, TAC.
f. In the event of an Asset Sale or Stock Sale, the Excess Cash Flow
payment under SECTION 6.5 of the Loan Agreement, if any, required in
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respect of the fiscal year of Borrowers during which such event occurred
shall be reduced by an amount equal to that portion of the proceeds of the
Release Price, if any, applied to any Acquisition Credit Facility Term
Loan.
g. As used herein, the term "RELEASE PRICE" shall mean an amount
equal to the lesser of (i) Seven Hundred Fifty Thousand Dollars
($750,000.00) or (ii) the Lender Indebtedness outstanding at the time of
the consummation of any Asset Sale or Stock Sale.
3. SECURITY. As security for the full and timely payment and performance
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of all Lender Indebtedness, TAC 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 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 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,
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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 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
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payment of all Lender Indebtedness, Nobel shall grant to Agent for the pro rata
benefit of Lenders a security interest in all stock of TAC held by Nobel. In
connection therewith, Nobel shall execute and deliver to Agent all such
documents as Agent may require including, with out 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. FUTURE AMENDMENTS. In the event of any amendments to the Loan
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Agreement entered into after the date hereof solely for the purpose of adding an
additional Borrower to the Loan Agreement, all existing and future Borrowers
agree that any such future amendment shall be effective with respect to all then
existing Borrowers if only executed by the party being added as a new Borrower
pursuant thereto, with the same force and effect as if each such Borrower had
executed such future amendment.
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6. ADDITIONAL DOCUMENTS. TAC covenants and agrees to execute and deliver
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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, including, without limitation, an
Allonge to each of the Notes.
7. FURTHER AGREEMENTS AND REPRESENTATIONS. Borrowers do hereby:
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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, 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.
8. COSTS AND EXPENSES. Upon execution of this Amendment, Borrowers shall
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pay to Agent, all costs and expenses incurred by Agent in connection with the
review, preparation and negotiation of this Amendment and all documents in
connection therewith, including, without limitation, all of Agent's attorneys'
fees and out-of-pocket expenses.
9. INCONSISTENCIES. To the extent of any inconsistency between the
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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.
10. CONSTRUCTION. All references to the Loan Agreement therein or in
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any other Loan Documents shall be deemed to be a reference to the Loan Agreement
as amended hereby.
11. NO WAIVER. Nothing contained herein and no actions taken pursuant to
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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.
12. BINDING EFFECT. This Amendment shall be binding upon and inure to the
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benefit of the parties hereto and their respective successors and assigns.
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13. GOVERNING LAW. This Amendment shall be governed by and construed in
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accordance with the laws of the Commonwealth of Pennsylvania.
14. HEADINGS. The headings of the sections of this Amendment are inserted
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for convenience only and shall not be deemed to constitute a part of this
Amendment.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written.
NOBEL LEARNING COMMUNITIES, INC.
By: _________________________________
Name/Title: ____________________________
IMAGINE EDUCATIONAL PRODUCTS, INC.
By: _________________________________
Name/Title: ____________________________
MERRYHILL SCHOOLS, INC.
By: _________________________________
Name/Title: ____________________________
NEDI, INC.
By: _________________________________
Name/Title: ____________________________
MERRYHILL SCHOOLS NEVADA, INC.
By: _________________________________
Name/Title: ____________________________
LAKE FOREST PARK MONTESSORI SCHOOLS, INC.
By: _________________________________
Name/Title: ____________________________
PALADIN ACADEMY, L.L.C.
By: _________________________________
Name/Title: ____________________________
NOBEL EDUCATION DYNAMICS FLORIDA, INC.
By: _________________________________
Name/Title: ____________________________
THE ACTIVITIES CLUB, INC.
By: ______________________________________
Name/Title: ________________________________
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SUMMIT BANK
By: ____________________________________
Name/Title: ________________________________
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