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 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 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
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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 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
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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.
(vi) (A) Holders of shares of the Class A Preferred
Stock shall be entitled to receive the dividends
provided for in paragraph
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(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.
(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
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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.
(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
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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 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%
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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 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
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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 "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;
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(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.
(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
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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 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
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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 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
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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.
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
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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 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
- 14 -
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 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
- 15 -
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 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
- 16 -
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 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;
- 17 -
(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 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.
- 18 -
(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.
(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;
- 19 -
(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.
(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
- 20 -
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 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:
- 21 -
(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 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,
- 22 -
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.
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
- 23 -
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
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
- 24 -
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.
"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
- 25 -
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 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.
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"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 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
- 27 -
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.
"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
- 28 -
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 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
- 29 -
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.
"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.
- 30 -
"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.
"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
- 31 -
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
"incurrence," "incurred," "incurable" 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
- 32 -
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.
"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,
- 33 -
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.
"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.
- 34 -
"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.
"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
- 35 -
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 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
- 36 -
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)
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.
- 37 -
"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 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.
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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
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.
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"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.
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.
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(c) The number of directors of the Corporation
shall be as from time to time fixed by, or in the
manner provided in, the ByLaws 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 (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
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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.
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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
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