EXHIBIT 10.1
AMENDMENT NO. 7
TO CREDIT AGREEMENT
THIS AMENDMENT NO. 7 TO CREDIT AGREEMENT (this "Amendment") is entered
into as of November 30, 2004, among LA PETITE ACADEMY, INC., a Delaware
corporation (the "Borrower"); LPA HOLDING CORP., a Delaware corporation
("Holdings"); the Lenders party hereto; U.S. BANK NATIONAL ASSOCIATION (the
"Resigning Administrative Agent"); and HERITAGE BANK, SSB (the "Successor
Administrative Agent"). Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed thereto in the Credit Agreement (as defined
below).
RECITALS
WHEREAS, the Borrower, Holdings, the Lenders and certain other persons
signatory thereto entered into the Credit Agreement dated as of May 11, 1998 (as
previously amended and modified by Amendment No. 1, dated as of December 13,
1999; Amendment No. 2, dated as of June 29, 2000; Amendment No. 3, dated as of
November 14, 2002; Amendment No. 4, dated as of February 5, 2002; Amendment No.
5 dated as of February 10, 2003; and Amendment No. 6 dated as of July 31, 2003,
and as otherwise amended or modified from time to time, the "Credit Agreement");
and
WHEREAS, the Lenders and the Loan Parties have agreed to modify the Credit
Agreement as more fully set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as set
forth below.
SECTION 1
AMENDMENTS TO CREDIT AGREEMENT
Effective as of the date hereof (or at such other time specified herein,
as applicable), the Credit Agreement is amended as set forth below.
1.1 Existing Definitions.
(a) 2003 Securities Purchase Agreement.The definition of "Securities
Purchase Agreement" set forth in Section 1.01 of the Credit Agreement is
amended and restated in its entirety to read as follows:
"2003 Securities Purchase Agreement" means the Securities Purchase
Agreement dated as of February 10, 2003, among Holdings, LPA Investment
and the other signatories thereto from time to time, as amended from time
to time.
(b) LIBO Rate. The definition of "LIBO Rate" set froth in Section 1.01 of
the Credit Agreement is amended and restated in its entirety to read as
follows:
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service
(or on any successor or substitute page of such Service, or any successor
to or substitute for such Service, providing rate quotations comparable to
those currently provided on such page of such Service, as determined by
the Administrative Agent from time to time for purposes of providing
quotations of interest rates applicable to dollar deposits in the London
interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for
dollar deposits with a maturity comparable to such Interest Period. In the
event that such rate is not available at such time for any reason, then
the "LIBO Rate" with respect to such Eurodollar Borrowing for such
Interest Period shall be the rate at which dollar deposits of $5,000,000
and for a maturity comparable to such Interest Period are offered by the
principal London office of the Administrative Agent in immediately
available funds in the London interbank market at approximately 11:00
a.m., London time, two Business Days prior to the commencement of such
Interest Period (and if the Administrative Agent shall not have a London
office, then the principal London office of the Syndication Agent).
(c) Maturity Date. The definition of "Maturity Date" set forth in Section
1.01 of the Credit Agreement is amended and restated in its entirety to
read as follows:
"Maturity Date" means November 15, 2007.
1.2 Loans and Borrowings. Section 2.02(c) of the Credit Agreement is
amended and restated to read as follows:
At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $100,000 and not less than $250,000. At the time that
each ABR Revolving Borrowing is made, such Borrowing shall be in an
aggregate amount that is an integral multiple of $100,000 and not less
than $250,000, provided that an ABR Revolving Borrowing may be in an
aggregate amount that is equal to the entire unused balance of the total
Revolving Commitments or that is required to finance the reimbursement of
an LC Disbursement as contemplated by Section 2.05(e). Each Swingline Loan
shall be in an amount that is an integral multiple of $50,000 and not less
than $250,000. Borrowings of more than one Type and Class may be
outstanding at the same time, provided that there shall not at any time be
more than a total of eight Eurodollar Borrowings outstanding.
1.3 Amortization of Term Loans. Section 2.10(a) of the Credit Agreement is
amended and restated to read as follows:
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(a) Subject to adjustment pursuant to paragraph (c) of this Section,
the Borrower shall repay Term Borrowings on the last day of each month set
forth below in the aggregate principal amount set forth opposite such
month:
Date Amount
- ------------- --------------
November 2004 $ 100,000
February 2005 $ 100,000
May 2005 $ 100,000
August 2005 $ 100,000
November 2005 $ 100,000
February 2006 $ 100,000
May 2006 $ 100,000
August 2006 $ 100,000
November 2006 $ 100,000
February 2007 $ 100,000
May 2007 $ 100,000
August 2007 $ 100,000
Maturity Date $31,552,174.50
1.4 Leverage Ratio. Section 6.13 of the Credit Agreement is amended and
restated in its entirety to read as follows:
SECTION 6.13. Leverage Ratio. The Borrower will not permit the
Leverage Ratio, as of the last day of any fiscal quarter ending closest to
the date set forth below, to be in excess of the ratio set forth opposite
such date:
Quarter Ending Closest To: Maximum Ratio
- ------------------------- -------------
September 30, 2004 7.25 to 1.00
December 31, 2004 7.25 to 1.00
March 31, 2005 7.25 to 1.00
June 30, 2005 7.25 to 1.00
September 30, 2005 6.75 to 1.00
December 31, 2005 6.75 to 1.00
March 31, 2006 6.25 to 1.00
June 30, 2006 6.25 to 1.00
September 30, 2006 6.00 to 1.00
December 31, 2006 6.00 to 1.00
March 31, 2007 5.50 to 1.00
June 30, 2007 5.50 to 1.00
September 30, 2007 5.50 to 1.00
1.5 Consolidated Fixed Charge Coverage Ratio. Section 6.14(a) of the
Credit Agreement is amended and restated in its entirety to read as follows:
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SECTION 6.14. Consolidated Fixed Charge Coverage Ratio.
(a) The Borrower will not permit the Consolidated Fixed Charge
Coverage Ratio for the four fiscal quarter period ending closest to each
date set forth below to be less than the ratio set forth opposite such
date:
Period: Minimum Ratio
- ------------------ -------------
September 30, 2004 1.00 to 1.00
December 31, 2004 0.95 to 1.00
March 31, 2005 0.95 to 1.00
June 30, 2005 0.95 to 1.00
September 30, 2005 0.95 to 1.00
December 31, 2005 1.00 to 1.00
March 31, 2006 1.00 to 1.00
June 30, 2006 1.00 to 1.00
September 30, 2006 1.00 to 1.00
December 31, 2006 1.00 to 1.00
March 31, 2007 1.00 to 1.00
June 30, 2007 1.00 to 1.00
September 30, 2007 1.00 to 1.00
1.6 Minimum Consolidated EBITDA. Section 6.15 of the Credit Agreement is
amended and restated in its entirety to read as follows:
SECTION 6.15. Minimum Consolidated EBITDA. The Borrower will not
permit Consolidated EBITDA for any period set forth below to be less than
the amount set forth below opposite such period:
Minimum
Consolidated
Period: EBITDA
- ------- ------------
For the four fiscal quarter
period ending closest to each
date set forth below:
September 30, 2004 $ 26,750,000
December 31, 2004 $ 27,000,000
March 31, 2005 $ 27,250,000
June 30, 2005 $ 27,250,000
September 30, 2005 $ 28,250,000
December 31, 2005 $ 28,750,000
March 31, 2006 $ 29,250,000
June 30, 2006 $ 30,000,000
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September 30, 2006 $ 30,250,000
December 31, 2006 $ 31,250,000
March 31, 2007 $ 32,250,000
June 30, 2007 $ 33,250,000
September 30, 2007 $ 33,750,000
1.7 Swingline Loans. The parties to this Amendment hereby agree that any and all
Swingline Loans are hereby terminated in all respects, and any references to the
Swingline Lender or to the Swingline Loans thereto in any Loan Document are, on
an after the date hereof, of no further effect, except with respect to required
participations in any Swingline Loan currently outstanding by the Lenders or
repayment thereof by the Borrower. Notwithstanding the foregoing, the
obligations of the Lenders to make Revolving Loans shall remain in full force
and effect.
SECTION 2
CONDITIONS PRECEDENT
This Amendment shall not be effective until the conditions set forth below
have been satisfied (or waived by the Lenders).
(a) Documentation. Receipt by the Administrative Agent of
counterparts of this Amendment executed by each of the Loan Parties and
the Lenders.
(b) Authority. Receipt by the Administrative Agent of a certificate
of the secretary of each of the Borrower, Holdings and the Subsidiary Loan
Parties dated as of the date hereof certifying as to (i) resolutions duly
adopted by the Board of Directors approving this Amendment (and any Loan
Documents to be executed in connection herewith) and the transactions
contemplated herein and authorizing the execution, delivery and
performance hereof and thereof; (ii) its respective certificate or
articles of incorporation and by-laws; and (iii) the incumbency of its
officers executing this Amendment and any Loan Documents to be executed in
connection herewith on its behalf.
(c) Good Standing. Receipt by the Administrative Agent of copies of
certificates of good standing, existence or its equivalent with respect to
each Loan Party certified as of a recent date by the appropriate
Governmental Authority of the state or other jurisdiction of its formation
and the state of its chief executive office and principal place of
business.
(d) Fees and Expenses. (i) The payment by the Borrower of an
amendment fee in an aggregate amount equal to $200,000 distributed to each
Lender pro rata in accordance with its respective aggregate Commitments;
(ii) the payment by the Borrower to Dallas Lease & Finance, L.P. of an
arrangement fee equal to $300,000; and (iii) the payment by Borrower to
Haynes and Boone, L.L.P., counsel to the Administrative Agent and Dallas
Lease & Finance, L.P., of all legal fees incurred by such Persons in
connection with the Credit Agreement, including an advance for anticipated
expenses to
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be incurred in connection with collateral matters, to the extent an
invoice for such fees and expenses is sent to the Borrower or its counsel
prior to the date hereof.
(e) Amendment No. 2 to 2003 Securities Purchase Agreement. Amendment
No. 2 to the 2003 Securities Purchase Agreement ("Amendment No. 2"), in
form and substance reasonably satisfactory to the Administrative Agent,
shall have been executed by Holdings and LPA Investment. The
Administrative Agent shall have received a copy, certified by an officer
of Holdings as true and complete, of Amendment No. 2.
(f) Legal Opinion. Receipt by the Administrative Agent of an opinion
from O'Melveny & Myers LLP, counsel to the Loan Parties, relating to this
Amendment and the transactions contemplated herein, in form and substance
satisfactory to the Administrative Agent.
(g) List of Owned Real Property. Receipt by the Administrative Agent
of a list of all owned real property of the Loan Parties.
SECTION 3
ADMINISTRATIVE AGENT
3.1 Resignation. The Resigning Administrative Agent hereby resigns as
Administrative Agent, Documentation Agent, Collateral Agent, Issuing Bank, and
Swingline Lender.
3.2 Appointment.
(a) The Required Lenders appoint the Successor Administrative Agent
to succeed Resigning Administrative Agent as Administrative Agent, Documentation
Agent, Collateral Agent, Issuing Bank, and Swingline Lender under the Credit
Agreement and the other Loan Documents.
(b) Notwithstanding the appointment of Successor Administrative
Agent, in order to minimize the administrative cost and expense associated with
the transfer of certain of the duties and responsibilities of Issuing Bank under
the Credit Agreement and other Loan Documents from Resigning Administrative
Agent to Successor Administrative Agent, the parties hereby agree as follows:
(i) Resigning Administrative Agent shall continue to be the issuer of
the existing Letters of Credit issued and outstanding on the date
hereof under the Credit Agreement as listed on Schedule 1 attached
hereto (the "Existing Letters of Credit") until the earlier to occur
of (i) the expiry of the Existing Letters of Credit or (ii) the date
upon which Successor Administrative Agent has issued replacement
Letters of Credit therefor which have been accepted by the
beneficiary thereof (and such beneficiary has returned the originals
of the Existing Letters of Credit to Resigning Administrative Agent.
Resigning Administrative Agent shall provide such reports and other
information to Borrower, Successor Administrative Agent, and the
Lenders consistent with their respective past practice for these
activities. Resigning Administrative Agent shall be entitled to all
rights as Issuing Bank under the Credit Agreement with respect to
the
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Existing Letters of Credit, including, without limitation, (x)
reimbursement by Borrower for draws under any such outstanding
Existing Letters of Credit issued by it, and (y) if not previously
reimbursed or repaid by Borrower, require each Lender to fund its
participation in such Existing Letter of Credit, all in accordance
with the applicable terms and provisions of the Credit Agreement
(with Resigning Administrative Agent being deemed to be the
"Administrative Agent" for such purposes).
(ii) Resigning Administrative Agent and Borrower shall cooperate with
Successor Administrative Agent to properly reflect the change of
Collateral Agent with respect to the Collateral and shall promptly
execute and deliver any documentation reasonably requested from time
to time by Successor Administrative Agent in order to preserve and
protect the Liens in favor of the Lenders on such Collateral;
provided, however, that at the request of Successor Administrative
Agent, (i) Resigning Administrative Agent shall remain the
mortgagee, assignee, and secured party of record as the Collateral
Agent for the benefit of the Secured Parties with respect to all or
any portion of the Collateral, (ii) any and all mortgages, security
agreements, financing statements, control agreements, and other
documents, instruments, and agreements creating, evidencing, or
relating to any Liens on such Collateral held by Resigning
Administrative Agent as Collateral Agent for the Lenders shall be,
and be deemed to be, modified and supplemented such that such Liens
shall be held by Successor Administrative Agent as Collateral Agent
for the Lenders, and (iii) Resigning Administrative Agent shall take
such actions as directed by Successor Administrative Agent with
respect to the release or modification of, or the exercise of any
rights or remedies regarding any such Collateral consistent with the
terms of the Loan Documents. Resigning Administrative Agent and
Borrower shall promptly execute and deliver any documentation
requested from time to time by Successor Administrative Agent to
evidence such Resigning Administrative Agent's capacity as
Collateral Agent for the Lenders.
(iii) Resigning Administrative Agent shall deliver all possessory
Collateral to Successor Administrative Agent as soon as possible,
but no later than December 15, 2004. Until the delivery of such
possessory Collateral to Successor Administrative Agent, Resigning
Administrative Agent shall hold such possessory Collateral in trust
for Successor Administrative Agent.
(iv) All expenses and costs incurred by Resigning Administrative Agent in
connection with this Agreement or in the performance thereof,
whether now or in the future, including reasonable attorney fees,
shall, upon demand, be paid by Borrower or if not paid by Borrower
shall be paid by Successor Administrative Agent on behalf of the
Lenders.
3.3 Consent. Borrower consents to such appointment of Successor
Administrative Agent as Administrative Agent, Documentation Agent, Collateral
Agent, Issuing Bank, and Swingline Lender.
3.4 Acceptance. Successor Administrative Agent accepts such appointment as
Administrative Agent, Documentation Agent, Collateral Agent, Issuing Bank, and
Swingline Lender.
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3.5 Assignment. Resigning Administrative Agent transfers, assigns, and
conveys to Successor Administrative Agent, for the benefit of the Secured
Parties, all right, title, and interest in the Collateral.
3.6 Amendment.
(a) The Credit Agreement and each other applicable Loan Document is deemed
amended to reflect the appointment of Successor Administrative Agent as
Administrative Agent, Documentation Agent, Collateral Agent, Issuing Bank
(except with regard to the Existing Letters of Credit), and Swingline Lender
under the Credit Agreement, and all references therein to Administrative Agent,
Documentation Agent, Collateral Agent and Issuing Bank (except with regard to
the Existing Letters of Credit) shall be to Successor Administrative Agent.
(b) The applicable notice provisions in the Loan Documents are amended by
replacing the contact information for Administrative Agent, Documentation Agent,
Collateral Agent, Issuing Bank, and Swingline Lender with the following:
Heritage Bank, SSB
13455 Noel Road, Suite 2220
Dallas, TX 75240
Attention: Davis Deadman
SECTION 4
MISCELLANEOUS
4.1 Mortgages. The Loan Parties, as applicable, shall execute and deliver
to the Collateral Agent, within five Business Days following receipt of such
document from the Collateral Agent, a Mortgage and such other documents,
financing statements, agreements and instruments, that may be required under any
applicable law, or which the Collateral Agent may reasonably request, to grant,
preserve, protect or perfect a Lien on the real property identified in Section
2(g).
4.2 Ratification of Loan Documents. The terms "Credit Agreement" and
"Agreement" as used in each of the Loan Documents shall hereafter mean the
Credit Agreement as amended by this Amendment. The Borrower and Holdings each
(a) ratifies and confirms all provisions of the Credit Agreement, as amended by
this Amendment, and the other Loan Documents; (b) ratifies and confirms that all
guaranties, assurances, and liens granted, conveyed, or assigned to Lender under
the Loan Documents are not released, reduced, or otherwise adversely affected by
this Amendment and continue to guarantee and secure full payment and performance
of its obligations under the Credit Agreement and the other Loan Documents; and
(c) agrees to perform such reasonable acts and duly authorize, execute,
acknowledge, deliver, file and record such additional documents, and
certificates as the Administrative Agent or Required Lenders may reasonably
request in order for the Lenders to create, perfect, preserve and protect those
guaranties, assurances and liens. Except to the extent amended hereby, all
terms, provisions and conditions of the Credit Agreement, the other Loan
Documents and all documents
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executed in connection therewith, shall continue in full force and effect and
shall remain enforceable and binding in accordance with their respective terms.
4.3 Authority/Enforceability. Each of the Loan Parties, the Administrative
Agent and the Lenders party hereto represents and warrants as set forth below.
(a) It has taken all necessary action to authorize the execution,
delivery and performance of this Amendment.
(b) This Amendment has been duly executed and delivered by such
Person and constitutes such Person's legal, valid and binding obligations,
enforceable in accordance with its terms, except as such enforceability
may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting creditors'
rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in
equity).
(c) No material consent, approval, authorization or order of, or
filing, registration or qualification with, any court or Governmental
Authority or third party is required in connection with the execution,
delivery or performance by such Person of this Amendment.
4.4 Representation and Warranties. Each of the Borrower and Holdings
represents and warrants to the Lenders as set forth below.
(a) The representations and warranties of the Borrower and Holdings
set forth in Article III of the Credit Agreement qualified as to
materiality are true and correct as of the date hereof and those not so
qualified are true and correct as of the date hereof in all material
respects, except, in each case, for those that specifically relate to an
earlier date.
(b) No event has occurred and is continuing which constitutes a
Default or an Event of Default.
(c) The Security Documents create a valid security interest in, and
Lien upon, the Collateral.
(d) The Loan Documents, as amended hereby, are valid and binding
obligations of the Loan Parties, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or law.
(e) The execution and delivery of this Amendment and the performance
of the transactions contemplated hereby (a) do not require any consent or
approval of, registration or filing with, or any other action by, any
Governmental Authority, except such as have been obtained or made and are
in full force and effect or, if not obtained or made, would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect; (b) will not violate any applicable law or regulation or
the charter, by-
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laws or other organizational documents of Holdings, the Borrower or any of
the Subsidiaries or any order of any Governmental Authority, except, with
respect to any violation of applicable law or regulation or any order of
any Governmental Authority, to the extent any such violation would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect; and (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon Holdings, the
Borrower or any of the Subsidiaries or its assets, or give rise to a right
thereunder to require any payment to be made by Holdings, the Borrower or
any of the Subsidiaries, except to the extent any such violation, default
or right would not, individually or in the aggregate, be reasonably likely
to have a Material Adverse Effect.
4.5 General Release. In consideration of the Lenders entering into this
Amendment, the Loan Parties hereby release the Administrative Agent, the
Lenders, and the Administrative Agent's and the Lenders' respective officers,
employees, representatives, agents, counsel and directors from any and all
actions, causes of action, claims, demands, damages and liabilities of whatever
kind or nature, in law or in equity, now known or unknown, suspected or
unsuspected to the extent that any of the foregoing arises from any action or
failure to act under the Credit Agreement on or prior to the date hereof.
4.6 Counterparts/Telecopy. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. Delivery of
executed counterparts by telecopy shall be effective as an original and shall
constitute a representation that an original will be delivered if requested.
4.7 Further Assurances. The Borrower agrees to promptly take such action,
upon the reasonable request of the Administrative Agent or the Required Lenders,
as is reasonably necessary to carry out the intent of this Amendment, the
Security Documents and the Loan Documents, including, but not limited to, such
actions as are necessary to ensure that the Lenders have a perfected security
interest in the Collateral subject to no Liens other than the Liens permitted by
Section 6.02 of the Credit Agreement.
4.8 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers or
attorneys-in-fact as of the day and year first above written.
BORROWER: LA PETITE ACADEMY, INC.
By: /s/ Gary A. Graves
--------------------------
Name: Gary A. Graves
Title: President
HOLDINGS: LPA HOLDING CORP.
By: /s/ Gary A. Graves
--------------------------
Name: Gary A. Graves
Title: President
Each of the undersigned are unconditional guarantors of all obligations of
the Borrower under the Loan Documents and acknowledge and agree that (a) this
Amendment does not modify or waive any of its obligations under the Loan
Documents, including the Guarantee Agreements and (b) all Liens granted by it to
support its obligations remain in full force and effect.
LPA HOLDING CORP.
By: /s/ Gary A. Graves
---------------------
Name: Gary A. Graves
Title: President
LPA SERVICES, INC.
By: /s/ Gary A. Graves
---------------------
Name: Gary A. Graves
Title: President
BRIGHT START, INC.
By: /s/ Gary A. Graves
---------------------
Name: Gary A. Graves
Title: President
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U.S. BANK NATIONAL ASSOCIATION
By: /s/ David L. Orf
------------------------
Name: David L. Orf
Title: Vice President
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HERITAGE BANK, SSB
By: /s/ Davis Deadman
--------------------------
Name: Davis Deadman
Title: Chief Executive Officer
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BANK OF AMERICA STRATEGIC
SOLUTIONS, INC.
By: /s/ John W. Woodiel
-------------------------
Name: John W. Woodiel
Title: Senior Vice President
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ML CBO IV CAYMAN
By: Highland Capital Management, L.P.
as Collateral Manager
By: /s/ Todd Travers
----------------------------
Name: Todd Travers
Title: Senior Portfolio Manager
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HIGHLAND LEGACY, LTD
By: Highland Capital Management, L.P.
as Collateral Manager
By: /s/ Todd Travers
---------------------------
Name: Todd Travers
Title: Senior Portfolio Manager
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PAMCO CAYMAN LTD
By: Highland Capital Management, L.P.
as Collateral Manager
By: /s/ Todd Travers
---------------------------
Name: Todd Travers
Title: Senior Portfolio Manager
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KZH - HIGHLAND 2 LLC
By: /s/ Todd Travers
---------------------------
Name: Todd Travers
Title: Senior Portfolio Manager
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SRV - HIGHLAND, INC
By: /s/ Todd Travers
--------------------------
Name: Todd Travers
Title: Senior Portfolio Manager
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