<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 7, 1997 Commission File No. 33-61232
LA PETITE ACADEMY, INC.
Formerly known as La Petite Holdings Corp.
(exact name of registrant as specified in its charter)
Delaware 43-1243221
(state or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
8717 WEST 110TH STREET, SUITE 300
OVERLAND PARK, KANSAS 66210
(address of principal executive office and zip code)
(913) 345-1250
(registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No___ (2) Yes X No ___
As of July 21, 1997, La Petite Academy, Inc. had 100 shares of common stock
outstanding.
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LA PETITE ACADEMY, INC.
INDEX
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED): PAGE
----
<S> <C>
Balance Sheets 1
Statements of Income 2
Statements of Cash Flows 3
Notes to Financial Statements 4-6
ITEM 2. MANAGEMEN'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7-8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 9
ITEM 2. CHANGES IN SECURITIES 9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 5. OTHER INFORMATION 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURE 10
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
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LA PETITE ACADEMY, INC.
BALANCE SHEETS
40 WEEKS ENDED JUNE 7, 1997
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
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<TABLE>
<CAPTION>
JUNE 7, AUGUST 31,
1997 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 21,758 $ 12,791
Restricted cash investments 2,102 9,227
Accounts and notes receivable, net 4,532 3,615
Prepaid supplies 5,671 6,409
Other prepaid expenses 6,703 2,210
Refundable income taxes 275 1,405
Current deferred income taxes 1,439 1,719
-------- --------
Total current assets 42,480 37,376
Property and equipment, at cost:
Land 6,917 6,867
Buildings 26,620 26,199
Furniture, equipment and leasehold improvements 62,602 58,874
Facilities under construction 194 377
-------- --------
96,333 92,317
Less accumulated depreciation and amortization 35,103 24,497
-------- --------
Net property and equipment 61,230 67,820
Other assets (Note 3) 65,448 69,001
Deferred income taxes 4,892 2,936
-------- --------
$174,050 $177,133
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Amounts due to banks, including overdrafts $ 3,535 $ 5,229
Accounts payable 3,488 3,109
Current reserve for closed academies 1,942 2,700
Accrued salaries, wages and other payroll costs 11,464 10,317
Accrued insurance liabilities 4,504 4,361
Accrued property, sales and use tax 3,516 4,254
Accrued interest payable 2,911 739
Other accrued liabilities 4,708 6,575
-------- --------
Total current liabilities 36,068 37,284
Long-term debt (Note 4) 85,716 86,590
Other long-term liabilities (Note 5) 16,030 19,749
Commitments and contingencies (Note 6)
Redeemable preferred stock ($.01 par value per share; 2,000,000 shares authorized; 800,000
issued and outstanding at aggregate liquidation preference; per share liquidation preference of
$39.729 and $35.581, respectively) 31,629 28,827
Stockholder's equity:
Common stock ($.01 par value per share; 1,000 shares authorized; 100
shares issued and outstanding)
Additional paid-in capital 17,175 19,977
Accumulated deficit (12,568) (15,294)
-------- --------
4,607 4,683
-------- --------
$174,050 $177,133
======== ========
</TABLE>
See notes to financial statements.
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LA PETITE ACADEMY, INC.
STATEMENTS OF INCOME
40 WEEKS ENDED JUNE 7, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
================================================================================================================================
12 WEEKS ENDED 40 WEEKS ENDED
==================================== ===================================
JUNE 7, JUNE 1, JUNE 7, JUNE 1,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Operating revenue $74,508 $71,601 $234,491 $228,410
Operating expenses:
Salaries, wages and
benefits 38,486 37,306 122,563 118,207
Facility lease payments 9,062 9,079 30,205 30,022
Depreciation 3,190 3,154 10,634 10,447
Amortization of goodwill
and other intangibles 516 516 1,720 2,258
Other 16,834 17,061 57,133 59,280
------- ------- -------- --------
68,088 67,116 222,255 220,214
------- ------- -------- --------
Operating income 6,420 4,485 12,236 8,196
------- ------- -------- --------
Interest expense 2,124 2,317 7,118 7,994
Interest income (193) (190) (686) (692)
------- ------- -------- --------
Net interest costs 1,931 2,127 6,432 7,302
------- ------- -------- --------
Income before income taxes
and extraordinary item 4,489 2,358 5,804 894
Provision for income taxes 2,027 1,144 3,078 1,056
------- ------- -------- --------
Income (loss) before
extraordinary item 2,462 1,214 2,726 (162)
------- ------- -------- --------
Extraordinary loss on
retirement of debt, net of
applicable income taxes of
$546 819 819
------- ------- -------- --------
Net income (loss) $ 2,462 $ 395 $ 2,726 $ (981)
======= ======= ======== ========
</TABLE>
See notes to financial statements.
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LA PETITE ACADEMY, INC.
STATEMENTS OF CASH FLOWS
40 WEEKS ENDED JUNE 7, 1997
(IN THOUSANDS OF DOLLARS)
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<TABLE>
<CAPTION>
40 WEEKS ENDED
-----------------------------
JUNE 7, JUNE 1,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,726 $ (981)
Adjustments to reconcile net income (loss) to net cash from operating
activities:
Non-cash portion of extraordinary loss 1,365
Depreciation and amortization 13,010 13,755
Deferred and accrued income taxes (1,675) 124
Changes in current assets and liabilities:
Accounts and notes receivable (882) (857)
Prepaid expenses and supplies (3,755) (3,899)
Accrued property, sales and use taxes (737) (1,154)
Accrued interest payable 2,172 2,127
Other changes in assets and liabilities, net (2,701) (3,486)
------------- ------------
Net cash from operating activities 8,158 6,994
------------- ------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Capital expenditures (4,306) (4,598)
Proceeds from sale of property and equipment 499 888
------------- ------------
Net cash used for investing activities (3,807) (3,710)
------------- ------------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
Repayment of long-term debt (877) (12,631)
Proceeds from capital lease 62
Amounts due to banks, including overdrafts (1,694) 5,204
Decrease (increase) in restricted cash investments 7,125 (832)
------------- ------------
Net cash from (used for) financing activities 4,616 (8,259)
------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH 8,967 (4,975)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,791 16,299
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 21,758 $ 11,324
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 4,291 $ 4,817
Income taxes 4,645 565
Cash received during the period from:
Interest $ 622 $ 756
Income taxes 1,141 663
See notes to financial statements.
</TABLE>
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LA PETITE ACADEMY, INC.
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NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND MERGER
La Petite Holdings Corp. was formed in 1993 as a Delaware corporation for
the purpose of holding the capital stock of La Petite Acquisition Corp. On
July 23, 1993, Holdings acquired all of the outstanding shares of common
stock, par value $.01 (the "Common Stock"), of La Petite Academy, Inc.
("Academy") for a total price of $104 million, net of transaction costs
and the intercompany note. The transaction was accounted for as a
purchase and the excess of purchase price over the net assets acquired of
$67 million is being amortized over 30 years. On, June 1, 1997, Holdings
was merged with and into its wholly-owned subsidiary Academy, a Delaware
corporation, pursuant to the Agreement and Plan of Merger dated as of May
22, 1997 by and between Holdings and Academy, with Academy as the
surviving corporation. Academy is referred to in these notes as the
"Company".
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL REPORTING - The financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is
suggested that these financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Holdings Annual Report on Form 10-K for the fiscal year ended August 31,
1996.
The Company utilizes a 52-week fiscal year ending on the last Saturday in
August composed of 13 four-week periods. The first quarter contains four
such periods or 16 weeks and each remaining quarter contains 3 periods or
12 weeks. The fiscal year ending 1996 was a 53-week year and the fourth
quarter contained one extra week.
The information included in these interim financial statements reflect all
normal recurring adjustments which are, in the opinion of management,
necessary to fairly state the Company's financial position and the results
of its operations for the periods presented.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified to
conform with the current year presentation.
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<PAGE> 7
3. OTHER ASSETS
(in thousands of dollars)
<TABLE>
<CAPTION>
JUNE 7, AUGUST 31,
1997 1996
<S> <C> <C>
Intangible assets:
Excess purchase price over net assets acquired $64,277 $64,277
Curriculum 1,497 1,497
Workforce 3,248 3,248
Accumulated amortization (12,179) (10,395)
------- -------
56,843 58,627
Deferred financing costs 12,743 12,854
Accumulated amortization (7,721) (6,271)
Other assets 3,583 3,791
------- -------
$65,448 $69,001
======= =======
4. LONG-TERM DEBT
(in thousands of dollars)
JUNE 7, AUGUST 31,
1997 1996
Convertible Debentures, 6.5% payable through
June 1, 2011 $ 850 $ 2,100
Senior Notes, 9.625% payable through August 1, 2001 85,000 85,000
Capital Lease - Computer hardware 60 0
------- -------
Total debt 85,910 87,100
Less unamortized discount (194) (510)
------- -------
$85,716 $86,590
======= =======
5. OTHER LONG-TERM LIABILITIES
(in thousands of dollars)
JUNE 7, AUGUST 31,
1997 1996
Unfavorable leases, net of accumulated amortization $ 6,371 $ 7,323
Non-current reserve for closed Academies 6,820 8,193
Long-term insurance liabilities 2,839 4,233
------- -------
$16,030 $19,749
======= =======
</TABLE>
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<PAGE> 8
6. COMMITMENTS AND CONTINGENCIES
The Company has litigation pending which arose in the ordinary course of
business. Litigation is subject to many uncertainties and the outcome of
the individual matters is not presently determinable. It is management's
opinion that this litigation will not result in liabilities that would
have a material adverse effect on the Company's financial position or
results of operations.
******
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS
The results of operations for La Petite Academy, Inc. (the "Company") for the
12 and 40 weeks ended June 7, 1997 are consistent and comparable with the 12
and 40 weeks ended June 1, 1996.
Historically, the Company's operating revenue has followed the seasonality of
the school year. The number of new children attending the Academies is highest
in September-October and January-February, generally referred to as the Fall
and Winter Enrollment periods. Revenues tend to decline during the calendar
year-end holiday period and during the Summer. As a result of this
seasonality, results for one quarter are not necessarily indicative of results
for an entire year.
The Company is continuing its expansion into new and existing markets on a very
selective basis and aggressively closing under-performing Academies in marginal
locations. Nineteen Academies in operation at the end of the third quarter of
fiscal year 1996 were closed prior to the end of the third quarter of fiscal
year 1997. Seven new Academies were opened during this same period. As a
result, the Company operated 750 Academies at the end of the third quarter of
fiscal 1997, twelve fewer than at the end of the same quarter of fiscal year
1996.
Operating revenue, excluding closed Academies from both years, increased 5.4%
during the 12 weeks and 4.7% during the 40 weeks ended June 7, 1997.
Attendance, excluding closed Academies from both years, increased 0.2% during
the 12 weeks and 1.4% during the 40 weeks ended June 7, 1997, while average
revenue per child increased 5.2% and 3.2%, respectively. Selective increases
in tuition rates took place in the second quarter of both years.
Labor costs increased 3.2% during the 12 weeks and 3.7% during the 40 weeks
ended June 7, 1997. As a percentage of revenue, labor costs were 51.7% for the
12 weeks and 52.3% for the 40 weeks ended June 7, 1997, as compared to 52.1%
and 51.8% during the same periods last year. The increase in labor cost was
principally due to Staff merit increases effective January 1, 1997.
Much of the Company's operating costs are relatively fixed and do not decline
or increase directly with small changes in attendance. Facility lease
payments, depreciation, amortization, and other operating costs all declined or
remained unchanged as a percentage of revenue during the third quarter of
fiscal year 1997 as compared to the same quarter of fiscal year 1996.
As a result of the foregoing, operating income for the 12 weeks ended June 7,
1997 was up $1.9 million or 43.1% from the same period last year. Operating
income for the 40 weeks ended June 7, 1997, was up $4.0 million or 49.3% from
the prior year. Earnings before interest, taxes, depreciation, and
amortization (EBITDA) was $10.1 million in the third quarter of fiscal 1997 as
compared to $8.2 million in the third quarter of fiscal 1996. EBITDA for the
40 weeks ended June 7, 1997, was $24.6 million as compared to $20.9 million in
the prior year.
After factoring in nondeductible goodwill amortization and other permanent
differences, the effective income tax rate for the 12 and 40 weeks ended June
7, 1997 was 40.6%, as compared to 40.0% for the comparable periods last year.
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<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $8.2 million through the third
quarter of fiscal year 1997 compared to cash flow of $7.0 million during the
same period last year. The increase in cash flow from operations of $1.2
million reflects increased net income of $3.7 million, increases in
miscellaneous working capital needs of $3.7 million, offset by increased net
income tax payments of $3.6 million, the purchase of a $1.8 million annuity to
fund workers' compensation claims, and increased payments to the VEBA Employee
Health Care Trust of $0.8 million.
Cash flows from financing activities were $4.6 million through the third
quarter of fiscal year 1997 compared to a negative cash flow of $8.3 million
during the same period last year. The increase in cash flow from financing
activities of $12.9 million reflects reduced term loan payments of $11.8
million, and an $8.0 net decrease in restricted cash requirements, offset by a
$6.9 million increase in the cash flow impact of changes in amounts due banks,
principally overdrafts. The decrease in term loan payments was principally due
to the retirement of borrowing under the Company's old credit agreement in the
prior year. The restricted cash investment represents cash deposited in escrow
accounts as collateral for the self-insured portion of the Company's workers*
compensation and automobile insurance coverage. The Company has the option to
replace these deposits with a credit or surety bond at any time. During the
first quarter of fiscal year 1997, a $5.0 million Letter of Credit (LOC) was
issued in exchange for a return of restricted cash in the same amount.
Through the third quarter, the Company also received, in aggregate, a $3.4
million return of restricted cash due to a reduction of collateral
requirements. The outstanding checks during 1997 declined from $5.2 million to
$3.5 million generating $1.7 million of cash. During 1996, outstanding checks
increased from $4.1 million to $9.3 million, reducing cash by $5.2 million.
The LOC discussed above was issued under the Company's $15.0 million revolving
credit facility. There remains $10 million available for working capital and
other corporate purposes which, in the opinion of management, is adequate to
meet foreseeable needs.
On October 22, 1996, the Company redeemed $1.25 million of the Company's 6 1/2%
Convertible Debentures for 70% of face value. The transaction was funded from
working capital.
The Senior Notes, Preferred Stock and the Credit Agreement (see Note 4 to
Consolidated Financial Statements of Holdings Annual Report on Form 10-K)
contain certain covenants that, among other things, set a maximum on the
Company*s leverage ratio. At June 7, 1997, the Company was in compliance with
all of its debt covenants.
INFLATION AND GENERAL ECONOMIC CONDITIONS
The Company has historically been able to increase tuition to offset increases
in its costs. During the past two years, a period of low to moderate
inflation, the Company implemented selective increases in tuition rates, based
on geographic market conditions and class capacity utilization. The Company did
not experience a material decline in attendance as a result of these increases.
There continues to be, however, no assurance of the impact future inflation
related tuition increases will have on attendance.
The minimum wage increase of October 1, 1996 did not have a material impact on
the Company's operations. On September 1, 1997 the minimum wage will increase
from $4.75 to $5.15 per hour, and it is also not expected to materially impact
Company operations.
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<PAGE> 11
PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS.
The Company has litigation pending which arose in the ordinary course of
business. In management's opinion, none of such litigation in which the
Company is currently involved will result in liabilities that will have a
material adverse effect on its financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits required by Item 601 of Regulation S-K:
Exhibit 3.3 - Restated Certificate of Incorporation of La Petite Academy,
Inc.
Exhibit 4.7 - First Supplemental Indenture dated as of May 19, 1997
between La Petite Holdings Corp., La Petite Academy, Inc. and Fleet
National Bank, as successor Trustee to Shawmut Bank Connecticut, with
respect to the Exchange Debentures.
Exhibit 4.8 - First Supplemental Indenture dated as of May 19, 1997
between La Petite Holdings Corp., La Petite Academy, Inc. and Fleet
National Bank, as successor Trustee to Shawmut Bank Connecticut, with
respect to the Senior Notes.
Exhibit 10.12 - First Amendment to Amended and Restated Credit
Agreement dated as of May 27, 1997, among La Petite Academy, Inc., La
Petite Holdings, Corp., various financial institutions, Bankers Trust
Company as Administrative Agent, and Mercantile Bank as Co-Agent.
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K:
Current Report on Form 8-K filed on July 10, 1997 reporting the merger on
June 1, 1997 of La Petite Holdings Corp. with and into La Petite Academy,
Inc.
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<PAGE> 12
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LA PETITE ACADEMY, INC.
Dated: July 21, 1997 /s/ Phillip M. Kane
--------------------------------------
By: Phillip M. Kane
Senior Vice-President, Chief Financial
Officer and Treasurer and duly
authorized representative of the
registrant
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<PAGE> 1
EXHIBIT 3.3
RESTATED CERTIFICATE OF INCORPORATION
OF
LA PETITE ACADEMY, INC.
(Under Section 245
of the Delaware General Corporation Law)
The undersigned, being the President of La Petite Academy, Inc., a
corporation existing under the laws of the State of Delaware, does hereby
certify as follows:
1. A Certificate of Incorporation of La Petite Academy, Inc. was filed
with the Secretary of State of the State of Delaware on October 5, 1981.
2. This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Section 245 of the General Corporation Law of
the State of Delaware.
3. This Restated Certificate of Incorporation restates and integrates
and also further amends the provisions of the Corporation's Certificate of
Incorporation as heretofore amended, restated or supplemented. This Restated
Certificate of Incorporation was proposed by the directors and adopted by the
stockholders in the manner and by the vote prescribed by Section 242 of the
Delaware General Corporation Law.
4. This Restated Certificate of Incorporation shall be effective as of
midnight on May 31, 1997.
5. The text of the Restated Certificate of Incorporation of La Petite
Academy, Inc. is hereby restated to read in full as follows:
FIRST: The name of the Corporation is La Petite Academy, Inc.
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
<PAGE> 2
Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "DGCL").
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01) and 2,000,000 shares of Class A Preferred Stock,
each having a par value of one penny ($.01).
4.A. Common Stock.
(a) Issuance. Shares of Common Stock may be issued from time to time
as the Board of Directors of this Corporation shall determine and on such terms
and for such consideration as shall be fixed by the Board of Directors.
(b) Dividends. After (i) the requirements with respect to preferential
dividends on the Class A Preferred Stock (fixed in accordance with the
provisions of this Article FOURTH herein), shall have been met, and (ii) the
Corporation shall have complied with the requirements, if any, with respect to
the setting aside of sums as sinking funds or redemption or purchase accounts
with respect to the Class A Preferred Stock (fixed in accordance with the
provisions of this Article FOURTH herein), and subject to any other conditions
which may be fixed in accordance with the provisions herein, the holders of
Common Stock shall be entitled to receive such dividends as may be declared
from time to time by the Board of Directors.
(c) Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, after
distribution in full of the preferential amount (fixed in accordance with the
provisions of this Article FOURTH herein), to be distributed to the holders of
Class A Preferred Stock, the holders of the Common Stock shall be entitled to
receive all of the remaining assets of the Corporation, tangible and intangible
of whatever kind, available for distribution to the holders of the Common Stock
ratably in proportion to the number of shares of Common Stock held by them
respectively.
4.B. Preferred Stock
(a) Issuance. Subject to the provisions contained herein, the Class
A Preferred Stock may be issued from time to time by the Board of Directors of
the Corporation. The initial liquidation preference of the Class A Preferred
Stock shall be $25.00 per share; such amount shall be subject to increase as
provided in paragraph (c)(i) herein.
(b) Rank. The Class A Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding up and
dissolution of the Corporation, rank senior to all classes of common stock of
the Corporation (including, without limitation, the Common Stock), and each
other class of capital stock or series of preferred stock hereafter created
which does not expressly provide that it ranks senior to or on a parity with
the
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<PAGE> 3
Class A Preferred Stock as to dividend distributions and distributions upon
the liquidation, winding up and dissolution of the Corporation ("Junior
Stock"). The Class A Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding up and
dissolution of the Corporation, rank on a parity with any class of capital
stock or series of preferred stock hereafter created which expressly provides
that it ranks on a parity with the Class A Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding up and
dissolution of the Corporation ("Parity Stock"), provided that any such Parity
Stock that was not approved by the Holders in accordance with paragraph
(f)(ii)(A) hereof shall be deemed to be Junior Stock and not Parity Stock. The
Class A Preferred Stock shall, with respect to dividend distributions and
distributions upon the liquidation, winding up and dissolution of the
Corporation, rank junior to each class of capital stock or series of preferred
stock hereafter created which has been approved by the Holders of the Class A
Preferred Stock in accordance with paragraph (f)(ii)(B) and which expressly
provides that it ranks senior to the Class A Preferred Stock as to dividend
distributions or distributions upon the liquidation, winding up and dissolution
of the Corporation ("Senior Stock").
(c) Dividends.
(i) Beginning on the Class A Preferred Stock Issue
Date, the Holders of the outstanding shares of Class A
Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors, out of
funds legally available therefor, distributions in the
form of cash dividends on each share of Class A
Preferred Stock, at a rate per annum equal to 12-1/8%
of the then effective liquidation preference per share
of the Class A Preferred Stock, payable quarterly. No
interest shall be payable in respect of any dividends
which may be in arrears. All dividends shall be
cumulative, whether or not earned or declared on a
daily basis from the Class A Preferred Stock Issue
Date and shall be payable quarterly in arrears on each
Dividend Payment Date, commencing on the first
Dividend Payment Date after the Class A Preferred
Stock Issue Date, provided that if any dividend
payable on any Dividend Payment Date on or before
August 1, 1998 is not declared and paid in full in
cash on such Dividend Payment Date the amount payable
as dividends on such Dividend Payment Date that is not
paid in cash on such Dividend Payment Date shall be
added to the liquidation preference of the Class A
Preferred Stock on such Dividend Payment Date and the
amount so added to the liquidation preference shall be
deemed paid in full and shall not accumulate. Each
distribution in the form of a dividend shall be
payable to, or added to the liquidation preference of
as herein provided, the Class A Preferred Stock held
by Holders of record as they appear on the stock books
of the Corporation on such record
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<PAGE> 4
dates, not less than ten (10) nor more than sixty (60) days
preceding the related Dividend Payment Date, as shall be fixed by
the Board of Directors. Dividends shall cease to accumulate in
respect of the Class A Preferred Stock on the Exchange Date or on
the date of their earlier redemption unless the Corporation shall
have failed to issue the appropriate aggregate principal amount of
Exchange Debentures in respect of the Class A Preferred Stock on
such Exchange Date or shall have failed to pay the relevant
redemption price on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Class
A Preferred Stock pursuant to paragraph (c)(i) shall be paid pro
rata to the Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of
Directors to declare, or the Corporation to pay or set apart for
payment, any dividends on shares of the Class A Preferred Stock at
any time.
(iv) Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption
pursuant to paragraph (e)(i) may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to Holders
of record on such date, not more than forty-five (45) days prior to
the payment thereof, as may be fixed by the Board of Directors of
the Corporation.
(v) No full dividends shall be declared by the Board of
Directors or paid or set apart for payment by the Corporation on
any Parity Stock for any period unless full cumulative dividends
have been or contemporaneously are declared and paid in cash, or
declared and a sum in cash set apart sufficient for such payment,
on the Class A Preferred Stock for all Dividend Periods terminating
on or prior to the date of payment of such full dividends on such
Parity Stock. If any dividends are not paid in full in cash, as
aforesaid, upon the shares of the Class A Preferred Stock and any
other Parity Stock, all dividends declared upon shares of the Class
A Preferred Stock and any other Parity Stock shall be declared pro
rata so that the amount of dividends declared per share on the
Class A Preferred Stock and such Parity Stock shall in all cases
bear to each other the same ratio that accrued dividends per share
on the Class A Preferred Stock and such Parity Stock bear to each
other.
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<PAGE> 5
(vi) (A) Holders of shares of the Class A Preferred Stock
shall be entitled to receive the dividends provided for in
paragraph (c)(i) hereof in preference to and in priority over any
dividends upon any of the Junior Stock.
(B) So long as any share of the Class A Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart
for payment any dividend on any of the Junior Stock or make any
payment on account of, or set apart for payment money for a sinking
or other similar fund for, the purchase, redemption or other
retirement of, any of the Junior Stock or any warrants, rights,
calls or options exercisable for or convertible into any of the
Junior Stock (other than redemptions of Junior Stock (and any
warrants, rights, calls or options exercisable for or convertible
into such Junior Stock) previously issued to any of the
Corporation's executive officers or employees pursuant to any
employee benefit or bonus plan, which redemptions shall have been
approved by a majority of the Board of Directors, provided that
Junior Stock held by executive officers or other management
employees of the Corporation may only be redeemed upon the
termination, retirement, death or disability of such executive
officer or management employee), or make any distribution in
respect thereof, either directly or indirectly, and whether in
cash, obligations or shares of the Corporation or other property
(other than distributions or dividends in Junior Stock to the
holders of Junior Stock), and shall not permit any corporation or
other entity directly or indirectly controlled by the Corporation
to purchase or redeem any of the Junior Stock or any such warrants,
rights, calls or options unless the dividends determined in
accordance herewith on the Class A Preferred Stock have been paid
in full in cash.
(C) So long as any share of the Class A Preferred Stock is
outstanding, the Corporation shall not make any payment on account
of, or set apart for payment money for a sinking or other similar
fund for, the purchase, redemption or other retirement of, any of
the Parity Stock or any warrants, rights, calls or options
exercisable for or convertible into any of the Parity Stock, and
shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any
of the Parity Stock or any such warrants, rights, calls or options
unless the dividends determined in accordance herewith on the Class
A Preferred Stock have been paid (or deemed to be paid) in full.
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<PAGE> 6
(vii) Dividends payable on the Class A Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day
year of twelve 30-day months and the actual number of days elapsed
in the period for which payable.
(viii) The Corporation will not claim any deduction from gross
income for dividends paid on the Class A Preferred Stock in any
Federal income tax return, claim for refund, or other statement,
report or submissions made to the Internal Revenue Service, and
will make any election or take any similar action to effectuate the
foregoing except, in each case, if there shall be a change in law
such that the Corporation may claim such dividends as deductions
from gross income without affecting the ability of the Holders of
the Class A Preferred Stock to claim the dividends received
deduction under Section 243(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor provision). At the
reasonable request of any Holder of Class A Preferred Stock (and at
the expense of such Holder), the Corporation will join in the
submission to the Internal Revenue Service of a request for a
ruling that the dividends paid on the Class A Preferred Stock will
be eligible for the dividends received deduction under Section
243(a)(1) of the Code (or any successor provision). In addition,
the Corporation will cooperate with any Holder of the Class A
Preferred Stock (at the expense of such Holder) in any litigation,
appeal or other proceeding relating to the eligibility for the
dividends received deduction under Section 243(a)(1) of the Code
(or any successor provision) of any dividends (within the meaning
of Section 316(a) of the Code or any successor provision) paid on
the Class A Preferred Stock. To the extent possible, the
principles of this paragraph (c)(viii) shall also apply with
respect to State and local income taxes.
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<PAGE> 7
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs
of the Corporation, the Holders of shares of Class A
Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Corporation available
for distribution to its stockholders an amount in cash
equal to the liquidation preference for each share
outstanding (including any dividends added to the
liquidation preference in accordance herewith), plus
an amount in cash equal to accumulated and unpaid
dividends thereon to the date fixed for liquidation,
dissolution or winding up (including an amount equal
to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for
liquidation, dissolution or winding up) before any
payment shall be made or any assets distributed to the
holders of any of the Junior Stock including, without
limitation, common stock of the Corporation. Except
as provided in the preceding sentence, Holders of
Class A Preferred Stock shall not be entitled to any
distribution in the event of liquidation, dissolution
or winding up of the affairs of the Corporation. If
the assets of the Corporation are not sufficient to
pay in full the liquidation payments payable to the
Holders of outstanding shares of the Class A Preferred
Stock and all Parity Stock, then the holders of all
such shares shall share equally and ratably in such
distribution of assets in accordance with the amounts
which would be payable on such distribution if the
amount to which the Holders of outstanding shares of
Class A Preferred Stock and the holders of outstanding
shares of all Parity Stock are entitled were paid in
full.
(ii) For the purposes of this paragraph (d), neither
the sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of
all or substantially all of the property or assets of
the Corporation nor the consolidation or merger of the
Corporation with or into one or more corporations
shall be deemed to be a liquidation, dissolution or
winding up of the affairs of the Corporation.
(e) Redemption.
(i) Optional Redemption. (A) The Corporation may,
at the option of the Board of Directors, redeem at any
time on or after August 1, 1998, from any source of
funds legally available
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<PAGE> 8
therefor, in whole or in part, in the manner provided in paragraph
(e)(iii) hereof, any or all of the shares of the Class A Preferred
Stock, at the redemption prices (expressed as a percentage of the
then effective liquidation preference) set forth below plus,
without duplication, an amount in cash equal to all accumulated and
unpaid dividends per share (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date)
(the "Optional Redemption Price"):
During the twelve (12) month period beginning on August 1 of
the years indicated below:
1998 ................................ 106.00%
1999 ................................ 104.00%
2000 ................................ 102.00%
2001 and thereafter ................. 100.00%
provided that no optional redemption pursuant to either this
paragraph or paragraph (e)(i)(B) hereof shall be authorized or made
unless prior thereto full unpaid dividends for all Dividend Periods
terminating on or prior to the Redemption Date and for an amount
equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Redemption Date to the
Redemption Date have been or immediately prior to the Redemption
Notice are declared and paid in cash or declared and a sum set
apart sufficient for such cash payment on the Redemption Date, on
the Class A Preferred Stock.
(B) In the event that the Corporation consummates an initial
public offering of its common stock resulting in the receipt of
cash proceeds, net of underwriting discounts and commissions and
net of the expenses payable by the Corporation directly related to
such Offering, of at least $20,000,000 on or before August 1, 1998,
the Corporation may, at its option, redeem from any source of funds
legally available therefor, in the manner provided in paragraph
(e)(iii) hereof, on a Redemption Date no later than 30 days
following the consummation of such offering, up to 100% of the
shares of the Class A Preferred Stock originally issued at a
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<PAGE> 9
redemption price equal to 112-1/8% of the then effective
liquidation preference thereof, plus, without duplication, an
amount in cash equal to all accumulated and unpaid dividends per
share (including an amount in cash equal to a prorated dividend for
the period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date) (the "Contingent Redemption
Price").
(C) In the event of a redemption pursuant to paragraph
(e)(i)(A) or (e)(i)(B) hereof of only a portion of the then
outstanding shares of the Class A Preferred Stock, the Corporation
shall effect such redemption pro rata according to the number of
shares held by each Holder of the Class A Preferred Stock, except
that the Corporation may redeem such shares held by Holders of
fewer than 100 shares (or shares held by Holders who would hold
less than 100 shares as a result of such redemption), as may be
determined by the Corporation.
(ii) Mandatory Redemption. On August 1, 2003 the Corporation
shall redeem from any source of funds legally available therefor,
in the manner provided in paragraph (e)(iii) hereof, all of the
shares of the Class A Preferred Stock then outstanding at a
redemption price equal to 100% of the then effective liquidation
preference per share, plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends per share (including
an amount equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date but excluding any dividends to be paid
contemporaneously with such redemption pursuant to the next
sentence) (the "Mandatory Redemption Price"). The Corporation
shall, to the extent of funds legally available therefor,
immediately prior to the authorization or the making of any such
redemption, declare and pay in cash (or set apart a sum sufficient
for such cash payment on such Redemption Date) all accumulated and
unpaid dividends on the Class A Preferred Stock for all Dividend
Periods terminating on or prior to the Redemption Date and an
amount equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date.
(iii) Procedures for Redemption. (A) At least thirty (30) days
and not more than sixty (60) days prior to the date fixed for any
redemption of the Class A Preferred Stock, written notice (the
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<PAGE> 10
"Redemption Notice") shall be given by first class mail, postage
prepaid, to each Holder of record on the record date fixed for such
redemption of the Class A Preferred Stock at such Holder's address
as the same appears on the stock register of the Corporation,
provided that no failure to give such notice nor any deficiency
therein shall affect the validity of the procedure for the
redemption of any shares of Class A Preferred Stock to be redeemed
except as to the Holder or Holders to whom the Corporation has
failed to give said notice or except as to the Holder or Holders
whose notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph
(e)(i)(A), (e)(i)(B) or (e)(ii) hereof;
(2) the Optional Redemption Price, the Mandatory
Redemption Price or the Contingent Redemption Price, as the
case may be;
(3) whether all or less than all the outstanding
shares of the Class A Preferred Stock redeemable thereunder
are to be redeemed and the total number of shares of the
Class A Preferred Stock being redeemed;
(4) the number of shares of Class A Preferred Stock
held, as of the appropriate record date, by the Holder that
the Corporation intends to redeem;
(5) the date fixed for redemption;
(6) that the Holder is to surrender to the
Corporation, at the place or places where certificates for
shares of Class A Preferred Stock are to be surrendered for
redemption, in the manner and at the price designated, his
certificate or certificates representing the shares of Class
A Preferred Stock to be redeemed; and
(7) that dividends on the shares of the Class A
Preferred Stock to be redeemed shall cease to accumulate on
such Redemption Date unless the Corporation defaults in the
payment of the Optional Redemption Price, the Contingent
Redemption Price or the Mandatory Redemption Price, as the
case may be.
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<PAGE> 11
(B) Each Holder of Class A Preferred Stock shall
surrender the certificate or certificates representing
such shares of Class A Preferred Stock to the
Corporation, duly endorsed, in the manner and at the
place designated in the Redemption Notice, and on the
Redemption Date the full Optional Redemption Price,
Contingent Redemption Price or Mandatory Redemption
Price, as the case may be, for such shares shall be
payable in cash to the Person whose name appears on
such certificate or certificates as the owner thereof,
and each surrendered certificate shall be canceled and
retired. In the event that less than all of the
shares represented by any such certificate are
redeemed, a new certificate shall be issued
representing the unredeemed shares.
(C) Unless the Corporation defaults in the
payment in full of the applicable redemption price,
dividends on the Class A Preferred Stock called for
redemption shall cease to accumulate on the Redemption
Date, and the Holders of such redeemed shares shall
cease to have any further rights with respect thereto
on the Redemption Date, other than the right to
receive the Optional Redemption Price, the Contingent
Redemption Price or the Mandatory Redemption Price, as
the case may be, without interest.
(f) Voting Rights.
(i) The Holders of Class A Preferred Stock, except as
otherwise required under Delaware law or as set forth
in paragraphs (ii), (iii) and (iv) below, shall not be
entitled or permitted to vote on any matter required
or permitted to be voted upon by the stockholders of
the Corporation.
(ii) (A) So long as any shares of the Class A
Preferred Stock are outstanding, the Corporation shall
not authorize any class of Parity Stock without the
affirmative vote or consent of Holders of at least
66-2/3% of the then outstanding shares of Class A
Preferred Stock, voting or consenting, as the case may
be, as one class, given in person or by proxy, either
in writing or by resolution adopted at an annual or
special meeting.
(B) So long as any shares of the Class A
Preferred Stock are outstanding, the Corporation shall
not authorize any class of Senior Stock without the
affirmative vote or consent of Holders of at least
66-2/3% of the outstanding shares of Class A Preferred
Stock, voting or consenting, as the case may be, as
one class, given
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<PAGE> 12
in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(C) So long as any shares of the Class A
Preferred Stock are outstanding, the Corporation shall
not amend this Article FOURTH so as to affect
adversely the specified rights, preferences,
privileges or voting rights of holders of shares of
Class A Preferred Stock or to authorize the issuance
of any additional shares of Class A Preferred Stock
without the affirmative vote or consent of Holders of
at least 66-2/3% of the issued and outstanding shares
of Class A Preferred Stock, voting or consenting, as
the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at
an annual or special meeting.
(D) Prior to the exchange of Class A Preferred
Stock for Exchange Debentures, the Corporation shall
not amend or modify the Indenture for the Exchange
Debentures in the form as executed on the Class A
Preferred Stock Issue Date (the "Indenture") (except
as expressly provided therein) without the affirmative
vote or consent of Holders of at least 66-2/3% of the
shares of Class A Preferred Stock then outstanding,
voting or consenting, as the case may be, as one
class, given in person or by proxy, either in writing
or by resolution adopted at an annual or special
meeting.
(E) Except as set forth in paragraphs (f)(ii)(A)
and (f)(ii)(B) above, (x) the creation, authorization
or issuance of any shares of any Junior Stock, Parity
Stock or Senior Stock, or (y) the increase or decrease
in the amount of authorized capital stock of any
class, including preferred stock, shall not require
the consent of Holders of Class A Preferred Stock and
shall not, unless not complying with paragraphs
(f)(ii)(A) and (f)(ii)(B) above, be deemed to affect
adversely the rights, preferences, privileges or
voting rights of Holders of Class A Preferred Stock.
(iii) Without the affirmative vote or consent of
Holders of a majority of the issued and outstanding
shares of Class A Preferred Stock, voting or
consenting, as the case may be, as one class the
Corporation will not, in a single transaction or
series of related transactions, consolidate or merge
with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of
its assets to, any Person or adopt a Plan of
Liquidation unless: (i) either (1) the Corporation
shall be the surviving or continuing corporation or
(2) the Person (if other than the
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<PAGE> 13
Corporation) formed by such consolidation or into which the
Corporation is merged or the Person which acquires by conveyance,
transfer or lease the properties and assets of the Corporation
substantially as an entirety or in the case of a Plan of
Liquidation, or Person to which assets of the Corporation have been
transferred shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the
District of Columbia; (ii) the Class A Preferred Stock shall be
converted into or exchanged for and shall become shares of such
successor, transferee or resulting corporation, having in respect
of such successor, transferee or resulting corporation the same
powers, preferences and relative participating, optional or other
special rights and the qualifications, limitations or restrictions
thereon, that the Class A Preferred Stock had immediately prior to
such transaction; (iii) immediately after giving effect to such
transaction and the conversion or exchange contemplated by clause
(ii) above (including giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Corporation
(in the case of clause (1) of the foregoing clause (i)) or such
Person (in the case of clause (2) thereof) (a) shall have a
Consolidated Net Worth (immediately after such transaction but
prior to any purchase accounting adjustments for such transaction)
equal to or greater than the Consolidated Net Worth of the
Corporation immediately prior to such transaction and (b) shall be
able to incur (assuming a market rate of interest with respect
thereto) at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under paragraph (l)(i) hereof, provided
that this clause (iii) shall not be applicable with respect to a
merger of the Corporation with or into any Wholly Owned Subsidiary
of the Corporation; (iv) immediately before and after giving effect
to such transactions and the conversion or exchange contemplated by
clause (ii) above (including giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transactions) no Voting
Rights Triggering Event shall have occurred or be continuing; and
(v) neither the Corporation nor any Subsidiary of the Corporation
nor such Person, as the case may be, would thereupon become
obligated with respect to any Indebtedness (including Acquired
Indebtedness), unless the Corporation or such Subsidiary or such
Person, as the case may be, could incur such Indebtedness under
paragraph (1)(i) hereof.
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<PAGE> 14
For purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise, in a single
transaction or series of transactions) of all or
substantially all of the properties or assets of one
or more Subsidiaries of the Corporation, the Capital
Stock of which constitutes all or substantially all of
the properties and assets of the Corporation shall be
deemed to be the transfer of all or substantially all
of the properties and assets of the Corporation.
(iv) (A) If (w) the corporation fails to declare and
pay dividends on the Class A Preferred Stock as set
forth in paragraph (c) (i) hereof (the deemed payment
of dividends pursuant to such paragraph (c) (i) being
also treated, for purposes of this paragraph (f) (iv),
as the declaration and payment of dividends) in an
amount equal to six full quarterly dividends (a
"Dividend Default"); or (x) the Corporation fails to
make a mandatory redemption of the Class A Preferred
Stock when required pursuant to paragraph (e) (ii)
hereof or to make a Change of Control Offer required
pursuant to paragraph (h) hereof (a "Redemption
Default"); or (y) the Corporation breaches or violates
one of the provisions set forth in either of
paragraphs (1) (i) or (1) (ii) hereof and the breach
or violation continues for a period of 30 days or more
(a "Restriction Default"); or (z) a default occurs on
the obligation to pay principal of, interest on or any
other payment obligation when due (a "Payment
Default") at final maturity on one or more classes of
Indebtedness of the Corporation or any Subsidiary,
whether such Indebtedness exists on the Class A
Preferred Stock Issue Date or is incurred thereafter,
having individually or in the aggregate, an
outstanding principal amount of $10.0 million or more,
or any other Payment Default occurs on one or more
such classes of Indebtedness and such class or classes
of Indebtedness are declared due and payable prior to
their respective maturities, then the number of
directors constituting the Board of Directors shall be
adjusted by the Board of Directors by the number, if
any, necessary to permit the Holders of the Class A
Preferred Stock, voting separately and as one class,
to elect the lesser of two directors or 25% of the
members of the Board of Directors of the Corporation.
Holders of a majority of the issued and outstanding
shares of Class A Preferred Stock, voting separately
and as one class, shall have the exclusive right to
elect the lesser of two directors or 25% of the
members of the Board of Directors at a meeting
therefor called upon occurrence of such Dividend
Default, Redemption Default, Restriction Default or
Payment Default, as the case may be, and at every
subsequent meeting at which the terms of office of the
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<PAGE> 15
directors so elected by the Holders of the Class A
Preferred Stock expire (other than as described in (f)
(iv) (B) below). Each such event described in clauses
(w), (x), (y) and (z) is a "Voting Rights Triggering
Event."
(B) The right of the Holders of Class A Preferred
Stock voting together as a separate class to elect
members of the Board of Directors as set forth in
subparagraph (f) (iv) (A) above shall continue until
such time as (w) in the event such right arises due to
a Dividend Default, all accumulated dividends that are
in arrears on the Class A Preferred Stock are paid in
full and the Corporation has paid dividends in full on
the two consecutive Dividend Payment Dates immediately
following the payment of such arrearage; and (x) in
the event such right arises due to a Redemption
Default, the Corporation makes the mandatory
redemption payment in cash in full as required hereby
or makes the payment in full in cash as required
hereby in respect of the Change of Control Offer that
gave rise to such right; and (y) in the event such
right arises due to a Restriction Default, the
Corporation remedies the breach or violation; and (z)
in the event such right arises due to a Payment
Default, the Corporation cures the default, at which
time (1) the special right of the Holders of Class A
Preferred Stock so to vote as a class for the election
of directors and (2) the term of office of the
directors elected by the Holders of the Class A
Preferred Stock shall terminate and the directors
elected by the holders of Common Stock shall
constitute the entire Board of Directors. At any time
after voting power to elect directors shall have
become vested and be continuing in the Holders of
Class A Preferred Stock pursuant to paragraph (f) (iv)
hereof, or if vacancies shall exist in the offices of
directors elected by the Holders of Class A Preferred
Stock, a proper officer of the Corporation may, and
upon the written request of the Holders of record of
at least ten percent (10%) of the shares of Class A
Preferred Stock then outstanding addressed to the
Secretary of the Corporation shall, call a special
meeting of the Holders of Class A Preferred Stock,
for the purpose of electing the directors which such
Holders are entitled to elect. If such meeting shall
not be called by the proper officer of the Corporation
within twenty (20) days after personal service of said
written request upon the Secretary of the Corporation,
or within twenty (20) days after mailing the same
within the United States by certified mail, addressed
to the Secretary of the Corporation at its principal
executive offices, then the Holders of record of at
least twenty
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<PAGE> 16
percent (20%) of the outstanding shares of Class A Preferred
Stock may designate in writing one of their number to call such
meeting at the expense of the Corporation, and such meeting may be
called by the Person so designated upon the notice required for the
annual meetings of stockholders of the Corporation and shall be
held at the place for holding the annual meetings of stockholders.
Any Holder of Class A Preferred Stock so designated shall have, and
the Corporation shall provide, access to the lists of stockholders
to be called pursuant to the provisions hereof.
(C) At any meeting held for the purpose of electing directors
at which the Holders of Class A Preferred Stock shall have the
right, voting together as a separate class, to elect directors as
aforesaid, the presence in person or by proxy of the Holders of at
least a majority of the outstanding Class A Preferred Stock shall
be required to constitute a quorum of such Class A Preferred Stock.
(D) Any vacancy occurring in the office of a director elected
by the Holders of Class A Preferred Stock may be filled by the
remaining directors elected by the Holders of Class A Preferred
Stock unless and until such vacancy shall be filled by the Holders
of Class A Preferred Stock.
(v) In any case in which the Holders of Class A Preferred Stock
shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of Class A Preferred Stock
shall be entitled to one vote for each share of Class A Preferred
Stock held.
(g) Exchange.
(i) Requirements. The outstanding shares of Class A Preferred
Stock are exchangeable as a whole but not in part, at the option of
the Corporation and subject to the terms and conditions of the
Credit Agreement and the Senior Note Indenture at any time on any
Dividend Payment Date on or after June 1, 1997, for the
Corporation's 12-1/8% Subordinated Exchange Debentures due 2003
(the "Exchange Debentures"), to be substantially in the form of
Exhibit A to the form of Indenture, a copy of which is on file with
the Secretary of the Corporation, provided that any such exchange
may only be made if on or prior to the date of such exchange (i)
the Indenture and the trustee thereunder (the "Trustee") each have
been qualified under the Trust Indenture Act of 1939, as amended;
(ii) the Corporation has paid (or is deemed to
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<PAGE> 17
have paid) all accumulated dividends on the Class A
Preferred Stock (including the dividends payable on
the date of exchange) and there shall be no
contractual impediment to such exchange; (iii) there
shall be legally available funds sufficient therefor;
(iv) a registration statement relating to the Exchange
Debentures shall have been declared effective under
the Securities Act of 1933, as amended (the "Act")
prior to such exchange and shall continue to be in
effect on the date of such exchange or the Corporation
shall have obtained a written opinion of counsel that
an exemption from the registration requirements of the
Act is available for such exchange, and that upon
receipt of such Exchange Debentures pursuant to such
exchange made in accordance with such exemption, the
holders (assuming such holder is not an Affiliate of
the Corporation) thereof will not be subject to any
restrictions imposed by the Act upon the resale
thereof and such exemption is relied upon by the
Corporation for such exchange; (v) immediately after
giving effect to such exchange, no Default or Event of
Default (as defined in the Indenture) would exist
under the Indenture; and (vi) the Corporation shall
have delivered a written opinion of counsel, dated the
date of exchange, regarding the satisfaction of the
conditions set forth in clauses (i)-(iv) and that the
Corporation has complied in all material respects with
all applicable state and Federal securities laws
relating to such exchange. The exchange rate shall be
$1.00 principal amount of the Exchange Debentures for
each $1.00 of liquidation preference of Class A
Preferred Stock, including, to the extent necessary,
Exchange Debentures in principal amounts less than
$1,000, provided that the Corporation shall have the
right, at its option and subject to the terms and
conditions of the Senior Note Indenture to pay cash in
an amount equal to the principal amount of that
portion of any Exchange Debenture that is not an
integral multiple of $1,000 instead of delivering an
Exchange Debenture in a denomination of less than
$1,000.
(ii) Procedure for Exchange. (A) At least thirty
(30) days and not more than sixty (60) days prior to
the date fixed for exchange, written notice (the
"Exchange Notice") shall be given by first-class mail,
postage prepaid, to each Holder of record on the
record date fixed for such exchange of the Class A
Preferred Stock at such Holder's address as the same
appears on the stock register of the Corporation,
provided that no failure to give such notice nor any
deficiency therein shall affect the validity of the
procedure for the exchange of any shares of Class A
Preferred Stock to be exchanged
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<PAGE> 18
except as to the Holder or Holders to whom the Corporation has
failed to give said notice or except as to the Holder or Holders
whose notice was defective. The Exchange Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, at the
place or places where certificates for shares of Class A Preferred
Stock are to be surrendered for exchange, in the manner designated,
his certificate or certificates representing the shares of Class A
Preferred Stock to be exchanged;
(3) that dividends on the shares of Class A Preferred Stock to
be exchanged shall cease to accrue on such Exchange Date whether or
not certificates for shares of Class A Preferred Stock are
surrendered for exchange on such Exchange Date unless the
Corporation shall default in the delivery of Exchange Debentures;
and
(4) that interest on the Exchange Debentures shall accrue from
the Exchange Date whether or not certificates for shares of Class A
Preferred Stock are surrendered for exchange on such Exchange Date.
(B) On or before the date fixed for exchange, each Holder of
Class A Preferred Stock shall surrender the certificate or
certificates representing such shares of Class A Preferred Stock,
in the manner and at the place designated in the Exchange Notice.
The Corporation shall cause the Exchange Debentures to be executed
on the Exchange Date and, upon surrender in accordance with the
Exchange Notice of the certificates for any shares of Class A
Preferred Stock so exchanged (properly endorsed or assigned for
transfer, if the notice shall so state), such shares shall be
exchanged by the Corporation into Exchange Debentures. The
Corporation shall pay interest on the Exchange Debentures at the
rate and on the dates specified therein from the Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice (x) the Indenture shall have
been duly executed and delivered by the Corporation and the trustee
thereunder and (y) all Exchange Debentures necessary for such
exchange shall have been duly executed by the Corporation and
delivered to the trustee under the Indenture with irrevocable
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<PAGE> 19
instructions to authenticate the Exchange Debentures necessary
for such exchange, then the rights of the Holders of Class A
Preferred Stock so exchanged as a stockholders of the Corporation
shall cease (except the right to receive Exchange Debentures, an
amount in cash equal to the amount of accrued and unpaid dividends
to the Exchange Date and, if the Corporation so elects, cash in
lieu of any Exchange Debenture not an integral multiple of $1,000),
and the Person or Persons entitled to receive the Exchange
Debentures issuable upon exchange shall be treated for all purposes
as the registered Holder or Holders of such Exchange Debentures as
of the date of exchange.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g), the Corporation shall not be
entitled to exchange the Class A Preferred Stock for Exchange
Debentures if such exchange, or any term or provision of the
Indenture or the Exchange Debentures, or the performance of the
Corporation's obligations under the Indenture or the Exchange
Debentures, shall materially violate or conflict with any
applicable law or agreement or instrument then binding on the
Corporation or if, at the time of such exchange, the Corporation is
insolvent or if it would be rendered insolvent by such exchange.
(h) Change of Control.
(i) In the event of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Corporation
shall notify the Holders of the Class A Preferred Stock in writing
of such occurrence and shall make an offer to purchase (the "Change
of Control Offer"), on a Business Day (the "Change of Control
Payment Date") not later than 60 days following the Change of
Control Date, all then outstanding shares of Class A Preferred
Stock at a purchase price of 101% of the then effective liquidation
preference thereof plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends per share (including
an amount in cash equal to a prorated dividend for the period from
the Dividend Payment Date immediately prior to the Change of
Control Payment Date to the Change of Control Payment Date).
Immediately prior to authorizing or making any such accrued and
unpaid dividends, the Corporation shall declare, to the extent of
funds legally available therefor, all such accrued and unpaid
dividends.
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<PAGE> 20
(ii) Notice of the Change of Control Offer shall be
mailed by the Corporation not less than 30 days nor
more than 60 days before the Change of Control Payment
Date to Holders of Class A Preferred Stock at their
last registered address and shall set forth:
(A) notice that a Change of Control has occurred
and that each Holder of Class A Preferred Stock has
the right to require the Corporation to repurchase for
cash such Holder's Class A Preferred Stock at 101% of
the then effective liquidation preference thereof
plus, without duplication, the amount in cash as
determined in accordance with paragraph (h) (i) above;
(B) the fact that the Corporation has the right
to redeem the Class A Preferred Stock on or after
August 1, 1998, at the specified Optional Redemption
Price and a statement as to whether the Corporation
intends to exercise such right in connection with the
Change of Control;
(C) the Change of Control Payment Date;
(D) a description of the Change of Control; and
(E) a description of the procedures to be
followed by such Holder in order to have its Class A
Preferred Stock repurchased.
The Change of Control Offer shall remain open
from the time of mailing until the Business Day
preceding the Change of Control Payment Date.
(iii) The Corporation will comply with any securities
laws and regulations to the extent such laws and
regulations are applicable to the repurchase of the
Class A Preferred Stock in connection with a Change of
Control.
(iv) On the Change of Control Payment Date, unless the
Corporation defaults in the payment for the shares of
Class A Preferred Stock tendered pursuant to the
Change of Control Offer, dividends will cease to
accrue with respect to the shares of Class A Preferred
Stock tendered. All rights of Holders of such
tendered shares will terminate, except for the right
to receive payment therefor, on the Change of Control
Payment Date.
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<PAGE> 21
(v) Notwithstanding anything to the contrary contained
above, prior to complying with the foregoing provisions
the Company shall, either repay all Indebtedness and
terminate all commitments outstanding under the Credit
Agreement or obtain the requisite consents, if any, under
the Credit Agreement required to permit the repurchase of
Class A Preferred Stock required by this paragraph (h).
Until the requirements of the immediately preceding
sentence are satisfied, the Company shall not make, and
shall not be obligated to make, any Change of Control Offer.
(i) Conversion or Exchange. The Holders of shares of Class A
Preferred Stock shall not have any rights hereunder to convert such shares into
or exchange such shares for shares of any other class or classes or of any
other series of any class or classes of Capital Stock of the Corporation.
(j) Reissuance of Class A Preferred Stock. Shares of Class A
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized
and unissued shares of preferred stock undesignated as to series and may be
redesignated and reissued as part of any series of preferred stock, provided
that any issuance of such shares as Class A Preferred Stock must be in
compliance with the terms hereof.
(k) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately
succeeding Business Day.
(l) Certain Additional Provisions.
(i) Limitation on Indebtedness. The Corporation will
not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, incur any
Indebtedness (including Acquired Indebtedness), other
than Permitted Indebtedness, provided that the
Corporation and its Subsidiaries may incur
Indebtedness (including Acquired Indebtedness) if:
(i) no Voting Rights Triggering Event shall have
occurred and be continuing at the time of the proposed
incurrence thereof or shall occur as a result of such
proposed incurrence, and (ii) after giving effect to
such proposed incurrence the Corporation's
Consolidated Fixed Charge Coverage Ratio would be
greater than 2.0 to 1.0.
Notwithstanding anything herein to the contrary,
if at any time the amount incurred and outstanding
under clause (vi) of the
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<PAGE> 22
definition of Permitted Indebtedness exceeds the amount that
would then be permitted to be incurred thereunder as a result of
any adjustments made in accordance with such clause (vi) to the
amount permitted to be incurred thereunder, the date the amount
incurred and outstanding thereunder exceeds the amount that would
then be permitted to be incurred thereunder shall be deemed to be
the incurrence of Indebtedness in the amount of such excess for
purposes of this Article FOURTH.
(ii) Limitation on Restricted Payments. (A) The Corporation
will not, and will not permit any of its Subsidiaries to, directly
or indirectly, make any Restricted Payment if:
(1) at the time of such proposed Restricted Payment or
immediately after giving effect to such proposed Restricted Payment
any Voting Rights Triggering Event shall have occurred and be
continuing;
(2) immediately after giving effect to such proposed
Restricted Payment the Corporation's Consolidated Fixed Charge
Coverage Ratio would be less than 2.25 to 1.0;
(3) immediately after giving effect to such proposed
Restricted Payment, and together with the aggregate amount of all
other Restricted Payments made since the Class A Preferred Stock
Issue Date, the aggregate amount expended for all Restricted
Payments (the value of any such payment, if other than cash, to be
determined reasonably and in good faith by the Board of Directors)
would exceed the sum of:
(I) 50% of the Corporation's cumulative Consolidated Net
Income (or if such Consolidated Net Income is a deficit, minus 100%
of such deficit) during the period beginning on the Class A
Preferred Stock Issue Date, and ending on the last day of the
Corporation's Fiscal Quarter immediately preceding such proposed
Restricted Payment; plus
(II) 100% of the aggregate Net Equity Proceeds, including
cash and the fair market value of property other than cash (such
value to be determined reasonably and in good faith by the Board of
Directors), received by the Corporation from any Person (other than
from a Subsidiary of the Corporation) as a capital contribution or
from the issuance or sale subsequent to the Class A
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<PAGE> 23
Preferred Stock Issue Date of Qualified Capital Stock
of the Corporation (excluding (x) any Qualified Capital
Stock of the Corporation paid as a dividend on any
Capital Stock of the Corporation or as interest on any
Indebtedness of the Corporation or any of its
Subsidiaries, (y) the issuance of Qualified Capital
Stock of the Corporation upon the conversion of, or in
exchange for, any Capital Stock of the Corporation or
any of its Subsidiaries and (z) any Qualified Capital
Stock of the Corporation with respect to which the
purchase price thereof has been financed, directly or
indirectly, using funds (A) borrowed from the
Corporation or any of its Subsidiaries, unless and
until and to the extend such borrowing is repaid, or
(B) contributed, extended, guaranteed or advanced by
the Corporation or any of its Subsidiaries, including,
without limitation, in respect of any employee stock
ownership or benefit); or
(4) After August 1, 1998, the Corporation has not,
on or prior to the date of such proposed Restricted
Payment, paid cash dividends on the Class A Preferred
Stock for two consecutive Dividend Payment Dates in
respect thereof.
(B) notwithstanding the above paragraph (A), the
Corporation or its Subsidiaries may (i) pay dividends
on the Corporation's Capital Stock within 60 days
after the date of declaration thereof it at such date
of declaration the payment of such dividend would
comply with the provisions set forth in paragraph (A)
above (provided that such dividend will be deemed to
have been paid as of its date of declaration for the
purposes of this provision); and (ii) if no Voting
Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof,
purchase, redeem, retire or acquire any shares of
Capital Stock of the Corporation solely with or out of
the cash proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Corporation) of
shares of Qualified Capital Stock of the Corporation
and no such purchase, redemption, retirement or
acquisition or the proceeds of any such sale shall be
included in any computation made under clause (A) (3)
(II) above.
In determining the amount of Restricted Payments permissible under
clause (3) of paragraph (A) above, amounts expended pursuant to clause (i) of
paragraph (B) above shall be included as Restricted Payments.
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<PAGE> 24
For purposes of this provision, any payment by the Corporation to
Vestar LPA or its Affiliates pursuant to the Management Consulting Agreement or
any other management agreement in excess of $500,000 in any fiscal year shall
deemed to be a Restricted Payment.
For purposes of this provision a distribution to holders of the
Corporation's Capital Stock of (i) shares of Capital Stock of any Subsidiary of
the Corporation or (ii) other assets of the Corporation or of any Subsidiary of
the Corporation, without, in either case, the receipt of equivalent
consideration therefor shall be deemed to be the equivalent of a cash dividend
equal to the excess of the Fair Market Value of the shares or other assets
being so distributed at the time of such distribution over the consideration,
if any, received therefor.
(iii) Reports. So long as any share of Class A
Preferred Stock is outstanding, the Corporation shall
file with the SEC the annual reports, quarterly
reports and the information, documents and other
reports required to be filed by the Corporation with
the SEC pursuant to Sections 13 and 15 of the Exchange
Act, whether or not the Corporation has or is required
to have a class of securities registered under the
Exchange Act, at the time it is or would be required
to file the same with the SEC and within 15 days after
it is or would be required to file such reports,
information or documents with the SEC shall mail such
reports, information and documents to the Holders at
their addresses set forth in the register of Class A
Preferred Stock maintained by the transfer agent and
registrar of the Class A Preferred Stock. Each annual
and quarterly report will include a statement setting
forth the then effective liquidation preference per
share of the Class A Preferred Stock as of the date of
the most recent balance sheet set forth in the
financial statements contained therein.
(m) Definitions. As used in this Article FOURTH, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"Acquired Indebtedness" of any specified Person means
Indebtedness of any other Person and its Subsidiaries existing at
the time such other Person merged with or into or became a
Subsidiary of such specified Person or assumed in connection with
the acquisition of assets from such other Person including, without
limitation, Indebtedness of such other Person and its Subsidiaries
incurred in connection with or in anticipation of such other Person
being merged with or into or becoming a Subsidiary of such
specified Person to such acquisition.
"Affiliate" means, when used with reference to any Person,
any other Person directly or indirectly controlling, controlled by,
or under direct or indirect
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<PAGE> 25
common control with, such first Person, or any Person who
beneficially owns, directly or indirectly, 5% or more of the equity
interests (excluding the Class A Preferred Stock in the case of the
Corporation) of such first Person or warrants, options or other
rights to acquire or hold more than 5% of any class of equity
interests (excluding the Class A Preferred Stock in the case of the
Corporation) of such first Person, provided that the term
"Affiliate", when used in reference to the Corporation shall not
include Bankers Trust Corporation and its Affiliates. For the
purposes of this definition, "control" when used with respect to
any specified Person means the power to direct or cause the
direction of management or policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative of the foregoing.
"Associate" of or a Person "associated" with, any Person,
means (i) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves
as a trustee or in a similar fiduciary capacity and (ii) any
relative or spouse of such Person, or any relative of such spouse,
who has the same home as such Person.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Business Day" means any day except a Saturday, a Sunday, or
any day on which banking institutions in New York, New York are
required or authorized by law or other governmental action to be
closed.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participation, rights in, or other equivalents
(however designated and whether voting or non-voting) of, such
Person's capital stock, whether outstanding on the Class A
Preferred Stock Issue Date or issued after the Class A Preferred
Stock Issue Date, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock (but
excluding any debt security that is exchangeable for or convertible
into such capital stock).
"Capitalized Lease Obligation" means any obligation under a
lease that is required to be classified and accounted for as a
capital lease obligation under GAAP and, for purposes of this
Article FOURTH, the amount of such obligation at any date shall be
the capitalized amount of such obligation at such date, determined
in accordance with GAAP, and the Stated Maturity thereof shall be
the date of the last payment of rent or any other amount due
thereunder prior to the first date upon which such lease may be
terminated by the lessee pursuant to the terms thereof without
payment of any penalty.
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<PAGE> 26
"Cash Equivalents" means at any time, (i) any evidence of Indebtedness
with a maturity of one year or less from the date of acquisition issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America or any agency or instrumentality thereof is
pledged in support thereof); (ii) bank deposits of, or certificates of deposit
or acceptances with a maturity of one year or less from the date of acquisition
of, any financial institution that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than $250
million; (iii) commercial paper with a maturity of one year or less from the
date of acquisition issued by a corporation (except an Affiliate of the
Corporation) organized under the laws of any state of the United States or the
District of Columbia and rated at least A-1 by Standard & Poor's Corporation or
at least P-1 by Moody's Investors Service, Inc.; (iv) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations issued
or unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition, provided that
the terms of such agreements comply with the guidelines set forth in the
Federal Financial Agreements of Depositary Institutions With Securities Dealers
and Others, as adopted by the Comptroller of the Currency on October 31, 1985;
and (v) money market funds and mutual funds, the assets of which are solely
invested in (i) through (iv) above.
"Change of Control" means the occurrence of one of more of the following
events (whether or not approved by the Board of Directors of the Corporation):
(i) any direct or indirect sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Corporation to any Person or entity or group of Persons or
entities acting in concert (a "Group") for purposes of Section 13 (d) of the
Exchange Act, together with any Affiliates thereof (whether or not otherwise in
compliance with the provisions of this Article FOURTH); (ii) the approval by
the holders of the Capital Stock of the Corporation of any Plan of Liquidation
(whether or not otherwise in compliance with the provisions of this Article
FOURTH); (iii) the acquisition in one or more transactions of "beneficial
ownership" (within meaning of Rule 13d-3 and Rule 13d-5 under the Exchange Act,
whether or not applicable) by any Person or other entity (other than any
Permitted Holder), or Group (excluding Permitted Holders) together with its or
their Affiliates or Associates, in either case, of any securities of the
Corporation or any securities of Vestar LPA such that, as a result of such
acquisition, such Person, entity or Group either: (A) beneficially owns (as set
forth above), directly or indirectly, at least 51% or more of the combined
voting power of the Corporation's then outstanding Voting Stock or (B)
otherwise has the ability to elect, directly or indirectly, a majority of the
members of the Board of Directors of the Corporation or other equivalent
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<PAGE> 27
governing body thereof; or (iv) during any consecutive two-year
period, individuals who at the beginning of such period constituted
the Board of Directors of the Corporation (together with any new
directors whose election to the Board of Directors of the
Corporation was approved by a vote of a majority of the directors
then still in office who were either directors at the beginning of
such period or whose election or nomination for election was
previously so approved) or such other directors as have been
appointed by the Permitted Holders cease for any reason to
constitute a majority of the Board of Directors of the Corporation
then in office.
"Change of Control Date" shall have the meaning ascribed to it
in paragraph (h)(i) hereof.
"Change of Control Payment Date" shall have the meaning
ascribed to it in paragraph (h)(i) hereof.
"Change of Control Offer" shall have the meaning ascribed to
it in paragraph (h)(i) hereof.
"Class A Preferred Stock" shall have the meaning ascribed to
it in paragraph (a) hereof.
"Class A Preferred Stock Issue Date" means the date on which
the Class A Preferred Stock was originally issued by La Petite
Holdings Corp.
"Code" has the meaning ascribed to it in paragraph (c) (viii)
hereof.
"Common Stock" means the 1,000 shares of common stock of the
Corporation, each having a par value of one penny ($.01).
"Consolidated EBITDA" for any Person means for any period for
which it is to be determined (A) the sum of, without duplication,
the amounts for such period, taken as a single accounting period,
of (i) Consolidated Net Income; and (ii) only to the extent
Consolidated Net Income has been reduced thereby, (1) Consolidated
Tax Expense of such Person and its Consolidated Subsidiaries paid
or accrued in accordance with GAAP for such period: (2)
Consolidated Interest Expense of such Person and its Consolidated
Subsidiaries for such period; and (3) all depreciation and
amortization expenses, the accretion for carrying value of the
Subordinated Debentures and other non-cash expenses (other than any
non-cash expense which requires the accrual of a reserve for cash
charges for any future period) for such Person and its Consolidated
Subsidiaries for such period, less (B) the amount of consolidated
non-cash items increasing Consolidated Net Income for such period,
all as determined on a consolidated basis in conformity with
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<PAGE> 28
GAAP consistent with those applied in the preparation of the audited
financial statements of the Corporation and its Consolidated
Subsidiaries.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to any Person, the ratio of (a) the aggregate amount of
Consolidated EBITDA of such Person for the four full Fiscal
Quarters ending on or immediately prior to the date of the
transaction (the "Transaction Date") giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio (such four
full Fiscal Quarter period being referred to herein as the "Four
Quarter Period") to (b) the aggregate Consolidated Fixed Charges of
such Person for such Four Quarter Period. In addition to and
without limitation of the foregoing, for purposes of this
definition, Consolidated EBITDA and Consolidated Fixed Charges
shall be calculated after giving effect on a pro forma basis for
the period of such calculation to: (i) the incurrence or
retirement, as the case may be, of any Indebtedness (including
Acquired Indebtedness) of such Person or of any of its Subsidiaries
during the period commencing on the first day of the Four Quarter
Period to and including the Transaction Date (the "Reference
Period"), including, without limitation, the incurrence of the
Indebtedness giving rise to the need to make such calculation, as
if such incurrence or retirement, as the case may be, occurred on
the first day of the Reference Period and (ii) the Consolidated
EBITDA of such Person during the Reference Period attributable to
any acquired or divested Person, business, property or asset to the
extent otherwise included or includible in the referent Person's
Consolidated EBITDA, as if such transaction occurred on the first
day of the Reference Period. If the Person for whom this ratio is
being calculated or any of its Subsidiaries directly or indirectly
guarantees Indebtedness of a third person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness
as if such Person or any Subsidiary of such Person had directly
incurred or otherwise assumed such guaranteed Indebtedness as of
the first day of the Reference Period. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the
denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio, " (1) interest on Indebtedness determined on
a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on
such Indebtedness in effect on the Transaction Date; (2) if
interest on any Indebtedness actually incurred on the Transaction
Date may be optionally determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered
rate or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding the foregoing,
interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to interest
swap agreements, shall be deemed to accrue at the rate per annum
resulting after given effect to the operation of such agreement.
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<PAGE> 29
"Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum of, without duplication, the amounts for
such period, taken as a single accounting period, of (i)
Consolidated Interest Expense; and (ii) the product of (x) the
amount of all cash dividends declared or paid on preferred stock of
such Person and its Consolidated Subsidiaries during such period
multiplied by (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective
consolidated Federal, state, local and foreign tax rate (expressed
as a decimal number between 1 and 0) of such Person (as reflected
in the audited consolidated financial statements of such Person for
the most recently completed fiscal year), less, to the extent
included in Consolidated Interest Expense, any amortization of any
debt-issuance costs of such Person and its Consolidated
Subsidiaries.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the aggregate of the interest expense of
such Person and its Consolidated Subsidiaries for such period, on a
consolidated basis, as determined in accordance with GAAP,
including all amortization of original issue discount, the interest
component of Capitalized Lease Obligations, net cash costs under
all Interest Rate Protection Agreements, all capitalized interest,
the interest portion of any deferred payment obligations for such
period and cash contributions to any employee stock ownership plan
to the extent such contributions are used by such employee stock
ownership plan to pay interest or fees to any Person (other than
the Corporation or Wholly Owned Subsidiary of the Corporation) in
connection with loans incurred by such employee stock ownership
plan to purchase Capital Stock of the Corporation, provided that
the accretion for carrying value for the Convertible Debentures
shall be excluded from the calculation of Consolidated Interest
Expense.
"Consolidated Net Income" means, with respect to any Person
for any period, the consolidated net income (or deficit) of the
referent Person and its Consolidated Subsidiaries for such period,
on a consolidated basis, as determined in accordance with GAAP
consistently applied, provided that the net income of any other
Person (other than a Subsidiary of the referent Person) in which
the referent Person or any Subsidiary of the referent Person has a
joint interest with a third party (which interest does not cause
the net income of such other Person to be consolidated into the net
income of the referent Person in accordance with GAAP) shall be
included only to the extent of the lesser of (a) such income that
has been actually received by the referent Person or such
Subsidiary in the form of cash dividends or similar cash
distributions (subject to, in the case of a dividend or other
distribution to a Subsidiary of the referent Person, the
limitations set forth in clause (i) (x) below) and (b) the net
income of such other Person (which in no event shall be less than
zero), provided, further, that there shall be excluded (i) (x) the
net income or loss of any Subsidiary of the referent Person that is
subject to
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<PAGE> 30
any restriction or limitation on the payment of dividends or the
making of other distributions to the extent of such restriction or
limitation and (y) the net income of any Person acquired in a
pooling of interests transaction accrued prior to the date it
became a Subsidiary of the referent Person or is merged into or
consolidated with the referent Person or any Subsidiary of the
referent Person; (ii) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was
made out of Consolidated Net Income of the referent Person accrued
at any time following the Class A Preferred Stock Issue Date; (iii)
any gain or loss, together with any related provisions for taxes,
realized upon the sale or other disposition (including, without
limitation, dispositions pursuant to sale-leaseback transactions)
of any property or assets of the referent Person and its
Subsidiaries which are not sold or otherwise disposed of in the
ordinary course of business and upon the sale or other disposition
of any Capital Stock of any Subsidiary of the referent Person; (iv)
any gain arising from the acquisition of any securities, or other
extinguishment, under GAAP, of any Indebtedness of the referent
Person and its Subsidiaries; (v) any extraordinary gain or loss
together with any related provision for taxes on any such
extraordinary gain, realized by the referent Person or any of its
Subsidiaries during the period for which such determination is
made; and (vi) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of its assets, any
earnings of the successor corporation prior to such consolidation,
merger or transfer of assets.
"Consolidated Net Worth" means, with respect to any Person for
any date of determination (without duplication), the sum of: (i)
stated capital, par or liquidation value with respect to Capital
Stock of such Person and additional paid-in-capital or capital
surplus, and (ii) retained earnings or earned surplus (or minus
accumulated deficit) of such Person and its Consolidated
Subsidiaries, less: (a) any revaluation or other write-ups
subsequent to the Class A Preferred Stock Issue Date in the book
value of any asset owned by such Person or a Consolidated
Subsidiary of such Person; (b) to the extent included in the
foregoing, amounts attributable to any Disqualified Stock or any
preferred stock or other equity security of such Person which is
not Disqualified Stock and which is exchangeable for or convertible
into a debt security for a security exchangeable for or convertible
into a debt security) of such Person or of any of its Subsidiaries
at the option of such Person or any of its Subsidiaries; and (c)
any amounts attributable to the cost of treasury stock and any
amount receivable but not paid from sales of Capital Stock of such
Person or its Consolidated Subsidiaries, all as determined in
accordance with GAAP.
"Consolidated Subsidiary" of any Person means a Subsidiary
which for financial reporting purposes is or, in accordance with
GAAP, should be, accounted for by such Person as a consolidated
subsidiary.
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"Consolidated Tax Expense" means, with respect to any Person
for any period, the aggregate of the U.S. Federal, state and local
tax expense attributable to taxes based on income and foreign
income tax expenses of such Person and its Consolidated
Subsidiaries for such period (net of any income tax benefit),
determined in accordance with GAAP, other than taxes (either
positive or negative) attributable to extraordinary, unusual or
nonrecurring gains or losses or taxes attributable to Asset Sales.
"Contingent Redemption Price" shall have the meaning ascribed
to it in paragraph (e) (i) (B) hereof.
"Convertible Debentures" means the 6 1/2% Convertible
Subordinated Debentures due 2011 of the Corporation.
"Credit Agreement" means the credit agreement dated as of July
1, 1993, among La Petite Holdings Corp., La Petite Acquisition
Corp., the lenders which are or became parties from time to time
thereto and Bankers Trust Company and Banque Paribas, as Agent
Banks, together with the documents related thereto (including,
without limitation, any guarantees or security documents), as
amended, and as the same may at any time may be amended and
restated, supplemented or otherwise modified, including any
refinancing, refunding, replacement or extension thereof (whether
before or after the termination thereof) and whether by the same or
any other lender or group of lenders.
"Disqualified Stock" means any class or series of Capital
Stock or other equity interest that, by its terms or the terms of
any agreement related thereto (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon
the happening of any event or the passage of time, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder thereof
(except, in each case, upon the occurrence of a change of control
of the issuer of such Capital Stock), in whole or in part, on or
prior to the mandatory redemption date of the Class A Preferred
Stock, or is convertible into or exchangeable for debt securities
at the option of the holder at any time prior to such date.
"Dividend Payment Date" means February 1, May 1, August 1 and
November 1, of each year.
"Dividend Period" means the Initial Dividend Period and,
thereafter, each Quarterly Dividend Period.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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<PAGE> 32
"Exchange Date" means a date on which shares of Class A
Preferred Stock are exchanged by the Corporation for Exchange
Debentures.
"Exchange Debentures" shall have the meaning ascribed to it in
paragraph (g) (i) hereof.
"Exchange Notice" shall have the meaning ascribed to it in
paragraph (g) (ii) hereof.
"Fair Market Value" or "fair value" means, with respect to any
asset or property, the price which could be negotiated in an
arm's-length, free market transaction, for cash, between a willing
seller and a willing and able buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market
Value shall be determined by the Board of Directors acting
reasonably and in good faith.
"Fiscal Quarter" means any quarter in any Fiscal Year, the
duration of such quarter being defined in accordance with GAAP.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the
accounting profession of the United States, which are in effect as
of the Class A Preferred Stock Issue Date.
"guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect,
in any manner, of any part of all of such obligation and (ii) an
agreement, direct or indirect, contingent or otherwise, the
practical or legal effect of which is to assure in any way the
payment or performance (or payment of damages in the event of a
non-performance) of all or any part of such obligation, including,
without limitation, the payment of amounts drawn down by letters of
credit.
"Holder" means a holder of shares of Class A Preferred Stock.
"incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion,
exchange or otherwise), assume, guarantee or otherwise become
liable in respect of such Indebtedness or other obligation or the
recording, as required pursuant to GAAP or otherwise, of any such
Indebtedness or other obligation on the balance sheet of such
Person (and
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<PAGE> 33
"incurrence," "incurred," "incurrable" and "incurring" shall
have meanings correlative to the foregoing), provided that a change
in GAAP that results in an obligation of such Person that exists at
such time becoming Indebtedness shall not be deemed an incurrence
of such Indebtedness.
"Indebtedness" means, with respect to any Person, at any date,
any of the following, without duplication, (i) any liability,
contingent or otherwise, of such Person (A) for borrowed money
(whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), (B) evidenced
by a note, bond, debenture or similar instrument or a letter of
credit (including a purchase money obligation) or (C) for the
payment of money relating to a Capitalized Lease Obligation or
other obligation (whether issued or assumed) relating to the
deferred purchase price of property but excluding trade accounts
payable arising in the ordinary course of business; (ii) all
conditional sale obligations and all obligations under any title
retention agreement (even if the rights and remedies of the seller
under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade
accounts payable arising in the ordinary course of business; (iii)
all obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction
entered into in the ordinary course of business; (iv) all
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on any asset or property (including, without
limitation, leasehold interests and any other tangible or
intangible property) of such Person, whether or not such
Indebtedness is assumed by such Person or is not otherwise such
Person's legal liability, provided that if the obligations so
secured have not been assumed in full by such Person or are
otherwise not such Person's legal liability in full, the amount of
such Indebtedness for the purposes of this definition shall be
limited to the lesser of the amount of such Indebtedness secured by
such Lien or the Fair Market Value of the assets or property
securing such Lien; (v) all Indebtedness of others (including all
interest and dividends on any Indebtedness or preferred stock of
any other Person for the payment of which is) guaranteed, directly
or indirectly, by such Person or that is otherwise its legal
liability or which such Person has agreed to purchase or repurchase
or in respect of which such Person has agreed contingently to
supply or advance funds; and (vi) all obligations under Interest
Rate Protection Agreements.
"Indenture" shall have the meaning ascribed to it in paragraph
(f) (ii) (d) hereof.
"Initial Dividend Period" means the dividend period commencing
on the Class A Preferred Stock Issue Date and ending on the first
Dividend Payment Date to occur thereafter.
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<PAGE> 34
"Interest Protection Agreements" means the Interest Rate
Protection Agreements (i) entered into by the Corporation in a
notional amount not exceeding the aggregate principal amount
outstanding under the Credit Agreement and (ii) as otherwise
permitted by the Credit Agreement, so long as the notional amount
thereof does not exceed the underlying obligation to which it
relates.
"Interest Rate Protection Agreement" means any interest rate
swap agreement, interest rate cap agreement or other similar
financial agreement.
"Investment" by any Person means any direct or indirect (i)
loan, advance or other extension of credit or capital contribution
(by means of transfers of cash or other property to others or
payments for property or services for the account or use of others,
or otherwise), (ii) purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidences of
Indebtedness issued by any other Person (whether by merger,
consolidation, amalgamation or otherwise and whether or not
purchased directly from the issuer of such securities or evidences
of Indebtedness), (iii) guarantee or assumption of the Indebtedness
of any other Person and (iv) all other items that would be
classified as investments (including, without limitation, purchases
of assets outside the ordinary course of business) on a balance
sheet of such Person prepared in accordance with GAAP. Investments
shall exclude extensions of trade credit and advances to customers
and suppliers to the extent in the ordinary course of business and
made in accordance with customary industry practice. The amount of
any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"Junior Stock" shall have the meaning ascribed to it in
paragraph (b) hereof.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien, charge or adverse claim affecting title or
resulting in an encumbrance against real or personal property or a
security interest of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the
nature thereof or any filing or agreement to file a financing
statement as debtor under the Uniform Commercial Code or any
similar statute other than to reflect ownership by a third party of
property leased to the Corporation or any of its Subsidiaries under
a lease that is not in the nature of a conditional sale or title
retention agreement).
"Management Consulting Agreement" means the management
consulting agreement dated as of July 23, 1993 between Vestar and
La Petite Acquisition Corp.
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<PAGE> 35
"Management Investors" means employees of the Corporation who
acquired or have the right to acquire Common Stock of Vestar LPA.
"Mandatory Redemption Price" shall have the meaning ascribed
to it in paragraph (e) (ii) hereof.
"Merger" means the merger of La Petite Holdings Corp., a
Delaware corporation, with and into the Corporation, its Wholly
Owned Subsidiary, with the Corporation as the survivor, effective
as of midnight on May 31, 1997. Pursuant to the Merger and by
operation of law, the 9-5/8% Senior Notes of the Corporation from
time to time issued in accordance with the Senior Note Indenture
evidencing indebtedness of to La Petite Holdings Corp. ceased to
exist.
"Net Equity Proceeds" means (a) in the case of any sale by the
Corporation of Qualified Capital Stock of the Corporation, the
aggregate net proceeds received by the Corporation, after payment
of expenses, commissions and similar charges incurred in connection
therewith, whether such proceeds are in cash or in other property
(valued at the Fair Market Value thereof at the time of receipt)
and (b) in the case of any exchange, exercise, conversion or
surrender of any outstanding Indebtedness of the Corporation for or
into shares of Qualified Capital Stock of the Corporation, the
amount of such Indebtedness (or, if such Indebtedness was issued at
an amount less than the stated principal amount thereof, the
accredited amount thereof as determined in accordance with GAAP) as
reflected in the consolidated financial statements of the
Corporation prepared in accordance with GAAP as of the most recent
date next preceding the date of such exchange, exercise, conversion
or surrender (plus any additional amount required to be paid by the
holder of such Indebtedness to the Corporation upon such exchange,
exercise, conversion or surrender and less any and all payments
made to the holders of such Indebtedness, and all other expenses
incurred by the Corporation in connection therewith), in the case
of either clause (a) or (b) to the extent consummated after the
Class A Preferred Stock Issue Date.
"Optional Redemption Price" shall have the meaning ascribed to
it in paragraph (e) (i) hereof.
"Parity Stock" shall have the meaning ascribed to it in
paragraph (b) hereof.
"Permitted Holders" means Vestar LPA (for so long as the
Voting Stock of Vestar LPA is controlled by Vestar, the Management
Investors and their respective Affiliates and Associates), the
Management Investors and their respective Affiliates and
Associates.
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<PAGE> 36
"Permitted Indebtedness" means (i) Indebtedness of Holdings and its
Subsidiaries existing on the Class A Preferred Stock Issue Date as in
effect on the Class A Preferred Stock Issue Date; (ii) Indebtedness of the
Corporation and its Subsidiaries evidenced by or arising under (a) the
Credit Agreement, provided that the aggregate principal amount of
Indebtedness outstanding under the Credit Agreement (whether or not
amended or refinanced) pursuant to this clause (ii) (a) shall not exceed
$25,000,000 (less, as of any date, any and all amounts of principal repaid
(a refinancing not being deemed a repayment) pursuant to such agreement
since the Class A Preferred Stock Issue Date (other than pursuant to the
working capital facility portion thereof)) at any time, and (b) Interest
Protection Agreements; (iii) Indebtedness of the Corporation evidenced by
or arising under the Senior Notes and the Senior Note Indenture (in each
case as in effect on the Class A Preferred Stock Issue Date); (iv)
Indebtedness of the Corporation to a Subsidiary of the Corporation or by
a Subsidiary of the Corporation to the Corporation or between Subsidiaries
of the Corporation, provided that any Indebtedness of the Corporation to
any of its Subsidiaries shall be evidenced by an intercompany promissory
note that is subordinated in right of payment to the payment and
performance of the Corporation's obligations under the Senior Note
Indenture and the Senior Notes to the same extent and in the same manner
as the Exchange Debentures would, if issued, be subordinated to Senior
Indebtedness of the Company (as defined in the Indenture), and provided,
further, that any subsequent issuance or transfer of Capital Stock of a
Subsidiary of the Corporation (the "Obligee Subsidiary") that results in
such Subsidiary's ceasing to be a Subsidiary of the Corporation or any
subsequent transfer of such Indebtedness owing from the Corporation or any
Subsidiary of the Corporation to such Obligee Subsidiary (other than a
transfer to another Subsidiary of the Corporation) shall be deemed in each
case to constitute the incurrence of Indebtedness by the Corporation or a
Subsidiary of the Corporation to the extent the Corporation or any
Subsidiary of the Corporation is indebted to such Obligee Subsidiary that
no longer is a Subsidiary of the Corporation or has transferred such
Indebtedness; (v) Indebtedness secured by mortgages or Capitalized Lease
Obligations incurred in connection with (x) the development or improvement
of properties of the Corporation existing on the Class A Preferred Stock
Issue Date (including Indebtedness incurred to refinance or refund the
cost of such development or improvement (whether incurred at the time of
such development or improvement or thereafter)), not to exceed $3,000,000
at any time outstanding and (y) the purchase or development of academies
of the Corporation not existing on the Class A Preferred Stock Issue Date
(including Indebtedness incurred to refinance or refund the cost of such
development or improvement (whether incurred at the time of such
development or improvement or thereafter)), such incurrence not to exceed
more than $10,000,000 in aggregate principal amount in any fiscal year of
the Corporation ($4,250,000 for the fiscal year ended December 31, 1993);
(vi) other Indebtedness of the Corporation and of its Subsidiaries which
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<PAGE> 37
may, but need not, be incurred under the Credit Agreement (to
the extent not permitted by clause (ii) (a) above), provided that
the aggregate of all Indebtedness outstanding at any time pursuant
to this clause (vi) does not exceed $20,000,000 (after giving
effect to the Indebtedness to be incurred on such date pursuant to
this clause (vi) and after giving effect to the adjustments
reflected in the next proviso hereto), and provided, further, that
to the extent the term loan portion of the Credit Agreement is
refinanced at any time after the Class A Preferred Stock Issue Date
and the Indebtedness that is or may be incurred thereunder is or
may be incurred for any purpose other than to fund the redemption
of the Subordinated Debentures, then the amount of Indebtedness at
any date permitted to be incurred (or incurred and outstanding)
under this clause (vi) shall be reduced by an amount equal to the
excess, if any, of (x) the aggregate principal amount of
Indebtedness outstanding at such date under such refinancing of the
term loan portion of the Credit Agreement over (y) the sum of (1)
the reduction since the Class A Preferred Stock Issue Date in the
amount payable upon conversion of all of the Subordinated
Debentures (not to exceed $17,400,000 in the aggregate) as a result
of conversions, redemptions or repurchases of the Subordinated
Debentures plus (2) the product of (A) $2,600,000 and (b) the ratio
of the aggregate principal amount of Subordinated Debentures that
have been converted or repurchased as of such date since the Issue
Date to $33,900,000 (not to exceed $2,600,000 in the aggregate);
(vii) any replacement, renewal, refinancing, amendment or extension
(collectively, "refinancing") of Indebtedness of the Corporation or
of any of its Subsidiaries incurred under clause (i) and (iii) of
this definition or any refinancing of Indebtedness of the
Corporation or of any of its Subsidiaries incurred in accordance
with the Consolidated Fixed Charge Coverage Ratio provisions under
paragraph (1) (i) hereof ("Existing Debt," and any such refinancing
of such Indebtedness, "New Debt"), provided that (a) any such New
Debt shall have a Stated Maturity no earlier than the earlier of
one year after August 1, 2003 or the Stated Maturity of the
Existing Debt and shall not provide for any other mandatory
redemptions or other repayments or prepayments in an amount greater
than or at a time prior to the amounts and times specified in the
Existing Debt, and (b) to the extent the principal amount of such
New Debt exceeds the amount of principal, interest and premium, if
any, of the Existing Debt outstanding as of the date of the
proposed incurrence of the New Debt, such excess may only be
incurred if otherwise permitted under the provisions described
under paragraph (1) (i) hereof; and (viii) letters of credit
obtained by the Corporation or its Subsidiaries in the ordinary
course of business consistent with past practices in connection
with workers' compensation and other insurance.
"Permitted Investments" means (i) Investments in the
Corporation by any Subsidiary of the Corporation or Investments
(including acquisitions) in any other Person, if after giving
effect to any such Investment, such Person continues to be or would
be a Subsidiary of the Corporation; (ii) cash and Cash Equivalents;
(iii)
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<PAGE> 38
Investments by the Corporation or by any of its Subsidiaries in a
business substantially similar to or related to that of the
Corporation including, but not limited to, joint ventures or other
business alliances formed for the purpose of contract bidding and
execution in the ordinary course of business or otherwise; and (iv)
Investments of the Corporation and its Subsidiaries arising as a
result of any Asset Sale (as defined in the Senior Note Indenture)
otherwise complying with the terms of the Senior Note Indenture.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
"Plan of Liquidation" means a plan (including by operation of
law) that provides for, contemplates or the effectuation of which
is preceded or accompanied by (whether or not substantially
contemporaneously) (i) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the
Corporation otherwise than as an entirety or substantially as an
entirety and (ii) the distribution of all or substantially all of
the proceeds of such sale, lease, conveyance or other disposition
and all or substantially all of the remaining assets of the
Corporation to the holders of the Capital Stock of the Corporation.
"Qualified Capital Stock" means, with respect to any Person,
any Capital Stock of such Person that is not Disqualified Stock or
convertible into or exchangeable or exercisable for Disqualified
Stock.
"Quarterly Dividend Period" shall mean the quarterly period
commencing on each February 1, May 1, August 1 and November 1 and
ending on each Dividend Payment Date, respectively.
"Redemption Date", with respect to any shares of Class A
Preferred Stock, means the date on which such shares of Class A
Preferred Stock are redeemed by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in
paragraph (e) (iii) hereof.
"refinancing" has the meaning set forth under the definition
of Permitted Indebtedness, and "refinanced" and "refinance" have
meanings correlative thereto.
"Restricted Payment" means (i) the declaration or payment of
any dividend or the making of any other distribution (whether in
cash, securities or other property or assets of the Corporation or
of any of its Subsidiaries) on the Corporation's Capital Stock
(other than the Class A Preferred Stock), or to the
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<PAGE> 39
holders of the Corporation's Capital Stock (other than the Class A
Preferred Stock), other than dividends distributions payable
solely in Qualified Capital Stock of the Corporation; (ii) the
making of any Investment by the Corporation or by any Subsidiary of
the Corporation other than Permitted Investments; or (iii) any
purchase, redemption, retirement or other acquisition for value of
any Capital Stock of the Corporation, or any warrants, rights or
options to purchase or acquire shares of the Capital Stock of the
Corporation held by any Person, other than through the issuance in
exchange therefor solely of Qualified Capital Stock of the
Corporation. The dollar amount of the non-cash dividend or
distribution by the Corporation or on the Corporation's Capital
Stock shall be equal to the Fair Market Value of such dividend or
distribution at the time of such dividend or distribution.
Notwithstanding the foregoing, provided that no Voting Rights
Triggering Event (as provided herein) has occurred and is
continuing at the time thereof or would occur as a result thereof
the advancing or dividending of funds in amounts and at times
necessary to permit the acquisition of Common Stock of a direct or
indirect parent of the Corporation from members of management of
the Corporation who have died or whose employment has terminated in
accordance with existing agreements shall not be or be deemed to be
Restricted Payments, provided that (x) the aggregate amount of all
such advances, dividends and payments from and including the Class
A Preferred Stock Issue Date shall not exceed $2,000,000 net of
receipts from reissuance and (y) the aggregate of all such
advances, dividends and payments shall not exceed $1,000,000 unless
immediately after giving effect to any such proposed advance,
dividend or payment the Corporation could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under paragraph
(1) (i) hereof.
"SEC" means the Securities and Exchange Commission.
"Senior Notes" means the 9-5/8% Senior Secured Notes due 2001
of the Corporation issued under the Senior Note Indenture.
"Senior Note Indenture" means the Indenture dated as of July
15, 1993, as amended, between the Corporation and Shawmut Bank
Connecticut, National Association, as trustee thereunder, under
which the Corporation's 9-5/8% Senior Secured Notes due 2001 were
issued.
"Senior Stock" shall have the meaning ascribed to it in
paragraph (b) hereof.
"Stated Maturity" means, with respect to any security or
Indebtedness, the date specified in such security or Indebtedness
as the fixed date on which the
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<PAGE> 40
principal of such security or Indebtedness is due and payable,
including pursuant to any mandatory redemption provision (other
than pursuant to any provision providing for the repurchase of such
security at the option of the holder thereof).
"Subordinated Debenture Indenture" means the indenture dated
as of June 1, 1986 between the Corporation and United Missouri Bank
of Kansas City, N.A., as trustee as in effect on the Issue Date,
pursuant to which the Subordinated Debentures were issued.
"Subordinated Debentures" means the 6 1/2% Convertible
Subordinated Debentures due June 1, 2011 of the Corporation issued
pursuant to the Subordinated Debenture Indenture.
"Subsidiary" means, with respect to any Person, (i) any
corporation more than fifty percent (50%) of the voting securities,
having ordinary voting power, of which is owned directly or
indirectly by such Person or by one or more other Subsidiaries of
such Person or such Person in conjunction with one or more other
Subsidiaries of such Person or (ii) any other Person more than
fifty percent (50%) of the voting interest, under ordinary
circumstances of which is owned directly or indirectly by such
Person or by one or more Subsidiaries of such Person or by such
Person in conjunction with one or more other Subsidiaries of such
Person.
"Vestar" means Vestar Capital Partners, Inc., a Delaware
corporation.
"Vestar LPA" means Vestar/LPA Investment Corp., a Delaware
Corporation and the entity owning 100% of the Common Stock of the
Corporation.
"Voting Rights Triggering Event" shall have the meaning
ascribed to it in paragraph (f) (iv) (A) hereof.
"Voting Stock" means, with respect to any Person, securities
of any class or classes of Capital Stock or then voting security or
ownership interest in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock
has voting power by reason of any contingency) to vote in the
election of members of the board of directors or other governing
body of such Person.
"Wholly Owned Subsidiary" means, with respect to any Person,
and Subsidiary of such Person all of the outstanding shares of
Capital Stock of which (other than directors' qualifying shares)
are owned directly by such Person or a Wholly Owned Subsidiary of
such Person.
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FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors.
(b) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(c) The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot
unless the By-Laws so provide.
(d) No director shall be personally liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except (i) for breaches of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) pursuant to Section 174 of the DGCL
or (iv) for any transaction from which the director derived an improper
personal benefit. Any repeal or modification of this Article FIFTH by
the stockholders of the Corporation shall not adversely affect any
right or protection of any director of the Corporation existing at the
time of such repeal or modification with respect to acts or omissions
occurring prior to such repeal or modification.
(e) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject to the
provisions of the DGCL, this Restated Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept
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<PAGE> 42
(subject to any provision contained in the DGCL) outside the State of
Delaware at such place or places as may be designated from time to time
by the Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
NINTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the
application in a summary way of the Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for the Corporation under Section 291 of Title 8 of the DGCL or
on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under Section 279 of Title 8 of
the DGCL, order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of the Corporation, as the
case may be, to be summoned in such manner as the said court directs. If
a majority in number representing three-fourths in value of the creditors
or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of the Corporation as
a consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court
to which the said application has been made, be binding on all the
creditors or class of creditors, and/or all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
- 42 -
<PAGE> 43
IN WITNESS WHEREOF, the Corporation, as authorized and directed by its
directors and adopted by its sole voting stockholder, has caused this Restated
Certificate of Incorporation to be executed by Phillip M. Kane, its Senior Vice
President, Chief Financial Officer and Treasurer, and attested by Peggy A.
Ford, its Secretary, this ___ day of May, 1997.
LA PETITE ACADEMY, INC.
By: _______________________________
Name: Phillip M. Kane
Title: Senior Vice President, Chief
Financial Officer and Treasurer
Attest:
By:_____________________________________
Name: Peggy A. Ford
Title: Secretary
- 43 -
<PAGE> 1
EXHIBIT 4.7
FIRST SUPPLEMENTAL INDENTURE
(Subordinated Exchange Debenture Indenture)
FIRST SUPPLEMENTAL INDENTURE, dated as of May 19, 1997, between LA PETITE
HOLDINGS CORP., a Delaware corporation, as original Issuer (the "Company" or
"Holdings"), LA PETITE ACADEMY, INC., a Delaware corporation ("Academy" or,
after the Merger Date, the "Company"), and FLEET NATIONAL BANK, a national
banking association, as successor Trustee (the "Trustee").
Recitals
(a) The Company and the Trustee (through its predecessor, Shawmut Bank
Connecticut, National Association) have entered into an Indenture dated as of
July 15, 1993, pursuant to which the Company may issue its 12-1/8% Subordinated
Exchange Debentures due 2003 in an aggregate principal amount not to exceed
$36,342,046 (the "Original Indenture").
(b) Subject to the terms of this First Supplemental Indenture, the Company
intends to merge with and into Academy, with Academy being the sole surviving
entity (the "Academy Merger"). The effective time and date of the Academy
Merger is referred to herein as the "Merger Date."
(c) Effective as of the Merger Date, (i) Academy is to assume the due and
punctual payment of the principal of, premium, if any, and interest on all of
the Securities and the performance of every covenant of the Indenture on the
part of Holdings to be performed or observed, and (ii) certain conforming
amendments to the Original Indenture relating to the Academy Merger are to
become effective.
(d) Pursuant to Section 9.1(d) of the Indenture, the Company and the
Trustee may, without the consent of the Holders, amend or supplement the
Indenture to evidence the merger of Holdings into Academy in accordance with
and subject to the terms and conditions of the Indenture and the Securities.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
The parties agree as follows for the benefit of each other and for the
equal and ratable benefit of the Holders:
<PAGE> 2
ARTICLE I
Section 1.1 Definitions.
For purposes of this First Supplemental Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) terms defined in the preamble and recitals hereto or the other
Articles hereof have the meanings assigned to them therein;
(b) terms defined in this Article have the meaning assigned to
them in this Article, and include the plural as well as the singular;
(c) terms not expressly defined in this First Supplemental
Indenture have the meanings assigned to them in Article One of the
Original Indenture, or as otherwise defined in the Original Indenture; and
(d) "Indenture" means the Original Indenture, as amended by this
First Supplemental Indenture or as otherwise supplemented or amended from
time to time by one or more indentures supplemental thereto or hereto
entered into pursuant to the applicable provisions of the Indenture.
ARTICLE II
Section 2.1 Consent to Merger.
The Trustee hereby consents to the Academy Merger and the Conforming
Merger Amendment (as defined in Article III), subject, however, to the terms
and conditions of this First Supplemental Indenture.
Section 2.2 Assumption by Academy.
Effective as of the Merger Date, (a) Academy assumes all of Holdings'
obligations under the Indenture and the Securities, (b) Academy shall have all
of the rights and obligations of Holdings under the Indenture and the
Securities, and (c) all references in the Indenture and the Securities to the
Company shall be deemed to refer instead to Academy, unless the context clearly
requires otherwise.
Section 2.3 Representations, Warranties and Covenants regarding the
Academy Merger.
Holdings and Academy jointly and severally represent, warrant and covenant
to the Trustee as follows:
First Supplemental Indenture (Subordinated Exchange Debentures) -- Page 2
<PAGE> 3
(a) Academy is a corporation duly organized and validly existing
under the laws of the State of Delaware;
(b) Immediately before and after giving effect to the Academy
Merger and the assumption contemplated by Section 2.2 of the First
Supplemental Indenture, no Default or Event of Default will occur or be
continuing; and
(c) Neither Academy nor any Subsidiary shall incur or become
obligated with respect to any Indebtedness including Acquired Indebtedness
(other than (i) Acquired Indebtedness that consists of Indebtedness that
could be incurred in accordance with the terms of the Indenture, and (ii)
the assumption by Academy of Holdings' obligations in respect of the
Securities and the Indenture, as more particularly described in Section
2.2 of this First Supplemental Indenture), nor shall any of their
respective properties become subject to any Lien (except Liens that could
be incurred in accordance with the terms of the Indenture) in connection
with or in respect of the Academy Merger.
Section 2.4 Conditions Precedent to Trustee's Consent to Academy Merger.
Notwithstanding anything to the contrary in this First Supplemental
Indenture (including, without limitation, anything to the contrary in Sections
2.1 or 3.1 of this First Supplemental Indenture), the Trustee's consent to the
Academy Merger and the Conforming Merger Amendment is subject to the
satisfaction of the following conditions precedent:
(a) Officers' Certificate. Academy and Holdings shall have
delivered to the Trustee a duly authorized and executed Officers'
Certificate, dated as of the date hereof, substantially in the form of
Exhibit A hereto;
(b) Opinion of Counsel. Shook, Hardy & Bacon L.L.P., counsel to
Holdings and Academy, shall have delivered to the Trustee an executed
Opinion of Counsel, dated as of the date hereof, substantially in the form
of Exhibit B hereto; and
(c) Board Resolutions. The Secretary or Assistant Secretary of
Holdings and Academy shall have delivered to the Trustee a certificate
dated as of the date hereof, substantially in the form of Exhibit C
hereto, attesting to the adoption and continued validity of the board
resolutions of Holdings and Academy authorizing the Academy Merger and the
taking of all actions incidental thereto.
It is a condition subsequent to the Trustee's consent to the Academy
Merger and the Conforming Merger Amendment that the Academy Merger shall have
been consummated on or before 5:00 p.m., E.D.T., June 15, 1997.
First Supplemental Indenture (Subordinated Exchange Debentures) -- Page 3
<PAGE> 4
Section 2.5 Post-Merger Certificate; Escrow
Promptly after the merger, Academy shall deliver to the Trustee a duly
authorized and executed Officers' Certificate, dated on or about the Merger
Date, substantially in the form of Exhibit D hereto (which certificate shall
have attached to it a copy of the certificate of merger of Holdings and Academy
bearing the file-stamp issued by the Delaware Secretary of State's Office) (the
"Post-Merger Certificate").
All executed originals of this First Supplemental Indenture shall be held
in escrow by the Trustee and shall be released and distributed by the Trustee
to the parties hereto upon the Trustee's receipt of the executed Post-Merger
Certificate.
ARTICLE III
Section 3.1 Conforming Merger Amendment.
In order to evidence the succession in accordance with Article V of
Academy to the rights and duties of Holdings under the Indenture and the
Securities, and pursuant to the Trustee's powers pursuant to Section 9.1 of the
Indenture, Academy, Holdings and the Trustee agree as follows (the "Conforming
Merger Amendment"):
Effective as of the Merger Date, the addresses for notices set forth in
subparagraphs (a) and (b) in Section 10.2 of the Original Indenture shall
be amended, without further action, to read as follows:
(a) if to the Company:
La Petite Academy, Inc.
14 Corporate Woods
8717 West 110th Street, Suite 300
Overland Park, Kansas 66210
Attention: Chief Financial Officer
Telecopier Number: (913) 345-9565
First Supplemental Indenture (Subordinated Exchange Debentures) -- Page 4
<PAGE> 5
(b) if to the Trustee:
Fleet National Bank
Mail Stop: CTOPO238
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telecopier Number: (860) 986-7920
Except as amended above, all other provisions of Section 10.2 of the
Original Indenture shall remain in effect.
ARTICLE IV
Section. 4.1 Ratification of Provisions of Original Indenture.
All provisions of the Original Indenture not specifically herein deleted,
supplemented or modified are hereby ratified and reaffirmed by the Company and
the Trustee.
Section 4.2 Counterparts.
This First Supplemental Indenture may be executed in counterparts by the
parties hereto.
[The remainder of this page intentionally left blank]
First Supplemental Indenture (Subordinated Exchange Debentures) -- Page 5
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
LA PETITE HOLDING CORP.
Attest:
By:____________________________________
Name: Phillip M. Kane
Title: Senior Vice President, Chief
Financial Officer and Treasurer
___________________________
Name: Peggy A. Ford
Title: Secretary
LA PETITE ACADEMY, INC.
Attest:
By:____________________________________
Name: Phillip M. Kane
Title: Senior Vice President, Chief
Financial Officer and Treasurer
___________________________
Name: Peggy A. Ford
Title: Secretary
FLEET NATIONAL BANK, as Trustee
Attest:
By:____________________________________
Name: Robert L. Reynolds
___________________________ Title: Vice President
Name: Phillip G. Kane, Jr.
Title: Vice President
First Supplemental Indenture (Subordinated Exchange Debentures) -- Page 6
<PAGE> 7
Exhibit A
OFFICERS' CERTIFICATE
(Subordinated Exchange Debenture Indenture)
This Officers' Certificate (the "Certificate") is delivered as of May 19,
1997, by the undersigned, in their respective capacities as officers of LA
PETITE HOLDINGS CORP., a Delaware corporation ("Holdings"), and LA PETITE
ACADEMY, INC., a Delaware corporation ("Academy"), to FLEET NATIONAL BANK, in
its capacity as successor Trustee under the Indenture dated as of April 15,
1993, between La Petite Holdings Corp., as Issuer, and Shawmut Bank
Connecticut, National Association, as original Trustee, as amended, relating to
the 12-1/8% Subordinated Exchange Debentures due 2003 referred to therein (the
"Indenture"). This Certificate is delivered pursuant to Section 5.1 of the
Indenture. Capitalized terms used and not defined in this Certificate shall
have the meanings given to them in the Indenture.
The undersigned, in their respective capacities as officers of Holdings
and Academy, do hereby certify to the Trustee, for the ratable benefit of the
Holders, that:
1. The undersigned are officers of Holdings and Academy and have read the
applicable covenants and conditions of the Indenture relating to the subject
matter of this Certificate and have made such inquiries of counsel and of other
officers or employees of Holdings and Academy and made such other examinations
or investigations as are necessary to issue this Certificate.
2. Upon the filing of the certificate of merger of Holdings and Academy
with the Secretary of State of Delaware, Holdings will merge with and into
Academy effective as of the time and date set forth therein (the "Merger
Date"), with Academy being the sole surviving entity (the "Academy Merger").
3. Effective as of the Merger Date, Academy will assume all obligations of
Holdings under the Indenture and the Securities, including, without limitation,
the due and punctual payment of the principal of, and premium, if any, and
interest on all of the Securities and the performance of every covenant of the
Indenture on the part of Holdings to be performed or observed.
4. No Default or Event of Default exists or will occur as a result of the
Academy Merger.
5. Neither Holdings or Academy will become obligated with respect to any
Indebtedness including Acquired Indebtedness as a result of the Academy Merger
(other than (i) Acquired Indebtedness that consists of Indebtedness that could
be incurred in accordance with the terms of the Indenture, and (ii) the
assumption by Academy of Holdings' obligations in respect of the Securities and
the Indenture), nor will any of their respective properties become subject to
any Lien (except Liens that could be incurred in accordance with the terms of
the Indenture) in connection with or in respect of the Academy Merger.
Exhibit A to First Supplemental Indenture
<PAGE> 8
6. The Academy Merger will, and the First Supplemental Indenture among
Academy, Holdings and the Trustee dated as of the date hereof (the
"Supplemental Indenture") does, comply with the Indenture (including Section
5.1 thereof), and all conditions precedents in the Indenture relating to the
Academy Merger and the Supplemental Indenture have been satisfied.
IN WITNESS WHEREOF, the undersigned, in their respective capacities as
officers of Academy and Holdings have executed and delivered this Certificate
as of the date first above written.
________________________________________
Phillip M. Kane, Chief Financial Officer
of Academy and Holdings
________________________________________
Peggy A. Ford, Secretary
of Academy and Holdings
Exhibit A to First Supplemental Indenture
<PAGE> 9
Exhibit B
(Letterhead of Shook, Hardy & Bacon L.L.P.)
May 19, 1997
Fleet National Bank, as successor Trustee
under the Indenture referred to below
Mail Stop: CTOPO238
777 Main Street
Hartford, Connecticut 06115
Re: Subordinated Exchange Debenture Indenture
Ladies and Gentlemen:
We have acted as counsel to La Petite Holdings Corp., a Delaware
corporation ("Holdings"), and La Petite Academy, Inc., a Delaware corporation
("Academy"), in connection with the proposed merger of Holdings into Academy,
with Academy being the surviving entity (the "Academy Merger").
This opinion letter is delivered pursuant to Section 5.1 of the Indenture
dated as of July 15, 1993, between Holdings, as issuer, and Shawmut Bank
Connecticut, National Association, as original trustee, relating to the 12-1/8%
Subordinated Exchange Debentures due 2003 in an aggregate principal amount not
to exceed $36,342,046 issuable thereunder (the "Original Indenture"). The
Original Indenture is being amended on the date hereof pursuant to a First
Supplemental Indenture dated as of the date hereof among Holdings, Academy and
Fleet National Bank, as successor Trustee (the "Supplemental Indenture"). The
Original Indenture, as amended by the Supplemental Indenture, is referred to
herein as the "Indenture." Capitalized terms used and not defined in this
letter have the meanings given to them in the Indenture.
In connection with this opinion, we have examined originals or copies of
the following documents:
(a) the Indenture;
(b) the officers' certificate referred to in Section 2.4 (a) of
the Supplemental Indenture;
Exhibit B to First Supplemental Indenture
<PAGE> 10
(b) the certificate of merger executed by Holdings and
Academy relating to the Academy Merger which is to be filed in
the Office of the Secretary of State of Delaware;
(c) the resolutions of Holdings and Academy authorizing the
Academy Merger; and
(d) the certificates of incorporation and by-laws of Holdings and
Academy, in each case as amended to date.
In our examination we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as copies and the
authenticity of the originals of such copies. As to questions of fact not
independently verified by us, we have relied, to the extent we have deemed
appropriate, upon representations and certificates of officers of Holdings and
Academy, public officials and other appropriate persons. We have further
assumed that Fleet National Bank has succeeded to the rights of the original
Trustee under the Indenture and has all of the rights and powers of the Trustee
thereunder, and that Fleet National Bank has executed and delivered, pursuant
to due authorization, the Supplemental Indenture.
Based upon the foregoing, and subject to the assumptions, qualifications
and limitations set forth herein, we are of the opinion that:
1. Upon the Academy Merger, Academy will assume all obligations of
Holdings under the Indenture, including, without limitation, the due and
punctual payment of the principal of, premium, if any, and interest on all of
the Securities and the performance of every covenant of the Indenture on the
part of Holdings to be performed or observed.
2. The Supplemental Indenture complies with the provisions of the
Indenture and all conditions precedent in the Indenture relating to the Academy
Merger have been satisfied.
We do not express any opinion herein regarding any laws other than the
General Corporation Law of the State of Delaware.
This opinion is being furnished only to the addressee hereof and is solely
for its benefit. This opinion may not be relied upon for any other purpose, or
relied upon by any other person or entity for any purpose, without in each
instance obtaining our prior written consent.
Very truly yours,
SHOOK, HARDY & BACON L.L.P.
Exhibit B to First Supplemental Indenture
<PAGE> 11
Exhibit C
SECRETARY'S CERTIFICATE
This Certificate is delivered pursuant to the First Supplemental Indenture
dated on or about the date hereof among LA PETITE HOLDINGS CORP., a Delaware
corporation ("Holdings"), LA PETITE ACADEMY, INC., a Delaware corporation
("Academy"), and FLEET NATIONAL BANK, as successor Trustee under the Indenture
date as of July 15, 1993, between Holdings, as Issuer, and Shawmut Bank
Connecticut, National Association, as original Trustee, as amended, relating to
the 12-1/8% Subordinated Exchange Debentures due 2003 referred to therein.
The undersigned, being the Secretary of Holdings and Academy, does hereby
certify that:
Attached hereto as Exhibit A is a true and correct copy of the
resolutions of the Board of Directors of Holdings and Academy authorizing
the Academy Merger (as such term is defined in the First Supplemental
Indenture referred to above) and the taking of all actions incidental
thereto. Such resolutions have not been modified, revoked or rescinded in
any respect and are in full force and effect in the form adopted.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of May 19, 1997.
___________________________________
Peggy A. Ford, Secretary of La Petite Holdings Corp.
and La Petite Academy, Inc.
Exhibit C to First Supplemental Indenture
<PAGE> 12
Exhibit A to Secretary's Certificate
(copy of 2/11/97 resolutions)
Exhibit A to Secretary's Certificate
<PAGE> 13
Exhibit D
OFFICERS' CERTIFICATE
This Officers' Certificate (the "Certificate") is delivered on [Merger
Date] by the undersigned, in their capacities as officers of LA PETITE ACADEMY,
INC., a Delaware corporation ("Academy"), to FLEET NATIONAL BANK, in its
capacity as successor Trustee under the Indenture dated as of April 15, 1993,
between La Petite Holdings Corp., as Issuer, and Shawmut Bank Connecticut,
National Association, as original Trustee, as amended, relating to the 12-1/8%
Subordinated Exchange Debentures due 2003 referred to therein (the
"Indenture"). This Certificate is delivered pursuant to Section 5.1 of the
Indenture. Capitalized terms used and not defined in this Certificate shall
have the meanings given to them in the Indenture.
The undersigned, in their capacities as officers of Academy, do hereby
certify to the Trustee, for the ratable benefit of the Holders, that:
1. The undersigned are officers of Academy and have read the applicable
covenants and conditions of the Indenture relating to the subject matter of
this Certificate and have made such inquiries of counsel and of other officers
or employees of Academy and made such other examinations or investigations as
are necessary to issue this Certificate.
2. Holdings has merged with and into Academy, with Academy being the sole
surviving entity (the "Academy Merger"). A copy of the certificate of merger
evidencing such merger is attached hereto as Exhibit A.
3. Academy has assumed all obligations of Holdings under the Indenture and
the Securities, including, without limitation, the due and punctual payment of
the principal of, and premium, if any, and interest on all of the Securities
and the performance of every covenant of the Indenture on the part of Holdings
to be performed or observed.
4. No Default or Event of Default exists or has occurred as a result of
the Academy Merger.
5. Academy has not become obligated with respect to any Indebtedness
including Acquired Indebtedness as a result of the Academy Merger (other than
(i) Acquired Indebtedness that consists of Indebtedness that could be incurred
in accordance with the terms of the Indenture, and (ii) the assumption by
Academy of Holdings' obligations in respect of the Securities and the
Indenture), nor have any of its properties become subject to any Lien (except
Liens that could be incurred in accordance with the terms of the Indenture) in
connection with or in respect of the Academy Merger.
6. The Academy Merger and the First Supplemental Indenture among Academy,
Holdings, and the Trustee dated as of May 19, 1997 (the "Supplemental
Indenture") comply with the
Exhibit D to First Supplemental Indenture
<PAGE> 14
Indenture (including Section 5.1 thereof), and all conditions precedents in
the Indenture relating to the Academy Merger and the Supplemental Indenture
have been satisfied.
IN WITNESS WHEREOF, the undersigned, in their capacities as officers of
Academy have executed and delivered this Certificate as of the date first above
written.
________________________________
Phillip M. Kane, Chief Financial Officer
of La Petite Academy, Inc.
________________________________
Peggy A. Ford, Secretary
of La Petite Academy, Inc.
Exhibit D to First Supplemental Indenture
<PAGE> 1
EXHIBIT 4.8
FIRST SUPPLEMENTAL INDENTURE
(Senior Note Indenture)
FIRST SUPPLEMENTAL INDENTURE, dated as of May 19, 1997, between LA PETITE
HOLDINGS CORP., a Delaware corporation, as original Issuer (the "Company" or
"Holdings"), LA PETITE ACADEMY, INC., a Delaware corporation ("Academy" or,
after the Merger Date, the "Company"), and FLEET NATIONAL BANK, a national
banking association, as successor Trustee (the "Trustee").
Recitals
(a) The Company and the Trustee (through its predecessor, Shawmut Bank
Connecticut, National Association) have entered into an Indenture dated as of
July 15, 1993, pursuant to which the Company has issued its 9-5/8% Senior
Secured Notes in the stated principal amount of $85,000,000 (the "Original
Indenture").
(b) Subject to the terms of this First Supplemental Indenture, the Company
intends to merge with and into Academy, with Academy being the sole surviving
entity (the "Academy Merger"). The effective time and date of the Academy
Merger is referred to herein as the "Merger Date."
(c) Effective as of the Merger Date, (i) Academy is to assume the due and
punctual payment of the principal of, premium, if any, and interest on all of
the Securities and the performance of every covenant of the Indenture on the
part of Holdings to be performed or observed, and (ii) certain conforming
amendments to the Original Indenture relating to the Academy Merger are to
become effective.
(d) Pursuant to Section 9.1(d) of the Indenture, the Company and the
Trustee may, without the consent of the Holders, amend or supplement the
Indenture to evidence the merger of Holdings into Academy in accordance with
and subject to the terms and conditions of the Indenture and the Securities.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
The parties agree as follows for the benefit of each other and for the
equal and ratable benefit of the Holders:
<PAGE> 2
ARTICLE I
Section 1.1 Definitions.
For purposes of this First Supplemental Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) terms defined in the preamble and recitals hereto or the other
Articles hereof have the meanings assigned to them therein;
(b) terms defined in this Article have the meaning assigned to them
in this Article, and include the plural as well as the singular;
(c) terms not expressly defined in this First Supplemental Indenture
have the meanings assigned to them in Article One of the Original
Indenture, or as otherwise defined in the Original Indenture; and
(d) "Indenture" means the Original Indenture, as amended by this
First Supplemental Indenture or as otherwise supplemented or amended from
time to time by one or more indentures supplemental thereto or hereto
entered into pursuant to the applicable provisions of the Indenture.
ARTICLE II
Section 2.1 Consent to Merger.
The Trustee hereby consents to the Academy Merger and the Conforming
Merger Amendments (as defined in Article III), subject, however, to the terms
and conditions of this First Supplemental Indenture.
Section 2.2 Assumption by Academy.
Effective as of the Merger Date, (a) Academy assumes all of Holdings'
obligations under the Indenture and the Securities, (b) Academy shall have all
of the rights and obligations of Holdings under the Indenture and the
Securities, and (c) all references in the Indenture and the Securities to the
Company shall be deemed to refer instead to Academy, unless the context clearly
requires otherwise.
Section 2.3 Representations, Warranties and Covenants regarding the
Academy Merger.
Holdings and Academy jointly and severally represent, warrant and covenant
to the Trustee as follows:
First Supplemental Indenture -- Page 2
<PAGE> 3
(a) Academy is a corporation duly organized and validly existing
under the laws of the State of Delaware;
(b) Immediately before and after giving effect to the Academy Merger
and the assumption contemplated by Section 2.2 of the First Supplemental
Indenture, no Default or Event of Default will occur or be continuing;
and
(c) Neither Academy nor any Subsidiary shall incur or become
obligated with respect to any Indebtedness including Acquired
Indebtedness (other than (i) Acquired Indebtedness that consists of
Indebtedness that could be incurred in accordance with the terms of the
Indenture, and (ii) the assumption by Academy of Holdings' obligations in
respect of the Securities and the Indenture, as more particularly
described in Section 2.2 of this First Supplemental Indenture), nor shall
any of their respective properties become subject to any Lien (except
Liens that could be incurred in accordance with the terms of the
Indenture) in connection with or in respect of the Academy Merger.
Section 2.4 Conditions Precedent to Trustee's Consent to Academy Merger.
Notwithstanding anything to the contrary in this First Supplemental
Indenture (including, without limitation, anything to the contrary in Sections
2.1 or 3.1 of this First Supplemental Indenture), the Trustee's consent to the
Academy Merger and the Conforming Merger Amendments is subject to the
satisfaction of the following conditions precedent:
(a) Officers' Certificate. Academy and Holdings shall have
delivered to the Trustee a duly authorized and executed Officers'
Certificate, dated as of the date hereof, substantially in the form of
Exhibit A hereto;
(b) Opinion of Counsel. Shook, Hardy & Bacon L.L.P., counsel to
Holdings and Academy, shall have delivered to the Trustee an executed
Opinion of Counsel, dated as of the date hereof, substantially in the
form of Exhibit B hereto; and
(c) Board Resolutions. The Secretary or Assistant Secretary of
Holdings and Academy shall have delivered to the Trustee a certificate
dated as of the date hereof, substantially in the form of Exhibit C
hereto, attesting to the adoption and continued validity of the board
resolutions of Holdings and Academy authorizing the Academy Merger and
the taking of all actions incidental thereto.
It is a condition subsequent to the Trustee's consent to the Academy
Merger and the Conforming Merger Amendments that the Academy Merger shall have
been consummated on or before 5:00 p.m., E.D.T., June 15, 1997.
First Supplemental Indenture -- Page 3
<PAGE> 4
Section 2.5 Post-Merger Certificate; Escrow
Promptly after the merger, Academy shall deliver to the Trustee a duly
authorized and executed Officers' Certificate, dated on or about the Merger
Date, substantially in the form of Exhibit D hereto (which certificate shall
have attached to it a copy of the certificate of merger of Holdings and Academy
bearing the file-stamp issued by the Delaware Secretary of State's Office) (the
"Post-Merger Certificate").
All executed originals of this First Supplemental Indenture shall be held
in escrow by the Trustee and shall be released and distributed by the Trustee
to the parties hereto upon the Trustee's receipt of the executed Post-Merger
Certificate.
ARTICLE III
Section 3.1 Conforming Merger Amendments.
In order to evidence the succession in accordance with Article V of
Academy to the rights and duties of Holdings under the Indenture and the
Securities, and pursuant to the Trustee's powers pursuant to Section 9.1 of the
Indenture, Academy, Holdings and the Trustee agree as follows (collectively,
the "Conforming Merger Amendments"):
(a) La Petite Academy Capital Stock and Intercompany Notes.
Effective as of the Merger Date, Section 4.13 of the Original Indenture
shall, without further action, be deleted in its entirety and be of no
force or effect.
(b) Intercompany Notes. Effective as of the Merger Date, Section
4.17 of the Original Indenture shall, without further action, be deleted
in its entirety and be of no force or effect.
(c) Issuance of Subsidiary Stock. Effective as of the Merger Date,
Section 4.18 of the Original Indenture shall be deleted and replaced in
its entirety, without further action, by the following:
SECTION 4.18. Restriction on Sale
and Issuance of Subsidiary Stock. The
Company will not permit any of its
Subsidiaries to issue any shares of
Preferred Stock, or any rights, options or
warrants with respect thereto, or any
securities convertible into or
exchangeable or exercisable therefor, to
any Person other than the Company or one
or more of its Wholly Owned Subsidiaries
nor will the Company permit any Person
(other than the Company or one or more of
its Wholly Owned Subsidiaries) to own or
hold any such Preferred Stock. In the
event any Wholly Owned
First Supplemental Indenture -- Page 4
<PAGE> 5
Subsidiary of the Company shall cease to be a
Wholly Owned Subsidiary of the Company, the date
of such event shall be deemed to be the issuance
of Preferred Stock or other Capital Stock of a
Subsidiary of the Company to a Person other than
the Company or one of its Wholly Owned Subsidiaries
if as of the date such former Wholly Owned
Subsidiary ceased to be such a Wholly Owned
Subsidiary or thereafter a Person other than the
Company or one of its Wholly Owned Subsidiaries
owns any Preferred Stock or Capital Stock of any
Subsidiary of the Company.
(d) Notice. Effective as of the Merger Date, the addresses for
notices set forth in subparagraphs (a) and (b) in Section 10.2 of the
Original Indenture shall be amended, without further action, to read as
follows:
(a) if to the Company:
La Petite Academy, Inc.
14 Corporate Woods
8717 West 110th Street, Suite 300
Overland Park, Kansas 66210
Attention: Chief Financial Officer
Telecopier Number: (913) 345-9565
(b) if to the Trustee:
Fleet National Bank
Mail Stop: CTOPO238
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telecopier Number: (860) 986-7920
Except as amended above, all other provisions of Section 10.2 of the
Original Indenture shall remain in effect.
(e) Release of Lien on Pledged Collateral. Effective as of the
Merger Date, the Trustee, acting pursuant to Section 11.5 of the
Indenture, shall direct the Collateral Agent, and the Collateral Agent
agrees, to release the Pledged Collateral from the terms of the Indenture
and the Securities Pledge Agreement and to deliver the Pledged Collateral
to the Company or to any other party the Company may direct by giving
written notice thereof to
First Supplemental Indenture -- Page 5
<PAGE> 6
the Collateral Agent. Effective as of the Merger Date, the Securities
Pledge Agreement and the Collateral Agency Agreement shall, without
further action, terminate and be of no force or effect.
ARTICLE IV
Section. 4.1 Ratification of Provisions of Original Indenture.
All provisions of the Original Indenture not specifically herein deleted,
supplemented or modified are hereby ratified and reaffirmed by the Company and
the Trustee.
Section 4.2 Counterparts.
This First Supplemental Indenture may be executed in counterparts by the
parties hereto.
IN WITNESS WHEREOF, the parties have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
LA PETITE HOLDING CORP.
Attest:
By:
---------------------------------
Name: Phillip M. Kane
Title: Senior Vice President, Chief
Financial Officer and Treasurer
- -----------------------
Name: Peggy A. Ford
Title: Secretary
LA PETITE ACADEMY, INC.
Attest:
By:
----------------------------------
Name: Phillip M. Kane
Title: Senior Vice President, Chief
Financial Officer and Treasurer
- -----------------------
Name: Peggy A. Ford
Title: Secretary
First Supplemental Indenture -- Page 6
<PAGE> 7
FLEET NATIONAL BANK, as Trustee and, for
purposes of Section 3.1(e) above, as
Collateral Agent
Attest:
By:
---------------------------------------
Name: Robert L. Reynolds
Title: Vice-President
- -----------------------------
Name: Phillip G. Kane, Jr.
Title: Vice-President
First Supplemental Indenture -- Page 7
<PAGE> 8
Exhibit A
OFFICERS' CERTIFICATE
This Officers' Certificate (the "Certificate") is delivered as of May 19,
1997, by the undersigned, in their respective capacities as officers of LA
PETITE HOLDINGS CORP., a Delaware corporation ("Holdings"), and LA PETITE
ACADEMY, INC., a Delaware corporation ("Academy"), to FLEET NATIONAL BANK, in
its capacity as successor Trustee under the Indenture dated as of April 15,
1993, between La Petite Holdings Corp., as Issuer, and Shawmut Bank
Connecticut, National Association, as original Trustee, as amended, relating to
the 9-5/8% Senior Secured Notes due 2001 referred to therein (the "Indenture").
This Certificate is delivered pursuant to Section 5.1 of the Indenture.
Capitalized terms used and not defined in this Certificate shall have the
meanings given to them in the Indenture.
The undersigned, in their respective capacities as officers of Holdings
and Academy, do hereby certify to the Trustee, for the ratable benefit of the
Holders, that:
1. The undersigned are officers of Holdings and Academy and have read the
applicable covenants and conditions of the Indenture relating to the subject
matter of this Certificate and have made such inquiries of counsel and of other
officers or employees of Holdings and Academy and made such other examinations
or investigations as are necessary to issue this Certificate.
2. Upon the filing of the certificate of merger of Holdings and Academy
with the Secretary of State of Delaware, Holdings will merge with and into
Academy effective as of the time and date set forth therein (the "Merger
Date"), with Academy being the sole surviving entity (the "Academy Merger").
3. Effective as of the Merger Date, Academy will assume all obligations of
Holdings under the Indenture and the Securities, including, without limitation,
the due and punctual payment of the principal of, and premium, if any, and
interest on all of the Securities and the performance of every covenant of the
Indenture on the part of Holdings to be performed or observed.
4. No Default or Event of Default exists or will occur as a result of the
Academy Merger.
5. Neither Holdings or Academy will become obligated with respect to any
Indebtedness including Acquired Indebtedness as a result of the Academy Merger
(other than (i) Acquired Indebtedness that consists of Indebtedness that could
be incurred in accordance with the terms of the Indenture, and (ii) the
assumption by Academy of Holdings' obligations in respect of the Securities and
the Indenture), nor will any of their respective properties become
subject to any Lien (except Liens that could be incurred in accordance with the
terms of the Indenture) in connection with or in respect of the Academy Merger.
Exhibit A to First Supplemental Indenture
<PAGE> 9
6. The Academy Merger will, and the First Supplemental Indenture among
Academy, Holdings and the Trustee dated as of the date hereof (the
"Supplemental Indenture") does, comply with the Indenture (including Section
5.1 thereof), and all conditions precedents in the Indenture relating to the
Academy Merger and the Supplemental Indenture have been satisfied.
IN WITNESS WHEREOF, the undersigned, in their respective capacities as
officers of Academy and Holdings have executed and delivered this Certificate
as of the date first above written.
----------------------------------------
Phillip M. Kane, Chief Financial Officer
of Academy and Holdings
----------------------------------------
Peggy A. Ford, Secretary
of Academy and Holdings
Exhibit A to First Supplemental Indenture
<PAGE> 10
Exhibit B
(Letterhead of Shook, Hardy & Bacon L.L.P.)
May 19, 1997
Fleet National Bank, as successor Trustee
under the Indenture referred to below
Mail Stop: CTOPO238
777 Main Street
Hartford, Connecticut 06115
Re: $85,000,000 Senior Note Indenture
Ladies and Gentlemen:
We have acted as counsel to La Petite Holdings Corp., a Delaware
corporation ("Holdings"), and La Petite Academy, Inc., a Delaware corporation
("Academy"), in connection with the proposed merger of Holdings into Academy,
with Academy being the surviving entity (the "Academy Merger").
This opinion letter is delivered pursuant to Section 5.1 of the Indenture
dated as of July 15, 1993, between Holdings, as Issuer, and Shawmut Bank
Connecticut, National Association, as original Trustee, relating to the 9-5/8%
Senior Secured Notes due 2001 in the aggregate original principal amount of
$85,000,000 issued thereunder (the "Original Indenture"). The Original
Indenture is being amended on the date hereof pursuant to a First Supplemental
Indenture dated as of the date hereof among Holdings, Academy and Fleet
National Bank, as successor Trustee (the "Supplemental Indenture"). The
Original Indenture, as amended by the Supplemental Indenture, is referred to
herein as the "Indenture." Capitalized terms used and not defined in this
letter have the meanings given to them in the Indenture.
In connection with this opinion, we have examined originals or copies of
the following documents:
(a) the Indenture;
(b) the officers' certificate referred to in Section
2.4 (a) of the Supplemental Indenture;
Exhibit B to First Supplemental Indenture
<PAGE> 11
(b) the certificate of merger executed by Holdings
and Academy relating to the Academy Merger which is to be
filed in the Office of the Secretary of State of Delaware;
(c) the resolutions of Holdings and Academy
authorizing the Academy Merger; and
(d) the certificates of incorporation and by-laws of
Holdings and Academy, in each case as amended to date.
In our examination we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as copies and the
authenticity of the originals of such copies. As to questions of fact not
independently verified by us, we have relied, to the extent we have deemed
appropriate, upon representations and certificates of officers of Holdings and
Academy, public officials and other appropriate persons. We have further
assumed that Fleet National Bank has succeeded to the rights of the original
Trustee under the Indenture and has all of the rights and powers of the Trustee
thereunder, and that Fleet National Bank has executed and delivered, pursuant
to due authorization, the Supplemental Indenture.
Based upon the foregoing, and subject to the assumptions, qualifications
and limitations set forth herein, we are of the opinion that:
1. Upon the Academy Merger, Academy will assume all obligations of
Holdings under the Indenture, including, without limitation, the due and
punctual payment of the principal of, premium, if any, and interest on all of
the Securities and the performance of every covenant of the Indenture on the
part of Holdings to be performed or observed.
2. The Supplemental Indenture complies with the provisions of the
Indenture and all conditions precedent in the Indenture relating to the Academy
Merger have been satisfied.
We do not express any opinion herein regarding any laws other than the
General Corporation Law of the State of Delaware.
This opinion is being furnished only to the addressee hereof and is solely
for its benefit. This opinion may not be relied upon for any other purpose, or
relied upon by any other person or entity for any purpose, without in each
instance obtaining our prior written consent.
Very truly yours,
SHOOK, HARDY & BACON L.L.P.
Exhibit B to First Supplemental Indenture
<PAGE> 12
Exhibit C
SECRETARY'S CERTIFICATE
This Certificate is delivered pursuant to the First Supplemental Indenture
dated on or about the date hereof among LA PETITE HOLDINGS CORP., a Delaware
corporation ("Holdings"), LA PETITE ACADEMY, INC., a Delaware corporation
("Academy"), and FLEET NATIONAL BANK, as successor Trustee under the Indenture
date as of July 15, 1993, as amended, between Holdings, as Issuer, and Shawmut
Bank Connecticut, National Association, as original Trustee.
The undersigned, being the Secretary of Holdings and Academy, does hereby
certify that:
Attached hereto as Exhibit A is a true and correct copy of
the resolutions of the Board of Directors of Holdings and Academy
authorizing the Academy Merger (as such term is defined in the
First Supplemental Indenture referred to above) and the taking of
all actions incidental thereto. Such resolutions have not been
modified, revoked or rescinded in any respect and are in full
force and effect in the form adopted.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of May 19, 1997.
---------------------------------------------
Peggy A. Ford, Secretary of La Petite Holdings Corp.
and La Petite Academy, Inc.
Exhibit C to First Supplemental Indenture
<PAGE> 13
Exhibit A to Secretary's Certificate
(copy of 2/11/97 resolutions)
Exhibit A to Secretary's Certificate
<PAGE> 14
Exhibit D
OFFICERS' CERTIFICATE
This Officers' Certificate (the "Certificate") is delivered on [Merger
Date], by the undersigned, in their capacities as officers of LA PETITE
ACADEMY, INC., a Delaware corporation ("Academy"), to FLEET NATIONAL BANK, in
its capacity as successor Trustee under the Indenture dated as of April 15,
1993, between La Petite Holdings Corp. ("Holdings"), as original Issuer, and
Shawmut Bank Connecticut, National Association, as original Trustee, as
amended, relating to the 9-5/8% Senior Secured Notes due 2001 referred to
therein (the "Indenture"). This Certificate is delivered pursuant to Section
5.1 of the Indenture. Capitalized terms used and not defined in this
Certificate shall have the meanings given to them in the Indenture.
The undersigned, in their capacities as officers of Academy, do hereby
certify to the Trustee, for the ratable benefit of the Holders, that:
1. The undersigned are officers of Academy and have read the applicable
covenants and conditions of the Indenture relating to the subject matter of
this Certificate and have made such inquiries of counsel and of other officers
or employees of Academy and made such other examinations or investigations as
are necessary to issue this Certificate.
2. Holdings has merged with and into Academy, with Academy being the sole
surviving entity (the "Academy Merger"). A copy of the Certificate of Merger
evidencing such merger is attached hereto as Exhibit A.
3. Academy has assumed all obligations of Holdings under the Indenture and
the Securities, including, without limitation, the due and punctual payment of
the principal of, and premium, if any, and interest on all of the Securities
and the performance of every covenant of the Indenture on the part of Holdings
to be performed or observed.
4. No Default or Event of Default exists or has occurred as a result of
the Academy Merger.
5. Academy has not become obligated with respect to any Indebtedness
including Acquired Indebtedness as a result of the Academy Merger (other than
(i) Acquired Indebtedness that consists of Indebtedness that could be incurred
in accordance with the terms of the Indenture, and (ii) the assumption by
Academy of Holdings' obligations in respect of the Securities and the
Indenture), nor have any of its properties become subject to any Lien (except
Liens that could be incurred in accordance with the terms of the Indenture) in
connection with or in respect of the Academy Merger.
6. The Academy Merger and the First Supplemental Indenture among Academy,
Holdings, and the Trustee dated as of May 19, 1997 (the "Supplemental
Indenture") comply with the
Exhibit D to First Supplemental Indenture
<PAGE> 15
Indenture (including Section 5.1 thereof), and all conditions
precedents in the Indenture relating to the Academy Merger and the Supplemental
Indenture have been satisfied.
IN WITNESS WHEREOF, the undersigned, in their capacities as officers of
Academy have executed and delivered this Certificate as of the date first above
written.
----------------------------------------
Phillip M. Kane, Chief Financial Officer
of La Petite Academy, Inc.
----------------------------------------
Peggy A. Ford, Secretary
of La Petite Academy, Inc.
Exhibit D to First Supplemental Indenture
<PAGE> 1
EXHIBIT 10.12
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment"), dated as of _____________, 1997, between LA PETITE ACADEMY, INC.,
a Delaware corporation (the "Borrower"), LA PETITE HOLDINGS CORP., a Delaware
corporation ("Holdings"), the financial institutions which are a party to the
Credit Agreement referred to below, (the "Banks"), Bankers Trust Company, as
Administrative Agent, and Mercantile Bank, as Co-Agent. All capitalized terms
defined in the Credit Agreement referred to below shall have the same meanings
when used herein unless otherwise defined herein.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks and the Agents are parties to
the Amended and Restated Credit Agreement dated as of July 10, 1996
(collectively, the "Credit Agreement");
WHEREAS, Holdings intends to merge with and into the Borrower, with the
Borrower being the sole surviving entity (the "Merger"). The effective date of
the Merger is referred to herein as the "Merger Date;"
WHEREAS, pursuant to Section 8.02(ix) of the Credit Agreement, the Banks
and the Administrative Agents must consent to the Merger;
WHEREAS, Holdings, the Borrower, the Banks and the Agents wish to amend
the Credit Agreement as herein provided;
NOW, THEREFORE, the parties agree as follows:
1. Consent to Merger.
The Banks and the Agents hereby consent to the Merger and the Conforming
Amendments (as defined in Section 4 below), subject, however, to the terms and
conditions of this Amendment and provided that the Borrower and Holdings
consummate the Merger on or before June 15, 1997.
2. Waiver of Lien on the Borrower's Capital Stock.
<PAGE> 2
The Banks and the Agents hereby waive their right, pursuant to Section
8.02(ix)(y) of the Credit Agreement, to require that all of the outstanding
capital stock of the Borrower be pledged to secure the Obligations of the
Borrower under the Credit Documents.
3. Representations, Warranties and Covenants.
(a) Capitalization. The Borrower represents, warrants and covenants
to the Banks that, effective as of the Merger Date, (i) the authorized
capital stock of the Borrower shall consist of (x) 1,000 shares of common
stock, $.01 par value per share, 100 of which shall be issued and
outstanding and owned by Vestar LPA and (y) 2,000,000 shares of preferred
stock, of which 800,000 shares shall be issued and outstanding, (ii) all
such outstanding shares have been duly and validly issued, are fully paid
and nonassessable and (iii) the Borrower will not have outstanding any
securities convertible into or exchangeable for its capital stock or
outstanding any rights to subscribe for or purchase, or any options for
the purchase of, or any agreements providing for the issuance (contingent
or otherwise) of or any calls, commitments or claims of any character
relating to, its capital stock.
(b) No Default; Continuing Representations. Each of Holdings and
the Borrower hereby represents and warrants that (i) immediately before
and after giving effect to the Merger, no Default or Event of Default
will occur or be continuing and (ii) each of the representations and
warranties contained in the Credit Agreement are true and correct in all
material respects both before and after giving effect to this Amendment.
4. Conforming Amendments.
Effective as of the Merger Date, the Credit Agreement shall be
amended as follows (collectively, the "Conforming Amendments"):
(a) General References to Holdings. All references to Holdings in
Sections 1, 5, 7, 8, 9, 10, and 12 of the Credit Agreement shall be
deemed to refer instead to the Borrower.
(b) Rights and Obligations. All rights, if any, and obligations of
Holdings under the Credit Agreement shall be the rights and obligations
of the Borrower.
(c) Credit Party. The meaning of the term "Credit Party" as defined
in Section 10.01 of the Credit Agreement shall be deleted in its entirety
and the following inserted in lieu thereof:
"Credit Party" shall mean the Borrower and each other Subsidiary
of the Borrower that is a party to any Credit Document.
(d) Permitted Dividends. Section 8.03 of the Credit Agreement shall
be deleted in its entirety and the following inserted in lieu thereof:
First Amendment -- Page 2
<PAGE> 3
8.03 Dividends. The Borrower will not, and will not permit any
of its Subsidiaries to, authorize, declare or pay any Dividends with
respect to any capital stock of the Borrower or any of its
Subsidiaries except that
(i) if no Default or Event of Default then exists or would
result therefrom, the accretion to the liquidation value in lieu of
cash Dividends on the Borrower's Preferred Stock in accordance with
the Certificate of Designation shall be permitted;
(ii) if no Default or Event of Default then exists or would
result therefrom, cash Dividends may be paid in respect of the
Borrower's Preferred Stock (to the extent such payment is made in
accordance with the Certificate of Designation) and the Borrower's
Common Stock and the purchase or redemption of the Borrower's
Preferred Stock shall be permitted so long as
(x) at the time cash Dividends are paid pursuant to
this Section 8.03(ii), and after giving effect thereto and to
any repurchase of Senior Notes on such date pursuant to Section
8.12(c), the aggregate amount of all cash Dividends paid
pursuant to this Section 8.03(ii) since the Closing Date
(together with the aggregate amount expended to repurchase
Senior Notes pursuant to Section 8.12(c) since the Closing
Date) shall not exceed the Accumulated Excess Earnings as of
the last day of the most recently ended fiscal quarter of the
Borrower,
(y) at the time cash Dividends are paid pursuant to
this Section 8.03(ii), and after giving effect thereto and to
any other cash Dividends paid pursuant to this Section 8.03 and
to any repurchase of Senior Notes pursuant to Section 8.12(c)
on such date, the Borrower and its Subsidiaries shall have
unrestricted cash and Cash Equivalents on hand in an aggregate
amount of not less than the sum of (a) $5,000,000, plus (b) the
aggregate principal balance of Revolving Loans then
outstanding, and
(z) no event of default then exists or would result
therefrom, and
(iii) if no Default or Event of Default then exists or would
result therefrom, cash Dividends may be paid in respect of the
Borrower's Common Stock in the amounts and at the times necessary to
permit the acquisition of the common stock of Vestar LPA from members
of management of the
First Amendment -- Page 3
<PAGE> 4
Borrower who have died or whose employment has terminated, provided
that (x) the aggregate amount of all such Dividends paid after the
Closing Date does not exceed an amount equal to $2,000,000 plus the
net cash proceeds of common stock of Vestar LPA issued to management
of the Borrower after the Closing Date which net cash proceeds are
contributed by Vestar LPA as common equity capital to the Borrower,
(y) no such payment made to any one Person shall exceed $1,000,000
and (z) in no event shall any such payment exceed the amount
permitted under the Senior Note Indenture; and
(iv) any Subsidiary of the Borrower may pay Dividends to the
Borrower or any wholly-owned Subsidiary of the Borrower.
(e) Permitted Debt. Section 8.05 of the Credit Agreement shall be
deleted in its entirety and the following inserted in lieu thereof:
8.05 Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer
to exist any Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(ii) Existing Indebtedness shall be permitted to the extent the
same is listed on Schedule III of this Agreement, together with any
renewals or refinancing thereof, so long as (x) the amount of
refinancing Indebtedness incurred pursuant to this clause (ii) does
not exceed the principal amount of the Indebtedness being refinanced
at the time of such refinancing and (y) the terms of such refinancing
Indebtedness incurred pursuant to this clause (ii) are no more
restrictive in any material respect as applied to the Borrower or any
of its Subsidiaries than the terms of the Indebtedness being
refinanced;
(iii) accrued expenses and current trade accounts payable
incurred in the ordinary course;
(iv) general unsecured Indebtedness of the Borrower in an
aggregate principal amount not to exceed $2,000,000 at any one time
outstanding;
(v) Indebtedness (including, without limitation, Capitalized
Lease Obligations) subject to Liens permitted under Section 8.01(vii)
not to exceed $500,000 at any one time outstanding;
First Amendment -- Page 4
<PAGE> 5
(vi) Indebtedness of the Borrower or any of its Subsidiaries
subject to Liens permitted under Section 8.01(viii) not to exceed
90% of the fair market value (as determined in good faith by the
Board of Directors of the Borrower) of the Real Property at the time
such Real Property is made subject to such Lien, provided that
(except in the case of the Gramercy Financing, if entered into) the
weighted average life to maturity of such Indebtedness shall not be
less than five years at the time of the incurrence of such
Indebtedness;
(vii) Indebtedness under Interest Rate Protection Agreements,
provided that after giving effect to such Interest Rate Protection
Agreements at all times thereafter the effective interest cost to
the Borrower in respect of at least 40% of the outstanding principal
amount of the Senior Notes shall be the fixed rate set forth
therein;
(viii) Indebtedness of any wholly-owned Subsidiary of the
Borrower to the Borrower or any other wholly-owned Subsidiary of the
Borrower, to the extent permitted by Section 8.06(vi);
(ix) Indebtedness of the Borrower under the Senior Notes in an
aggregate principal amount not to exceed $85,000,000 (less any
repayments of principal thereof); and
(x) Indebtedness of the Borrower under the Convertible
Subordinated Debentures in an aggregate principal amount not to
exceed $2,200,000 (less any repayments of principal thereof after
the Closing Date).
(f) Permitted Investments. Sections 8.06(iv) and (vii) of the Credit
Agreement shall be deleted in their entirety and shall be of no force or effect.
(g) Transactions with Affiliates. Section 8.07 of the Credit
Agreement shall be deleted in its entirety and the following inserted in lieu
thereof:
8.07 Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any
transaction or series of related transactions, whether or not in the
ordinary course of business, with any Affiliate of Borrower or any
of its Subsidiaries, other than in the ordinary course of business
and on terms and conditions substantially as favorable to the
Borrower or such Subsidiary as would reasonably be obtained by the
Borrower or such Subsidiary at that time in a comparable
arm's-length transaction with a Person other than an Affiliate,
except that (i) Dividends may be paid to the extent provided in
Section 8.03 and (ii) loans may be made and other transactions may
be entered into to the extent permitted by Sections 8.05 and 8.06.
Without limiting the foregoing, in no event shall any
First Amendment -- Page 5
<PAGE> 6
management or similar fees be paid by the Borrower or any of its
Subsidiaries to any Person, provided that management fees may be
paid to Vestar and certain other shareholders of Vestar LPA, so long
as the aggregate amount of such fees paid in any fiscal year shall
not exceed $500,000.
(h) Voluntary Payments and Modifications. Section 8.12 of the
Credit Agreement shall be deleted in its entirety and the following inserted in
lieu thereof:
8.12 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation, By-Laws
and Certain Other Agreements; etc. (a) The Borrower will not, or
will not permit any of its Subsidiaries to,
(i) make (or give any notice in respect of) any voluntary or
optional payment or prepayment on or redemption or acquisition for
value of (including, without limitation, by way of depositing with
the trustee with respect thereto money or securities before due for
the purpose of paying when due) any Senior Notes, Preferred Stock or
Convertible Subordinated Debentures, provided that the Borrower may
(x) repurchase Preferred Stock to the extent permitted by Section
8.03(ii), (y) repurchase Senior Notes to the extent permitted by
Section 8.12(c), and (z) repurchase Convertible Subordinated
Debentures to the extent permitted by Section 8.12(b),
(ii) amend or modify, or permit the amendment or modification
of, any provision of the Senior Notes, the Convertible Subordinated
Debentures or the Preferred Stock (including, without limitation,
the Senior Note Indenture, the Certificate of Designation or the
Convertible Subordinated Debenture Indenture), or
(iii) amend, modify or change its Certificate of Incorporation
(including, without limitation, by the filing or modification of any
certificate of designation) or By-Laws, or any Shareholders'
Agreement, in each case, if such amendment, modification or change
would materially and adversely affect the interests of the Banks, or
enter into any new agreement with respect to its capital stock.
(b) Notwithstanding the foregoing, the Borrower may repurchase the
Convertible Subordinated Debentures for cash, provided that (x) the
purchase price therefor shall not exceed 75% of the face amount of
the Convertible Subordinated Debentures being repurchased, and (y)
no Default or Event of Default then exists or would result
therefrom.
First Amendment -- Page 6
<PAGE> 7
(c) Notwithstanding the foregoing, the Borrower may repurchase
Senior Notes, provided that (x) at the time of such repurchase and
after giving effect thereto and to any Dividends paid on such date
pursuant to Section 8.03(ii), the aggregate amount expended to
repurchase Senior Notes pursuant to this Section 8.12(c) since the
Closing Date (together with the aggregate amount of cash Dividends
paid pursuant to Section 8.03(ii) since the Closing Date) shall not
exceed the Accumulated Excess Earnings as of the last day of the
most recently ended fiscal quarter of the Borrower, (y) at the time
of such repurchase, and after giving effect thereto and to any
Dividends paid on such date pursuant to Section 8.03, the Borrower
and its Subsidiaries shall have unrestricted cash and Cash
Equivalents on hand in an aggregate amount of not less than the sum
of (a) $5,000,000, plus (b) the aggregate principal balance of
Revolving Loans then outstanding and (z) no Default or Event of
Default then exists or would result therefrom.
(i) Business Activities. Section 8.13 of the Credit Agreement
shall be deleted in its entirety and the following inserted in lieu
thereof:
8.13 Business. The Borrower will not, and will not permit
any of its Subsidiaries to, engage (directly or indirectly) in any
business other than the business in which the Borrower is engaged
on the Effective Date and any other reasonably related businesses.
(j) Intercompany Notes and Tax Sharing Agreement. Section 8.14 of
the Credit Agreement shall be deleted in its entirety and shall be of no
force or effect.
(k) Tax Sharing Agreement, Default. Section 9.08 of the Credit
Agreement shall be deleted in its entirety and shall be of no force or
effect.
5. Effective Date.
This Amendment shall not become effective (the "Amendment Effective
Date") until the date on which the Borrower, Holdings, the Agents and the
Required Banks shall have executed a counterpart hereof and shall have
delivered (including by way of telecopier) the same to the Administrative
Agent.
6. Governing Law.
THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
First Amendment -- Page 7
<PAGE> 8
7. Miscellaneous.
The amendments set forth herein are limited precisely as written and shall
not be deemed to be an amendment, consent, waiver or modification of any other
term or condition of the Credit Agreement or any of the instruments or
agreements referred to therein, or prejudice any right or rights which the
Agents or the Banks may now have or may have in the future under or in
connection with the Credit Agreement or any of the instruments or agreements
referred to therein. Except as expressly modified hereby, the terms and
provisions of the Credit Agreement shall continue in full force and effect.
Whenever the Credit Agreement is referred to in the Credit Agreement or any of
the instruments, agreements, or other documents or papers executed and
delivered in connection therewith, such reference shall be deemed to mean the
Credit Agreement as modified hereby.
8. Duplicate Originals.
This Amendment may be executed in two or more counterparts which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
[The remainder of this page intentionally omitted.]
First Amendment -- Page 8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective duly authorized officers as of
the date first above written.
LA PETITE ACADEMY, INC.
By:__________________________
Phillip M. Kane
Chief Financial Officer
LA PETITE HOLDINGS CORP.
By:__________________________
Phillip M. Kane
Chief Financial Officer
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By:____________________________
Name: Patricia Hogan
Title: Vice President
MERCANTILE BANK,
Individually and as Co-Agent
By:____________________________
Name: Roger Lumley
Title: Senior Vice President
NORWEST BANK IOWA, N.A.
By:____________________________
Name: John D. Landry
Title: Asst. Vice President
First Amendment--Signature Page
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 7, 1997 AND THE STATEMENT OF INCOME FOR THE FORTY WEEKS ENDED
JUNE 7, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> AUG-30-1997
<PERIOD-END> JUN-07-1997
<CASH> 21,758
<SECURITIES> 0
<RECEIVABLES> 4,532
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 42,480
<PP&E> 96,333
<DEPRECIATION> 35,103
<TOTAL-ASSETS> 174,050
<CURRENT-LIABILITIES> 36,068
<BONDS> 85,716
31,629
0
<COMMON> 0
<OTHER-SE> 4,607
<TOTAL-LIABILITY-AND-EQUITY> 174,050
<SALES> 0
<TOTAL-REVENUES> 234,491
<CGS> 0
<TOTAL-COSTS> 222,255
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,118
<INCOME-PRETAX> 5,804
<INCOME-TAX> 3,078
<INCOME-CONTINUING> 2,726
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,726
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
