EXHIBIT 4.1
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, dated
as of July 19, 2002 (this "Amendment"), is by and between CHILDTIME CHILDCARE,
INC., an Illinois corporation (the "Company"), and BANK ONE, NA, with its main
office in Chicago, Illinois, and successor by merger to Bank One, Michigan, a
Michigan banking corporation (the "Bank").
INTRODUCTION
A. The Company and the Bank have entered into an Amended and Restated
Credit Agreement, dated as of January 31, 2002, as amended by the First
Amendment to Amended and Restated Credit Agreement, dated as of April 1, 2002
(the "Credit Agreement").
B. The Company has requested the Bank to amend the Credit Agreement in
certain respects, and the Bank is willing to do so on the terms and conditions
set forth in this Amendment.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein and in the Credit Agreement contained, the parties hereto
agree as follows:
ARTICLE 1. AMENDMENTS TO CREDIT AGREEMENT
The Credit Agreement hereby is amended as follows:
1.1 The following is added to the end of the definition of the
term "Applicable Margin" in Section 1.1:
Notwithstanding anything in this Agreement to the contrary, immediately
upon the consummation of the Tutor Time Property Purchase (as defined
in Section 5.2(g)), the Applicable Margin for determining the
Eurodollar Rate and the Letter of Credit fees under Section 2.3(c)
shall be and at all times thereafter remain 3.00%, and the Applicable
Margin for determining the Floating Rate and the commitment fees
payable under Section 2.3(a) shall be and at all times thereafter
remain 0.50%.
1.2 The following definitions of the terms "Senior Debt", "Senior
Debt to EBITDA Ratio", "Subordinated Debt" and "Tangible Capital Funds" are
added to Section 1.1 in alphabetical order:
"Senior Debt" of any person shall mean, as of any date, Total
Debt of such person less Subordinated Debt of such person.
"Senior Debt to EBITDA Ratio" means, as of the end of any
fiscal quarter of the Parent Guarantor, the ratio of (a) the
Consolidated Senior Debt of the Parent Guarantor and its Subsidiaries
as of the end of such fiscal quarter to (b) the Consolidated EBITDA of
the Parent Guarantor and its Subsidiaries for the period of four
consecutive fiscal quarters of the Parent Guarantor then ended.
"Subordinated Debt" of any person shall mean, as of any date,
that Indebtedness of such person for borrowed money on terms and
conditions satisfactory to the Bank, which is expressly subordinate and
junior in right and priority of payment to the Advances and other
Indebtedness of such person to the Bank in manner and by agreement
satisfactory in form and substance to the Bank.
"Tangible Capital Funds" of any person shall mean, as of any
date, the sum of Tangible Net Worth of such person plus Subordinated
Debt of such person.
1.3 The definition of the term "Loan Documents in Section 1.1 is
amended and restated in full as follows:
"Loan Documents" means, collectively, this Agreement, the Note,
the Security Documents, all subordination agreements in favor of the
Bank with respect to Subordinated Debt, and all agreements, instruments
and documents executed pursuant thereto at any time.
1.4 The following is added to the end of Section 1.2:
Notwithstanding anything herein, in any financial statements of the
Company or in Generally Accepted Accounting Principles to the contrary,
for purposes of calculating and determining compliance with the
financial covenants in Section 5.2, as amended or modified from time to
time, including defined terms used therein, any permitted Acquisition
(as defined in Section 5.2(g)) made by the Parent Guarantor, the
Company or any of the Parent Guarantor's other Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the period for which such financial covenants were
calculated shall be deemed to have occurred on the first day of the
relevant period for which such financial covenants were calculated on a
pro forma basis acceptable to the Bank, except that with respect to the
Tutor Time Property Purchase (as defined in Section 5.2(g)), for any
relevant periods prior to the actual closing of the Tutor Time Property
Purchase, the impact of the Tutor Time Property Purchase shall be
deemed to be as set forth in the pro forma financial information with
respect to the Tutor Time Property Purchase presented by the Company to
the Bank on June 13, 2002.
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1.5 The following is added to the end of Section 5.1(a) and
Section 5.1(b):
; provided that failure of any of the locations acquired in the Tutor
Time Property Purchase to be in compliance in all material respects
with all applicable state and local licensing and permit requirements
as a result of the change of ownership shall not constitute a violation
of this Section unless such failure occurs after, or continues beyond,
January 19, 2003
1.6 Clause (iii) of Section 5.2(e) is relabeled as clause "(iv)"
and new clause (iii) is added to Section 5.2(e), as follows:
(iii) Subordinated Debt provided by the Investors to
the Company or the Parent Guarantor in accordance with Section 5.2(g)
in an aggregate principal amount of not more than $14,000,000 and any
other Subordinated Debt the proceeds of which are used to refinance
such Subordinated Debt; and
1.7 The following is added to the end of Section 5.2(g):
Notwithstanding anything in this Section 5.2(g) or any other provision
of this Agreement, the Bank agrees that in the event Tutor Time
Learning Systems, Inc. ("Tutor Time") is the subject of proceedings
under the United States Bankruptcy Code and the trustee in the
proceedings elects to sell property of the Tutor Time estate, the
Company and/or any of the Guarantors may purchase all or any portion of
such property (the "Tutor Time Property Purchase"), subject to the
satisfaction of each of the following conditions:
(1) the assets of Tutor Time subject of the Tutor Time
Property Purchase shall have been approved by the Bank in its sole
discretion, the Bank shall otherwise have completed all due diligence
required by the Bank with respect to the Tutor Time Property Purchase,
and the results of all such due diligence shall be satisfactory to the
Bank in its sole discretion,
(2) the assets of Tutor Time purchased in the Tutor Time
Property Purchase shall be free and clear of all Liens, claims and
other encumbrances and interests, and the Tutor Time Property Purchase
shall have been approved under Section 363 of the Bankruptcy Code
pursuant to terms and an order acceptable to the Bank in its sole
discretion,
(3) the maximum aggregate principal amount of the Loans the
Company may use for the Tutor Time Property Purchase shall be the
amount equal to the then unused Commitment minus $2,000,000 (such
amount so used, hereinafter the "Credit Facility Usage"),
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(4) for every $1.00 of Credit Facility Usage used to fund the
consideration paid by the Company and the Guarantors for the Tutor Time
Property Purchase, JP Acquisition Fund III L.P., other shareholders of
the Parent Guarantor acceptable to the Bank or other investors
acceptable to the Bank (collectively, the "Investors") shall have
contributed to the Company net $1.00 cash of Subordinated Debt on terms
and conditions satisfactory to the Bank (the "Initial Subordinated
Debt"), and such cash likewise shall have been used by the Company to
fund the Tutor Time Property Purchase (or contributed by the Company to
the Subsidiary Guarantors and used by them for such purpose);
(i) provided that the terms of the Initial Subordinated Debt must
include without limitation: (A) the first required principal payment
with respect to the Initial Subordinated Debt shall be not earlier than
December 31, 2004, (B) the total interest, commissions, discounts,
fees, charges and other consideration and compensation (collectively,
"Interest") payable by the Company and the Guarantors with respect to
the Initial Subordinated Debt, including without limitation, all
Interest payable in kind with the issuance of additional securities and
all Interest payable in cash and cash equivalents, shall not in the
aggregate exceed an amount equal to a per annum rate of return of 15%,
and (C) the total Interest payable by the Company and the Guarantors in
cash or cash equivalents with respect to the Initial Subordinated Debt
prior to December 31, 2004 shall not, except as otherwise provided in
clause (ii)(B) below, in the aggregate exceed an amount equal to a per
annum rate of return of 7% (all Interest with respect to the Initial
Subordinated Debt in excess of a per annum rate of return of 7%
hereinafter is called the "Initial Subordinated Debt PIK Interest");
(ii) provided, further, that the Initial Subordinated Debt may be
repaid with the proceeds of equity and Subordinated Debt, or cancelled
in connection with the payment of a portion of the purchase price,
pursuant to a rights offering (the "Rights Offering") by the Company
and/or the Parent Guarantor to shareholders of the Parent Guarantor to
purchase common stock of the Parent Guarantor (the "Rights Offering
Equity") and Subordinated Debt of the Company or the Parent Guarantor
in an aggregate principal amount of not more than $3,500,000 on terms
and conditions satisfactory to the Bank (the "Rights Offering
Subordinated Debt"), so long as the terms of the Rights Offering
Subordinated Debt include without limitation: (A) the first required
principal payment with respect to the Rights Offering Subordinated Debt
shall be not earlier than December 31, 2004, and (B) the total Interest
payable by the Company and the Guarantors with respect to the Rights
Offering Subordinated Debt shall not in the aggregate exceed an amount
equal to a per annum rate of return of 15% (all of which may be payable
in cash), except that, notwithstanding anything to the contrary, no
Initial Subordinated Debt PIK Interest shall be paid with the proceeds
of the Rights Offering Equity or the Rights Offering Subordinated Debt,
or cancelled in connection with the payment of a portion of the
purchase price pursuant to the Rights Offering, until such time on or
after March 31, 2003
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at which the Senior Debt to EBITDA Ratio is not greater than 3.00 to
1.00 as of the end of the fiscal quarter of the Parent Guarantor
immediately preceding such payment and would not be greater than 3.00
to 1.00 after giving effect to such payment, and no other Default or
Event of Default shall have then occurred and be continuing or would be
caused thereby; and
(iii) and provided, further, that if the Company and/or the Parent
Guarantor has not cancelled Initial Subordinated Debt in connection
with its tender in payment of the purchase price of, and/or received
net cash proceeds from, the Rights Offering Equity in an aggregate
amount of $7,500,000 or more by July 19, 2003, then at all times
thereafter until the earlier of December 31, 2004 or the Company's
and/or the Parent Guarantor's cancellation of Initial Subordinated Debt
in payment of the purchase price of, and/or receipt of net cash
proceeds from, the Rights Offering Equity in such amount, all Interest
with respect to the Initial Subordinated Debt and the Rights Offering
Subordinated Debt shall be payable only in kind with the issuance of
additional securities and no Interest with respect to the Initial
Subordinated Debt or the Rights Offering Subordinated Debt shall be
payable in cash or cash equivalents, and
(5) all consideration paid by the Company and the Guarantors
for the Tutor Time Property Purchase in excess of the sum of the Credit
Facility Usage plus the equal amount contributed by the Investors and
used to fund the Tutor Time Property Purchase under the foregoing
clause (4), shall have been contributed by the Investors to the Company
in the form of new cash equity or Subordinated Debt and used by the
Company to fund the Tutor Time Property Purchase (or contributed by the
Company to the Subsidiary Guarantors and used by them for such
purpose),
(6) immediately before and after giving effect to the Tutor
Time Property Purchase, no Default or Event of Default shall exist or
shall have occurred and be continuing, all Subsidiaries, including
without limitation TT Acquisition LLC and CTT Acquisition Corp., shall
have become Guarantors and the Company otherwise shall have complied
with the requirements of clause (ii) of Section 5.1(g) with respect to
all new Subsidiaries of the Company or any Guarantor (without regard
for the 30-day period referenced therein which the Company hereby
waives), and the representations and warranties contained in Article IV
of the Credit Agreement and in the other Loan Documents shall be true
and correct on and as of the date thereof (both before and after the
Tutor Time Property Purchase is consummated) as if made on the date the
Tutor Time Property Purchase is consummated, and, without limiting the
foregoing, immediately before and after giving effect to the Tutor Time
Property Purchase, the Parent Guarantor and its Subsidiaries shall be
in compliance on a pro forma basis with all financial covenants under
this Agreement (including without limitation as amended in accordance
with the Second Amendment to this Agreement), on a pro forma basis
consistent with Section 1.2 of this Agreement and otherwise acceptable
to the Bank,
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(7) by not later than October 4, 2002, the Company shall have
executed and delivered to the Bank additional Mortgages covering not
less than ten (10) facilities of the Company in locations acceptable to
the Bank in its sole discretion, together with the related items
contemplated under Section 5.1(f)(iii); provided that the Bank shall
not require appraisals or surveys of such additional mortgaged
facilities,
(8) the Tutor Time Property Purchase shall close on or before
August 15, 2002, and
(9) prior to the consummation of the Tutor Time Property
Purchase, the Company shall have paid to the Bank a fee in the amount
of $50,000 in immediately available funds and all other amounts owing
to the Bank, or for which the Company has agreed with the Bank to be
responsible, under this Agreement or otherwise, including without
limitation all fees and expenses of counsel to the Bank and all
appraisal fees.
1.8 Immediately upon the closing of the Tutor Time Property
Purchase (as defined above), Sections 5.2(a), (b), (c) and (d) of the Credit
Agreement automatically shall be deemed amended and restated in full,
respectively, as follows:
(a) Tangible Capital Funds. Permit or suffer
Consolidated Tangible Capital Funds of the Parent Guarantor and its
Subsidiaries at any time to be less than the amount equal to the sum of
(i) the higher of (A) $15,000,000 and (B) 90% of Consolidated Tangible
Capital Funds of the Parent Guarantor and its Subsidiaries in
accordance with the pro forma financial information included with the
Parent Guarantor's Securities and Exchange Commission Form 8-K report
filed with respect to the Tutor Time Property Purchase plus, at all
times at or after the end of the Parent Guarantor's fiscal year ending
on or about March 31, 2004, and (ii) an amount equal to 50% of
Consolidated Cumulative Net Income of the Parent Guarantor and its
Subsidiaries for the period from the end of the Parent Guarantor's
fiscal year ended on or about March 31, 2003 through the end of the
then most recently completed fiscal year of the Parent Guarantor.
(b) Senior Debt to EBITDA. Permit or suffer the
Senior Debt to EBITDA Ratio to be greater than 3.00 to 1.00 as of the
end of the Parent Guarantor's fiscal quarter ending on or about March
31, 2003 or at any time thereafter.
(c) Debt Service Coverage Ratio. Permit or suffer the
Consolidated Debt Service Coverage Ratio of the Parent Guarantor and
its Subsidiaries to be less than (i) 1.05 to 1.00 as of the end of the
Parent Guarantor's fiscal quarter ending on or about March 31, 2003 or
at any time thereafter prior to the end of the Parent Guarantor's
fiscal quarter ending on or about March 31, 2004, or (ii) 1.20 to 1.00
as of the end of the Parent Guarantor's fiscal quarter ending on
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or about March 31, 2004 or at any time thereafter, such ratio to be
determined as of the end of each fiscal quarter of the Parent Guarantor
for the period of four consecutive fiscal quarters of the Parent
Guarantor then ended.
(d) EBITDA. Permit or suffer the Consolidated EBITDA
of the Parent Guarantor and its Subsidiaries to be less than (i)
$1,875,000 as of the end of the Parent Guarantor's fiscal quarter
ending on or about June 30, 2002, for the period of the fiscal quarter
then ended, (ii) $2,589,000 as of the end of the Parent Guarantor's
fiscal quarter ending on or about September 30, 2002, for the period of
two consecutive fiscal quarters then ended, (iii) $4,035,000 as of the
end of the Parent Guarantor's fiscal quarter ending on or about
December 31, 2002, for the period of three consecutive fiscal quarters
then ended, or (iv) $7,000,000 as of the end of the Parent Guarantor's
fiscal quarter ending on or about March 31, 2003 or as of the end of
any fiscal quarter of the Parent Guarantor ending thereafter, in each
case for the period of four consecutive fiscal quarters of the Parent
Guarantor the ended.
1.9 The following is added to the end of Section 5.2(k):
; provided that the following shall not be deemed to violate this
Section 5.2(k): (i) the arrangements with Xxxxxxxx Partners
("Xxxxxxxx") with respect to the Tutor Time Property Purchase as
described in the fee agreement between the Parent Guarantor and
Xxxxxxxx attached to the Parent Guarantor's Securities and Exchange
Commission Form 10-K report as of the end of its fiscal year ended on
or about March 31, 2002, providing for the payment to Xxxxxxxx of a fee
of $1 million comprised of $334,334 in cash and the remainder in
175,438 shares of common stock of the Parent Guarantor, (ii) the
Subordinated Debt financing and Rights Offering described in Section
5.2(g), and (iii) the execution of a standby securities purchase
agreement by, among others, the Company and certain affiliates of
Xxxxxxxx in connection with the Rights Offering described in Section
5.2(g), and in connection with such standby securities purchase
agreement, the grant of options, subject to shareholder approval, to
such affiliates of Xxxxxxxx for 400,000 shares of common stock of the
Parent Guarantor with a strike price of $5.00/share, so long as there
is no other consideration provided by the Company or any of the
Guarantors for such standby securities purchase agreement.
1.10 The following new Section 5.2(n) is added after Section
5.2(m):
(n) Payments and Modification of Subordinated Debt.
Make any optional payment, prepayment or redemption of any Subordinated
Debt, nor amend or modify, or consent or agree to any amendment or
modification, which would shorten any maturity or increase the amount
of any payment of principal or increase the rate (or require earlier
payment) of Interest on any such Subordinated Debt, nor amend any
agreement under which any Subordinated Debt is issued or created or
otherwise related thereto, nor enter into any
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agreement or arrangement providing for the defeasance of any
Subordinated Debt; provided that this Section 5.2(n) shall not prohibit
the prepayment, in accordance with subpart (4) of the last sentence of
Section 5.2(g), of the Initial Subordinated Debt (as defined in such
subpart (4)) with the proceeds of the equity and Subordinated Debt
issued pursuant to the Rights Offering described in such subpart (4).
1.11 Schedule 4.4 (Subsidiaries) attached to this Amendment is
substituted for Schedule 4.4 attached to the Credit Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Amendment, the
Company represents and warrants that:
2.1 The execution, delivery and performance by the Company of
this Amendment are within its corporate powers, have been duly authorized by all
necessary corporate action and are not in contravention of any law, rule or
regulation, or any judgment, decree, writ, injunction, order or award of any
arbitrator, court or governmental authority, or of the terms of the Company's
charter or by-laws, or of any contract or undertaking to which the Company is a
party or by which the Company or its property is or may be bound or affected.
2.2 This Amendment is a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
2.3 No consent, approval or authorization of or declaration,
registration or filing with any governmental authority or any nongovernmental
person or entity, including without limitation any creditor or stockholder of
the Company, is required on the part of the Company in connection with the
execution, delivery and performance of this Amendment or the transactions
contemplated hereby or as a condition to the legality, validity or
enforceability of this Amendment, other than any such consent, registration and
filing required in connection with the raising of capital from certain investors
as contemplated under subparts (4) and (5) of the last sentence of Sections
5.2(g) of the Credit Agreement as amended by this Amendment; provided that all
such consents, registrations and filings required in connection with the raising
of such capital shall have been obtained or made prior to the Company or any of
the Guarantors making any commitment for (other than any commitment that is
subject to obtaining or making such consents, registrations and filings), or
consummating, all or any portion of the Tutor Time Property Purchase.
2.4 After giving effect to the amendments contained in Article 1
of this Amendment, the representations and warranties contained in Article IV of
the Credit Agreement and in the Loan Documents are true on and as of the date
hereof with the same force and effect as if made on and as of the date hereof,
and no Default or Event of Default has occurred and is continuing.
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ARTICLE 3. MISCELLANEOUS
3.1 If the Company shall fail to perform or observe any term,
covenant or agreement in this Amendment, or any representation or warranty made
by the Company in this Amendment shall prove to have been incorrect in any
material respect when made, such occurrence shall be deemed to constitute an
Event of Default.
3.2 All references to the Credit Agreement in any other document,
instrument or certificate referred to in the Credit Agreement or delivered in
connection therewith or pursuant thereto hereafter shall be deemed references to
the Credit Agreement, as amended hereby
3.3 The Loan Documents and, subject to the amendments herein
provided, the Credit Agreement shall in all respects continue in full force and
effect.
3.4 Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement.
3.5 This Amendment shall be governed by and construed in
accordance with the laws of the State of Michigan.
3.6 The Company agrees to pay the reasonable fees and expenses of
Xxxxxxxxx Xxxxxx PLLC, counsel for the Bank, in connection with the negotiation
and preparation of this Amendment and the consummation of the transactions
contemplated hereby, and in connection with advising the Bank as to its rights
and responsibilities with respect thereto.
3.7 This Amendment may be executed upon any number of
counterparts with the same effect as if the signatures thereto were upon the
same instrument.
[The remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered as of the day and year first-above written.
CHILDTIME CHILDCARE, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Its: Treasurer
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BANK ONE, NA
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Its: First Vice President
-----------------------
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GUARANTOR ACKNOWLEDGEMENT
Each of the undersigned hereby acknowledges that it has reviewed and
fully consents to the foregoing Second Amendment to Amended and Restated Credit
Agreement (the "Amendment"), that the Guaranty Agreements and all other Loan
Documents made by each of the undersigned in favor of the Bank continue in full
force and each of the undersigned acknowledges and agrees that it has no
defenses, counterclaims or offsets with respect thereof. All references to the
Credit Agreement in the Guaranty Agreements and in all other Loan Documents or
any other document, instrument or certificate referred to in the Credit
Agreement or delivered in connection therewith or pursuant thereto, hereafter
shall be deemed references to the Credit Agreement, as amended by the Amendment.
Except as otherwise expressly set forth herein, capitalized terms used but not
defined herein shall have the respective meanings ascribed thereto in the
Amendment or the Credit Agreement, as the case may be.
CHILDTIME LEARNING CENTERS, INC.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Its: Treasurer
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CHILDTIME CHILDCARE-PMC, INC.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Its: Treasurer
-------------------------------
CHILDTIME CHILDCARE-MICHIGAN, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Its: President and Secretary
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TT ACQUISITION LLC
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Its: Treasurer
-------------------------------
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XXX XXXXXXXXXXX CORP.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Its: President
-------------------------------
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Schedule 4.4
SUBSIDIARIES
STATE OF
NAME INCORPORATION OWNER
------------------------------------------------- --------------------- ----------------------------------------------
Childtime Childcare, Inc. Illinois Childtime Learning Centers, Inc.
Childtime Childcare - PMC, Inc. Michigan Childtime Childcare - Michigan, Inc.
Childtime Childcare - Michigan, Inc. Michigan Childtime Childcare, Inc.
TT Acquisition LLC Michigan Childtime Childcare, Inc.
CTT Acquisition Corp. Michigan TT Acquisition LLC
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