EXECUTION COPY
INDEMNITY, SUBROGATION and CONTRIBUTION
AGREEMENT dated as of May 11, 1998, among LA PETITE
ACADEMY, INC., a Delaware corporation (the
"Borrower"), each Subsidiary of the Borrower (the
"Guarantors") and NATIONSBANK, N.A., ("Nationsbank"),
as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of May 11, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, LPA HOLDING CORP., a Delaware corporation, the
lenders from time to time party thereto (the "Lenders"), Nationsbank, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), documentation agent and Collateral Agent, and THE CHASE MANHATTAN BANK,
as syndication agent and as issuing bank (in such capacity, the "Issuing Bank"),
and (b) the Subsidiary Guarantee Agreement dated as of May 11, 1998 between the
Guarantors and the Collateral Agent (the "Subsidiary Guarantee Agreement").
Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower, pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. The Guarantors have guaranteed such Loans and the other Obligations
(as defined in the Subsidiary Guarantee Agreement) of the Borrower under the
Credit Agreement pursuant to the Subsidiary Guarantee Agreement; certain
Guarantors have granted Liens on and security interests in certain of their
assets to secure such guarantees. The obligations of the Lenders to make Loans
and of the Issuing Bank to issue Letters of Credit are conditioned on, among
other things, the execution and delivery by the Borrower and the Guarantors of
an agreement in the form hereof.
Accordingly, the Borrower, each Guarantor and the Collateral Agent agree as
follows:
SECTION 1. Indemnity and Subrogation. In addition to all such rights of
indemnity and subrogation as the Guarantors may have under applicable law (but
subject to Section 3), the Borrower agrees that (a) in the event a payment shall
be made by any Guarantor under the Guarantee Agreement, the Borrower shall
indemnify such Guarantor for the full amount of such payment and such Guarantor
shall be subrogated to the rights of the Person to whom such payment shall have
been made to the extent of such payment and (b) in the event any assets of any
Guarantor shall be sold pursuant to any Security Document to satisfy a claim of
any Secured Party, the Borrower shall indemnify such Guarantor in an amount
equal to the greater of (i) the book value of the assets so sold and (ii) the
fair market value of the assets so sold.
SECTION 2. Contribution and Subrogation. Each Guarantor (a "Contributing
Guarantor") agrees (subject to Section 3) that, in the event a payment shall be
made by any other Guarantor under the Subsidiary Guarantee Agreement or assets
of any other Guarantor shall be sold pursuant to any Security Document to
satisfy a claim of any Secured Party and such other Guarantor (the "Claiming
Guarantor") shall not have been fully indemnified by the Borrower as provided in
Section 1, the Contributing Guarantor shall indemnify the Claiming Guarantor in
an amount equal to the amount of such payment or the greater of (i) the book
value of the assets so sold and (ii) the fair market value of such assets, as
the case may be, in each case multiplied by a fraction of which the numerator
shall be the net worth of the Contributing Guarantor on the date
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hereof and the denominator shall be the aggregate net worth of all the
Guarantors on the date hereof (or, in the case of any Guarantor becoming a party
hereto pursuant to Section 12, the date of the Supplement hereto executed and
delivered by such Guarantor). Any Contributing Guaran tor making any payment to
a Claiming Guarantor pursuant to this Section 2 shall be subrogated to the
rights of such Claiming Guarantor under Section 1 to the extent of such payment.
SECTION 3. Subordination. Notwithstanding any provision of this Agreement
to the contrary, all rights of the Guarantors under Sections 1 and 2 and all
other rights of indemnity, contribution or subrogation under applicable law or
otherwise shall be fully subordinated to the indefeasible payment in full in
cash of the Obligations. No failure on the part of the Borrower or any Guarantor
to make the payments required by Sections 1 and 2 (or any other payments
required under applicable law or otherwise) shall in any respect limit the
obligations and liabilities of any Guarantor with respect to its obligations
hereunder, and each Guarantor shall remain liable for the full amount of the
obligations of such Guarantor hereunder.
SECTION 4. Termination. This Agreement shall survive and be in full force
and effect so long as any Obligation is outstanding and has not been
indefeasibly paid in full in cash, and so long as the LC Exposure has not been
reduced to zero or any of the Commitments under the Credit Agreement have not
been terminated, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment, or any part thereof, of any Obligation is
rescinded or must otherwise be restored by any Secured Party or any Guarantor
upon the bankruptcy or reorganization of the Borrower, any Guarantor or
otherwise.
SECTION 5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. No Waiver; Amendment. (a) No failure on the part of the
Collateral Agent or any Guarantor to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy by the
Collateral Agent or any Guarantor preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. None of
the Collateral Agent or any of the Guarantors shall be deemed to have waived any
rights hereunder unless such waiver shall be in writing and signed by such
parties.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Borrower, the Guarantors and the Collateral Agent, with the prior written
consent of the Required Lenders (except as otherwise provided in the Credit
Agreement).
SECTION 7. Notices. All communications and notices hereunder shall be in
writing and given as provided in the Subsidiary Guarantee Agreement and
addressed as specified therein.
SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party, and all covenants, promises and
agreements by or on behalf of the parties that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
Neither the Borrower nor any Guarantor may assign or transfer any of its rights
or obligations hereunder (and any such attempted assignment or transfer shall be
void) without the prior written consent of the Required Lenders. Notwithstanding
the foregoing, at the time any Guarantor is released from its obligations under
the Subsidiary Guarantee Agreement in accordance with such Subsidiary Guarantee
Agreement and the Credit Agreement, such Guarantor will cease to have any rights
or obligations under this Agreement.
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SECTION 9. Survival of Agreement; Severability. (a) All covenants and
agreements made by the Borrower and each Guarantor herein and in the
certificates or other instruments pre pared or delivered in connection with this
Agreement or the other Loan Documents shall be considered to have been relied
upon by the Collateral Agent, the other Secured Parties and each Guarantor and
shall survive the making by the Lenders of the Loans and the issuance of the
Letters of Credit by the Issuing Bank, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loans or any
other fee or amount payable under the Credit Agreement or this Agreement or
under any of the other Loan Documents is outstanding and unpaid or the LC
Exposure does not equal zero and as long as the Commitments have not been ter
minated.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 10. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement shall be effective with
respect to any Guarantor when a counterpart bearing the signature of such
Guarantor shall have been delivered to the Collateral Agent. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Agreement.
SECTION 11. Rules of Interpretation. The rules of interpretation specified
in Section 1.03 of the Credit Agreement shall be applicable to this Agreement.
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SECTION 12. Additional Guarantors. Pursuant to Section 5.12 of the Credit
Agreement, each Subsidiary that was not in existence or not such a Subsidiary on
the date of the Credit Agreement is required to enter into the Subsidiary
Guarantee Agreement as a Subsidiary Guarantor upon becoming such a Subsidiary
that is a Subsidiary Loan Party. Upon execution and delivery, after the date
hereof, by the Collateral Agent and such a Subsidiary of an instrument in the
form of Annex 1 hereto, such Subsidiary shall become a Guarantor hereunder with
the same force and effect as if originally named as a Guarantor hereunder. The
execution and delivery of any instrument adding an additional Guarantor as a
party to this Agreement shall not require the consent of any Guarantor
hereunder. The rights and obligations of each Guarantor hereunder shall remain
in full force and effect notwithstanding the addition of any new Guarantor as a
party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first appearing above.
LA PETITE ACADEMY, INC.,
by
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Name:
Title:
LPA SERVICES, INC., as a Guarantor,
by
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Name:
Title:
NATIONSBANK, N.A., as Collateral Agent,
by
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Name:
Title:
Annex 1 to
the Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. dated as of [ ], to the
Indemnity, Subrogation and Contribution Agreement
dated as of May [ ], 1998 (as the same may be
amended, supplemented or otherwise modified from time
to time, the "Indemnity, Subrogation and Contribution
Agreement"), among LA PETITE ACADEMY, INC., a
Delaware corporation (the "Borrower"), each
Subsidiary of the Borrower listed on Schedule I
thereto (the "Guarantors"), and NATIONSBANK, N.A.,
("Nationsbank"), as collateral agent (the "Collateral
Agent") for the Secured Parties (as defined in the
Credit Agreement referred to below).
A. Reference is made to (a) the Credit Agreement dated as of May [ ], 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, LPA HOLDING CORP., a Delaware corporation, the
lenders from time to time party thereto (the "Lenders") , Nationsbank, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), documentation agent and Collateral Agent, and THE CHASE MANHATTAN BANK,
as syndication agent and as issuing bank (in such capacity, the "Issuing Bank"),
and (b) the Subsidiary Guarantee Agreement dated as of May [ ], 1998, among the
Guarantors and the Collateral Agent (the "Subsidiary Guarantee Agreement").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Indemnity, Subrogation and
Contribution Agreement and the Credit Agreement.
C. The Borrower and the Guarantors have entered into the Indemnity,
Subrogation and Contribution Agreement in order to induce the Lenders to make
Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.12
of the Credit Agreement, each Subsidiary that was not in existence or not such a
Subsidiary on the date of the Credit Agreement is required to enter into the
Subsidiary Guarantee Agreement as a Guarantor upon becoming a Subsidiary that is
a Subsidiary Loan Party. Section 12 of the Indemnity, Subrogation and
Contribution Agreement provides that additional Subsidiaries of the Borrower may
become Guarantors under the Indemnity, Subrogation and Contribution Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary of the Borrower (the "New Guaran tor") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Guarantor under the Indemnity, Subrogation and Contribution Agreement in order
to induce the Lenders to make additional Loans and the Issuing Bank to issue
additional Letters of Credit and as consideration for Loans previously made and
Letters of Credit previously issued.
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Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation and
Contribution Agreement, the New Guarantor by its signature below becomes a
Guarantor under the Indemnity, Subrogation and Contribution Agreement with the
same force and effect as if originally named therein as a Guarantor and the New
Guarantor hereby agrees to all the terms and provisions of the Indemnity,
Subrogation and Contribution Agreement applicable to it as a Guarantor
thereunder. Each reference to a "Guarantor" in the Indemnity, Subrogation and
Contribution Agreement shall be deemed to include the New Guarantor. The
Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein
by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Guarantor and the Collateral
Agent. Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In the event any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein and in the Indemnity, Subrogation and Contribution Agreement
shall not in any way be affected or impaired (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing and
given as provided in Section 7 of the Indemnity, Subrogation and Contribution
Agreement. All communications and notices hereunder to the New Guarantor shall
be given to it care of the Borrower.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
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IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.
[Name Of New Guarantor],
by
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Name:
Title:
Address:
NATIONSBANK, N.A., as Collateral
Agent,
by
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Name:
Title:
SCHEDULE I
to Supplement No.___ to the Indemnity
Subrogation and Contribution Agreement
Guarantors
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Name Address
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