<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED JULY 2, 2005

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                        Commission File No. 333-56239-01

                                LPA HOLDING CORP.
             (exact name of registrant as specified in its charter)

                       SEE TABLE OF ADDITIONAL REGISTRANTS

<TABLE>
<S>                                         <C>
            DELAWARE                                     48-1144353
(State or other jurisdiction of             (IRS employer identification number)
 incorporation or organization)
</TABLE>

                      130 SOUTH JEFFERSON STREET, SUITE 300
                                CHICAGO, IL 60661
              (Address of principal executive office and zip code)

                                 (312) 798-1200
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                                      NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]


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<PAGE>
As of January 15, 2005 (the last business day of the most recently completed
second fiscal quarter), the market value of the voting and non-voting common
equity of LPA Holding Corp. and La Petite Academy, Inc. held by non-affiliates
was zero.

As of September 30, 2005, LPA Holding Corp. had outstanding 773,403 shares of
Class A Common Stock (par value, $0.01 per share) and 20,000 shares of Class B
Common Stock (par value, $0.01 per share). As of September 30, 2005, the
additional registrant had the number of outstanding shares, shown on the
following table.

ADDITIONAL REGISTRANT

<TABLE>
<CAPTION>
                                                                                 Number of Shares
                          Jurisdiction of    Commission      IRS Employer            of Common
Name                       Incorporation    File Number   Identification No.     Stock Outstanding
----                      ---------------   -----------   ------------------   --------------------
<S>                       <C>               <C>           <C>                  <C>
La Petite Academy, Inc.       Delaware       333-56239        43-1243221       100 shares of Common
                                                                               Stock (par value,
                                                                               $0.01 per share)
</TABLE>


                                       2
<PAGE>
LPA HOLDING CORP.

INDEX

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<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
PART I.
Item 1.     Business                                                          4
Item 2.     Properties                                                       10
Item 3.     Legal Proceedings                                                11
Item 4.     Submission of Matters to a Vote of Security Holders              12

PART II.
Item 5.     Market for Registrant's Common Equity, Related Stockholder
               Matters and Issuer Purchases of Equity Securities             12
Item 6.     Selected Financial Data                                          13
Item 7.     Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                     15
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk       27
Item 8.     Financial Statements and Supplementary Data                      27
Item 9.     Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure                                      49
Item 9A.    Controls and Procedures                                          49
Item 9B.    Other Information                                                50

PART III.
Item 10.    Directors and Executive Officers of the Registrant               51
Item 11.    Executive Compensation                                           55
Item 12.    Security Ownership of Certain Beneficial Owners and
               Management and Related Stockholder Matters                    57
Item 13.    Certain Relationships and Related Transactions                   60
Item 14.    Principal Accountant Fees and Services                           60

PART IV.
Item 15.    Exhibits and Financial Statement Schedules                       62

SIGNATURES                                                                   73
</TABLE>


                                       3
<PAGE>
PART I.

ITEM 1. BUSINESS

ORGANIZATION

The consolidated financial statements presented herein include LPA Holding Corp.
(Parent), and its wholly owned subsidiary, La Petite Academy, Inc. (La Petite),
and La Petite's wholly owned subsidiaries: Bright Start Inc. (Bright Start), and
LPA Services, Inc. (Services). Parent, consolidated with La Petite, Bright Start
and Services, is referred to herein as the "Company".

On March 17, 1998, LPA Investment LLC (LPA), a Delaware limited liability
company, and Parent entered into an Agreement and Plan of Merger pursuant to
which a wholly owned subsidiary of LPA was merged into Parent (the
Recapitalization). LPA is the direct parent company of Parent and an indirect
parent of La Petite.

As of September 30, 2005, LPA beneficially owned 94.0% of the common stock of
Parent on a fully diluted basis, $45 million of Series A preferred stock of
Parent and $21.7 million of Series B preferred stock of Parent. An affiliate of
J.P. Morgan Partners (JPMP) owns a majority of the economic interests of LPA and
an entity controlled by Robert E. King owns a majority of the voting interests
of LPA. On September 28, 2005, certain members of Parent's management, including
its President and Chief Executive Officer, and its Chief Financial Officer, were
granted Class C Units of LPA. LPA has reserved 100,000 Class C Units to be
issued to management of Parent from time to time. Pursuant to the terms of the
Fourth Amended and Restated Operating Agreement (the "Operating Agreement") of
LPA, the Class C Units are non-voting equity interests of LPA and are subject to
repurchase by LPA or its designee upon the termination of such person's
employment with Parent and La Petite. Upon the achievement of enumerated
valuation thresholds set forth in the Operating Agreement, the Class C Units
will represent in the aggregate up to 13% of the economic interests of LPA.

BUSINESS DESCRIPTION

La Petite, founded in 1968, is the second largest privately held and one of the
leading operators of for-profit preschool educational centers (commonly referred
to as Academies) in the United States based on the number of centers operated.
The Company provides center-based educational services and childcare to children
between the ages of six weeks and 12 years. Management believes the Company
differentiates itself through its superior educational programs, which were
developed and are regularly enhanced by its curriculum department. The Company's
focus on quality educational services allows it to capitalize on the increased
awareness of the benefits of premium educational instruction for preschool and
elementary school-age children. At its residential and employer-based Academies,
the Company utilizes its proprietary Journey(R) curriculum with the intent of
maximizing a child's cognitive, social, and physical development. The Company
also operates Montessori schools that employ the Montessori method of teaching,
a classical approach that features the programming of tasks with materials
presented in a sequence dictated by each child's capabilities.

As of July 2, 2005, the Company operated 649 schools, including 590 residential
Academies, 30 employer-based Academies and 29 Montessori schools located in 36
states and the District of Columbia. For the 52 weeks ended July 2, 2005, the
Company had an average attendance of approximately 65,600 full and part-time
children.

CURRICULUM

Residential and Employer-Based Academies. La Petite maintains a team of internal
early childhood education experts who design curricula and program materials for
each developmental age group that La Petite serves.


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All of La Petite's programs are developmentally age appropriate, and follow an
integrated approach to learning. Each program is based upon thoroughly
researched learning objectives, significant teacher training, well-crafted
activities and associated assessments, a well-planned and maintained
environment, and ongoing parent communication.

Each program provides a balance of teacher-facilitated and child-directed
activities that address both the intellectual and physical developmental needs
of young children. Intellectual activities are designed to promote language
development, early literacy, and pre-writing skills as well as cognitive
development, problem solving, imagination, and creativity. Physical activities
are designed to increase gross and fine motor skills such as dexterity and
eye-hand coordination.

For infants and toddlers, activities are planned for a variety of developmental
areas. As infants become toddlers, more activities focus on nurturing their need
for independence and practicing fine motor skills that help toddlers learn to
feed themselves, walk, and communicate. Some of the many activities included in
the infant and toddler curricula are songs, finger plays, art projects,
storytelling, and exercises. These activities are designed to build the
foundation for social skills such as sharing and getting along with others.

The two-year-old curriculum includes activities that provide guidance and
practice in developing all-important social and emotional skills, as well as
emerging cognitive skills. Creativity and art continue to be reinforced through
drawing. Other sample activities include story time, dancing, and singing.

For preschoolers, typically three and four-year-old children, a new Journey(R)
curriculum was developed in 2004 and implemented in all La Petite academies in
the fall of 2004. The new Journey(R) curriculum is designed with an increased
focus on early-literacy and pre-writing skills. The program incorporates ongoing
assessments to demonstrate proof of learning for parents. Learning occurs
throughout seven Learning Centers that focus on different skills and areas of
development. The Company believes the learning outcomes generated by the
Journey(R) curriculum surpass those of any major competitor, many of which have
not updated their programs in some time, and only provide curriculum-based
activities for a portion of the day. The new Journey(R) curriculum, on the other
hand, has incorporated the most recent research in early childhood education,
and covers the entire day that children are with La Petite.

Pre-kindergartners, typically children that will go to kindergarten the
following fall, have their own curriculum designed to ensure that they are ready
for more formal schooling at the elementary level. This program is heavily
focused on reading readiness, and also includes math, science, character
education, social and emotional development, and physical strength and skills
development. An important component of this program is based upon Scholastic's
Building Language for Literacy program, which is used in all pre-kindergarten
classrooms. Careful assessment via teacher observation and portfolio evaluation
provides accountability, and the program's focus on understanding individual
children's skills provides the necessary flexibility to tailor lesson planning
to each child's needs.

The private kindergarten program provides a balanced educational approach that
rivals any school district's program. This program meets or exceeds all
applicable state requirements. Scholastic's Kindergarten Place, Handwriting
without Tears, AIMS Science Program and Everyday Math along with LPA specific
report cards, portfolios, and character education round out this program.

The Kids Station curriculum for school age children, typically children ages
five through twelve, consists of ten Fun Stations with appropriate activities in
each. Examples of these stations include Study Hall, in which the children
complete their homework, the Recreation Station, which offers fun indoor games,
and Sports Port, which utilizes outdoor areas for sports and other related
activities. In addition to allowing children time to complete their homework,
the Kids Station program allows children to develop relationships with other
children their own age, and participate in enrichment activities such as arts
and crafts and fitness. Most locations also provide transportation to and from
local elementary schools.

Montessori Unlimited(R) Schools. Montessori is a non-traditional method of
education developed by the late Dr. Maria Montessori, who was one of the most
influential pioneers in early childhood education in the 20th century. Her
methods stress individualized learning and emphasize social interaction and the
education of the whole personality rather than the teaching of a specific body
of knowledge. Highly trained


                                       5
<PAGE>
instructors certified in the Montessori method create a learning environment in
which children become energized to explore, investigate, and learn. Children
work in mixed age-group classrooms with state-of-the-art Montessori materials
that have been designed to stimulate each child's interest in reading,
mathematics, geography, and science. Some Montessori Unlimited(R) schools also
offer enrichment alternatives in addition to their Montessori programs such as
foreign language and computer science.

ACADEMY NETWORK

The Company operates three types of childcare centers: residential Academies,
employer-based Academies and Montessori schools. Academies generally operate
year-round, five days-a-week and typically are open from 6:30 AM to 6:30 PM. A
child may be enrolled in any of a variety of program schedules from a full-time,
five-day-per-week plan to as little as two or three half-days a week. A child
attending full-time typically spends approximately nine hours-a-day, five
days-per-week, at an Academy. The Kids Station program for children ages five to
12 provides extended childcare before and after the elementary school day and
transportation to and from the elementary school.

Academy employees include Academy Directors, Assistant Directors (who are
generally teachers), full-time and part-time teachers, temporary and substitute
teachers, teachers' aides, and non-teaching staff. On average, there are 15 to
20 employees per Academy. Each Academy is managed by an Academy Director. An
Academy Director's responsibilities include management of company policies and
procedures, curriculum implementation, the establishment of daily, weekly and
monthly operating schedules, staffing, marketing to develop and increase
enrollment and control of operating expenses. Personnel involved in operations
as Academy Director and above are compensated in part on the basis of the
profitability and level of parent and employee satisfaction of each Academy for
which they have managerial responsibility.

Academy Directors are supervised by 48 District Managers. District Managers have
an average of 9 years of experience with the Company, typically are responsible
for 7 to 20 Academies and report to one of six Divisional Vice Presidents.
District Managers visit their Academies regularly and are in frequent contact to
help make decisions and improvements to program quality and profitability. The
Divisional Vice Presidents have an average of 5 years of experience with the
Company.

Residential Academies. As of July 2, 2005, the Company operated 590 residential
Academies. Residential Academies are typically located in residential, middle
income neighborhoods, and are usually one-story, air-conditioned buildings
located on three-quarters of an acre to one acre of land. A typical Academy also
has an adjacent playground designed to accommodate the full age range of
children attending the school. The latest Academy design is approximately 10,000
square feet, built on a site of approximately 1.5 acres, with an operating
capacity of approximately 185 children and incorporates a closed classroom
concept. The Company continues to improve, modernize and renovate existing
residential Academies to improve efficiency and operations, to better compete,
to respond to the requests of parents and to support the Journey(R) curriculum.

Residential Academies generally have programs to care for children from toddlers
to 12 years old arranged in five age groups. In addition, over half of the
Academies offer childcare for infants, as young as six weeks old.
Teacher-student ratios vary depending on state requirements but generally
decrease with the older child groups.

Employer-Based Academies. As of July 2, 2005, the Company operated 30
employer-based Academies. These Academies utilize an operating model that is
very similar to residential Academies including collecting tuition fees directly
from the employee parent. They are, however, opened to support businesses,
government, hospitals and universities with large, single-site employee
populations. Employer-based Academies are located on the employer's property and
the employer sponsors and usually support the Academy with free or reduced rent,
utilities and custodial maintenance. Employer-based Academies may be operated on
a management fee basis, on a profit and loss basis or a variation of the two.
Most employer-based Academies also allow community children to attend as a
second priority to the business owner employee's children, which helps to
maximize the revenue and profit opportunity at each employer-based Academy.


                                       6
<PAGE>
Montessori Unlimited(R) Schools. As of July 2, 2005, the Company's Montessori
Unlimited(R) division operated a network of 29 schools offering a traditional
Montessori curriculum. Montessori Unlimited(R) schools typically are located in
upper-middle income areas and feature brick facades and closed classrooms
outfitted with state-of-the-art Montessori materials. Lead teachers and many of
the Administrative Directors are certified in the Montessori methodology. The
vast majority of Montessori Unlimited(R) students are enrolled for an entire
school year. They pay tuition monthly in advance and tuition rates tend to be
higher than those at residential Academies.

SEASONALITY

Historically, the Company's operating revenue has followed the seasonality of a
school year, declining during the summer months and the year-end holiday period.
The number of new children enrolling at the Academies is generally highest in
September-October and January-February; therefore, the Company attempts to
concentrate its marketing efforts immediately preceding these high enrollment
periods.

NEW ACADEMY DEVELOPMENT

The Company continues to seek out sites for new school locations within existing
markets. As part of this expansion, the Company is looking at build-to-suit
leases, and is seeking out "turn-key" opportunities from existing local
child-care operators or other users whose facilities meet the Company's needs.
Management believes it has developed an effective selection process to identify
attractive sites through the use of a newly purchased national site
selection/demographic software mapping program. In evaluating the suitability of
a particular location, the Company performs an extensive financial analysis of
the historical performance of all existing schools, which includes consideration
of each facility's structural condition, looking for a positive trend within
that market. Once this has been established, the Company concentrates on the
demographics of its target customer within a two-mile radius of new school
locations.

Newly constructed Academies are generally able to open approximately 36 weeks
after the real estate contract is signed. Because a location's early performance
is critical in establishing its ongoing reputation, the Academy staff is
supported with a variety of special programs to help achieve quick enrollment
gains and development of a positive reputation. These programs include
investment in local marketing prior to the opening.

The Company has also expanded its efforts to seek out potential acquisitions of
existing pre-school operators. The evaluation potential acquisitions is focused
on existing markets, taking into consideration the effects an acquisition could
have on the Companies existing portfolio within that market.

During fiscal 2005, the Company opened three employer-based Academy, and seven
residential-based Academy. Six of the new school openings were through
acquisitions.

TUITION

Academy tuition depends upon a number of factors including, but not limited to,
location of an Academy, age of the child, full or part-time attendance,
utilization and competition. The Company also provides various tuition discounts
primarily consisting of sibling, staff, and Preferred Employer Program. Parents
also pay an annual registration fee. Tuition and fees are payable weekly and in
advance for most residential and employer-based Academies and monthly and in
advance for Montessori schools. Other fees include activity fees for summer
activities and supply fees for Pre-Kindergarten and Private Kindergarten
programs. Management estimates that state governments subsidize the tuition for
approximately 25% of the children under its care.

MARKETING AND ADVERTISING

The Company's advertising plans are multi-faceted and heavily dependent on
direct response programs, including consumer and business-to-business direct
mail, mass media, and electronic media and personalized mail to former prospects
and families. Additional training is provided to Academy Directors as plans are
rolled out throughout the country, including enhanced phone and tour sales
training and tools.


                                       7
<PAGE>
An additional emphasis is placed on expanding corporate partner relationships
and growing the Preferred Employer Program, not necessarily through new
companies, but through additional enrollment from currently participating
corporations. The Preferred Employer Program allows the Company to build quality
relationships with large corporations by providing preferred pricing for their
employees who enroll their children at the Company's Academies.

The WOW! program, which was launched in January 2003 and is now available to
Academy Directors electronically through the company intranet, continues to
provide clear and tangible facility expectations for Academy Directors, with
accountability on the District Manager level. The purpose of this program is to
insure that the Academies appearance and program execution is consistent
throughout the system. The five sections of the WOW! Program provide Academy
Directors with a clear set of minimum facility expectations, an overview, and Q
& A for each section. The WOW! Assessments are now a component of the regularly
conducted academy operations reviews, and will be updated as new programs are
introduced.

An internal launch of the new Journey(R) program for preschoolers commenced in
April, 2004. The implementation and the promotion of this program continued
throughout fiscal year 2005. The focus of the early phase of this launch was to
"educate and motivate" the Academy employees and Field Management team so that
they, in turn, will share their enthusiasm with current and prospective parents.
In addition, along with the New Journey(R) Preschool launch, a Transition
process was introduced to assist Academy Directors in re-selling to current two
year old parents as they prepare their child for a successful transition to
preschool.

The Parent Advisory Liaison continues in many Academies across the system and
encourages increased parent participation and loyalty, forms partnerships
between staff and parents, and creates a forum for the exchange of ideas between
staff and parents for the benefit of children. To further encourage retention,
the La Petite Academy Service Guarantee was implemented in July 2002. This
guarantee simply states: (i) the Company's education professionals are committed
to exceeding the customer's expectations and (ii) for the Company's newly
enrolled customers, after 90 days, if the Company does not meet their
expectations, the Company will guarantee to refund the customer's last
registration fee.

The VIP Referral Program continues to be highly successful in driving new
enrollments into the Academies. Through this program, current customers who
refer new customers are rewarded, and the new customer receives a discount for
enrolling.

INFORMATION SYSTEMS

The Company's financial and management-reporting systems are connected through a
Virtual Private Network (VPN) that connects all Academies, field management and
Support Center employees. Through the use of the Company's point of sale
software product, called ADMIN, and the implementation of the VPN, information
such as financial reporting, enrollments, pricing, labor, receivables, and
attendance are available at all levels of the organization.

The Company continues to review its management information systems to ensure the
issuance of meaningful, specific performance measures, and the production of
timely and accurate operating and financial information.

During fiscal year 2005, the Company continued to expand its infrastructure,
with over 600 schools now equipped with secure, high-speed broadband
connections. A Corporate Performance Management initiative resulted in new
business reporting and analysis capabilities that allow school management and
their supervisors, as well as Support Center analysts, to better diagnosis and
correct operating issues. New systems and procedures were put in place to
improve cash reconciliation. ADMIN enhancements included measures for improved
security and reliability, as well as a continued focus on controls, especially
over third party contract-related transactions.


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<PAGE>
COMPETITION

The United States preschool education and childcare industry is highly
fragmented and competitive. The Company's competition consists principally of
local nursery schools and childcare centers, some of which are non-profit
(including religious-affiliated centers), providers of services that operate out
of their homes and other for-profit companies, which may operate a number of
centers. Local nursery schools and childcare centers generally charge less for
their services. Many religious-affiliated and other non-profit childcare centers
have no or lower rental costs than the Company, may receive donations or other
funding to cover operating expenses and may utilize volunteers for staffing.
Consequently, tuition rates at these facilities are commonly lower than the
Company's rates. Additionally, fees for home-based care are normally lower than
fees for center-based care because providers of home care are not always
required to satisfy the same health, safety or operational regulations as the
Company's Academies. The competition also consists of other large, national,
for-profit childcare companies that may have more aggressive tuition discounting
and other pricing policies than La Petite. The Company competes principally by
offering trained and qualified personnel, professionally planned educational and
recreational programs that emphasize the individual development of the child,
well-equipped facilities and additional services such as transportation.

REGULATION AND GOVERNMENTAL INVOLVEMENT

Childcare centers are subject to numerous state and local regulations and
licensing requirements, and the Company has policies and procedures in place in
order to comply with such regulations and requirements. Although state and local
regulations vary from jurisdiction to jurisdiction, government agencies
generally review the ratio of staff to enrolled children, the safety, fitness
and adequacy of the buildings and equipment, the dietary program, the daily
curriculum, staff training, record keeping, transportation policies and
compliance with health and safety standards. In certain jurisdictions,
regulations have been enacted or are being considered which establish
requirements for employee background checks or other clearance procedures for
new employees of childcare centers or vehicle operators. In most jurisdictions,
governmental agencies conduct scheduled and unscheduled inspections of childcare
centers, and licenses must be renewed periodically. Failure by an Academy to
comply with applicable regulations can subject it to state sanctions, which
might include the Academy being placed on probation or, in more serious cases,
suspension or revocation of the Academy's license to operate and could also lead
to sanctions against other Academies located in the same jurisdiction. In
addition, this type of action could result in reputational damage extending
beyond that jurisdiction.

Management believes the Company is in material compliance with all applicable
regulations and licensing requirements. However, there is no assurance that a
licensing authority will not determine a particular Academy to be in violation
of applicable regulations and take action against that Academy. In addition,
there may be changes in regulations and licensing requirements, such as changes
in the required ratio of staff personnel to enrolled children that could have a
material adverse effect on the Company's operations.

Certain tax incentives exist for childcare programs. Section 21 of the Internal
Revenue Code provides a federal income tax credit ranging from 20% to 35% of
certain childcare expenses for "qualifying individuals" (as defined in the
Code). The fees paid to the Company for childcare services by eligible taxpayers
qualify for the tax credit, subject to the limitations of Section 21 of the
Code.

Various state and federal programs provide childcare assistance to low-income
families. These programs are generally administered through state and local
agencies. Management estimates approximately 25% of operating revenue is
generated from such federal and state programs. Although no federal license is
required at this time, there are minimum standards that must be met to qualify
for participation in certain federal subsidy programs. Many states utilize
tiered reimbursement programs. These programs typically have quality tiers that
allow higher reimbursement for low-income programs that meet the highest quality
standards.

Government, at both the federal and state levels, is involved in actively
expanding the quality and availability of childcare services. Federal support is
delivered at the state level through government-operated educational and
financial assistance programs. Childcare services offered directly by states


                                       9
<PAGE>
include training for childcare providers and resource and referral systems for
parents seeking childcare. The state of Georgia has an extensive
Government-funded private sector preschool program in which the Company
participates. The state of Florida will be implementing a Government-funded
private sector preschool program in the upcoming school year. Other states are
evaluating preschool programs based upon the Georgia and Florida models.

In September of 1998, the National Highway Transportation Safety Administration
(NHTSA) issued interpretative letters that modified its interpretation of
regulations governing the sale by automobile dealers of vehicles intended to be
used for the transportation of children to and from school. These letters
indicate that dealers may no longer sell fifteen-passenger vans for this use,
and that any vehicle designed to transport eleven persons or more must meet
federal school bus standards if it is likely to be "used significantly" to
transport children to and from school or school-related events. The Company
currently maintains a fleet of approximately 1,160 fifteen-passenger vans and
140 school buses for use in transportation of children which management believes
are safe and effective vehicles for that purpose. The Company's current fleet
meets all necessary federal, state, and local safety requirements. In accordance
with the NHTSA requirements, all new fleet additions or replacements must meet
school bus standards.

COMPLIANCE WITH ENVIRONMENTAL PROTECTION PROVISIONS

Compliance with federal, state and local laws and regulations governing
pollution and protection of the environment is not expected to have any material
effect upon the financial condition or results of operations of the Company.

TRADEMARKS

A federally registered trademark in the United States is effective for ten years
subject only to a required filing and the continued use of the mark by the
registrant. A federally registered trademark provides the presumption of
ownership of the mark by the registrant in connection with its goods or services
and constitutes constructive notice throughout the United States of such
ownership. The Company has various registered trademarks and servicemarks
covering the name La Petite Academy, its logos, and a number of other names,
slogans and designs, including, but not limited to: La Petite Journey(R),
Parent's Partner, SuperStars and Montessori Unlimited(R). Management believes
that the Company name and logos are important to its operations and intends to
continue to renew the registration thereof.

INSURANCE AND CLAIMS ADMINISTRATION

The Company maintains an insurance program covering comprehensive general
liability, automotive liability, workers' compensation, property and casualty,
crime and directors and officers liability insurance. The policies provide for a
variety of coverage, are subject to various limits, and include substantial
deductibles or self-insured retention levels. The Company believes its insurance
program is appropriate given the nature of its business and its claims history.
However, claims may be asserted which fall outside of, or are in excess of the
limits of, the Company's insurance, the effect of which could have a material
adverse effect on the Company.

EMPLOYEES

As of July 2, 2005, the Company employed approximately 10,000 full time
employees and 2,700 part time employees. The Company's employees are not
represented by any organized labor unions or employee organizations and
management believes relations with employees are good.

ITEM 2. PROPERTIES

As of July 2, 2005, the Company operated 649 Academies, 566 of which were leased
under operating leases, 68 of which were owned and 15 of which were operated in
employer-owned centers. Most of these Academy leases have 15-year terms, some
have 20-year terms, many have renewal options, and most require the Company to
pay utilities, maintenance, insurance and property taxes. In addition, some of
the leases provide for contingent rentals, if the Academy's operating revenue
exceeds certain base levels. The


                                       10
<PAGE>
Company also leases administrative office space in the cities of Chicago,
Illinois, Overland Park, Kansas, Charlotte, North Carolina, and Burbank,
California.

Because of different licensing requirements and design features, Academies vary
in size and licensed capacity. Academies typically contain 5,400 to 10,000
square feet in a one-story, air-conditioned building located on three-quarters
of an acre to one acre of land. Each Academy has an adjacent playground designed
to accommodate the full age range of children attending the Academy. Licensed
capacity for the same size building varies from state to state.

The following table summarizes Academy openings and closings for the indicated
periods.

<TABLE>
<CAPTION>
FISCAL YEAR                   2005   2004   2003   2002   2001
-----------                   ----   ----   ----   ----   ----
<S>                           <C>    <C>    <C>    <C>    <C>
Academies:
Open at Beginning of Period    641    648    715    734    752
Opened During Period            10      2      6      8      6
Closed During Period            (2)    (9)   (73)   (27)   (24)
                               ---    ---    ---    ---    ---
Open at End of Period          649    641    648    715    734
                               ===    ===    ===    ===    ===
</TABLE>

During the 2005 fiscal year, the Company opened seven Journey-based Academies
and three employer-based Academies. During that same period, the Company closed
two Journey-based Academies. The closures resulted from management's decision to
close certain school locations where the conditions no longer supported an
economically viable operation.

The following table shows the number of locations operated by the Company as of
July 2, 2005:

<TABLE>
<S>           <C>    <C>           <C>    <C>              <C>    <C>              <C>
Alabama       (13)   Indiana       (13)   Nevada           (13)   Tennessee        (24)
Arizona       (24)   Iowa          (5)    New Jersey       (2)    Texas            (97)
Arkansas      (4)    Kansas        (19)   New Mexico       (16)   Utah             (4)
California    (50)   Kentucky      (4)    New York         (1)    Virginia         (34)
Colorado      (18)   Louisiana     (1)    North Carolina   (24)   Washington, DC   (1)
Connecticut   (2)    Maryland      (15)   Ohio             (17)   Washington       (14)
Delaware      (1)    Minnesota     (5)    Oklahoma         (21)   Wisconsin        (20)
Florida       (78)   Mississippi   (3)    Oregon           (5)
Georgia       (32)   Missouri      (23)   Pennsylvania     (5)
Illinois      (18)   Nebraska      (8)    South Carolina   (15)
</TABLE>

The leases have initial terms expiring as follows:

<TABLE>
<CAPTION>
   YEARS INITIAL     NUMBER OF
LEASE TERMS EXPIRE   ACADEMIES
------------------   ---------
<S>                  <C>
2006                    102
2007                    115
2008                     98
2009                     87
2010                     61
2011 and later          103
                        ---
                        566
                        ---
</TABLE>

At July 2, 2005, the Company leased 566 Academies from approximately 262
lessors. The Company has generally been successful when it has sought to renew
expiring Academy leases.


                                       11
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

The Company has litigation pending which arose in the ordinary course of its
business. In management's opinion, no litigation in which the Company currently
is involved will result in liabilities that will have a material adverse effect
on its financial position, liquidity or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

The common stock of the Parent is not publicly traded. As of September 30, 2005,
LPA owned 66.0% of the Parent's outstanding common stock, Vestar/LPT Limited
Partnership owned 2.7%, management owned 0.3% and former management owned 31.0%.
In addition, the Class C Units of LPA issued to management of Parent from time
to time will, upon the achievement of enumerated valuation thresholds set forth
in the Operating Agreement, represent in the aggregate up to 13% of the economic
interests of LPA.

No cash dividends were declared or paid on the Parent's common stock during the
2005 and 2004 fiscal years. The Company's 10% Series B Senior Notes due 2008
(Senior Notes) and preferred stock (see Note 4 and Note 8 to the consolidated
financial statements) contain certain covenants that, among other things, do not
permit Parent to pay cash dividends on its common or preferred stock now or in
the immediate future.

As of September 30, 2005, there were 14 holders of record of Parent's common
stock.

Note 11 of the consolidated financial statements contains a description of the
stock based compensation plans of Parent, including the number of securities
available for future issuance under such plans and whether such plans were
approved by Parent's security holders.

Pursuant to the terms of the Securities Purchase Agreement dated February 10,
2003, entered into by Parent and its stockholders who have elected to exercise
their respective preemptive rights (the "Electing Stockholders"), as amended by
Amendment No. 1 to the Securities Purchase Agreement dated July 31, 2003, Parent
may issue up to 6,669,734 shares of its Series B convertible preferred stock. In
accordance with such commitment, during fiscal 2005, LPA, as one of the Electing
Stockholders, purchased 459,982 shares of Series B preferred stock in December
2004 for $1.0 million. Each of the foregoing transactions was exempt from the
registration requirements of the Securities Act of 1933 pursuant to Section 4(2)
thereunder, as transactions not involving any public offering. In each of such
transactions, no general solicitation was made, the securities sold are subject
to transfer restrictions, and the certificates evidencing such securities
contains an appropriate legend stating such securities have not been registered
under the Securities Act and may not be offered or sold absent registration or
pursuant to an exemption therefrom. No underwriters were involved in connection
with any of these sales of Parent's equity securities.


                                       12
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA (IN THOUSANDS OF DOLLARS)

The following selected financial data of the Company should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the other financial information included
elsewhere in this annual report on Form 10-K. The Company's fiscal year ends on
the Saturday closest to June 30.

<TABLE>
<CAPTION>
                                                  52 WEEKS    53 WEEKS    52 WEEKS    52 WEEKS    52 WEEKS
                                                   ENDED       ENDED       ENDED       ENDED       ENDED
                                                  JULY 2,     JULY 3,     JUNE 28,    JUNE 29,    JUNE 30,
                                                    2005      2004 (A)      2003        2002      2001 (A)
                                                 ---------   ---------   ---------   ---------   ---------
<S>                                              <C>         <C>         <C>         <C>         <C>
INCOME STATEMENT DATA

Revenue                                          $ 393,992   $ 383,491   $ 390,165   $ 391,205   $ 384,924

Operating expenses, exclusive of restructuring
   charges and asset impairments                   373,760     362,199     376,520     388,871     374,051
   Restructuring charges (reversals) (b)               122        (864)      4,908       3,208       2,455
   Asset impairments (c)                             1,174         692       3,057      57,436          --
                                                 ---------   ---------   ---------   ---------   ---------
Total operating expenses                           375,056     362,027     384,485     449,515     376,506
                                                 ---------   ---------   ---------   ---------   ---------
Operating (loss) income                             18,936      21,464       5,680     (58,310)      8,418
Interest expense (d)                                31,286      30,354      21,509      21,902      20,487
Interest income                                        (86)        (43)       (127)       (204)        (85)
                                                 ---------   ---------   ---------   ---------   ---------
Loss before income taxes                           (12,264)     (8,847)    (15,702)    (80,008)    (11,984)
Provision (benefit) for income
   taxes                                                80          66         246      (3,236)     16,204
                                                 ---------   ---------   ---------   ---------   ---------
Net loss                                           (12,344)     (8,913)    (15,948)    (76,772)    (28,188)
Other comprehensive income (loss):
   Derivative adjustments, net                          --          --          --          --         492
   Amounts reclassified into operations                (74)        (86)        (86)        (85)       (161)
                                                 ---------   ---------   ---------   ---------   ---------
Comprehensive loss                               $ (12,418)  $  (8,999)  $ (16,034)  $ (76,857)  $ (27,857)
                                                 =========   =========   =========   =========   =========

BALANCE SHEET DATA (AT END OF PERIOD)
Total assets                                     $  77,655   $  75,862   $  78,089   $  91,568   $ 148,665
Total long-term debt and capital lease             191,370     184,731     197,908     196,963     193,211
   obligations
Preferred stock                                    116,634     102,613      86,117      75,649      52,623
Stockholders' deficit                             (293,012)   (279,417)   (269,411)   (243,654)   (158,771)

OTHER DATA
Cash flows from operating activities                 8,312      10,922        (120)      4,401       3,450
Cash flows from investing activities               (10,853)     (7,372)     (4,107)     (8,791)    (14,313)
Cash flows from financing activities                   966      (5,540)     (2,339)     15,068      12,269
Depreciation and amortization                        9,498       8,776      10,372      14,664      14,966
Capital expenditures                                10,153       8,373       5,594       9,629      14,502
Proceeds from sale of assets                            --       1,001       1,487         838         189
Ratio of earnings to fixed charges (e)                  (e)         (e)         (e)         (e)         (e)
Academies at end of period                             649         641         648         715         734
FTE utilization during the period (f)                   62%         61%         62%         63%         63%
</TABLE>


                                       13
<PAGE>
a)   On April 18, 2001, the Company changed its fiscal year end from the 52 or
     53-week period ending on the first Saturday in July to the 52 or 53-week
     period ending on the Saturday closest to June 30. The fiscal year ended
     July 3, 2004 contains 53 weeks.

b)   Restructuring charges resulted from management's decision to close certain
     Academies where conditions no longer support an economically viable
     operation and to restructure its operating management to better serve the
     remaining Academies. These charges consist principally of the present value
     of rent (net of anticipated sublease income), real estate taxes, common
     area maintenance charges, and utilities, the write-off of goodwill
     associated with closed Academies, and the write-down of fixed assets to
     fair market value. Reversals are principally due to settlement of lease
     liabilities for less than the recorded reserves. See Note 12 to the
     consolidated financial statements included in Item 8 of this report for
     further discussion.

c)   During fiscal years 2005, 2004 and 2003, the Company identified conditions,
     including a projected current year operating loss as well as negative cash
     flows in certain of the Company's schools, as indications that the carrying
     amount of certain long-lived assets may not be recoverable. In accordance
     with the Company's policy, management assessed the recoverability of
     long-lived assets at these schools using a cash flow projection based on
     the remaining useful lives of the assets. Based on this projection, the
     cumulative cash flow over the remaining depreciation or amortization period
     was insufficient to recover the carrying value of the assets at certain of
     these schools. As a result, the Company recognized impairment losses of
     $1.2 million, $0.7 million and $3.1 million related to property and
     equipment in fiscal 2005, 2004 and 2003, respectively. During fiscal year
     2002, the Company recognized asset impairment losses of $57.4 million, of
     which $52.3 million related to goodwill and $5.1 million related to
     property and equipment.

d)   Interest expense includes $11.8 million and $10.5 million in dividends and
     accretion for fiscal years 2005 and 2004 respectively, as a result of the
     Company's adoption of SFAS No. 150 "Accounting for Certain Financial
     Instruments with Characteristics of Both Liabilities and Equity" (See Note
     8 to the consolidated financial statements included at Item 8 of this
     report). Interest expense also includes $1.1 million, $1.1 million, $1.2
     million, $1.0 million, and $1.1 million of amortization of deferred
     financing costs for fiscal years 2005, 2004, 2003, 2002, and 2001,
     respectively.

e)   For purposes of determining the ratio of earnings to fixed charges,
     earnings are defined as income before income taxes and extraordinary items,
     plus fixed charges. Fixed charges consists of interest expense on all
     indebtedness, amortization of deferred financing costs, and one-third of
     rental expense on operating leases representing that portion of rental
     expense that the Company deemed to be attributable to interest. For the 52
     weeks ended July 2, 2005, the 53 weeks ended July 3, 2004, the 52 weeks
     ended June 28, 2003, June 29, 2002, and June 30, 2001, earnings were
     inadequate to cover fixed charges by $12.3 million $8.8 million, $15.7
     million, $80.0 million, and $12.0 million, respectively.

f)   FTE utilization is the ratio of full-time equivalent (FTE) students to the
     total operating capacity for all of the Company's Academies. FTE attendance
     is not a measure of the absolute number of students attending the Company's
     Academies; rather, it is an approximation of the full-time equivalent
     number of students based on Company estimates and weighted averages. For
     example, a student attending full-time is equivalent to one FTE, while a
     student attending one-half of each day is equivalent to 0.5 FTE.


                                       14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

The following discussion should be read in conjunction with the consolidated
financial statements and the related notes thereto included in Item 8 of this
report.

The Company utilizes a 52 or 53-week fiscal year ending on the Saturday closest
to June 30. The tables below present the results of the 52 weeks ended July 2,
2005, the results of the 53 weeks ended July 3, 2004, and the results of the 52
weeks ended June 28, 2003 (herein referred to as the 2005 year, the 2004 year,
and the 2003 year).

New educational facilities (new schools), as defined by the Company, are
Academies opened within the current or previous fiscal year. These schools
typically generate operating losses until the Academies achieve normalized
occupancies. Established educational facilities (established schools), as
defined by the Company, are schools that were open prior to the start of the
previous fiscal year.

Full-time equivalent (FTE) attendance, as defined by the Company, is not a
measure of the absolute number of students attending the Company's schools, but
rather is an approximation of the full-time equivalent number of students based
on Company estimates and weighted averages. For example, a student attending
full-time is equivalent to one FTE, while a student attending only one-half of
each day is equivalent to 0.5 FTE. The average weekly FTE tuition rate, as
defined by the Company, is the tuition revenue divided by the FTE attendance for
the respective period.

OVERVIEW

La Petite is the largest privately held and one of the leading for-profit
preschool educational facilities in the United States based on the number of
centers operated. The Company provides center-based educational services and
childcare to children between the ages of six weeks and 12 years. The Company
also operates Montessori schools that employ the Montessori method of teaching,
a classical approach that features the programming of tasks with materials
presented in a sequence dictated by each child's capabilities.

The majority of the Company's revenue comes from the tuition and fees that it
charges for attendance at its Academies. Academy tuition depends upon a number
of factors including, but not limited to, location of an Academy, age of the
child, full or part-time attendance, utilization and competition. The Company
also provides various tuition discounts primarily consisting of sibling, staff,
and Preferred Employer Program. Parents also pay an annual registration fee.
Tuition and fees are payable weekly and in advance for most residential and
employer-based Academies and monthly and in advance for Montessori schools.
Other fees include activity fees for summer activities and supply fees for
Pre-Kindergarten and Private Kindergarten programs. Tuition rates per FTE are
impacted by the age mix of children and generally decrease as the age of the
children increase. Over the past year the Company has experienced increases in
its infant, toddler and preschool classrooms while experiencing decreases in its
before and after school programs. Overall FTE attendance improved during the
second half of the 2005 year. While FTE Attendance was down 0.3% during the
first half of the 2005 year as compared to the same period last year, FTE
attendance was up 2.5% during the second half of the 2005 year and was up 1.1%
for the full 52 weeks ended July 2, 2005 as compared to the same period last
year.

Management estimates that state and county governments subsidize the tuition for
approximately 25% of the children under its care. FTE attendance in this area is
dependent on the level of governmental funding for childcare assistance
programs. In the 2004 year and into the early part of the 2005 year, FTE
attendance was negatively impacted by the level of governmental funding for
childcare assistance programs, which declined or remained unchanged in many
areas. During the second half of the 2005 year, the impact began to level off
and turn around in many areas. During the first half of the 2005 year
enrollments in governments subsidized programs were down 4.2% as compared to the
prior year. During the second half of the 2005 year enrollments in governments
subsidized programs increased and were up 0.5% as


                                       15
<PAGE>
compared to the prior year. For the full 2005 year, enrollments in governments
subsidized programs were down 2.0% as compared to the prior year

Historically, operating revenue has followed the seasonality of the school year.
The number of new children attending the Company's schools is highest in
September-October and January-February, generally referred to as the fall and
winter enrollment periods. Revenues tend to decline during the calendar year-end
holiday period and during the summer.

Operating expenses consist of both direct costs associated with the operation of
our schools and administrative costs associated with the operation of our field
and corporate support centers.

Direct labor costs at the Company's schools represent the largest component of
operating expenses. Direct labor costs per FTE are impacted by the age mix of
children and generally decrease as the age of the children increase. For the
2005 year, the Company experienced some decreased in labor productivity at its
established schools, measured in labor hours per FTE as compared to the prior
year. Some of the decrease in productivity was due to non recurring training
time related to the rollout of a new preschool curriculum program during the
first quarter of the 2005 year. Labor has also been negatively impacted by the
change in age mix noted above, with the increase in infants and toddlers
requiring significantly more labor hours per FTE. Management has focused on
improving labor productivity through the use of a labor scheduling tool which
assists the school directors in the optimization of labor costs. As a result of
these and other efforts, the year over year increase in total labor hours per
FTE at established schools, was reduced from 3.2% in the first half of the 2005
year to 0.3% in the second half of the 2005 year. For the full 52 weeks ended
July 2, 2005, total labor hours per FTE at established schools increased 1.9% as
compared to the prior year. Administrative labor costs have also increased as
management has reduced spans of control through the hiring of additional
divisional vice presidents and district managers and as management has added
additional staff support at the Company's corporate office. Management believes
the reduction in spans of control and the increase in support staff will provide
for improved internal control and will assist Academy Directors to grow new
enrollment, implement program quality improvements and more effectively manage
Academy direct labor costs.

Facility lease expense is the second largest component of operating expenses.
Most of the Company's school locations are leased under operating leases,
generally with 15 year terms. Many leases have renewal options and some provide
for contingent rentals if the Academy's operating revenue exceeds certain base
levels. The Company has experienced increases in lease costs, principally due to
market rate increases, increases in lease payments for facilities with
contingent rent provisions and in some cases, increases resulting from
negotiated landlord funded capital improvements. Other significant operating
costs include repairs and maintenance, food, insurance, utilities, supplies,
depreciation and real estate taxes.


                                       16
<PAGE>
2005 COMPARED TO 2004 RESULTS

<TABLE>
<CAPTION>
                                               52 WEEKS ENDED          53 WEEKS ENDED
                                                JULY 2, 2005            JULY 3, 2004
                                           ---------------------   ---------------------
                                                      Percent of              Percent of
(IN THOUSANDS OF DOLLARS)                   Amount      Revenue     Amount      Revenue
-------------------------                  --------   ----------   --------   ----------
<S>                                        <C>        <C>          <C>        <C>
Revenue                                    $393,992     100.0%     $383,491     100.0%
Operating expenses:
   Salaries, wages and benefits             221,668      56.3       214,844      56.0
   Facility lease expense                    47,137      12.0        44,924      11.7
   Depreciation                               9,498       2.4         8,776       2.3
   Restructuring charges (reversals)            122        --          (864)     (0.2)
   Asset impairments                          1,174       0.3           692       0.2
   Provision for doubtful accounts            1,526       0.4         2,490       0.6
   Other                                     93,931      23.8        91,165      23.8
                                           --------     -----      --------     -----
Total operating expenses                    375,056      95.2       362,027      94.4
                                           --------     -----      --------     -----
Operating income                           $ 18,936       4.8%     $ 21,464       5.6%
                                           ========     =====      ========     =====
</TABLE>

The Company operated 649 schools at the end of the 2005 year as compared to 641
at the end of the 2004 year. The net increase of 8 schools is a result of 10
openings and 2 closures. The closures resulted from management's decision to
close certain school locations where the conditions no longer supported an
economically viable operation.

Operating revenue. Operating revenue increased $10.5 million or 2.7% during the
2005 year as compared to the 2004 year. Excluding the 53rd week from the 2004
year, operating revenue would have increased $17.5 million, or 4.6%, from the
2004 year. The operating revenue increase consists of a $9.0 million increase at
established schools, and a $2.8 million increase at new schools offset by a $1.3
million reduction in operating revenue at closed schools. Excluding the 53rd
week from the 2004 year, tuition revenue at established schools increased 3.7%
during the 2005 year as compared to the 2004 year. The increase in tuition
revenue at established schools reflects a 3.1% increase in the average weekly
FTE tuition rates and a 0.6% increase in FTE attendance. The increase in average
weekly tuition per FTE was principally due to selective price increases that
were put into place based on geographic market conditions and class capacity
utilization along with an increase in FTE attendance. The increase in FTE
attendance was principally due to increases in infant, toddler and preschool
classroom attendance.

Salaries, wages and benefits. Salaries, wages and benefits increased $6.8
million or 3.2% during the 2005 year as compared to the 2004 year. Excluding the
53rd week from the 2004 year, salaries would have increased $10.9 million, or
5.2%, from the 2004 year. As a percentage of revenue, labor costs were 56.3% for
the 2005 year as compared to 56.0% for the 2004 year. The increase in salaries,
wages and benefits includes increased labor costs of $6.5 million at established
schools, increased field management and corporate administration labor costs of
$2.3 million, and increased labor costs of $1.6 million at new schools, offset
by decreased benefit costs of $1.5 million, a $1.4 million decrease in bonus
costs and reduced labor costs of $0.7 million at closed schools. Excluding the
impact of the 53rd week, staff labor costs at established schools would have
increased $10.0 million or 5.6%. The increase in labor costs at established
schools, excluding the impact of the 53rd week was mainly due to a 3.0% increase
in average hourly wage rates and a 2.5% increase in labor hours as compared to
the same period in the prior year.

Facility lease expense. Facility lease expense increased $2.2 million or 4.9%
during the 2005 year as compared to the 2004 year. The increase in facility
lease expense was principally a result of increased rents due to lease renewals,
and new equipment leases, offset by decreases in lease payments for facilities
with contingent rent provisions.


                                       17
<PAGE>
Depreciation and amortization. Depreciation expense increased $0.7 million or
8.2% during the 2005 year as compared to the 2004 year. The increase in
depreciation expense was principally due to increased capital spending on
leasehold improvements and school curriculum, offset by a decrease in
depreciation expense related to computer equipment.

Restructuring charges (reversals). In the 2005 year, the Company recorded
adjustments to its previously established restructuring reserves which had the
net effect of increasing the reserves by $0.1 million, These adjustments were
principally due to the under-realization of sublet income and the settlement of
rent liabilities for more than the recorded reserves, offset by the settlement
of contractual repairs and maintenance costs, and real estate taxes for less
than the recorded reserves. In the 2004 year, the Company recorded adjustments
to its previously established restructuring reserves, which had the net effect
of reducing the reserves by $0.9 million. These adjustments included
restructuring charges of $0.5 million, primarily due to repairs and maintenance
costs related to closed schools, offset by recoveries of $1.5 million
principally due to settlement of lease liabilities related to previously closed
schools. In the 2004 year, the Company also recognized restructuring charges of
$0.1 million in connection with the closure of 6 schools. The restructuring
charges related to the school closures consisted principally of the present
value of rent (net of anticipated sublease income), real estate taxes, repairs
and maintenance costs, common area maintenance charges, and utilities, along
with the write-off of leasehold improvements.

Asset impairments. During the 2005 year and the 2004 year, the Company
identified conditions, including a projected current year operating loss as well
as negative cash flows in certain of the Company's schools, as indications that
the carrying amount of certain long-lived assets may not be recoverable. In
accordance with the Company's policy, management assessed the recoverability of
long-lived assets at these schools using a cash flow projection based on the
remaining useful lives of the assets. Based on this projection, the cumulative
cash flow over the remaining depreciation or amortization period was
insufficient to recover the carrying value of the assets at certain of these
schools. As a result, the Company recognized impairment losses of $1.2 million
and $0.7 million related to property and equipment in the 2005 and 2004 years,
respectively.

Provision for doubtful accounts. The provision for doubtful accounts decreased
$1.0 million or 38.7% during the 2005 year as compared to the 2004 year. The
decrease in the provision for doubtful accounts is principally the result of
improved billing practices and enhanced collection efforts over the prior year.

Other operating costs. Other operating costs increased $2.8 million or 3.0% from
the same period last year. Other operating costs include repairs and
maintenance, food, insurance, utilities, supplies, real estate taxes,
transportation, professional fees, marketing, travel, bank overages and
shortages, training, data processing, personnel, recruitment, and other
miscellaneous costs. The increase in other operating costs was due primarily to
increases in credit card fees, supplies, food costs, insurance, and data
processing costs, offset by decreases in professional fees, repair and
maintenance, transportation costs, and personnel expense. As a percentage of
revenue, other operating costs were 23.8% for both the 52 weeks ended July 2,
2005, and the 53 weeks ended July 3, 2004.

Operating income. As a result of the foregoing, operating income was $18.9
million for the 2005 year as compared to $21.5 million for the 2004 year.
Excluding the impact of the 53rd week, operating income for the 2004 year would
have been $19.2 million.

Interest expense. Net interest expense increased $0.9 million or 2.9% during the
2005 year as compared to the 2004 year. The increase was principally due to
increased interest expense on the accrued dividends and accretion related to
Company's Series A preferred stock, offset by decreased interest expense on the
term loan and decreased accretion related to the closed school liability. The
charges to interest expense on the Series A preferred stock dividends are
currently non-cash charges because such accrued dividends are added to the
Series A preferred stock liquidation value. Commencing on July 1, 2005, the
Series A preferred stock dividends became payable in cash, subject to the
limitations in the Company's senior credit agreement which prohibit such
payments without the lenders' prior consent. Absent such consent, the dividends
will continue to be added to the Series A preferred stock liquidation value.

Income tax rate. Income tax expense was $0.1 million in both the 2005 year and
the 2004 year. The effective tax rate was 0% in the 2005 and 2004 years due to
the loss before income taxes in both years and


                                       18
<PAGE>
the Company's provision of a full valuation allowance against deferred tax
assets created in the 2005 and 2004 years.

2004 COMPARED TO 2003 RESULTS IN THOUSANDS OF DOLLARS

<TABLE>
<CAPTION>
                                               53 WEEKS ENDED          52 WEEKS ENDED
                                                JULY 3, 2004           JUNE 28, 2003
                                           ---------------------   ---------------------
                                                      Percent of              Percent of
(IN THOUSANDS OF DOLLARS)                   Amount      Revenue     Amount      Revenue
-------------------------                  --------   ----------   --------   ----------
<S>                                        <C>        <C>          <C>        <C>
Revenue                                    $383,491     100.0%     $390,165     100.0%
Operating expenses:
   Salaries, wages and benefits             214,844      56.0       214,414      55.0
   Facility lease expense                    44,924      11.7        45,652      11.7
   Depreciation and amortization              8,776       2.3        10,372       2.7
   Restructuring charges (reversals)           (864)     (0.2)        4,908       1.3
   Asset impairments                            692       0.2         3,057       0.8
   Provision for doubtful accounts            2,490       0.6         2,802       0.7
   Other                                     91,165      23.8       103,280      26.5
                                           --------     -----      --------     -----
Total operating expenses                    362,027      94.4       384,485      98.5
                                           --------     -----      --------     -----
Operating income (loss)                    $ 21,464       5.6%     $  5,680       1.5%
                                           ========     =====      ========     =====
</TABLE>

The Company operated 641 schools at the end of the 2004 year as compared to 648
at the end of the 2003 year. The net decrease of 7 schools is a result of 2
openings and 9 closures, 3 of which were due to the combining of these
operations with other school locations. The closures resulted from management's
decision to close certain school locations where the conditions no longer
supported an economically viable operation.

Operating revenue. Operating revenue decreased $6.7 million or 1.7% during the
2004 year as compared to the 2003 year. Excluding the 53rd week from the 2004
year, operating revenue would have decreased $13.7 million, or 3.5%, from the
2003 year to $376.5 million. The operating revenue decrease consists of a $15.1
million reduction in operating revenue at closed schools offset by a $6.8
million increase at established schools, and a $1.6 million increase at new
schools. The revenue increase at established schools was the result of selective
price increases that were put into place based on geographic market conditions
and class capacity utilization. This increase was partially offset by decreased
FTE attendance. FTE attendance in the 2004 year was negatively impacted by the
level of governmental funding for childcare assistance programs, which declined
or remained unchanged in many areas.

Salaries, wages and benefits. Salaries, wages and benefits increased $0.4
million or 0.2% during the 2004 year as compared to the 2003 year. Excluding the
53rd week from the 2004 year, salaries would have decreased $3.6 million, or
1.7%, from the 2003 year to $210.8 million. As a percentage of revenue, labor
costs were 56.0% for the 2004 year as compared to 55.0% for the 2003 year. The
increase in salaries, wages and benefits includes increased field management and
corporate administration labor costs of $1.9 million, increased labor costs of
$5.7 million at established schools, increased labor costs of $0.8 million at
new schools, and a $1.0 million increase in bonus costs offset by reduced labor
costs of $8.9 million at closed schools and decreased benefit costs of $0.2
million. Excluding the impact of the 53rd week, labor costs at established
schools would have increased $2.3 million or 1.3%. The increase in labor costs
at established schools, excluding the impact of the 53rd week was mainly due to
a 1.3% increase in average hourly wage rates offset by a 0.2% decrease in labor
hours as compared to the same period in the prior year.

Facility lease expense. Facility lease expense decreased $0.7 million or 1.6%
during the 2004 year as compared to the 2003 year. The decrease in facility
lease expense was mainly due to closed schools, offset


                                       19
<PAGE>
by increases in lease payments for facilities with contingent rent provisions,
increases due to lease renewals, and lower rent credits resulting from certain
unfavorable lease liabilities becoming fully utilized prior to the end of the
2004 year.

Depreciation and amortization. Depreciation expense decreased $1.6 million or
15.4% during the 2004 year as compared to the 2003 year. The decrease in
depreciation expense was principally due to the reduction in the carrying value
of fixed assets as a result of the impairment charge recognized in the fourth
quarter of the 2003 year and the write off the leasehold improvements related to
school closures in the 2003 year.

Restructuring charges (reversals). In the 2004 year, the Company recorded
adjustments to its previously established restructuring reserves, which had the
net effect of reducing the reserves by $0.9 million. These adjustments included
restructuring charges of $0.5 million, primarily due to repairs and maintenance
costs related to closed schools, offset by recoveries of $1.5 million
principally due to settlement of lease liabilities related to previously closed
schools. In the 2004 year, the Company also recognized restructuring charges of
$0.1 million in connection with the closure of 6 schools. In the 2003 year, the
Company recognized restructuring charges of $7.4 million in connection with the
closure of 73 schools and $0.4 million in connection with the write-down to fair
market value of real estate properties held for disposal, offset by recoveries
of $2.9 million principally due to settlement of lease liabilities related to
previously closed schools. The restructuring charges related to the school
closures consisted principally of the present value of rent (net of anticipated
sublease income), real estate taxes, repairs and maintenance costs, common area
maintenance charges, and utilities, along with the write-off of leasehold
improvements.

Asset impairments. During the 2004 year and the 2003 year, the Company
identified conditions, including a projected current year operating loss as well
as negative cash flows in certain of the Company's schools, as indications that
the carrying amount of certain long-lived assets may not be recoverable. In
accordance with the Company's policy, management assessed the recoverability of
long-lived assets at these schools using a cash flow projection based on the
remaining useful lives of the assets. Based on this projection, the cumulative
cash flow over the remaining depreciation or amortization period was
insufficient to recover the carrying value of the assets at certain of these
schools. As a result, the Company recognized impairment losses of $0.7 million
and $3.1 million related to property and equipment in the 2004 and 2003 years,
respectively.

Provision for doubtful accounts. The provision for doubtful accounts decreased
$0.3 million or 11.1% during the 2004 year as compared to the 2003 year. The
decrease in the provision for doubtful accounts is principally the result of
improved collection efforts over the prior year.

Other operating costs. Other operating costs decreased $12.1 million or 11.7%
during the 2004 year as compared to the 2003 year. Other operating costs include
repairs and maintenance, food, insurance, utilities, supplies, real estate
taxes, transportation, marketing, professional fees, travel, bank overages and
shortages, school activity costs, recruitment, data processing, personnel and
other miscellaneous costs. The decrease was due primarily to a $2.6 million
decrease in legal and professional fees, a $1.7 million reduction in bank
shortages, a $1.4 million decrease in management meeting costs, a $ 1.4 million
decrease in insurance costs, a $1.3 million reduction in supplies, a $1.0
million reduction in real estate taxes, along with lower food expenses,
transportation, personnel and utilities, offset by a $0.5 million increase in
travel costs. As a percentage of revenue, other operating costs decreased to
23.8% in the 2004 year as compared to 26.5% in the 2003 year.

Operating income. As a result of the foregoing, operating income was $21.5
million for the 2004 year as compared to $5.7 million for the 2003 year.

Interest expense. Net interest expense increased $8.9 million or 41.8% during
the 2004 year as compared to the 2003 year. The increase was principally due to
the $10.5 million impact resulting from the adoption of SFAS No. 150 at the
start of the 2004 year, offset primarily by reduced interest expense resulting
from the fair value adjustment to the carrying value of the Senior Notes
becoming fully amortized prior to the 2004 year and by lower debt fees. SFAS No.
150 impacts the classification of the Company's Series A preferred stock and
requires that accrued dividends and accretion related to these shares be
classified as interest expense rather than a charge to accumulated deficit. The
charges to interest expense resulting from


                                       20
<PAGE>
the adoption of SFAS No. 150 are currently non-cash charges, as the Series A
preferred stock dividends have not been paid but rather have been added to the
Series A preferred stock liquidation value and are payable in the future.

Income tax rate. Income tax expense was $0.1 million in the 2004 year, as
compared to $0.2 million in the 2003 year. The effective tax rate was 0% in the
2004 and 2003 years due to the loss before income taxes in both years and the
Company's provision of a full valuation allowance against deferred tax assets
created in the 2004 and 2003 years.

LIQUIDITY AND CAPITAL RESOURCES

FINANCING ACTIVITIES

Parent and La Petite entered into an agreement on May 11, 1998, providing for a
term loan facility and a revolving credit agreement (as amended, the "Credit
Agreement"), consisting of a $40 million Term Loan Facility and a $25 million
Revolving Credit Facility. Parent and La Petite borrowed the entire $40 million
available under the Term Loan Facility in connection with the Recapitalization.
Pursuant to an amendment to the Credit Agreement, which was effective as of
November 30, 2004, the final maturity of the Credit Agreement was extended to
November 15, 2007. This amendment also (i) revised certain existing financial
covenant targets required to be maintained by the Company and set new targets
for the extended period of the Credit Agreement; (ii) deleted the requirement
that LIBOR borrowings pay a predetermined minimum interest rate; and (iii)
lowered the minimum dollar amount required to make a borrowing under the Credit
Agreement. Payments due under the amortization schedule for the term loan are
$0.4 million in fiscal year 2006, $0.4 million in fiscal year 2007 and $31.7
million in fiscal year 2008. The term loan is also subject to mandatory
prepayment in the event of certain equity or debt issuances or asset sales by
the Company or any of its subsidiaries and in amounts equal to specified
percentages of excess cash flow (as defined). On April 13, 2005, the Company
entered into Amendment No. 8 to the Credit Agreement to change the issuing bank
of its Letters of Credit and to restore a swingline loan mechanism that was
previously deleted by prior amendments to the Company's Credit Agreement. On
July 2, 2005, there was $32.5 million outstanding under the term loan and $14.0
million outstanding under the Revolving Credit Facility. In addition, La Petite
had outstanding letters of credit in an aggregate amount of $5.1 million, and
$5.9 million available for working capital purposes under the Revolving Credit
Facility. The Company's Credit Agreement, Senior Notes and preferred stock
contain certain covenants that limit the ability of the Company to incur
additional indebtedness, pay cash dividends or make certain other restricted
payments.

Pursuant to the terms of the Securities Purchase Agreement dated February 10,
2003, entered into by Parent and its stockholders who have elected to exercise
their respective preemptive rights, as amended by Amendment No. 1 to the
Securities Purchase Agreement dated July 31, 2003, Parent may issue up to a
total of 6,669,734 shares of its Series B 5% convertible redeemable
participating preferred stock (Series B preferred stock) at a price of $2.174
per share. LPA has committed to purchase in accordance with the terms of the
Securities Purchase Agreement, 6,658,636 shares of the Series B preferred stock
being offered. Purchases may be made at LPA's discretion or upon occurrence of
conditions detailed in the Securities Purchase Agreement. In accordance with
such commitment, LPA purchased 341,766 shares of Series B preferred stock in
June 2003 for $0.7 million, 1,379,945 shares of Series B preferred stock in
November 2003 for $3.0 million, 919,963 shares of Series B preferred stock in
December 2003 for $2.0 million, and 459,982 shares of Series B preferred stock
in December 2004 for $1.0 million. Further, in accordance with their commitment
to purchase shares of Series B preferred stock and in accordance with the terms
of the Securities Purchase Agreement, the Electing Stockholders other than LPA
purchased 570 shares of Series B preferred stock in June 2003, 2,300 shares of
Series B preferred stock in November 2003, 1,534 shares of Series B preferred
stock in December 2003, and 766 shares of Series B preferred stock in December
2004. Accordingly, at July 2, 2005, the remaining contingent equity commitment
from the stockholders of Parent is $7.7 million. Pursuant to Amendment No. 2 to
the Securities Purchase Agreement which was effective as of November 30, 2004,
the Electing Stockholders agreed to purchase Series B preferred stock if the
Company fails at any time to make principal and interest payments on the Senior
Notes due 2008. The foregoing obligation is in addition to the existing
obligations of the Electing Stockholders to purchase shares of Series B
preferred stock; however, the additional obligation does not increase the amount
of equity committed by any of the Electing Stockholders. The amendment to the
Securities Purchase


                                       21
<PAGE>
Agreement also granted the holders representing a majority of the Senior Notes
due 2008 with the right to release the Electing Stockholders from the equity
commitments under the Securities Purchase Agreement at any time after the
repayment of the debt outstanding under the Credit Agreement.

As of July 2, 2005, LPA beneficially owned 94.0% of the common stock of Parent
on a fully diluted basis, $45 million of Series A preferred stock of Parent and
approximately $21.7 million of Series B preferred stock of Parent. An affiliate
of JPMP owns a majority of the economic interests of LPA and an entity
controlled by Robert E. King, owns a majority of the voting interests of LPA. On
September 28, 2005, certain members of Parent's management, including its
President and Chief Executive Officer, and its Chief Financial Officer, were
granted Class C Units of LPA. LPA has reserved 100,000 Class C Units to be
issued to management of Parent from time to time. Pursuant to the terms of the
Operating Agreement of LPA, the Class C Units are non-voting equity interests of
LPA and are subject to repurchase by LPA or its designee upon the termination of
such person's employment with Parent and La Petite. Upon the achievement of
enumerated valuation thresholds set forth in the Operating Agreement, the Class
C Units will represent in the aggregate up to 13% of the economic interests of
LPA.

CASH FLOWS AND SOURCES AND USES OF FUNDS

The Company's principal sources of funds are from cash flows from operations,
borrowings on the revolving credit facility under the Credit Agreement, and
capital contributions received from LPA. The Company's principal uses of funds
are debt service requirements, capital expenditures and working capital needs.
The Company incurred substantial indebtedness in connection with the
Recapitalization.

Cash flows provided by operating activities were $8.3 million during the 2005
year compared to cash flows provided by operating activities of $10.9 million
during the 2004 year. The $2.6 million decrease in cash flows from operations
was due to a $0.1 million increase in net losses, net of non-cash charges, and
decreased working capital amounts of $3.2 million offset by decreased insurance
deposits of $0.7 million. Insurance deposits represent cash on deposit at
insurance carriers as security for the self-insured portion of the Company's
workers compensation, general liability and automobile insurance coverage.

Cash flows used for investing activities were $10.9 million during the 2005 year
as compared to $7.4 million during the 2004 year. The $3.5 million increase in
cash flows used for investing activities was due to a $1.8 million increase in
capital expenditures and acquisition costs of $0.7 million associated with the
acquisition of 6 schools, along with a $1.0 million decrease in proceeds from
the sale of assets.

Cash flows provided by financing activities were $1.0 million during the 2005
year as compared to cash flows used for financing activities of $5.5 million
during the 2004 year. The $6.5 million increase in cash provided by financing
activities was due to a $11.1 million increase in revolver borrowings, a $1.5
million decrease in repayment of term loan and capital lease obligations, and a
$0.1 million increase in other long term debt, offset by a $4.0 million
reduction in proceeds from the issuance of redeemable preferred stock, a $1.6
million decrease in bank overdrafts related to the timing of monthly expense
payments, and a $0.6 increase in deferred debt issuance costs.

Cash flows provided by operating activities were $10.9 million during the 2004
year compared to cash flows used for operating activities of $0.1 million during
the 2003 year. The $11.0 million increase in cash flows from operations was due
to a $6.9 million decrease in net losses, net of non-cash charges, decreased
insurance deposits of $3.4 million and increased working capital amounts of $0.7
million. Insurance deposits represent cash held by insurance carriers as
security for the self-insured portion of the Company's workers compensation,
general liability and automobile insurance coverage.

Cash flows used for investing activities were $7.4 million during the 2004 year
as compared to $4.1 million during the 2003 year. The $3.3 million increase in
cash flows used for investing activities was due to a $2.8 million increase in
capital expenditures and a $0.5 million decrease in proceeds from the sale of
assets.

Cash flows used for financing activities were $5.5 million during the 2004 year
as compared to $2.3 million during the 2003 year. The $3.2 million increase in
cash used for financing activities was due to an $0.1 million increase in
repayments of term loan and capital lease obligations and a $10.0 million
decrease in


                                       22
<PAGE>
net borrowings under the revolving credit agreement, offset by a $4.3 million
increase in proceeds from the issuance of Series B preferred stock, a $2.1
million increase in bank overdrafts related to the timing of monthly expense
payments, and a $0.5 million decrease in deferred financing costs

Over each of the past three years the Company has experienced significant losses
before income taxes. In addition, as shown in the accompanying financial
statements, the Company has a working capital and stockholders' deficit as of
July 2, 2005. Over the past three years, there have been instances where the
Company was not in compliance with its financial covenants set forth in the
Credit Agreement and required multiple equity investments by LPA (see Note 8 to
the accompanying consolidated financial statements included in this report) and
other electing stockholders to enable it to meet its financial obligations as
they came due and provide adequate liquidity to operate the business.

Over the past year management has implemented a series of measures to improve
the Company's operating results and cash flow. These actions included decreased
discretionary expense spending and greater realization of revenue resulting from
increased controls over the use of tuition discounts and coupons and an
increased focus on collection of accounts receivable on the part of the
divisional finance staff. Management is continuing to identify additional
opportunities to further reduce its cost of operation and optimize revenue per
academy classroom. Management believes that these efforts, coupled with (i) the
remaining $7.7 million of equity commitment, as of July 2, 2005, provided by LPA
and certain of the other stockholders of Parent, (ii) the available funds under
the Revolving Credit Facility, (iii) the extension of the final maturity date of
the Credit Agreement and (iv) revision of certain existing financial covenant
targets and establishment of new targets for the extended period of the Credit
Agreement, will enable the Company to comply with its required financial
covenants, meet its obligations as they come due and provide adequate liquidity
to operate the business for the next twelve months. However, there can be no
assurance in this regard, nor can there be any assurance that the Company can
obtain additional funding from LPA beyond that as noted above or from any other
external source.

CAPITAL EXPENDITURES

Total capital expenditures for the 52 weeks ended July 2, 2005 and the 53 weeks
ended July 3, 2004 were $10.2 million and $8.4 million, respectively. The
increase in total capital expenditures was a result of increased spending on
maintenance capital expenditures. The Company views all capital expenditures,
other than those incurred in connection with the development of new schools, to
be maintenance capital expenditures. Maintenance capital expenditures for the 52
weeks ended July 2, 2005 and the 53 weeks ended July 3, 2004 were $8.8 million,
and $8.4 million, respectively. Capital expenditures incurred in connection with
the development of new schools for the 52 weeks ended July 2, 2005 were $1.3
million. The Company also incurred acquisition costs of $0.7 million in
connection with the acquisition of five schools in Wisconsin and one school in
Mississippi. For fiscal year 2006, the Company expects capital expenditures to
be approximately $9.8 million for maintenance capital expenditures and $2.2
million for new school development.

In addition to maintenance capital expenditures, the Company expends additional
funds to ensure that its facilities are in good working condition. Such funds
are expensed in the periods in which they are incurred. The amounts of such
expenses for the 52 weeks ended July 2, 2005, the 53 weeks ended July 3, 2004
and the 52 weeks ended June 28, 2003, were $14.6 million, $15.1 million, and
$15.1 million, respectively.

CONTRACTUAL COMMITMENTS

The Company has certain contractual obligations and commercial commitments.
Contractual obligations are those that will require cash payments in accordance
with the term of a contract, such as borrowing or lease agreements. Commercial
commitments represent obligations for cash performance in the event of demands
by third parties or other contingent events, such as lines of credit.
Contractual obligations and commercial commitments at July 2, 2005 were as
follows, in thousands of dollars:


                                       23
<PAGE>
<TABLE>
<CAPTION>
                                                            Fiscal Year
                             ------------------------------------------------------------------------
                               Total      2006      2007      2008       2009      2010    Thereafter
                             --------   -------   -------   --------   -------   -------   ----------
<S>                          <C>        <C>       <C>       <C>        <C>       <C>       <C>
Long-term debt(a)            $191,570   $   423   $   424   $190,679   $    29   $    15     $    --
Interest on long term debt     50,062    18,063    18,006     13,991         2        --
Capital lease obligations         814       591       177         46        --        --          --
Operating leases              198,402    43,985    35,208     28,195    21,586    15,763      53,665
Letters of credit               5,905     5,905        --         --        --        --          --
Severance agreement(b)            702       200       200        200       102        --          --
                             --------   -------   -------   --------   -------   -------     -------
                             $447,455   $69,167   $54,015   $233,111   $21,719   $15,778     $53,665
                             ========   =======   =======   ========   =======   =======     =======
</TABLE>

(a)  Long-term debt consists of the term loan and revolving credit facility
     under the Credit Agreement and Senior Notes.

(b)  Commitments under a Separation Agreement the Company's former Chief
     Executive Officer and President entered into on December 11, 2002.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires that management make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Predicting future events is inherently an
imprecise activity and as such requires the use of judgment. Actual results may
vary from estimates in amounts that may be material to the financial statements.
See "-Cautionary Statement Concerning Forward Looking Statements."

For a description of the Company's significant accounting policies, see "Item 8.
Financial Statements and Supplementary Data, Note 2. Summary of Significant
Accounting Policies." The following accounting estimates and related policies
are considered critical to the preparation of the Company's financial statements
due to the business judgment and estimation processes involved in their
application.

Revenue recognition. Tuition revenues, net of discounts, and other revenues are
recognized as services are performed. Certain fees may be received in advance of
services being rendered, in which case the fee revenue is deferred and
recognized over the appropriate time period. Accounts receivable. Accounts
receivable are comprised primarily of tuition due from governmental agencies,
parents and employers. Accounts receivable are presented at estimated net
realizable value. The company use estimates in determining the collectibility of
its accounts receivable and must rely on its evaluation of historical trends,
governmental funding levels, specific customer issues and current economic
trends to arrive at appropriate allowances. Material differences may result in
the amount and timing of bad debt expense if actual experience differs
significantly from management estimates.

Long-lived assets. Under the requirements of Statement of Financial Accounting
Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, the Company assesses the potential impairment of property and
equipment whenever events or change in circumstances indicate that the carrying
value may not be recoverable. An asset's value is impaired if the Company's
estimate of the aggregate future cash flows, undiscounted and without interest
charges, to be generated by the asset are less than the carrying value of the
asset. Such estimates consider factors such as expected future operating income
and historical trends, as well as the effects of demand and competition. To the
extent impairment has occurred, the loss will be measured as the excess of the
carrying amount of the asset over the fair value of the asset. Such estimates
require the use of judgment and numerous subjective assumptions, which, if
actual experience varies, could result in material differences in the
requirements for impairment charges. Impairment charges of $1.2 million were
recorded in fiscal 2005 and were shown separately as asset impairment expense in
the financial statements.


                                       24
<PAGE>
Self-insurance obligations. The Company self-insures a portion of its general
liability, workers' compensation, auto, property and employee medical insurance
programs. The Company purchases stop loss coverage at varying levels in order to
mitigate its potential future losses. The nature of these liabilities, which may
not fully manifest themselves for several years, requires significant judgment.
The Company estimates the obligations for liabilities incurred but not yet
reported or paid based on available claims data and historical trends and
experience, as well as future projections of ultimate losses, expenses, premiums
and administrative costs. The accrued obligations for these self-insurance
programs were $15.5 million and $15.3 million at July 2, 2005 and July 3, 2004,
respectively, see "Item 8. Financial Statements and Supplementary Data, Note 2.
Summary of Significant Accounting Policies, Self-insurance Programs." The
Company's internal estimates are reviewed annually by a third party actuary.
While the Company believes that the amounts accrued for these obligations are
sufficient, any significant increase in the number of claims and costs
associated with claims made under these programs could have a material adverse
effect on the Company's financial position, cash flows or results of operations.

Income taxes. Accounting for income taxes requires the Company to estimate its
income taxes in each jurisdiction in which it operates. Due to differences in
the recognition of items included in income for accounting and tax purposes,
temporary differences arise which are recorded as deferred tax assets or
liabilities. The Company estimates the likelihood of recovery of these assets,
which is dependent on future levels of profitability and enacted tax rates. The
Company determined that, based on cumulative historical pretax losses, it was
more likely than not that the deferred tax assets as of July 2, 2005 and July 3,
2004 would not be realized. Therefore, the Company recorded a valuation
allowance to fully reserve those deferred tax assets at both fiscal 2005 and
2004 year-end. The provision for income taxes at July 2, 2005 includes a $0.4
million reduction of the valuation allowance and the provision for income taxes
at July 3, 2004 includes a $2.5 million reduction of the valuation allowance.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS
No. 123 (R), Share-Based Payment. The Statement requires that the compensation
cost relating to share-based payment transactions be recognized in the financial
statements. That cost will be measured based on the fair value of the equity or
liability instruments issued. The Company will be required to apply Statement
123 (R) as of the first annual period that begins after December 15, 2005. The
Company did not issue any stock options in fiscal 2004 or fiscal 2005 and does
not expect the adoption of Statement 123 (R) will have a material impact on the
Company's financial position or results of operations resulting from the
Company's stock option plans in effect as of July 2, 2005. On September 28,
2005, certain members of Parent's management, including its President and Chief
Executive Officer, and its Chief Financial Officer, acquired Class C Units of
LPA. The Company is currently evaluating the impact of the acquisition by
certain members of Parent's management of Class C Units of LPA on the Company's
financial position or results of operations upon the adoption of Statement 123
(R).

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets,
an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions. The
amendments made by Statement No. 153 are based on the principle that exchanges
of nonmonetary assets should be measured based on the fair value of assets
exchanged. Further, the amendments eliminate the narrow exception for
nonmonetary exchanges of similar productive assets and replace it with a broader
exception for exchanges of nonmonetary assets that do no have commercial
substance. The Statement is effective for nonmonetary asset exchanges occurring
in the fiscal periods beginning after June 15, 2005. The Company does not expect
the adoption of Statement No. 153 will have a material on the Company's
financial position or results of operations.

In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations", to clarify certain provisions of FASB
Statement No. 143, "Accounting for Asset Retirement Obligations." Interpretation
No. 47 specifies that the term "conditional asset retirement obligation"
includes an entity's legal obligation to perform an asset retirement activity
for which the timing and (or) method of settlement are conditional on a future
event that may or may not be in the control of the entity. This interpretation
provides that an entity is required to recognize a liability for a conditional
asset retirement obligation if the fair value of the obligation can be
reasonably estimated. Interpretation No. 47 is


                                       25
<PAGE>
effective no later than the end of fiscal years ending after December 15, 2005.
The Company does not expect the adoption of Interpretation No. 47 will have a
material on the Company's financial position or results of operations.

SEASONALITY

See "Item 1. Business -Seasonality."

GOVERNMENTAL LAWS AND REGULATIONS

See "Item 1. Business -Regulation and Government Involvement."

INFLATION AND GENERAL ECONOMIC CONDITION

During the past three years (a period of low inflation) the Company implemented
selective increases in tuition rates based on geographic market conditions and
class capacity utilization. During the 2005 year, the Company experienced
inflationary pressures on average wage rates, as hourly rates increased
approximately 3.1%. Management believes this is occurring industry wide and
there is no assurance that such wage rate increases can be recovered through
future increases in tuition. A sustained recession with high unemployment may
have a material adverse effect on the Company's operations.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995, the Company cautions investors that any forward-looking statements or
projections made by the Company, including those made in this document, are
subject to risks and uncertainties that may cause actual results to differ
materially from those projected or discussed in these forward looking
statements.

This Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this report contain forward-looking statements
that are based on management's current expectations, estimates and projections.
Words such as "expects," "projects," "may," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates," variations of these words and similar
expressions are intended to identify these forward-looking statements. Certain
factors, including but not limited to those listed below, may cause actual
results to differ materially from current expectations, estimates, projections
and from past results.

     -    Economic factors, including changes in the rate of inflation, business
          conditions and interest rates.

     -    Operational factors, including the Company's ability to open and
          profitably operate Schools, the Company's ability to comply with the
          covenants contained in the Credit Agreement and the Company's ability
          to satisfy its debt service obligations, including its obligations to
          repay the Credit Agreemen when it matures in November 2007 and the
          notes when they mature in May 2008.

     -    Demand factors, including general fluctuations in demand for childcare
          services and seasonal fluctuations.

     -    Competitive factors, including: (a) pricing pressures primarily from
          local nursery schools and childcare centers and other large, national
          for-profit childcare companies, (b) the hiring and retention of
          trained and qualified personnel, (c) the ability to maintain
          well-equipped facilities and (d) any adverse publicity concerning
          alleged child abuse at the Company's facilities.

     -    Governmental action including: (a) new laws, regulations and judicial
          decisions related to state and local regulations and licensing
          requirements, (b) changes in the Federal assistance and funding of
          childcare services and (c) changes in the tax laws relating to La
          Petite's operations.

     -    Changes in accounting or other standards promulgated by the Financial
          Accounting Standards Board, the Securities and Exchange Commission or
          the Public Company Accounting Oversight Board.

     -    Changes in costs or expenses, changes in tax rates, the effects of
          acquisitions, dispositions or other events occurring in connection
          with evolving business strategies.

     -    Management's ability to implement plans designed to improve the
          Company's operating results, cash flows and financial position.


                                       26
<PAGE>
No assurance can be made that any expectation, estimate or projection contained
in a forward-looking statement will be achieved. Readers are cautioned not to
place undue reliance on such statements, which speak only as of the date made.
The Company undertakes no obligation to release publicly any revisions to
forward-looking statements as the result of subsequent events or developments.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Indebtedness as of July 2, 2005 consisted of Senior Notes in the aggregate
principal amount of $145 million, the term loan under the Credit Agreement in
the aggregate principal amount of $32.5 million and the revolving credit
facility under the Credit Agreement providing for revolving loans to the Company
in an aggregate principal amount (including swingline loans and the aggregate
stated amount of letters of credit) of up to $25 million. Borrowings under the
Senior Notes bear interest at 10% per annum. Borrowings under the Credit
Agreement bear interest at a rate per annum equal (at the Company's option) to:
(a) an adjusted London inter-bank offered rate ("LIBOR") plus a percentage based
on the Company's financial performance; or (b) a rate equal to the higher of the
administrative agent's published prime rate, a certificate of deposit rate
multiplied by the statutory reserve rate, plus the cost of FDIC insurance or the
federal funds effective rate plus 1/2 of 1% plus, in each case, a percentage
based on the Company's financial performance. The borrowing margins applicable
to the Credit Agreement are currently 4.25% for LIBOR loans and 3.25% for
Alternate Base Rate loans as defined in the Credit Agreement. The Senior Notes
mature in May 2008. Pursuant to Amendment No. 7 to the Credit Agreement,
effective November 30, 2004, the final maturity of the Credit Agreement was
extended to November 15, 2007. Payments due under the amortization schedule for
the term loan are $0.4 million in fiscal year 2006, $0.4 million in fiscal year
2007 and $31.7 million in fiscal year 2008. The term loan is also subject to
mandatory prepayment in the event of certain equity or debt issuances or asset
sales by the Company or any of its subsidiaries in amounts equal to specified
percentage of excess cash flow (as defined).

A 1% increase or decrease in the applicable index rate would result in a
corresponding interest expense increase or decrease of $0.5 million per year.

The Company had no derivative instruments at July 2, 2005.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements:

     Report of Independent Registered Public Accounting Firm.

     Consolidated Balance Sheets as of July 2, 2005 and July 3, 2004.

     Consolidated Statements of Operations and Comprehensive Loss for the 52
     weeks ended July 2, 2005, the 53 weeks ended July 3, 2004, and the 52 weeks
     ended June 28, 2003.

     Consolidated Statements of Stockholders' Deficit for the 52 weeks ended
     July 2, 2005, the 53 weeks ended July 3, 2004, and the 52 weeks ended June
     28, 2003.

     Consolidated Statements of Cash Flows for the 52 weeks ended July 2, 2005,
     the 53 weeks ended July 3, 2004, and the 52 weeks ended June 28, 2003.

     Notes to Consolidated Financial Statements


                                       27
<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
LPA Holding Corp.

We have audited the accompanying consolidated balance sheets of LPA Holding
Corp. and subsidiaries (the "Company") as of July 2, 2005 and July 3, 2004, and
the related consolidated statements of operations and comprehensive loss,
stockholders' deficit, and cash flows for each of the three years in the period
ended July 2, 2005. Our audits also included the financial statement schedules
listed in the Index at Item 15. (a). 2. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of LPA Holding Corp. and subsidiaries
as of July 2, 2005 and July 3, 2004, and the results of their operations and
their cash flows for each of the three years in the period ended July 2, 2005,
in conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.


Deloitte & Touche LLP

Chicago, Illinois
September 23, 2005


                                       28
<PAGE>
LPA HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                          JULY 2,    JULY 3,
                                                           2005       2004
                                                         --------   --------
<S>                                                      <C>        <C>
ASSETS
Current assets:
   Cash and cash equivalents                             $  5,967   $  7,542
   Accounts receivable, net of allowance for
      doubtful accounts of $567 and $501, respectively     12,676     10,919
   Insurance deposits (Note 2)                              4,279      3,415
   Supplies inventory                                       4,172      3,949
   Other prepaid expenses                                   2,016        887
   Refundable taxes                                            27         39
                                                         --------   --------
      Total current assets                                 29,137     26,751

Property and equipment, at cost:
   Land                                                     5,442      5,442
   Buildings and leasehold improvements                    88,373     81,479
   Furniture and equipment                                 33,198     30,658
   Construction in progress                                    --         60
                                                         --------   --------
                                                          127,013    117,639
   Less accumulated depreciation                           88,859     79,474
                                                         --------   --------
      Property and equipment, net                          38,154     38,165

Insurance deposits (Note 2)                                 5,134      5,613
Other assets (Note 3)                                       5,230      5,333
                                                         --------   --------
Total assets                                             $ 77,655   $ 75,862
                                                         ========   ========
</TABLE>

                                                                     (continued)


                                       29
<PAGE>
LPA HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                          JULY 2,     JULY 3,
                                                            2005        2004
                                                         ---------   ---------
<S>                                                      <C>         <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Overdrafts due banks                                  $   2,879   $   3,789
   Accounts payable                                          7,784       7,690
   Current maturities of long-term debt and capital
      lease obligations  (Note 4)                            1,014       5,871
   Accrued salaries, wages and other payroll costs          20,284      20,434
   Accrued insurance liabilities                             6,454       5,857
   Accrued property and sales taxes                          3,811       4,041
   Accrued interest payable                                  1,946       1,997
   Reserve for closed schools                                  770       1,002
   Other current liabilities                                 9,619       8,578
                                                         ---------   ---------
      Total current liabilities                             54,561      59,259

Long-term liabilities:
   Long-term debt and capital lease obligations
      (Note 4)                                             191,370     184,731
   Other long-term liabilities (Note 5)                      8,102       8,676
   Series A 12% mandatorily redeemable preferred stock
      (Note 8)                                              91,699      79,866
                                                         ---------   ---------
      Total long-term liabilities                          291,171     273,273

Series B 5% convertible redeemable participating
   preferred stock ($0.01 par value per share);
   13,645,000 shares authorized, 10,006,550 shares and
   9,541,968 shares issued and outstanding; aggregate
   liquidation preference of $24.9 million and $22.7
   million, as of July 2, 2005 and July 3, 2004,
   respectively                                             24,935      22,747

Stockholders' deficit:
   Class A common stock ($0.01 par value per share);
      17,500,000 shares authorized; and 773,403 shares
      issued and outstanding                                     8           8
   Class B common stock ($0.01 par value per share);
      20,000 shares authorized, issued and outstanding

   Common stock warrants                                     8,596       8,596
   Accumulated other comprehensive income                       --          74
   Accumulated deficit                                    (301,616)   (288,095)
                                                         ---------   ---------
      Total stockholders' deficit                         (293,012)   (279,417)
                                                         ---------   ---------
Total liabilities and stockholders' deficit              $  77,655   $  75,862
                                                         =========   =========
</TABLE>

See notes to consolidated financial statements.


                          30
<PAGE>
LPA HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                         52WEEKSENDED   53WEEKSENDED   52WEEKSENDED
                                                            JULY 2,        JULY3,        JUNE 28,
                                                             2005           2004           2003
                                                         ------------   ------------   ------------
<S>                                                      <C>            <C>            <C>
Revenue                                                    $393,992       $383,491       $390,165
Operating expenses:
   Salaries, wages and benefits                             221,668        214,844        214,414
   Facility lease expense                                    47,137         44,924         45,652
   Depreciation and amortization                              9,498          8,776         10,372
   Restructuring charges (reversals) (Note 9)                   122           (864)         4,908
   Asset impairments (Note 13)                                1,174            692          3,057
   Provision for doubtful accounts                            1,526          2,490          2,802
   Other                                                     93,931         91,165        103,280
                                                           --------       --------       --------
Total operating expenses                                    375,056        362,027        384,485
                                                           --------       --------       --------
Operating income                                             18,936         21,464          5,680
Interest expense
   Interest on debt                                          19,453         19,865         21,509
   Dividends and accretion on Series A preferred
      stock (Note 6)                                         11,833         10,489             --
                                                           --------       --------       --------
Total interest expense                                       31,286         30,354         21,509
Interest income                                                 (86)           (43)          (127)
                                                           --------       --------       --------
      Net interest expense                                   31,200         30,311         21,382
                                                           --------       --------       --------
Income (loss) before income taxes                           (12,264)        (8,847)       (15,702)
Provision (benefit) for income taxes                             80             66            246
                                                           --------       --------       --------
Net income (loss)                                           (12,344)        (8,913)       (15,948)
                                                           --------       --------       --------
Other comprehensive loss:
   Derivative adjustments reclassified into operations          (74)           (86)           (86)
                                                           --------       --------       --------
      Total other comprehensive loss                            (74)           (86)           (86)
                                                           --------       --------       --------
Comprehensive income (loss)                                $(12,418)      $ (8,999)      $(16,034)
                                                           ========       ========       ========
</TABLE>

See notes to consolidated financial statements.


                                       31
<PAGE>
LPA HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                            CLASS A AND B
                                            COMMON STOCK
                                         ------------------                              ACCUMULATED        TOTAL
                                           NUMBER                        ACCUMULATED    OTHER COMPRE-   STOCKHOLDERS'
                                         OF SHARES   AMOUNT   WARRANTS     DEFICIT     HENSIVE INCOME      DEFICIT
                                         ---------   ------   --------   -----------   --------------   -------------
<S>                                      <C>         <C>      <C>        <C>           <C>              <C>
Balance, June 29, 2002                    584,985       6       8,596      (252,502)         246           (243,654)
                                          =======     ===      ======     =========         ====          =========
Amounts reclassified into operations                                                         (86)               (86)
Exercise of stock options                 208,418       2                                                         2
Preferred stock dividend and accretion                                       (9,725)                         (9,725)
Net loss                                                                    (15,948)                        (15,948)
                                          -------     ---      ------     ---------         ----          ---------
Balance, June 28, 2003                    793,403      $8      $8,596     $(278,175)        $160          $(269,411)
                                          =======     ===      ======     =========         ====          =========
Amounts reclassified into operations                                                         (86)               (86)
Preferred stock dividend and accretion                                       (1,007)                         (1,007)
Net loss                                                                     (8,913)                         (8,913)
                                          -------     ---      ------     ---------         ----          ---------
Balance, July 3, 2004                     793,403      $8      $8,596     $(288,095)        $ 74          $(279,417)
                                          =======     ===      ======     =========         ====          =========
Amounts reclassified into operations                                                         (74)               (74)
Preferred stock dividend and accretion                                       (1,177)                         (1,177)
Net loss                                                                    (12,344)                        (12,344)
                                          -------     ---      ------     ---------         ----          ---------
Balance, July 2, 2005                     793,403      $8      $8,596     $(301,616)        $ --          $(293,012)
                                          =======     ===      ======     =========         ====          =========
</TABLE>

See notes to consolidated financial statements


                                       32
<PAGE>
LPA HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)

<TABLE>
<CAPTION>
                                                                       52 WEEKS       53 WEEKS        52 WEEKS
                                                                         ENDED          ENDED          ENDED
                                                                     JULY 2, 2005   JULY 3, 2004   JUNE 28, 2003
                                                                     ------------   ------------   -------------
<S>                                                                  <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                            $(12,344)      $(8,913)       $(15,948)
   Adjustments to reconcile net loss to net cash from
      operating activities
      Asset impairments                                                   1,174           692           3,057
      Restructuring (reversals) charges                                     122          (864)          4,908
      Depreciation and amortization                                       9,498         8,776          10,372
      Dividends and accretion on Series A preferred stock (Note 6)       11,833        10,489              --
      Loss on sales and disposals of property and equipment                  89           211              90
      Other non cash items                                                  907           948           1,925
   Changes in assets and liabilities, net of acquisition:
      Accounts receivable                                                (1,757)           99             207
      Insurance deposits                                                   (385)       (1,035)         (4,477)
      Supplies inventory                                                   (223)         (874)           (120)
      Other prepaid expenses                                             (1,006)           18             612
      Refundable taxes                                                       12            17             472
      Accounts payable                                                       94          (755)            376
      Accrued salaries, wages and other payroll costs                      (350)        2,276           1,210
      Accrued property and sales taxes                                     (230)         (272)            260
      Accrued interest payable                                              (51)           15            (137)
      Other current liabilities                                           1,041         2,030          (2,206)
      Accrued insurance liabilities                                         732           144           2,861
      Reserve for closed schools                                           (690)       (1,972)         (3,268)
      Other changes in assets and liabilities, net                         (154)         (108)           (308)
                                                                       --------       -------        --------
         Net cash provided by (used for) operating activities             8,312        10,922            (114)
                                                                       --------       -------        --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Capital expenditures                                                 (10,153)       (8,373)         (5,594)
   Acquisitions                                                            (700)
   Proceeds from sale of assets                                              --         1,001           1,487
                                                                       --------       -------        --------
         Net cash used for investing activities                         (10,853)       (7,372)         (4,107)
                                                                       --------       -------        --------

CASH FLOWS FROM FINANCING ACTIVITIES
   Repayment of term loan and capital lease obligations                  (1,568)       (3,180)         (3,083)
   Net borrowings (payments) under the Revolving Credit Agreement         3,000        (8,095)          1,931
   Deferred debt issuance costs                                            (566)                         (496)
   Proceeds from issuance of common stock, redeemable preferred
      stock and warrants, net of expenses                                 1,010         5,001             745
   Overdrafts due bank                                                     (910)          734          (1,436)
                                                                       --------       -------        --------
         Net cash provided by (used for) financing activities               966        (5,540)         (2,339)
                                                                       --------       -------        --------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                (1,575)       (1,990)         (6,560)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                          7,542         9,532          16,092
                                                                       --------       -------        --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                             $  5,967       $ 7,542        $  9,532
                                                                       ========       =======        ========

SUPPLEMENTAL CASH FLOW INFORMATION:
   Cash paid during the period for:
      Interest                                                         $ 18,549       $18,854        $ 19,585
      Income taxes                                                           41            49             138

   Non-cash investing and financing activities:
      Capital lease obligations                                             350         1,470           1,400
</TABLE>

See notes to consolidated financial statements.


                                       33
<PAGE>
LPA HOLDING CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION

     The consolidated financial statements presented herein include LPA Holding
     Corp. (Parent), and its wholly owned subsidiary, La Petite Academy, Inc.
     (La Petite), and La Petite's wholly owned subsidiaries: Bright Start Inc.
     (Bright Start), and LPA Services, Inc. (Services). Parent, consolidated
     with La Petite, Bright Start and Services, is referred to herein as the
     Company.

     On March 17, 1998, LPA Investment LLC (LPA), a Delaware limited liability
     company, and Parent entered into an Agreement and Plan of Merger pursuant
     to which a wholly owned subsidiary of LPA was merged into Parent (the
     Recapitalization). LPA is the direct parent company of Parent and an
     indirect parent La Petite. LPA is owned by an affiliate of J.P. Morgan
     Partners LLC (JPMP) and by an entity controlled by Robert E. King. On
     September 28, 2005, certain members of Parent's management, including its
     President and Chief Executive Officer, and its Chief Financial Officer,
     were granted Class C Units of LPA. LPA has reserved 100,000 Class C Units
     to be issued to management of Parent from time to time. Pursuant to the
     terms of the Fourth Amended and Restated Operating Agreement (the
     "Operating Agreement") of LPA, the Class C Units are non-voting equity
     interests of LPA and are subject to repurchase by LPA or its designee upon
     the termination of such person's employment with Parent and La Petite. Upon
     the achievement of enumerated valuation thresholds set forth in the
     Operating Agreement, the Class C Units will represent in the aggregate up
     to 13% of the economic interests of LPA.

     The Company offers educational, developmental and childcare programs that
     are available on a full-time or part-time basis, for children between six
     weeks and twelve years old. The Company's Academies are located in 36
     states and the District of Columbia, primarily in the southern, Atlantic
     coastal, mid-western and western regions of the United States.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION - Over each of the past three years the Company has
     experienced significant losses before income taxes. In addition, as shown
     in the accompanying financial statements, the Company has a working capital
     and stockholders' deficit as of July 2, 2005. Over the past three years,
     there have been instances where the Company was not in compliance with its
     financial covenants set forth in the Credit Agreement and required multiple
     equity investments by LPA and other electing stockholders to enable it to
     meet its financial obligations as they came due and provide adequate
     liquidity to operate the business.

     Over the past year management has implemented a series of measures to
     improve the Company's operating results and cash flow. These actions
     included decreased discretionary expense spending and greater realization
     of revenue resulting from increased controls over the use of tuition
     discounts and coupons and an increased focus on collection of accounts
     receivable on the part of the divisional finance staff. Management is
     continuing to identify additional opportunities to further reduce its cost
     of operation and optimize revenue per academy classroom. Management
     believes that these efforts, coupled with (i) the remaining $7.7 million of
     equity commitment, as of July 2, 2005, provided by LPA and certain of the
     other stockholders of Parent, (ii) the available funds under the Revolving
     Credit Facility of $5.9 million, (iii) the extension of the final maturity
     date of the Credit Agreement to November 2007 and (iv) revision of certain
     existing financial covenant targets and establishment of new targets for
     the extended period of the Credit Agreement, will enable the Company to
     comply with its required financial covenants, meet its obligations as they
     come due and provide adequate liquidity to operate the business for the
     next twelve months. However, there can be no assurance in this regard, nor
     can there be any assurance that the Company can obtain additional funding
     from LPA beyond that as noted above or from any other external source.


                                       34
<PAGE>
     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
     the accounts of Parent and its wholly-owned subsidiary, La Petite, and La
     Petite's wholly-owned subsidiaries, Bright Start and Services, after
     elimination of all significant inter-company accounts and transactions.

     FISCAL YEAR END - The Company's fiscal year ends on the Saturday closest to
     June 30. Fiscal year 2005 was a 52 week year ended July 2, 2005, fiscal
     year 2004 was a 53 week year ended July 3, 2004, and fiscal year 2003 was a
     52 week year ended June 28, 2003. Unless otherwise noted, references in
     this report relate to fiscal years rather than calendar years.

     USE OF ESTIMATES - The preparation of financial statements in conformity
     with accounting principles generally accepted in the United States of
     America requires management to make estimates and assumptions that affect
     the reported amounts of assets and liabilities and disclosure of contingent
     assets and liabilities at the date of the financial statements and the
     reported amounts of revenues and expenses during the reporting period.
     Actual results could differ from those estimates. Significant estimates
     include the reserve for bad debts, reserve for closed schools, asset
     impairments, self insurance reserves, and depreciation and amortization.

     CASH EQUIVALENTS - The Company's cash equivalents consist of commercial
     paper and money market funds with original maturities of three months or
     less and receivables from banks and credit card companies for the
     settlement of credit card transactions, as they are generally collected
     within three business days.

     INSURANCE DEPOSITS - Insurance deposits represent cash held by insurance
     carriers as security for the self-insured portion of the Company's workers
     compensation, general liability and automobile insurance coverage.

     ALLOWANCE FOR DOUBTFUL ACCOUNTS - The Company calculates allowances for
     estimated losses resulting from the inability of customers to make required
     payments. The Company assesses the credit worthiness of its customers based
     on multiple sources of information and analyzes such factors as historical
     bad debt experience, publicly available information regarding customers and
     the inherent credit risk related to them, current economic trends and
     changes in customer payment terms or payment patterns.

     SUPPLIES INVENTORY- The Company's inventory consists primarily of various
     supplies, such as food, books, small equipment and office supplies, which
     are used in the operation of the Academies. The Company estimates the value
     of supplies on hand based on recent purchases and the related usage periods
     of those supplies.

     PROPERTY AND EQUIPMENT - Buildings, furniture and equipment are depreciated
     over the estimated useful lives of the assets using the straight-line
     method. Leasehold improvements are depreciated over the lesser of the
     estimated useful lives of the assets or the remaining life of the lease
     using the straight-line method. For financial reporting purposes, buildings
     are generally depreciated over 29 to 40 years, furniture and equipment over
     three to 10 years and leasehold improvements over five to 15 years.

     Maintenance and repairs are charged to expense as incurred. The cost of
     additions and improvements is capitalized and depreciated over the
     remaining useful lives of the assets. The cost and accumulated depreciation
     of assets sold or retired are removed from the accounts, and any gain or
     loss is recognized in the year of disposal, except gains and losses on
     property and equipment that have been sold and leased back, which are
     recognized over the terms of the related lease agreements.

     GOODWILL - Goodwill represents the excess of the purchase price over the
     fair value of assets and liabilities acquired related to the Company's
     acquisitions. Goodwill is tested for impairment on an annual basis, or
     earlier when facts and circumstances indicate that there may be a potential


                                       35
<PAGE>
     impairment. The test for impairment is based upon a number of factors
     including operating results, business plans and projected future cash
     flows.

     OTHER ASSETS - Other assets include real estate property held for sale, the
     deferred loss on real estate sale-leaseback transactions, deposits for rent
     and utilities, goodwill, and deferred financing costs. The loss on
     sale-leaseback transactions is being amortized over the lease term.

     IMPAIRMENT OF LONG-LIVED ASSETS - The Company reviews long-lived assets and
     certain identifiable intangibles for impairment whenever events or changes
     in circumstances indicate that the carrying amount of an asset may not be
     recoverable. If the carrying amount is not recoverable and the fair value
     is less than the carrying amount of the asset, a loss is recognized for the
     difference. Fair value is determined based on market quotes, if available,
     or is based on valuation techniques (See Note 13).

     INCOME TAXES - The Company uses the asset and liability method of
     accounting for deferred income taxes. Under the asset and liability method,
     deferred tax assets and liabilities are recognized for the estimated future
     tax consequences attributable to differences between the financial
     statement carrying amounts of existing assets and liabilities and their
     respective tax bases. This method also requires the recognition of future
     tax benefits such as net operating loss carry forwards, to the extent that
     realization of such benefits is more likely than not. Deferred tax assets
     and liabilities are measured using enacted tax rates expected to apply to
     taxable income in the years in which those temporary differences are
     expected to be recovered or settled. The effect on deferred tax assets and
     liabilities of a change in tax rates is recognized in income in the period
     that includes the enactment date.

     FINANCIAL INSTRUMENTS - At July 2, 2005, the carrying values of the
     Company's financial instruments, with the exception of the Company's Senior
     Notes, preferred stock, and convertible redeemable participating preferred
     stock, approximate fair value. The estimated fair value of the Senior Notes
     was $125.8 million and $107.3 million at July 2, 2005 and July 3, 2004,
     respectively. Estimates of fair value for the Senior Notes are obtained
     from independent broker quotes. There is not an active market for the
     Company's preferred stock. Management estimates that the fair value of the
     Series A preferred stock was $32.0 million at July 2, 2005 and had no fair
     value at July 3, 2004. Management estimates that the Series B preferred
     stock had no fair value at July 2, 2005 and July 3, 2004.

     RECOGNITION OF REVENUES AND PRE-OPENING EXPENSES - Tuition revenue, net of
     discounts, and other revenues are recognized as services are performed.
     Certain fees and tuition revenue may be received in advance of services
     being rendered, in which case the fee revenue is deferred and recognized
     over the expected service period. At July 2, 2005 and July 3, 2004,
     deferred registration fees and tuition revenue were $5.0 million and $4.4
     million, respectively. Expenses associated with opening new Academies are
     charged to expense as incurred.

     ADVERTISING COSTS - The Company expenses the production costs of
     advertising the first time the advertising takes place, except for prepaid
     advertising, which is capitalized and amortized over its expected period of
     future benefits. At July 2, 2005 and July 3, 2004, advertising assets were
     $0.3 million and $0.7 million, respectively. Advertising expense was $4.7
     million, $4.4 million and $4.3 million for the 52 weeks ended July 2, 2005,
     the 53 weeks ended July 3, 2004 and the 52 weeks ended June 28, 2003,
     respectively.

     SELF-INSURANCE PROGRAMS - The Company is self-insured for certain levels of
     general liability, workers' compensation, auto and employee medical
     coverage. Estimated costs of these self-insurance programs are accrued at
     the value of projected settlements for known and anticipated claims
     incurred.

     STOCK-BASED COMPENSATION - The Company accounts for stock compensation
     awards under Accounting Principles Board ("APB") Opinion No. 25 that
     requires compensation cost to be recognized based on the excess, if any,
     between the market price of the stock at the date of grant


                                       36
<PAGE>
     and the amount an employee must pay to acquire the stock. The weighted
     average fair value at date of grant for options granted during fiscal 2003
     was $0.00. Had compensation costs for these options been recognized as
     prescribed by Statement of Financial Accounting Standards ("SFAS) No. 123,
     Accounting for Stock-Based Compensation, as amended by SFAS No. 148,
     Accounting for Stock-Based Compensation - Transition and Disclosure, an
     Amendment of SFAS No. 123, it would not have had a material effect on the
     Company's results of operations. There were no options granted in fiscal
     2005 or fiscal 2004.

     SEGMENT REPORTING -The Company has determined that it currently operates
     entirely in one segment.

     DERIVATIVE FINANCIAL INSTRUMENTS- All derivatives are recorded on the
     balance sheet at fair value. Changes in derivative fair values are
     recognized in earnings as offsets to the changes in fair value of related
     hedged assets, liabilities and firm commitments. The ineffective portion,
     if any, of a hedging derivative's change in fair value is immediately
     recognized in earnings.

     From time to time derivative financial instruments are utilized by the
     Company in the management of its interest rate exposures. The Company does
     not use derivative financial instruments for trading or speculative
     purposes.

     During fiscal years ended July 2, 2005 and July 3, 2004, approximately
     $74,000 and $86,000 net of taxes, was reclassified from accumulated other
     comprehensive income into interest expense, respectively.

     The Company had no derivative financial instruments as of July 2, 2005.

     RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - In December 2004, the Financial
     Accounting Standards Board (FASB) issued SFAS No. 123 (R), Share-Based
     Payment. The Statement requires that the compensation cost relating to
     share-based payment transactions be recognized in the financial statements.
     That cost will be measured based on the fair value of the equity or
     liability instruments issued. The Company will be required to apply
     Statement 123 (R) as of the first annual period that begins after December
     15, 2005. The Company did not issue any stock options in fiscal 2004 or
     fiscal 2005 and does not expect the adoption of Statement 123 (R) will have
     a material impact on the Company's financial position or results of
     operations resulting from the Company's stock option plans in effect as of
     July 2, 2005. On September 28, 2005, certain members of Parent's
     management, including its President and Chief Executive Officer, and its
     Chief Financial Officer, acquired Class C Units of LPA. The Company is
     currently evaluating the impact of the acquisition by certain members of
     Parent's management of Class C Units of LPA on the Company's financial
     position or results of operations upon the adoption of Statement 123 (R).

     In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
     Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary
     Transactions. The amendments made by Statement No. 153 are based on the
     principle that exchanges of nonmonetary assets should be measured based on
     the fair value of assets exchanged. Further, the amendments eliminate the
     narrow exception for nonmonetary exchanges of similar productive assets and
     replace it with a broader exception for exchanges of nonmonetary assets
     that do no have commercial substance. The Statement is effective for
     nonmonetary asset exchanges occurring in the fiscal periods beginning after
     June 15, 2005. The Company does not expect the adoption of Statement No.
     153 will have a material on the Company's financial position or results of
     operations.

     In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting for
     Conditional Asset Retirement Obligations", to clarify certain provisions of
     FASB Statement No. 143, "Accounting for Asset Retirement Obligations."
     Interpretation No. 47 specifies that the term "conditional asset retirement
     obligation" includes an entity's legal obligation to perform an asset
     retirement activity for which the timing and (or) method of settlement are
     conditional on a future event that may or may not be in the control of the
     entity. This interpretation provides that an entity is required to
     recognize a liability for a conditional asset retirement obligation if the
     fair value of the obligation can be reasonably estimated. Interpretation
     No. 47 is effective no later than the end of fiscal years


                                       37
<PAGE>
     ending after December 15, 2005. The Company does not expect the adoption of
     Interpretation No. 47 will have a material on the Company's financial
     position or results of operations. RECLASSIFICATIONS - Certain
     reclassifications to prior year amounts have been made in order to conform
     to the current year presentation.

3.   NON-CURRENT ASSETS

     Insurance deposits represent cash held by insurance carriers as security
     for the self-insured portion of the Company's workers compensation, general
     liability and automobile insurance coverage.

     Other non-current assets consist of the following in thousands of dollars:

<TABLE>
<CAPTION>
                           JULY 2,    JULY 3,
                             2005      2004
                           -------   --------
<S>                        <C>       <C>
Deferred financing costs   $10,576   $10,010
Accumulated amortization    (7,740)   (6,642)
                           -------   -------
                             2,836     3,368
Other (a)                    2,394     1,965
                           -------   -------
                           $ 5,230   $ 5,333
                           =======   =======
</TABLE>

     a)   Other includes the unamortized portion of losses on sale-leasebacks,
          goodwill, utility deposits and properties held for sale, which are
          valued at fair value less cost to sell.

4.   LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

     Long-term debt and capital lease obligations consist of the following in
     thousands of dollars:

<TABLE>
<CAPTION>
                                                      JULY 2,    JULY 3,
                                                       2005       2004
                                                     --------   --------
<S>                                                  <C>        <C>
Senior Notes, 10.0% due May 15, 2008                 $145,000   $145,000
Borrowings under term loan facility,
   interest rate of 7.58% at July 2, 2005              32,452     33,002
Borrowings under revolving credit agreement,
   interest rate of 7.58% at July 2, 2005              14,000     11,000
Capital lease obligations and other long term debt        932      1,600
                                                     --------   --------
                                                      192,384    190,602
Less current maturities of long-term
   debt and capital lease obligations                  (1,014)    (5,871)
                                                     --------   --------
                                                     $191,370   $184,731
                                                     ========   ========
</TABLE>

     a)   The Senior Notes mature on May 15, 2008. Interest is payable
          semi-annually on May 15 and November 15 of each year. Commencing May
          15, 2003, the Senior Notes are redeemable at various redemption prices
          at Parent and La Petite's option. The Senior Notes are joint and
          several obligations of Parent and its 100% owned subsidiary, La
          Petite, as co-issuers, and are fully and unconditionally guaranteed on
          a joint and several basis by all of La Petite's 100% owned
          subsidiaries, namely, Bright Start and Services. Parent has no
          independent assets or operations. The Senior Notes contain certain
          covenants that, among other things, limit La Petite's ability to incur
          additional debt, pay cash dividends to Parent, transfer or sell
          assets, incur liens, enter into transactions with affiliates and merge
          with or into, consolidate with or transfer all or substantially of its
          assets to, other persons. In addition, the Senior Notes limit Parent's
          ability to merge with or into, consolidate with or transfer all or
          substantially all of its assets to, other persons. Except for these
          provisions in the Senior Notes and the provisions in


                                       38
<PAGE>
          the Credit Agreement described in the next paragraph, there are no
          restrictions on the ability of Parent or La Petite to obtain funds
          from its subsidiaries by dividend or loan.

     b)   On May 11, 1998 the Company entered into an agreement (the Credit
          Agreement) providing for a term loan facility in the amount of $40.0
          million and a revolving credit agreement for working capital and other
          general corporate purposes in the amount of $25 million. Borrowings
          under the Credit Agreement are secured by substantially all of the
          assets of Parent, La Petite and its subsidiaries. Loans under the
          Credit Agreement bear an interest rate per annum equal to (at the
          Company's option): (i) an adjusted London inter-bank offered rate
          (LIBOR) not to be less than an amount equal to 2.5% per annum, plus a
          percentage based on the Company's financial performance or (ii) a rate
          equal to the higher of The Chase Manhattan Bank's published prime
          rate, a certificate of deposit rate plus 1%, or the Federal Funds rate
          plus 1/2 of 1% plus in each case a percentage based on the Company's
          financial performance. The Company is required to pay fees of 0.5% per
          annum of the unused portion of the Credit Agreement plus letter of
          credit fees, annual administration fees and agent arrangement fees.
          The Credit Agreement contains certain covenants that, among other
          things, limit La Petite's and Parent's ability to incur additional
          debt, and limit La Petite's ability to pay cash dividends or make
          certain other restricted payments. In particular under the Credit
          Agreement, Parent may not incur any intercompany indebtedness and La
          Petite's ability to pay dividends to Parent is limited to dividends
          which are used by Parent to pay (i) expenses for administrative, legal
          and accounting services in an amount not to exceed $500,000 per year
          and (ii) franchise fees and taxes.

          On December 6, 2004, the Company entered into Amendment No. 7 to the
          Credit Agreement, effective as of November 30, 2004. Pursuant to the
          amendment to the Credit Agreement the final maturity of the Credit
          Agreement was extended to November 15, 2007. This amendment also (i)
          revised certain existing financial covenant targets required to be
          maintained by the Company and set new targets for the extended period
          of the Credit Agreement; (ii) deleted the requirement that LIBOR
          borrowings pay a predetermined minimum interest rate; and (iii)
          lowered the minimum dollar amount required to make a borrowing under
          the Credit Agreement. Payments due under the amortization schedule for
          the term loan are $0.4 million in fiscal year 2006, $0.4 million in
          fiscal year 2007 and $31.7 million in fiscal year 2008. The term loan
          is also subject to mandatory prepayment in the event of certain equity
          or debt issuances or asset sales by the Company or any of its
          subsidiaries and in amounts equal to specified percentages of excess
          cash flow (as defined). On July 2, 2005, there was $32.5 million
          outstanding under the term loan and $14.0 million outstanding under
          the Revolving Credit Facility. In addition, La Petite had outstanding
          letters of credit in an aggregate amount of $5.1 million, resulting in
          $5.9 million available for working capital purposes under the
          Revolving Credit Facility. The Company's Credit Agreement, Senior
          Notes and preferred stock contain certain covenants that limit the
          ability of the Company to incur additional indebtedness, pay cash
          dividends or make certain other restricted payments. At July 2, 2005
          the Company was in compliance with the covenants described above.

          On April 13, 2005, the Company entered into Amendment No. 8 to the
          Credit Agreement to change the issuing bank of its Letters of Credit
          and to restore a swingline loan mechanism that was previously deleted
          by prior amendments to the Company's Credit Agreement.

     Scheduled maturities and mandatory prepayments of long-term debt and
     capital lease obligations during the five years subsequent to July 2, 2005,
     adjusted for the impact of the amendment of the Credit Agreement, are as
     follows (in thousands of dollars):


                                       39
<PAGE>
<TABLE>
<CAPTION>
                         CAPITAL  LEASES
                      --------------------   LONG-TERM
                      COMPUTERS   VEHICLES      DEBT       TOTAL
                      ---------   --------   ---------   --------
<S>                   <C>         <C>        <C>         <C>
FISCAL YEAR ENDING:
2006                     $ 2        $589      $    423   $  1,014
2007                      --         177           424        601
2008                      --          46       190,679    190,725
2009                      --          --            29         29
2010                      --          --            15         15
2011 and thereafter       --          --            --         --
                         ---        ----      --------   --------
                         $ 2        $812      $191,570   $192,384
                         ===        ====      ========   ========
</TABLE>

5.   OTHER LONG-TERM LIABILITIES

     Other long-term liabilities consist of the following in thousands of
     dollars:

<TABLE>
<CAPTION>
                                      JULY 2,   JULY 3,
                                        2005      2004
                                      -------   -------
<S>                                   <C>       <C>
Unfavorable leases (a)                 $  435    $  638
Reserve for closed schools (b)            267       573
Deferred severance (c)                    302       502
Long-term insurance liabilities (d)     7,098     6,963
                                       ------    ------
                                       $8,102    $8,676
                                       ======    ======
</TABLE>

     (a)  In connection with the acquisitions of La Petite and Bright Start, a
          liability for unfavorable operating leases was recorded and is being
          amortized over the average remaining life of the leases.

     (b)  The reserve for closed schools includes the long-term liability
          related primarily to leases for schools that were closed and are no
          longer operated by the Company.

     (c)  On December 11, 2002, the Company entered into a Separation Agreement
          with the Company's former Chief Executive Officer and President. The
          long-term portion of the Company's total contractual obligations
          pursuant to the Separation Agreement is $0.3 million as of July 2,
          2005.

     (d)  Long-term insurance liabilities reflect the Company's obligation for
          reported but not paid, and incurred but not reported, workers'
          compensation, auto and general liability claims.

6.   INCOME TAXES

     The provision (benefit) for income taxes recorded in the Consolidated
     Statements of Operations and Comprehensive Loss consisted of the following
     (in thousands of dollars):

<TABLE>
<CAPTION>
              52 WEEKS ENDED   53 WEEKS ENDED   52 WEEKS ENDED
                  JULY 2,          JULY 3,         JUNE 28,
                   2005             2004             2003
              --------------   --------------   --------------
<S>           <C>              <C>              <C>
Current:
   Federal          $--              $--             $ 46
   State             80               66              200
                    ---              ---             ----
      Total          80               66              246
                    ---              ---             ----
Deferred:
   Federal           --               --               --
   State             --               --               --
                    ---              ---             ----
      Total          --               --               --
                    ---              ---             ----
                    $80              $66             $246
                    ===              ===             ====
</TABLE>


                                       40
<PAGE>
     A reconciliation between the statutory federal income tax rate and the
     effective income tax rate is as follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                  52 WEEKS ENDED   53 WEEKS ENDED   52 WEEKS ENDED
                                                   JULY 2, 2005     JULY 3, 2004     JUNE 28, 2003
                                                  --------------   --------------   --------------
<S>                                               <C>              <C>              <C>
Expected tax benefit at federal statutory
   rate of 35%                                       $(4,293)         $(3,097)         $(5,495)
State income tax benefit, net of federal income
   tax effect                                             (8)              77             (879)
Goodwill amortization and impairment                      --               --               --
Change in effective rate                                  --            1,268               --
Preferred stock dividend                               4,141            3,671               --
Tax credits                                               --              (91)            (154)
Valuation allowance adjustment                            74           (2,538)           6,316
Other                                                    164              776              458
                                                     -------          -------          -------
   Total                                             $    80          $    66          $   246
                                                     =======          =======          =======
</TABLE>

     Deferred income taxes result from differences between the financial
     reporting and income tax basis of the Company's assets and liabilities. The
     sources of these differences and their cumulative tax effects at July 2,
     2005 and July 3, 2004 are estimated as follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                     JULY 2,    JULY 3,
                                                      2005       2004
                                                    --------   --------
<S>                                                 <C>        <C>
Current deferred taxes:
   Accruals not currently deductible                $  7,213   $  6,939
   Supplies                                           (1,592)    (1,494)
   Prepaids and other                                    141        211
                                                    --------   --------
      Gross current deferred tax assets                5,761      5,656
Noncurrent deferred taxes:
   Unfavorable leases                                    170        249
   Insurance reserves                                  2,768      2,716
   Reserve for closed academies                          104        224
   Operating losses and tax credit carry forwards     14,581     13,934
   Property and equipment                              6,645      6,675
   Intangible assets                                     250        252
   Original issue discount                               434        572
   Other                                                 262        625
                                                    --------   --------
      Gross noncurrent deferred tax assets            25,216     25,247
                                                    --------   --------
Total gross deferred tax assets                       30,977     30,903
      Less valuation allowance                       (30,977)   (30,903)
                                                    --------   --------
Net deferred tax assets                             $     --   $     --
                                                    ========   ========
</TABLE>

     The Company determined that based on cumulative historical pretax losses,
     it was more likely than not that the deferred tax assets as of July 2, 2005
     and July 3, 2004 would not be realized. Therefore, the Company has recorded
     a valuation allowance to fully reserve those deferred tax assets at both
     fiscal 2005 and 2004 year-end. The provision for income taxes at July 2,
     2005 includes a $0.1 million increase in the valuation allowance and the
     provision for income taxes at July 3, 2004 includes a $2.5 million
     reduction of the valuation allowance.

     The Company has federal net operating loss carry-forwards and tax credit
     carry-forwards of 31.5 million and $2.3 million, respectively. These
     carry-forwards expire in fiscal years 2006 through 2024.


                                       41
<PAGE>
7.   LEASES

     Academy facilities are leased for terms ranging from 15 to 20 years. The
     leases provide renewal options and require the Company to pay utilities,
     maintenance, insurance and property taxes. Some leases provide for annual
     increases in the rental payment and many leases require the payment of
     additional rentals if operating revenue exceeds stated amounts. These
     additional rentals range from 2% to 10% of operating revenue in excess of
     the stated amounts and are recorded as rental expense. Vehicles are also
     rented under various lease agreements, most of which are cancelable within
     30 days after a one-year lease obligation. Substantially all facility
     leases and 63% of the vehicle leases are operating leases. Rental expenses
     for these leases were $48.3 million, $46.9 million, and $48.7 million, for
     the 52 weeks ended July 2, 2005, the 53 weeks ended July 3, 2004, and the
     52 weeks ended June 28, 2003, respectively. Contingent rental expense of
     $1.1 million, $1.6 million, and $1.5 million were included in rental
     expense for the 52 weeks ended July 2, 2005, the 53 weeks ended July 3,
     2004, and the 52 weeks ended June 28, 2003, respectively.

     Aggregate minimum future rentals payable under facility leases as of July
     2, 2005 were as follows (in thousands of dollars):

<TABLE>
<S>                   <C>
Fiscal year ending:
2006                  $ 43,985
2007                    35,208
2008                    28,195
2009                    21,586
2010                    15,763
2011 and thereafter     53,665
                      --------
                      $198,402
                      --------
</TABLE>

     While the Company is liable for maintenance, insurance and other similar
     costs under most of its leases, such costs are not included in the future
     minimum lease payments.

8.   REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

     The authorized stock of Parent as of July 2, 2005 consists of:

     (i)  45,000 shares of Series A 12% mandatorily redeemable preferred stock,
          $0.01 par value, (Series A preferred stock) all of which were issued
          and outstanding as of July 2, 2005 and July 3, 2004. The original
          carrying value of the preferred stock of $36.4 million is being
          accreted to its redemption value of $45.0 million on May 11, 2008. The
          Series A preferred stock is non-voting and mandatorily redeemable on
          May 11, 2008. Dividends at the rate of 12.0% per annum are cumulative
          and if not paid on the June 30 or December 31 semi-annual Series A
          preferred stock dividend dates are added to the liquidation value. The
          liquidation value was $97.6 million and $86.9 million as of July 2,
          2005 and July 3, 2004, respectively. Accrued dividends were $52.6
          million and $41.9 million at July 2, 2005 and July 3, 2004,
          respectively. The Series A preferred stock may be exchanged for 12.0%
          Subordinated Exchange Debentures due 2008, at Parent's option, subject
          to certain conditions, in whole, but not in part, on any scheduled
          dividend payment date. The Series A preferred stock contains certain
          restrictive provisions that limit the ability of Parent to pay cash
          dividends.


                                       42
<PAGE>
          The Company recognized $11.8 million and $10.5 million in dividends
          and accretion on the Series A preferred stock as interest expense
          during the 52 weeks ended July 2, 2005 and July 3, 2004, respectively.
          The charges to interest expense are currently non-cash charges, as the
          Series A preferred stock dividends have not been paid but rather have
          been added to the Series A preferred stock liquidation value.
          Commencing on July 1, 2005, the Series A preferred stock dividends
          became payable in cash, subject to the limitations in the Company's
          senior credit agreement which prohibits such payments without the
          lenders' prior consent. Absent such consent, the dividends will
          continue to be added to the Series A preferred stock liquidation
          value.

     (ii) 13,645,000 shares of Series B 5% convertible participating redeemable
          preferred stock, $0.01 par value, (Series B preferred stock) of which
          10,006,550 and 9,541,968 shares were issued and outstanding as of July
          2, 2005 and July 3, 2004, respectively. The Series B preferred stock
          votes on an "as-converted" basis with the Class A common stock and is
          redeemable at the holders' option, at any time on or after May 11,
          2009. Dividends at the rate of 5.0% per annum are cumulative and if
          not paid on the June 30 or December 31 semi-annual preferred stock
          dividend dates are added to the liquidation value. The liquidation
          value was $24.9 million and $22.7 million as of July 2, 2005 and July
          3, 2004, respectively. Accrued dividends were $3.2 million and $2.0
          million at July 2, 2005 and July 3, 2004, respectively. The Series B
          preferred stock may be converted into shares of the Company Class A
          common stock at any time at the then applicable conversion price, as
          defined in the purchase agreement, and all shares will automatically
          convert into shares of the Company Class A common stock (i) upon an
          election to so convert by holders of a majority of the Series B
          preferred stock or (ii) immediately prior to the consummation of a
          qualified initial public offering of common stock. The conversion rate
          was $2.174 as of July 2, 2005. 13,645,000 shares of Class A common
          stock has been reserved for the conversion of the Series B preferred
          stock. The Series B preferred stock contains certain restrictive
          provisions that limit the ability of Parent to pay cash dividends.

     (iii) 17,500,000 shares of Class A common stock, $0.01 par value, (Class A
          common stock) of which 773,403 shares were issued and outstanding as
          of July 2, 2005 and July 3, 2004. At July 2, 2005, 526,582 shares of
          Class A common stock were reserved for issuance under the 1998 Stock
          Option Plan and the 1999 Non Employee Director Stock Option Plan. The
          Class A common stock contains certain restrictive provisions that
          limit the ability of Parent to pay cash dividends.

     (iv) 20,000 shares of Class B common stock, $0.01 par value, (Class B
          common stock) of which 20,000 shares were issued and outstanding as of
          July 2, 2005 and July 3, 2004. The Class B common stock votes together
          with the Class A common stock as a single class, with the holder of
          each share of common stock entitled to cast one vote. The holders of
          the Class B common stock have the exclusive right, voting separately
          as a class, to elect one member to the Board of Directors of Parent.
          Each share of the Class B common stock is convertible at the option of
          the holder, at any time, into one share of Class A common stock.

     The outstanding warrants of Parent as of July 2, 2005 consist of:

     (i)  Warrants to purchase 64,231 shares of Class A common stock at a
          purchase price of $0.01 per share any time on or before May 11, 2008.
          The warrants were issued in connection with the sale of Series A
          preferred stock; the Company recognized discounts on the Series A
          preferred stock by allocating $8.6 million to the warrants
          representing the fair value of the warrants when issued.

     (ii) Warrants to purchase 562,500 shares of Class A common stock at a
          purchase price of $0.01 per share any time on or before May 11, 2009.
          The warrants were issued in connection with the sale of Series B
          preferred stock in fiscal year 2002. The Company did not recognize
          discounts on the Series B preferred stock, as the warrants had no fair
          value when issued.

     (iii) Warrants to purchase 1,692,423 shares of Class A common stock at a
          purchase price of $0.01 per share any time on or before May 11, 2009.
          The warrants were issued in connection with the commitment by LPA and
          other electing shareholders to purchase Series B preferred stock.


                                       43
<PAGE>
          The Company did not recognize discounts on the Series B preferred
          stock, as the warrants had no fair value when issued.

     Pursuant to the terms of the Securities Purchase Agreement dated February
     10, 2003, entered into by Parent and its stockholders who have elected to
     exercise their respective preemptive rights (the "Electing Stockholders"),
     as amended by Amendment No. 1 to the Securities Purchase Agreement dated
     July 31, 2003, Parent may issue up to 6,669,734 shares of its Series B
     convertible preferred stock. In connection with such prospective issuance,
     Parent issued warrants to purchase 1,692,423 shares of its class A common
     stock, pro rata to each Electing Stockholder. All of the proceeds received
     by Parent from the issuance of the Series B preferred stock will be
     contributed to La Petite as common equity and are expected to be used by La
     Petite for general working capital and liquidity purposes.

     The Electing Stockholders are only required to purchase shares of Series B
     preferred stock if (a) the fixed charge coverage ratio at the end of a
     fiscal quarter (calculated in accordance with the terms of the Credit
     Agreement) is less than the fixed charge coverage ratio target set forth in
     the Credit Agreement with respect to such fiscal quarter (a "Fixed Charge
     Purchase"), (b) from time to time, the cash account of Parent and its
     subsidiaries is negative (as calculated in accordance with the provisions
     of Amendment No. 1 to the Securities Purchase Agreement) over a historical
     4 or 5 week review period (a "Cash Shortfall Purchase"), or (c) (i) a
     payment default shall occur and be continuing under the Credit Agreement or
     (ii) following payment in full of the obligations under the Credit
     Agreement, a payment default shall occur and be continuing under the
     Indenture for the Senior Notes (a "Payment Default Purchase"). The
     aggregate number of shares to be purchased, if any, by the Electing
     Stockholders pursuant to a Fixed Charge Purchase shall be purchased within
     ten business days following the date that Parent is required to deliver its
     quarterly or annual, as applicable, financial information to the senior
     lenders pursuant to the terms of the Credit Agreement, and shall equal the
     quotient obtained by dividing (x) the amount of cash which would have been
     needed to increase the Parent's consolidated EBITDAR (as defined in the
     Credit Agreement) to an amount which would have satisfied the fixed charge
     coverage ratio target set forth in the Credit Agreement by (y) $2.174. The
     aggregate number of shares to be purchased, if any, by the Electing
     Stockholders pursuant to a Cash Shortfall Purchase shall be made on the
     tenth business day after the end of each review period, and shall equal (A)
     the sum of (x) the cash deficit and (y) $500,000, divided by (B) $2.174,
     less (C) the number of shares purchased pursuant to Cash Shortfall
     Purchases and Fixed Charge Purchases during the applicable review period.
     The aggregate number of shares to be purchased by the Electing Stockholders
     pursuant to a Payment Default Purchase shall be purchased within five (5)
     business days after notice of such default is delivered to the Electing
     Stockholders and shall equal (A) the amount of funds necessary to cure the
     payment default under the Credit Agreement or the Indenture for the Senior
     Notes, as applicable, divided by (B) $2.174. The Electing Stockholders have
     the right to purchase shares of Series B preferred stock at any time, in
     which case the aggregate number of shares of Series B preferred stock to be
     purchased by the Electing Stockholders with respect to a particular fiscal
     quarter or review period, as applicable, shall be reduced by the number of
     shares of Series B preferred stock purchased prior to the expiration of
     such fiscal quarter or review period. The obligation of each Electing
     Stockholder to purchase shares of Series B preferred stock shall expire on
     the earlier of (a) the date the Electing Stockholders purchase an aggregate
     of 6,669,734 shares of Series B preferred stock; and (b) the date the
     obligations (other than contingent obligations and liabilities) of Parent
     and its subsidiaries under (i) the Credit Agreement and (ii) the Indenture
     dated as of May 11, 1998, among the Corporation and certain of its
     subsidiaries and PNC Bank, National Association as trustee (as amended) are
     terminated.

     LPA has committed to purchase, in accordance with the terms of the
     Securities Purchase Agreement, 6,658,636 shares of the Series B preferred
     stock being offered and has received warrants to purchase 1,689,607 shares
     of Parent's class A common stock in connection with such commitment. In
     accordance with such commitment, LPA purchased 341,766 shares of Series B
     preferred stock in June 2003 for $0.7 million, 1,379,945 shares of Series B
     preferred stock in November 2003 for $3.0 million, 919,963 shares of Series
     B preferred stock in December 2003 for $2.0 million, and 459,982 shares of
     Series B preferred stock in December 2004 for $1.0 million.


                                       44
<PAGE>
     Further, in accordance with their commitment to purchase shares of Series B
     preferred stock and in accordance with the terms of the Securities Purchase
     Agreement, the Electing Stockholders other than LPA purchased 570 shares of
     Series B preferred stock in June 2003, 2,300 shares of Series B preferred
     stock in November 2003, 1,534 shares of Series B preferred stock in
     December 2003, and 766 shares of Series B preferred stock in December 2004.
     Accordingly, at July 2, 2005, the remaining contingent equity commitment
     from the stockholders of Parent was $7.7 million. Pursuant to Amendment No.
     2 to the Securities Purchase Agreement which was effective as of November
     30, 2004, the Electing Stockholders agreed to purchase Series B preferred
     stock if the Company fails at any time to make principal and interest
     payments on the Senior Notes due 2008. The foregoing obligation is in
     addition to the existing obligations of the Electing Stockholders to
     purchase shares of Series B preferred stock; however, the additional
     obligation does not increase the amount of equity committed by any of the
     Electing Stockholders. The amendment to the Securities Purchase Agreement
     also granted the holders representing a majority of the Senior Notes due
     2008 with the right to release the Electing Stockholders from the equity
     commitments under the Securities Purchase Agreement at any time after the
     repayment of the debt outstanding under the Credit Agreement.

9.   BENEFIT PLAN

     The Company sponsors a defined contribution plan that was established on
     January 1, 2001 (the "2001 Plan") for substantially all employees. Eligible
     participants may make contributions to the 2001 Plan from 0% to 15% of
     their compensation (as defined). The Company may make contributions at the
     discretion of the Board of Directors. The Company made no contributions for
     fiscal years 2005 and 2004.

10.  COMMITMENTS AND CONTINGENCIES

     The Company has litigation pending which arose in the ordinary course of
     business. Litigation is subject to many uncertainties and the outcome of
     the individual matters is not presently determinable. It is management's
     opinion that this litigation will not result in liabilities that would have
     a material adverse effect on the Company's financial position, annual
     results of operations or annual cash flows. The Company has employment
     contracts with certain executive officers.

11.  STOCK-BASED COMPENSATION

     On August 27, 1995, the Board of Directors of Parent adopted the
     "Non-Qualified Stock Option Agreement" (1995 Plan). Under the terms of the
     1995 Plan, the Board of Directors in their sole discretion granted
     non-qualified options for common stock of Parent to key executives of the
     Company. Options were granted pursuant to an agreement at the time of
     grant, and typically became exercisable in equal cumulative installments
     over a five-year period beginning one year after the date of grant. All
     such options granted expire on the tenth anniversary of the grant date. No
     market existed for the common stock of Parent, but options were granted at
     prices that, in the opinion of the Board of Directors, were equal to or
     greater than the fair value of the stock at the time of grant.

     Effective May 11, 1998, the Board of Directors of Parent adopted the "1998
     Stock Option Plan" (1998 Plan). The 1998 Plan provides for the granting of
     Tranche A and Tranche B options to purchase up to 60,074 shares of the
     Parent's common stock. During the 2001 year, the Board of Directors of
     Parent amended the 1998 Plan, increasing to 230,000 the number of shares of
     the Parent's common stock that may be purchased. During the 2002 year, the
     Board of Directors of Parent amended the 1998 Plan, increasing to 725,000
     the number of shares of the Parent's common stock that may be purchased.
     Tranche A options expire ten years from the date of grant and become
     exercisable ratably over 48 months. Tranche B options expire ten years from
     the date of grant and are exercisable only in the event of a change in
     control or a registered public offering of common stock which provides
     certain minimum returns (as defined).

     On August 19, 1999, Parent adopted the 1999 Stock Option Plan for
     Non-Employee Directors (1999 Plan). Under the terms of the 1999 Plan,
     10,000 shares of Parent's common stock are


                                       45
<PAGE>
     reserved for issuance to non-employee directors at prices that approximate
     the fair value of a share of Parent's common stock at the date of issuance.
     Options vest ratably on the last day of each month over four years
     following the date of grant, if the person is a director on that day.

     On August 26, 2002, the Company granted options to purchase 180,254 shares
     of common stock of Parent at an exercise price of $0.01 to its then Chief
     Operating Officer (subsequently promoted to Chief Executive Officer). On
     August 26, 2002, the Company also granted options to purchase 270,381
     shares of common stock of Parent at an exercise price of $0.01 to its Chief
     Executive Officer. In return for the grant of new options, the Chief
     Executive Officer forfeited all previous option grants. In February 2003,
     the former Chief Executive Officer exercised options to purchase 208,418
     shares of common stock of LPA Holding at an exercise price of $0.01 and
     61,963 options were cancelled. There were no stock options granted in
     fiscal years 2004 and 2005.

     The 1995 Plan, the 1998 Plan, and the 1999 Plan were approved by the
     shareholders of Parent.

     Stock option transactions during the past three years have been as follows:

<TABLE>
<CAPTION>
                                                     1998 PLAN              1998 PLAN
                                               --------------------   --------------------
                              1995 PLAN              TRANCHE A              TRANCHE B              1999 PLAN
                        --------------------   --------------------   --------------------   --------------------
                                   WEIGHTED               WEIGHTED               WEIGHTED               WEIGHTED
                        OPTIONS   AVG. PRICE   OPTIONS   AVG. PRICE   OPTIONS   AVG. PRICE   OPTIONS   AVG. PRICE
                        -------   ----------   -------   ----------   -------   ----------   -------   ----------
<S>                     <C>       <C>          <C>       <C>          <C>       <C>          <C>       <C>
Options outstanding
   at June 29, 2002      3,213      $21.97     119,610     $66.92         600     $133.83     3,900      $66.92
                         -----      ------     -------     ------      ------     -------     -----      ------
   Granted                                     450,635     $ 0.01
   Exercised                                   208,418     $ 0.01
   Canceled                                    131,773     $35.46
                         -----      ------     -------     ------      ------     -------     -----      ------
Options outstanding
   at June 28, 2003      3,213      $21.97     230,054     $14.49         600     $133.83     3,900      $66.92
                         =====      ======     =======     ======      ======     =======     =====      ======
   Granted
   Exercised
   Canceled
                         -----      ------     -------     ------      ------     -------     -----      ------
Options outstanding
   at July 3, 2004       3,213      $21.97     230,054     $14.49         600     $133.83     3,900      $66.92
                         =====      ======     =======     ======      ======     =======     =====      ======
   Granted
   Exercised
   Canceled                963      $18.00      25,600     $66.92                             2,900      $66.92
                         -----      ------     -------     ------      ------     -------     -----      ------
Options outstanding
   at July 2, 2005       2,250      $23.67     204,454     $ 7.93         600     $133.83     1,000      $66.92
                         =====      ======     =======     ======      ======     =======     =====      ======
Options exercisable
   at July 2, 2005       2,250                 155,635                                        1,000
                         =====                 =======                 ======                 =====
Options available for
   grant at
   June 2, 2005                                297,112                 14,416                 9,000
                         =====                 =======                 ======                 =====
</TABLE>


                                       46
<PAGE>
<TABLE>
<CAPTION>
                               OPTIONS OUTSTANDING
                      ------------------------------------     OPTIONS EXERCISABLE
                                      WEIGHTED               ----------------------
                                      AVERAGE     WEIGHTED                 WEIGHTED
                                     REMAINING     AVERAGE                  AVERAGE
RANGE OF                 NUMBER     CONTRACTUAL   EXERCISE      NUMBER     EXERCISE
EXERCISE PRICE        OUTSTANDING       LIFE        PRICE    EXERCISABLE     PRICE
--------------        -----------   -----------   --------   -----------   --------
<S>                   <C>           <C>           <C>        <C>           <C>
1995 Plan:
   $18.00                 1,500       0.2 years    $ 18.00       1,500      $18.00
   $35.00                   750       1.4 years    $ 35.00         750      $35.00
                        -------       ---------    -------     -------      ------
   $18.00 to $35.00       2,250       0.6 years    $ 23.67       2,250      $23.67
                        =======       =========    =======     =======      ======

1998 Tranche A:
   $66.92                24,200       4.9 years    $ 66.92      24,200      $66.92
   $ 0.01               180,254       7.1 years    $  0.01     131,435      $ 0.01
                        -------       ---------    -------     -------      ------
   $18.00 to $66.92     204,454       6.8 years    $  7.93     155,635      $10.41
                        =======       =========    =======     =======      ======

1998 Tranche B
   $133.83                  600       2.9 years    $133.83
                        =======       =========    =======
1999 Plan
   $66.92                 1,000       4.1 years    $ 66.92       1,000      $66.92
                        =======       =========    =======     =======      ======
</TABLE>

     The Company accounts for all options in accordance with APB Opinion No. 25,
     which requires compensation cost to be recognized only on the excess, if
     any, between the fair value of the stock at the date of grant and the
     amount an employee must pay to acquire the stock. Under this method, no
     compensation cost has been recognized for stock options granted.

     On September 28, 2005, certain members of Parent's management, including
     its President and Chief Executive Officer, and its Chief Financial Officer,
     were granted Class C Units of LPA. LPA has reserved 100,000 Class C Units
     to be issued to management of Parent from time to time. Pursuant to the
     terms of the Operating Agreement of LPA, the Class C Units are non-voting
     equity interests of LPA and are subject to repurchase by LPA or its
     designee upon the termination of such person's employment with Parent and
     La Petite. Upon the achievement of enumerated valuation thresholds set
     forth in the Operating Agreement, the Class C Units will represent in the
     aggregate up to 13% of the economic interests of LPA.

12.  RESTRUCTURING CHARGES

     In the 2005 year, the Company recorded adjustments to its previously
     established restructuring reserves which had the net effect of increasing
     the reserves by $0.1 million, These adjustments were principally due to the
     under-realization of sublet income and the settlement of rent liabilities
     for more than the recorded reserves, offset by the settlement of
     contractual repairs and maintenance costs, and real estate taxes for less
     than the recorded reserves. In the 2004 year, the Company recorded
     adjustments to its previously established restructuring reserves, which had
     the net effect of reducing the reserves by $0.9 million. These adjustments
     included restructuring charges of $0.5 million, primarily due to repairs
     and maintenance costs related to closed schools, offset by reversals of
     $1.5 million principally due to settlement of lease liabilities for less
     than the recorded reserves. In the 2004 year, the Company also recognized
     restructuring charges of $0.1 million in connection with the closure of 6
     schools. In the 2003 year, the Company recognized restructuring charges of
     $7.4 million in connection with the closure of 73 schools and $0.4 million
     in connection with the write-down to fair market value of real estate
     properties held for disposal, offset by recoveries of $2.9 million
     principally due to settlement of lease liabilities for less than the
     recorded reserves. Included in the restructuring charges, were non-cash
     charges of $0. million, $0.0 million and $1.7 million in fiscal years 2005,
     2004 and 2003 respectively. As of July 2, 2005, the remaining reserves for
     closed schools primarily reflect the present value of future rent


                                       47
<PAGE>
     payments for closed facilities. The leases on the closed facilities expire
     between fiscal year 2006 and 2010. A summary of the restructuring reserve
     activity is as follows, with dollars in thousands:

<TABLE>
<CAPTION>
                                         FISCAL YEAR
                                             2005
                                         -----------
<S>                                      <C>
Balance at June 29, 2002                   $ 4,598
Provision recorded in fiscal year 2003       7,788
Reversals recorded in fiscal year 2003      (2,880)
Amount utilized in fiscal year 2003         (5,040)
                                           -------
Balance at June 28, 2003                     4,466

Provision recorded in fiscal year 2004         620
Reversals recorded in fiscal year 2004      (1,484)
Amount utilized in fiscal year 2004         (2,026)
                                           -------
Balance at July 3, 2004                      1,576

Provision recorded in fiscal year 2005         315
Reversals recorded in fiscal year 2005        (193)
Amount utilized in fiscal year 2005           (661)
                                           -------
Balance at July 2, 2005                    $ 1,037
                                           =======
</TABLE>

     On the consolidated balance sheet, the current portion of the restructuring
     reserve is presented in the reserve for closed academies line item, and the
     long-term portion is included in the other long-term liabilities line item.

13.  ASSET IMPAIRMENTS

     During fiscal years 2005, 2004 and 2003, the Company identified conditions,
     including a projected current year operating loss as well as negative cash
     flows in certain of the Company's schools, as indications that the carrying
     amount of certain long-lived assets may not be recoverable. In accordance
     with the Company's policy, management assessed the recoverability of
     long-lived assets at these schools using a cash flow projection based on
     the remaining useful lives of the assets. Based on this projection, the
     cumulative cash flow over the remaining depreciation or amortization period
     was insufficient to recover the carrying value of the assets at certain of
     these schools. As a result, the Company recognized impairment losses of
     $1.2 million, $0.7 million and $3.1 million related to property and
     equipment in fiscal 2005, 2004 and 2003, respectively.

14.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     Following is a summary of amounts reported in the Company's Quarterly
     Reports on Form 10-Q.

<TABLE>
<CAPTION>
                          12 WEEKS   12 WEEKS   12 WEEKS   16 WEEKS
                            ENDED      ENDED      ENDED      ENDED
FISCAL YEAR 2005           JULY 2,     APRIL     JANUARY    OCTOBER
IN THOUSANDS OF DOLLARS     2005      9, 2005   15, 2005   23, 2004
-----------------------   --------   --------   --------   --------
<S>                       <C>        <C>        <C>        <C>
Revenue                   $98,144     $96,504   $86,972    $112,372
Operating income            7,200       8,201     4,648      (1,113)
                          -------     -------   -------    --------
Net income (loss)         $  (158)    $   928   $(2,529)   $(10,585)
                          =======     =======   =======    ========
</TABLE>


                                       48
<PAGE>
<TABLE>
<CAPTION>
                          13 WEEKS   12 WEEKS   12 WEEKS   16 WEEKS
                            ENDED      ENDED      ENDED      ENDED
FISCAL YEAR 2004           JULY 3,     APRIL     JANUARY    OCTOBER
IN THOUSANDS OF DOLLARS     2004      3, 2004   10, 2004   18, 2003
-----------------------   --------   --------   --------   --------
<S>                       <C>        <C>        <C>        <C>
Revenue                    $99,262    $90,617   $82,881    $110,731
Operating income (loss)      8,999      7,327     4,645         493
                           -------    -------   -------    --------
Net income (loss)          $ 1,686    $   400   $(2,223)   $ (8,776)
                           =======    =======   =======    ========
</TABLE>

15.  SUBSEQUENT EVENTS

     On September 28, 2005, certain members of Parent's management, including
     its President and Chief Executive Officer, and its Chief Financial Officer,
     were granted Class C Units of LPA. LPA has reserved 100,000 Class C Units
     to be issued to management of Parent from time to time. Pursuant to the
     terms of the Operating Agreement of LPA, the Class C Units are non-voting
     equity interests of LPA and are subject to repurchase by LPA or its
     designee upon the termination of such person's employment with Parent and
     La Petite. Upon the achievement of enumerated valuation thresholds set
     forth in the Operating Agreement, the Class C Units will represent in the
     aggregate up to 13% of the economic interests of LPA.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
     FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures (the "Disclosure
Controls") that are designed to ensure that information required to be disclosed
in the reports filed under the Securities Exchange Act of 1934, as amended
("Exchange Act"), is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms. The Company's Disclosure
Controls include, without limitation, those components of internal controls over
financial reporting ("Internal Controls") that provide reasonable assurances
that transactions are recorded as necessary to permit preparation of the
Company's financial statements in accordance with generally accepted accounting
principles.

As of July 2, 2005 the Company evaluated the effectiveness of the design and
operation of its Disclosure Controls pursuant to Rule 15d-15 of the Exchange
Act. This evaluation ("Controls Evaluation") was done under the supervision and
with the participation of management, including the Chief Executive Officer
("CEO") and the Chief Financial Officer ("CFO"). Based on this evaluation, the
CEO and CFO have concluded that, to the best of their knowledge, the Disclosure
Controls are effective, at a reasonable level of assurance, to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the Commission's
rules and forms.

As of July 2, 2005, the Company does not believe that there are any internal
control deficiencies that would be considered to be material weaknesses under
standards established by the American Institute of Certified Public Accountants.
By way of background, in the prior year, the Company did identify certain
material weaknesses in the Company's Internal Controls primarily related to the
lack of consistent understanding and compliance with the Company's policies and
procedures at several of its field locations, and weaknesses in the information
technology control environment. Under the direction of the Audit Committee and
with the participation of senior management, the Company took steps throughout
the year designed to strengthen our disclosure controls and procedures and our
internal control over financial reporting. These steps included the following:


                                       49
<PAGE>
-    Enhancements were made to the Company's field level reporting systems to
     improve controls over the customer billing process.

-    Field operational procedures were changed to improve controls over
     attendance, billing and cash collection.

-    The Company strengthened it's information technology controls over
     information security, application implementation, database support,
     information systems operation and system interfaces, based on the findings
     of a internal control assessment conducted in the prior year.

-    The Company intensified its training programs around key operating
     procedures and controls.

-    The Company increased the number and the scope of financial field audits of
     academies.

-    The Company implemented a centralized sales audit function

-    Divisional financial staff resources were used to ensure field adherence to
     financial policies and internal controls

As a result of these steps, we believe there currently are no internal control
deficiencies considered to be material weaknesses under standards established by
the American Institute of Certified Public Accountants. The Company is committed
to continuing the process of identifying, evaluating and implementing corrective
actions, including enhancements to the Company's field reporting systems and its
information technology controls, where required to improve the effectiveness of
its Disclosure Controls on an overall basis.

The Company's Disclosure Controls, including the Company's Internal Controls,
are designed to provide a reasonable level of assurance that the stated
objectives are met. The Company's management, including the CEO and CFO, does
not expect that the Company's Disclosure Controls or Internal Controls will
prevent all errors and all fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected.

Other than the corrective actions discussed above, there have been no changes in
the Company's internal control over financial reporting that occurred during the
Company's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect the Company's internal control over
financial reporting.

ITEM 9B. OTHER INFORMATION

On September 28, 2005, certain members of Parent's management, including its
President and Chief Executive Officer, and its Chief Financial Officer, were
granted Class C Units of LPA. LPA has reserved 100,000 Class C Units to be
issued to management of Parent from time to time. Pursuant to the terms of the
Operating Agreement of LPA, the Class C Units are non-voting equity interests of
LPA and are subject to repurchase by LPA or its designee upon the termination of
such person's employment with Parent and La Petite. Upon the achievement of
enumerated valuation thresholds set forth in the Operating Agreement, the Class
C Units will represent in the aggregate up to 13% of the economic interests of
LPA.

The Company entered into an amended and restated employment agreement with Gary
A. Graves dated and effective as of September 28, 2005 (Employment Agreement).
The term of the Employment Agreement automatically renews on August 26th of each
year for an additional one-year period unless notice to terminate is provided by
one of the parties 90 days prior to such date. The Employment Agreement provides
for Mr. Graves to receive a base salary of $425,000, subject to annual
performance adjustments, plus a bonus of up to 200% of base salary. The
Employment Agreement provides that the executive is entitled to participate in
the health and welfare benefit plans available to the Company's other senior


                                       50
<PAGE>
executives. The Employment Agreement also provides for severance in the case of
termination without 'cause' or a resignation with 'good reason' in an amount
equal to one year of base salary (two years of base salary in the event that
such termination without 'cause' or a resignation with 'good reason' occurs six
months prior to or twenty-four months following a 'change of control' of Parent)
plus two times the bonus at 100% of base salary. Included in the severance in
the case of termination without 'cause' or resignation with 'good reason' is one
year of coverage under and participation in the Company's employee benefit
program (two years of coverage in the event that such termination without
'cause' or a resignation with 'good reason' occurs six months prior to or
twenty-four months following a 'change of control' of Parent). The Employment
Agreement also contains customary non-disclosure, non-competition and
non-solicitation covenants.

PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the name, age and current position held by the
persons who are the directors and executive officers of the Company:

<TABLE>
<CAPTION>
Name                      Age                       Position
----                      ---                       --------
<S>                       <C>   <C>
Stephen P. Murray .....    42   Chairman of the Board and Director
Gary A. Graves.........    45   Chief Executive Officer, President, and Director
Glenn H. Gage .........    62   Director
Terry D. Byers ........    50   Director
Kevin G. O'Brien ......    38   Director
Ronald L. Taylor ......    61   Director
Neil P. Dyment ........    50   Senior Vice President, Chief Financial Officer
Hugh W. Tracy .........    43   Vice President, Chief Information Officer
William C. Buckland ...    58   Vice President, People
Gregory S. Davis  .....    43   Vice President, General Counsel and Secretary
William H. Van Huis ...    48   Vice President, Chief Revenue Officer
Lisa J. Miskimins .....    44   Vice President, Central Division
Lawrence Appell .......    55   Vice President, Western Division
Stephan Laudicino......    55   Vice President, Eastern Division
Stephanie L. Pasche....    42   Vice President, Texas Division
Leah L. Oliva..........    43   Vice President, Florida Division
</TABLE>

The business experience during the last five years and other information
relating to each director and executive officer of the Company is set forth
below.

Stephen P. Murray became the Chairman of the Board in January 2000 and has been
a Director of the Company since May 1998. Mr. Murray has been a General Partner
of J.P. Morgan Partners, LLC (JPMP) since 1994. From 1988 to 1994 Mr. Murray was
a Principal at JPMP. Prior thereto, he was a Vice President with the
Middle-Market Lending Division of Manufacturers Hanover. Mr. Murray has a BA
from Boston College and a MBA from Columbia Business School. He also serves as a
director of Cornerstone Brands, ERisk, The Excite Network, Pinnacle Foods Group,
Inc., Strongwood Holdings, Zoots, Inc., MQ Associates, Inc., and MedQuest, Inc.
and is a Board Observer at Cabela's Inc.

Gary A. Graves joined La Petite Academy in August 2002 as the Chief Operating
Officer and became President and Chief Executive Officer in December 2002. Prior
to joining the Company, Mr. Graves was Chief Operating Officer of InterParking,
Inc. from 1998 to 2001. From 1996 to 1998, he was Executive Vice President for
Boston Market, Inc. From 1989 to 1996, Mr. Graves held various positions in
Operations for PepsiCo. Prior to joining PepsiCo, Mr. Graves was a consultant
for McKinsey and Company. He has a BS in Chemical Engineering from the
University of Michigan and a MBA from the University of Chicago. Mr. Graves also
serves on the National Board for the Make-A-Wish Foundation,


                                       51
<PAGE>
having been elected to the board in 2004.

Glenn H. Gage has been a Director of the Company since March 2003. Most
recently, Mr. Gage was the Senior Vice President and Chief Financial Officer
with National Steel. Mr. Gage also served on the Management Executive Committee
and was the Senior Member of the $2 billion Retirement Income Committee.
Previously, Glenn was the Senior Vice President and Chief Financial Officer with
Uarco incorporated, where he also served as a member of the Board of Directors.
Until 1995, Mr. Gage was a Partner with Ernst & Young where he served in
numerous leadership positions, most recently with their Mergers &
Acquisitions/Due Diligence Group. He was also Chairman of Ernst & Young's
National Energy Group. Mr. Gage has an MS in Accounting from the University of
California at Los Angeles and a BS in Business and Accounting from the
California State University at Fresno. He is a CPA in California and New York,
and he served as adjunct professor at Southern Methodist University while
working with Ernst & Young in Dallas. He has served on numerous Boards,
including Uarco Incorporated, TIPRO, DALENPAC and the Dallas Energy Forum.

Terry D. Byers has been a Director of the Company since December 1998. Ms. Byers
has more than 20 years experience in information technology ranging from
hands-on systems design and development to executive management. She has
extensive experience in designing and architecting enterprise-level IT
Infrastructures, developing and integrating business information systems,
implementing large ERP applications, and developing and deploying
technology-based solutions to clients. Since 1996, Ms. Byers has been an
Executive Vice President and the Chief Technology Officer for Teleflora, LLC.
She holds a Bachelors of Business Administration degree in Computer Science from
the University of Central Oklahoma.

Kevin G. O'Brien has been a Director of the Company since May 2002. Mr. O'Brien
has been a Principal of JPMP since 2000. From 1994 to 2000, Mr. O'Brien was a
Vice President in the High Yield Capital Markets and High Yield Corporate
Finance Groups at Chase Securities Inc. (and prior to merging in 1996, Chemical
Securities, Inc.). From 1988 to 1992 he was a commissioned officer in the U.S.
Navy. Mr. O'Brien has a BA from the University of Notre Dame and a MBA from the
Wharton School of the University of Pennsylvania. He also serves as director of
Pinnacle Foods Group, Inc.

Ronald L. Taylor has been a Director of the Company since April 1999. Mr. Taylor
has been President and CO-CEO of DeVry, Inc. since 1987 and, on July 1, 2004,
became CEO of DeVry, Inc. He is Chairman of the Proprietary Schools Advisory
Committee for the Illinois Board of Higher Education; a member of the Board of
Trustees for the Higher Learning Commission of the North Central Association of
Colleges and Schools. He serves on the Board of Directors of DeVry, Inc. and the
Better Business Bureau of Chicago & Northern Illinois, Inc. Mr. Taylor has a BA
from Harvard University and received his MBA from Stanford University.

Neil P. Dyment joined the Company in August 2003 as the Chief Financial Officer.
Prior to joining La Petite, Mr. Dyment was employed by Argus Management
Corporation from 2001 to 2003 providing financial consulting and interim
financial management services to companies undergoing restructuring. Mr. Dyment
served as interim Corporate Controller at the Company from June 2002 to December
2002 and subsequently provided other financial advisory services to the Company
until hired in August 2003. Prior to joining Argus Management Corporation, Mr.
Dyment was a Plant Manager for Chemfab Corporation from 1996 to 2000. Prior to
rejoining Chemfab Corporation in 1996, Mr. Dyment served in a variety of
financial capacities for various companies including Corporate Controller at
Chemfab from 1986 -1991 and a variety of financial positions at Textron
Corporation (formerly AVCO Corporation) from 1977 to 1984. He has a BS in
Business Administration with an accounting major from Northeastern University.

Hugh W. Tracy joined the Company as the Chief Information Officer in July 2003.
Prior to joining La Petite, Mr. Tracy was the Chief Information Officer at
InterPark, Inc. from 1999-2002. From 1989-1998, Mr. Tracy held various positions
in Information Technology and Operations for McDonalds Corporation and its
licensees. He has a BS in Information and Computer Science from the Georgia
Institute of Technology (Georgia Tech) and an MBA from the Wharton School,
University of Pennsylvania.

William C. Buckland joined the Company in July 2001 as Vice President, People.
From 1993 to 2001, Mr.


                                       52
<PAGE>
Buckland was Vice President, Human Resources of Allied Van Lines, Inc. From 1990
to 1992, he was the Director, Human Resources for SuperAmerica Group, a
subsidiary of Ashland Oil. From 1969 to 1990 Mr. Buckland held various operating
and Human Resources positions with the Montgomery Ward Company. He has a BBA
from the University of Kentucky.

Gregory S. Davis joined the Company in May 2003 as the Vice President, General
Counsel. He subsequently was elected to the position of Corporate Secretary and
was assigned operational responsibility for the Company's Montessori
Unlimited(R) division. Mr. Davis also oversees the Company's Licensing &
Compliance and Industry & Governmental Affairs functions. Prior to joining the
Company, Mr. Davis was one of three Arthur Andersen Partners responsible for the
international firm's expansion and alliance activities. From 1991-2001, he was a
Partner in the ArthurAndersen Legal Group, focused primarily on professional
practice litigation and risk management. Mr. Davis practiced commercial
litigation as an Associate in the Chicago headquarters of Seyfarth, Shaw,
Fairweather & Geraldson from 1987-1991. He holds a BA from Indiana University
and a J.D. from Boston University School of Law.

William H. Van Huis joined the Company in December 2002 as the Chief Revenue
Officer. Prior to joining La Petite Academy, Mr. Van Huis was the Vice President
of Marketing for Childtime Childcare, Inc., from 1990 to 2001. From 1986 to 1990
Mr. Van Huis was National marketing Manager for Zebart International
Corporation/TKD North America, an automotive aftermarket firm. He holds a BA
from Michigan State University.

Lisa J. Miskimins became the Vice President of the Central Division of the
Company in June 2000. Ms. Miskimins is responsible for the supervision of 147
locations in 12 states. From 1997 to 2000, Ms. Miskimins was an Area Vice
President with supervisory responsibility for the operations of the Company in
eight midwestern states. She was a Divisional Director of 72 schools in three
states from 1994 to 1997. She began her career with the Company in 1983 as a
Preschool Teacher. Ms. Miskimins has a BA in Elementary Education and English.

Lawrence "Larry" Appell joined La Petite Academy as the Western Division Vice
President in January 2003. Mr. Appell is responsible for the supervision of 141
locations in 9 states. Prior to joining La Petite, Mr. Appell served as
President of the International Division of Futurekids, Inc., the world's largest
provider of technology education for children from 2000-2003. From 1995-2000 he
was the President of Westlake Management Co., LLC, a boutique investment capital
and business incubator, From 1983-1995 Mr. Appell held various senior management
positions with The H.J. Heinz Company in their Weight Watchers division and The
Quaker Oats Company in their Pritikin division. Mr. Appell was a management
consultant from 1974-1983. He has a BA from the City University of New York and
a MS in Counselor Education from St. John's University.

Stephan "Steve" Laudicino joined La Petite Academy as the Eastern Division Vice
President in January 2005. Mr. Laudicino is responsible for the supervision of
129 locations in 14 states. Prior to joining La Petite, Mr. Laudicino served as
Territory Vice President of Cole National, a specialty retailer with over 2000
optical locations that included Sears Optical, Pearle Vision, Target Optical and
BJ's Optical. Mr. Laudicino held a number of senior management positions with
Cole National from 1992 to 2005. Prior to Cole, (1989 - 1992) Mr. Laudicino was
president of Access International Eyewear, an importer of exclusive optical
products selling directly to independent optical retailers throughout the US.
From 1972 to 1989 Mr. Laudicino was with Optical Corporation of America where he
served as President of Lugene. This division was a specialty retailer that
included high end optical, sunglass, hearing aid, social engraving stores.

Stephanie L. Pasche joined La Petite Academy as the Vice President of the Texas
Division in April 2004.


                                       53
<PAGE>
Ms. Pasche is responsible for the supervision of 83 locations in Texas. Ms.
Pasche's background includes the position of Director of Store Operations for
Brookstone from 1994 to 2002. Ms. Pasche has a BA in Business from the
University of Northern Iowa.

Leah L. Oliva joined La Petite Academy as the Vice President of the Southeastern
Division in June 2004. Ms. Oliva is responsible for the supervision of 114
locations in Florida, Georgia, and Alabama. Prior to her joining La Petite
Academy, Ms. Oliva has 25 years experience in the Retail field working for
several internationally recognized name brands including London Fog Industries
and Esprit de Corp. Most recently she was with Build A Bear Workshop as
Bearitory Leader for the Florida and North Carolina stores. Ms. Oliva received
her Associate of the Arts from the University of South Florida.

BOARD COMMITTEES AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors has an Audit Committee consisting of Glenn H. Gage,
Stephen P. Murray and Kevin G. O'Brien, and a Compensation Committee consisting
of Stephen P. Murray and Kevin O'Brien. The Audit Committee reviews the scope
and results of the Company's internal audit test plans, site reviews and audits,
the Company's accounting controls, and all tasks performed by the Company's
independent public accountants. The Compensation Committee determines
compensation for the executive officers and administers the 1998 Option Plan and
the Non-Employee Director Plan. None of the Company's executive officers has
served as a director or member of the compensation committee (or other committee
forming an equivalent function) of any other entity whose executive officers
served as a director of or member of the Compensation Committee of the Company's
Board of Directors.

AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Directors has determined that Glenn H. Gage is an "audit committee
financial expert" as defined by Item 401(h) of Regulation S-K of the Exchange
Act and that he is "independent" as such term is used in Item 7(d)(iv) of
Schedule 14A under the Exchange Act assuming that the listing standards of the
The Nasdaq Stock Market, Inc. had applied.

COMPENSATION OF DIRECTORS

The members of the Board of Directors are reimbursed for out-of-pocket expenses
related to their service on the Board of Directors or any committee thereof. In
addition, members of the Board of Directors who are neither officers of the
Company nor employed by JPMP or any of its partners are entitled to receive an
attendance fee of $1,500 for each meeting attended.

On August 19, 1999, Parent adopted the LPA Holding Corp. 1999 Stock Option Plan
for Non-Employee Directors (1999 Plan). The purpose of the plan is to provide a
means for attracting, retaining, and incentivizing qualified directors. Under
the terms of the plan, 10,000 shares of Parent's common stock are reserved for
issuance to non-employee directors.

Non-employee directors may exercise their options to purchase shares of Parent's
common stock once those options have vested. One-forty eighth of the options
become vested on the last day of each month following the date of grant, if the
person is a director on that day. Each option entitles the director to purchase
one share of Parent's common stock. The exercise price will equal the fair
market value on the date of grant of the option to the non-employee director.
Vested options and shares of common stock may be repurchased from any
non-employee director who ceases to be a director for any reason. Any options
that have not vested at the time the non-employee director ceases to be a
director are forfeited

CODE OF ETHICS

The Company has adopted a Code of Conduct for all Associates, including the
chief executive officer and chief financial officer. The Company undertakes to
provide a copy of such code of ethics to any person, without charge, upon
written request to LPA Holding Corp., 130 South Jefferson Street, Suite 300,
Chicago, Illinois 60661, Attention: General Counsel.


                                       54
<PAGE>
ITEM 11.  EXECUTIVE COMPENSATION

The following table provides certain summary information concerning compensation
earned for the 52 weeks ended July 2, 2005 (2005), the 53 weeks ended July 3,
2004 (2004), and the 52 weeks ended June 28, 2003 (2003), by the Company's Chief
Executive Officer and the four other most highly compensated executive officers
whose salary and bonus exceeded $100,000 for the 2005 fiscal year (collectively
the "named executive officers"):

                           SUMMARY COMPENSATION TABLE
                           COMPENSATION FOR THE PERIOD

<TABLE>
<CAPTION>
                                                                             LONG-TERM
                                                                            COMPENSATION
                                                                         -----------------
                                                         ANNUAL              NUMBER OF
                                                      COMPENSATION           SECURITIES
                                                 ---------------------       UNDERLYING        ALL OTHER
NAME AND PRINCIPAL POSITION               YEAR      SALARY      BONUS    OPTION/SAR AWARDS   COMPENSATION
---------------------------               ----   -----------  --------   -----------------   ------------
<S>                                       <C>    <C>          <C>        <C>                 <C>
Gary A. Graves                            2005   $425,000     $165,000
   Chief Executive Officer, President,    2004   $411,583      390,116
   Chief Operating Officer and Director   2003    289,423(1)   375,000        180,254

Neil P. Dyment                            2005    255,721       40,000
   Senior Vice President, Chief           2004    216,346(2)    77,670
   Financial Officer

Gregory S. Davis                          2005    207,645       28,730
   Vice President, General Counsel        2004    205,808       74,535
   and Secretary                          2003     30,769(3)

Hugh W. Tracy                             2005    172,102       23,890
   Vice President, Chief Information      2004    154,973(4)    57,024                        $13,048(5)
   Officer

Lawrence Appell                           2005    158,388       27,500                          4,845(6)
   Vice President, Western Region         2004    155,120       56,314                          1,986(6)
                                          2003     63,462(7)
</TABLE>

(1)  Mr. Graves joined the Company in August 2002. Fiscal 2003 compensation
     covers 44 weeks from August 26, 2002 through June 28, 2003.

(2)  Mr. Dyment joined the Company in August 2003. Fiscal 2004 compensation
     covers 46 weeks from August 18, 2003 through July 3, 2004.

(3)  Mr. Davis joined the Company in May 2003. Fiscal 2003 compensation covers 8
     weeks from May 5, 2003 through June 28, 2003.

(4)  Mr. Tracy joined the Company in July 2003. Fiscal 2004 compensation covers
     49 weeks from July 28, 2003 through July 3, 2004.

(5)  Represents payments to cover transitional health care costs at time of
     hire.

(6)  Represents auto allowance.

(7)  Mr. Appell joined the Company in January 2003. Fiscal 2003 compensation
     covers 23 weeks from January 20, 2003 through June 28, 2003.


                                       55
<PAGE>
The table below presents information relating to grants to the named executive
officers of options to purchase common stock of Company. There were no
Options/SAR Grants granted in fiscal year 2004.

             AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
                        FISCAL YEAR END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                    NUMBER OF
                                                   SECURITIES
                                                   UNDERLYING           VALUE OF
                                                   UNEXERCISED        IN-THE-MONEY
                                                  OPTIONS/SARS        OPTIONS/SARS
                                                  AT FY END (#)       AT FY END (1)
                                                ----------------      -------------
                   SHARES ACQUIRED     VALUE       EXERCISABLE/        EXERCISABLE/
      NAME         ON EXERCISE (#)   REALIZED     UNEXERCISABLE       UNEXERCISABLE
----------------   ---------------   --------   ----------------      -------------
<S>                <C>               <C>        <C>                   <C>
Gary A. Graves                                  131,435 / 48,819 (2)        0 / 0
Neil  P. Dyment                                    None / None          n/a / n/a
Gregory S. Davis                                   None / None          n/a / n/a
Hugh W. Tracy                                      None / None          n/a / n/a
Lawrence Appell                                    None / None          n/a / n/a
</TABLE>

(1)  The equity of the Company is not traded and there is no market for pricing
     the value of the options. "In the Money" calculations are based on the
     estimated enterprise value of the Company adjusted for debt, preferred
     stock, common shares issued and retired, warrants and options and
     adjustments for market liquidity and a control premium.

(2)  The Board of Directors granted to certain key executives Tranche A options
     at $0.01 per share, an amount that approximates the fair value of a share
     of common stock of the Company at the date of the grant. These options
     become exercisable ratably over forty-eight months and expire ten years
     from the date of grant.

EMPLOYMENT CONTRACTS

The Company entered into an amended and restated employment agreement with Gary
A. Graves dated and effective as of September 28, 2005 (Employment Agreement).
The term of the Employment Agreement automatically renews on August 26th of each
year for an additional one-year period unless notice to terminate is provided by
one of the parties 90 days prior to such date. The Employment Agreement provides
for Mr. Graves to receive a base salary of $425,000, subject to annual
performance adjustments, plus a bonus of up to 200% of base salary. The
Employment Agreement provides that the executive is entitled to participate in
the health and welfare benefit plans available to the Company's other senior
executives. The Employment Agreement also provides for severance in the case of
termination without 'cause' or a resignation with 'good reason' in an amount
equal to one year of base salary (two years of base salary in the event that
such termination without 'cause' or a resignation with 'good reason' occurs six
months prior to or twenty-four months following a 'change of control' of Parent)
plus two times the bonus at 100% of base salary. Included in the severance in
the case of termination without 'cause' or resignation with 'good reason' is one
year of coverage under and participation in the Company's employee benefit
program (two years of coverage in the event that such termination without
'cause' or a resignation with 'good reason' occurs six months prior to or
twenty-four months following a 'change of control' of Parent). The Employment
Agreement also contains customary non-disclosure, non-competition and
non-solicitation covenants.


                                       56
<PAGE>
1998 OPTION PLAN

The Company adopted the 1998 Plan pursuant to which options, which currently
represent 2.3% of Parent's common stock, on a fully diluted basis, are available
to grant. The 1998 Plan provides for the granting of Tranche A and Tranche B
options to purchase up to 60,074 shares of Parent's common stock. During fiscal
year 2002, the Company amended the 1998 Plan, increasing to 725,000 the number
of options available for grant. The options will be allocated in amounts to be
agreed upon between LPA and Parent. Seventy-five percent of the options will
vest over four years and twenty-five percent of the options will vest if certain
transactions are consummated which generate certain minimum returns to LPA. The
exercise price for the time vesting options will be 50% of the per share price
paid by LPA for its common stock of Parent and the exercise price for the
remaining options will be 100% of the per share price paid by LPA for its common
stock of Parent. The options expire 10 years from the date of grant. Options to
purchase 205,054 shares of Parent's common stock are currently outstanding under
the 1998 Plan.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

All of La Petite's common stock is held by LPA Holding Corp. (Parent). As of
July 2, 2005, LPA Investment LLC (LPA) owned 66.0% of the outstanding common
stock of Parent (approximately 94.0% on a fully diluted basis, including the
warrants described below) and Vestar, the former principal stockholder of the
Company, and La Petite's current and former management own approximately 2.7%,
0.3% and 31.0%, respectively, of the outstanding common stock of Parent
(approximately 0.2%, 1.6% and 1.8%, respectively, on a fully diluted basis). In
connection with the purchases of preferred stock of Parent, described below, LPA
received warrants to purchase shares of Parent's common stock that currently
represents the right to acquire approximately 17.0% of Parent's common stock on
a fully diluted basis.

In connection with the recapitalization, LPA purchased redeemable preferred
stock (Series A preferred stock) of Parent and warrants to purchase 42,180
shares of Parent's common stock on a fully diluted basis for aggregate cash
consideration of $30.0 million, the proceeds of which were contributed by Parent
to common equity. On December 15, 1999, LPA acquired an additional $15.0 million
of Parent's Series A preferred stock and received warrants to purchase an
additional 22,051 shares of Parent's common stock on a fully diluted basis. The
$15.0 million proceeds received by Parent were contributed to common equity.

The Series A preferred stock is not redeemable at the option of the holder prior
to the maturity of the notes. Commencing on July 1, 2005, the Series A preferred
stock dividends became payable in cash, subject to the limitations in the
Company's senior credit agreement which prohibits such payments without the
lenders' prior consent. Absent such consent, the dividends will continue to be
added to the Series A preferred stock liquidation value.

Following the consummation of the recapitalization, Parent and its stockholders,
including all holders of options and warrants, entered into a Stockholder's
Agreement. The Stockholders' Agreement contains restriction on the
transferability of Parent common stock, subject to certain exceptions. The
Stockholder' Agreement also contains provisions regarding the designation of
members of the Board of Directors and other voting arrangements. The
Stockholders' Agreement will terminate at such time as Parent consummates a
qualified public offering.

The Stockholders' Agreement restricts transfers of common stock of Parent by,
among other things (i) granting rights to all stockholders to tag along on
certain sales of stock by LPA and management, (ii) granting rights to LPA to
force the other stockholders to sell their common stock on the same terms as
sales of common stock by LPA, and (iii) granting preemptive rights to all
holders of 2% or more of Parent's common stock in respect of sales by other
stockholders.

The Stockholder's Agreement provides that the Board of Directors of Parent shall
consist of 5 to 8 persons as determined pursuant to the Stockholders Agreement.
The Stockholder's Agreement further provides that LPA is entitled to designate
four of the directors, one of whom is entitled to three votes as a director.
Messrs. Murray, and O'Brien have been elected as directors pursuant to this
provision and currently there has not been a director designated to be entitled
to three votes as a director. On December 11, 2002 the


                                       57
<PAGE>
Stockholder's Agreement was amended to provide that the remaining directors will
be the Chief Executive Officer of Parent and up to three other directors
designated by the foregoing directors.

The Stockholders' Agreement also contains covenants in respect of the delivery
of certain financial information to Parent's stockholders and granting access to
Parent's records to holders of more than 2% of Parent's common stock.

A majority of the economic interests of LPA is owned by J.P. Morgan Partners
(23A SBIC), LLC (JPMP SBIC) an affiliate of JPMP, and a majority of the voting
interests of LPA is owned by an entity controlled by Robert E. King. However,
pursuant to the LPA Operating Agreement, as amended, if certain triggering
events occur and notice is given by JPMP SBIC to LPA that it is exercising its
rights thereunder, JPMP SBIC will have the right to vote a majority of the
voting interests of LPA. Accordingly, if these triggering events occur and
notice is given, through its control of LPA, JPMP SBIC would be able to elect a
majority of the Board of Directors of Parent. As a licensed small business
investment company, or SBIC, JPMP SBIC is subject to certain restrictions
imposed upon SBICs by the regulations established and enforced by the United
States Small Business Administration. Among these restrictions are certain
limitations on the extent to which an SBIC may exercise control over companies
in which it invests. As a result of these restrictions, unless certain events
described in the operating agreement occur, JPMP SBIC may not own or control a
majority of the outstanding voting stock of LPA or designate a majority of the
members of the Board of Directors. Accordingly, while JPMP SBIC owns a majority
of the economic interests of LPA, JPMP SBIC owns less than a majority of LPA's
voting stock. LPA also agreed not to take certain actions in respect of the
common stock of Parent held by LPA without the consent of JPMP SBIC. At no time
prior to the date hereof, has JPMP SBIC exercised such voting rights. On
September 28, 2005, certain members of Parent's management, including its
President and Chief Executive Officer, and its Chief Financial Officer, were
granted Class C Units of LPA. LPA has reserved 100,000 Class C Units to be
issued to management of Parent from time to time. Pursuant to the terms of the
Operating Agreement of LPA, the Class C Units are non-voting equity interests of
LPA and are subject to repurchase by LPA or its designee upon the termination of
such person's employment with Parent and La Petite. Upon the achievement of
enumerated valuation thresholds set forth in the Operating Agreement, the Class
C Units will represent in the aggregate up to 13% of the economic interests of
LPA.

In connection with the recapitalization, Parent and its stockholders following
consummation of the recapitalization entered into a Registration Rights
Agreement. The Registration Rights Agreement grants stockholders demand and
incidental registration rights with respect to shares of capital stock held by
them and contains customary terms and provisions with respect to such
registration rights.

Pursuant to a pre-emptive offer dated November 13, 2001, Parent offered all of
its stockholders the right to purchase up to their respective pro rata amount of
a newly created class of Series B convertible redeemable participating preferred
stock (Series B preferred stock) and warrants to purchase common stock of
Parent. The Series B preferred stock is junior to the Series A preferred stock
of Parent in terms of dividends, distributions, and rights upon liquidation.
Parent offered and sold $15.0 million of Series B preferred stock of Parent and
warrants to purchase 562,500 shares of common stock of Parent.

All of the proceeds received by Parent from the sale of Series B preferred stock
and warrants have been contributed to La Petite as common equity. In connection
with such purchase, the banks waived their right under the Credit Agreement to
require that the proceeds be used to repay amounts outstanding under the Credit
Agreement.

Pursuant to the terms of the Securities Purchase Agreement dated February 10,
2003, entered into by Parent and its stockholders who have elected to exercise
their respective preemptive rights (the "Electing Stockholders"), as amended by
Amendment No. 1 to the Securities Purchase Agreement dated July 31, 2003, Parent
may issue up to 6,669,734 shares of its Series B convertible preferred stock. In
connection with such prospective issuance, Parent issued warrants to purchase
1,692,423 shares of its class A common stock, pro rata to each Electing
Stockholder. All of the proceeds received by Parent from the issuance of the
Series B preferred stock will be contributed to La Petite as common equity and
will be used by La Petite for general working capital and liquidity purposes.


                                       58
<PAGE>
The Electing Stockholders are only required to purchase shares of Series B
preferred stock if (a) the fixed charge coverage ratio at the end of a fiscal
quarter (calculated in accordance with the terms of the Credit Agreement) is
less than the fixed charge coverage ratio target set forth in the Credit
Agreement with respect to such fiscal quarter (a "Fixed Charge Purchase"), (b)
from time to time, the cash account of Parent and its subsidiaries is negative
(as calculated in accordance with the provisions of Amendment No. 1 to the
Securities Purchase Agreement) over a historical 4 or 5 week review period (a
"Cash Shortfall Purchase"), or (c) (i) a payment default shall occur and be
continuing under the Credit Agreement or (ii) following payment in full of the
obligations under the Credit Agreement, a payment default shall occur and be
continuing under the Indenture for the Senior Notes (a "Payment Default
Purchase"). The aggregate number of shares to be purchased, if any, by the
Electing Stockholders pursuant to a Fixed Charge Purchase shall be purchased
within ten business days following the date that Parent is required to deliver
its quarterly or annual, as applicable, financial information to the senior
lenders pursuant to the terms of the Credit Agreement, and shall equal the
quotient obtained by dividing (x) the amount of cash which would have been
needed to increase the Parent's consolidated EBITDAR (as defined in the Credit
Agreement) to an amount which would have satisfied the fixed charge coverage
ratio target set forth in the Credit Agreement by (y) $2.174. The aggregate
number of shares to be purchased, if any, by the Electing Stockholders pursuant
to a Cash Shortfall Purchase shall be made on the tenth business day after the
end of each review period, and shall equal (A) the sum of (x) the cash deficit
and (y) $500,000, divided by (B) $2.174, less (C) the number of shares purchased
pursuant to Cash Shortfall Purchases and Fixed Charge Purchases during the
applicable review period. The aggregate number of shares to be purchased by the
Electing Stockholders pursuant to a Payment Default Purchase shall be purchased
within five (5) business days after notice of such default is delivered to the
Electing Stockholders and shall equal (A) the amount of funds necessary to cure
the payment default under the Credit Agreement or the Indenture for the Senior
Notes, as applicable, divided by (B) $2.174. The Electing Stockholders have the
right to purchase shares of Series B preferred stock at any time, in which case
the aggregate number of shares of Series B preferred stock to be purchased by
the Electing Stockholders with respect to a particular fiscal quarter or review
period, as applicable, shall be reduced by the number of shares of Series B
preferred stock purchased prior to the expiration of such fiscal quarter or
review period. The obligation of each Electing Stockholder to purchase shares of
Series B preferred stock shall expire on the earlier of (a) the date the
Electing Stockholders purchase an aggregate of 6,669,734 shares of Series B
preferred stock; and (b) the date the obligations (other than contingent
obligations and liabilities) of Parent and its subsidiaries under (i) the Credit
Agreement and (ii) the Indenture dated as of May 11, 1998, among the Corporation
and certain of its subsidiaries and PNC Bank, National Association as trustee
(as amended) are terminated.

LPA has committed to purchase, in accordance with the terms of the Securities
Purchase Agreement, 6,658,636 shares of the Series B preferred stock being
offered and has received warrants to purchase 1,689,607 shares of Parent's class
A common stock in connection with such commitment. In accordance with such
commitment, LPA purchased 341,766 shares of Series B preferred stock in June
2003 for $0.7 million, 1,379,945 shares of Series B preferred stock in November
2003 for $3.0 million, 919,963 shares of Series B preferred stock in December
2003 for $2.0 million, and 459,982 shares of Series B preferred stock in
December 2004 for $1.0 million. Further, in accordance with their commitment to
purchase shares of Series B preferred stock and in accordance with the terms of
the Securities Purchase Agreement, the Electing Stockholders other than LPA
purchased 570 shares of Series B preferred stock in June 2003, 2,300 shares of
Series B preferred stock in November 2003, 1,534 shares of Series B preferred
stock in December 2003, and 766 shares of Series B preferred stock in December
2004. Accordingly, at July 2, 2005, the remaining contingent equity commitment
from the stockholders of Parent was $7.7 million. Pursuant to Amendment No. 2 to
the Securities Purchase Agreement which was effective as of November 30, 2004,
the Electing Stockholders agreed to purchase Series B preferred stock if the
Company fails at any time to make principal and interest payments on the Senior
Notes due 2008. The foregoing obligation is in addition to the existing
obligations of the Electing Stockholders to purchase shares of Series B
preferred stock; however, the additional obligation does not increase the amount
of equity committed by any of the Electing Stockholders. The amendment to the
Securities Purchase Agreement also granted the holders representing a majority
of the Senior Notes due 2008 with the right to release the Electing Stockholders
from the equity commitments under the Securities Purchase Agreement at any time
after the repayment of the debt outstanding under the Credit Agreement. See Note
8 to the consolidated financial statements included at Item 8 of this report for
further information.


                                       59
<PAGE>
For information regarding securities authorized for issuance under equity
compensation, see Note 11 of the Notes to Consolidated Financial Statements.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

J.P. Morgan Securities Inc., or JPMSI, one of the initial purchasers of the old
Senior Notes, is an affiliate of JPMorgan Chase Bank (formerly known as The
Chase Manhattan Bank), which is an agent and a lender to La Petite under the
Credit Agreement, an affiliate of JPMP, JPMorgan Chase Bank and JPMSI, owns
66.0% of the outstanding common stock of Parent (approximately 94.0% on a fully
diluted basis as of September 30, 2005). LPA owns $45 million of Parent's Series
A preferred stock, $21.7 million of Parent's Series B preferred stock, and
warrants to purchase 17.6% of the common stock of Parent on a fully diluted
basis. Certain employees of JPMP are members of La Petite's Board of Directors
(see Item 10). In addition, JPMSI, JPMorgan Chase Bank and their affiliates
perform various investment banking, trust and commercial banking services on a
regular basis for the Company's affiliates.

In connection with the recapitalization, JPMP SBIC entered into an
Indemnification Agreement with Robert E. King, pursuant to which JPMP SBIC has
agreed to indemnify Mr. King for any losses, damages or liabilities and all
expenses incurred or sustained by Mr. King in his capacity as a manager, officer
or director of LPA or any of its subsidiaries, including Parent and La Petite.

In December 1999, November 2001, December 2001, May 2002, June 2003, November
2003, December 2003 and December 2004 Parent sold additional equity to LPA. See
"Item 1. Business -Organization"

The Company entered into an employment agreement with Judith A. Rogala,
President and Chief Executive Officer, in January 2000, which was due to expire
in January 2003. Judith A. Rogala resigned her positions as the President and
Chief Executive Officer of the Company effective as of December 11, 2002. Under
the terms of her Employment Agreement with the Company, such resignation
entitled Ms. Rogala to receive a lump sum payment of $750,000 on January 1,
2004, representing the deferred portion of her signing bonus. In connection with
her resignation and in lieu of such payment, Ms. Rogala entered into a
Separation Agreement with the Company. Pursuant to the Separation Agreement, Ms.
Rogala is entitled to receive severance payments from the Company at a rate
equal to (a) $380,000 per annum for the period from December 11, 2002 to
December 31, 2002, and (b) $200,000 per annum for the period from January 1,
2003 to December 31, 2007. Such payments will be accelerated if there is a
change in control of the Company or if the Company meets certain EBITDA targets
for any consecutive twelve-month period during the term of the Separation
Agreement. If the Company defaults in any of its payment obligations to Ms.
Rogala under the Separation Agreement, it will make a lump-sum payment to Ms.
Rogala equal to the product of 1.5 and any future payments then owed to her
pursuant to the Separation Agreement. The Separation Agreement allowed Ms.
Rogala to retain her options in the Company, which had vested or will vest on or
prior to January 1, 2003, for a sixty-day period from December 11, 2002. The
Company and Ms. Rogala agreed to standard mutual releases and standard mutual
non-disparagement clauses as part of the Separation Agreement. Ms. Rogala agreed
to a non-compete provision that will expire in 2007.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Deloitte & Touche LLP, an independent registered public accounting firm, audited
the Company's financial statements for the fiscal years ended July 2, 2005 and
July 3, 2004. The chart below sets forth the total amount billed to us by
Deloitte & Touche LLP for services performed in fiscal years 2005 and 2004 and
breaks down these amounts by the category of service:

<TABLE>
<CAPTION>
                      JULY 2,    JULY 3,
                       2005       2004
                     --------   --------
<S>                  <C>        <C>
Audit Fees           $460,000   $475,000
Audit-Related Fees     28,000    111,000
Tax Fees                4,000      3,950
All Other Fees             --         --
</TABLE>


                                       60
<PAGE>
Audit fees are fees billed for the audit of the fiscal year 2005 and 2004 annual
financial statements and review of the quarterly financial statements.

For fiscal year 2005, audit-related fees were primarily for employee benefit
plan audits. For fiscal year 2004, audit-related fees included employee benefit
plan audits and audit services related to information technology internal
controls.

Tax fees in fiscal years 2005 and 2004 were principally for review of the
Company's IRS Forms 5500-Annual Return/Report of Employee Benefit Plans related
to the Company's 401k plan and health and welfare plans.

There were no other fees incurred in fiscal years 2005 or 2004.

The audit committee approves all audit, audit-related services, tax services and
other services provided by Deloitte & Touche LLP. Any services provided by
Deloitte & Touche LLP that are not specifically included within the scope of the
audit must be pre-approved by the audit committee in advance of any engagement.

                                    ********


                                       61
<PAGE>
PART IV.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)1. Financial Statements

      See pages 28 to 50 of this Annual Report on Form 10-K for financial
      statements of LPA Holding Corp. as of July 2, 2005 and July 3, 2004 and
      for the 52 weeks ended July 2, 2005, the 53 weeks ended July 3, 2004, and
      the 52 weeks ended June 28, 2003.

(a)2. Financial Statement Schedules

      The following additional financial data should be read in conjunction with
      the consolidated financial statements for the 52 weeks ended July 2, 2005,
      the 53 weeks ended July 3, 2004, and the 52 weeks ended June 28, 2003.
      Other schedules not included with these additional financial statement
      schedules have been omitted because they are not applicable or the
      required information is contained in the consolidated financial statements
      or notes thereto.

                                    SCHEDULES

      Schedule I - Condensed Financial Information of Registrants

      Schedule II - Valuation and Qualifying Accounts

(a)3. Exhibits

<TABLE>
<CAPTION>
   EXHIBIT
   NUMBER                                 DESCRIPTION
   -------                                -----------
<S>            <C>
3.1(i)         Amended and Restated Certificate of Incorporation of LPA Holding
               Corp.

3.2(i)         Certificate of Designations, Preferences and Rights of Series A
               Redeemable Preferred Stock of LPA Holding Corp.

3.3(i)         Bylaws of LPA Holding Corp.

3.4(i)         Amended and Restated Certificate of Incorporation of La Petite
               Academy, Inc.

3.5(i)         Bylaws of La Petite Academy, Inc.

3.6(v)         Certificate of Amendment of the Amended and Restated Certificate
               of Incorporation of LPA Holding Corp. filed on December 13, 1999.

3.7(v)         Certificate of Amendment of the Certificate of Designations,
               Preferences and Rights of Series A Redeemable Preferred Stock of
               LPA Holdings Corp. filed on December 13, 1999.

3.8(viii)      Certificate of Amendment of the Amended and Restated Certificate
               of Incorporation of LPA Holding Corp., filed on November 14,
               2001.

3.9(viii)      Certificate of Designations, Preferences and Rights of Series B
               Convertible Redeemable Participating Preferred Stock of LPA
               Holding Corp., filed on November 14, 2001.

3.10(xvi)      Certificate of Amendment to the Amended and Restated Certificate
               of Incorporation of LPA Holding Corp., filed on February 10,
               2003.

3.11(xvi)      Certificate of Amendment to the Certificate of Designations,
               Preferences and Rights of Series B Convertible Redeemable
               Participating Preferred Stock of LPA Holding Corp., filed on
               February 10, 2003.

4.1(i)         Indenture among LPA Holding Corp., La Petite Academy, Inc., LPA
               Services, Inc. and PNC Bank, National Association dated as of May
               11, 1998.

4.2(iv)        First Supplemental Indenture dated as of July 23, 1999, among
               Bright Start, Inc., LPA Holding Corp., La Petite Academy, Inc.,
               and The Chase Manhattan Bank.
</TABLE>


                                       62
<PAGE>
<TABLE>
<CAPTION>
   EXHIBIT
   NUMBER                                 DESCRIPTION
   -------                                -----------
<S>            <C>
10.1(i)        Purchase Agreement among Vestar/LPA Investment Corp., La Petite
               Academy, Inc., LPA Services, Inc., Chase Securities Inc. and
               NationsBanc Montgomery Securities LLC dated May 6, 1998.

10.2(i)        Exchange and Registration Rights Agreement among La Petite
               Academy, Inc., LPA Holding Corp., LPA Services, Inc., Chases
               Securities Inc., NationsBanc Montgomery Securities LLC dated May
               11, 1998.

10.3(i)        Merger Agreement by and between LPA Investment LLC and Vestar/LPA
               Investment Corp. dated as of March 17, 1998.

10.4(i)        Stockholders Agreement among LPA Holding Corp., Vestar/LPT
               Limited Partnership, LPA Investment LLC and the management
               stockholders dated as of May 11, 1998.

10.5(v)        Amendment #1 and Consent of the Stockholders Agreement among LPA
               Holding Corp., Vestar/LPT Limited Partnership, LPA Investment LLC
               and the management stockholders dated as April 8, 1999.

10.6(i)        1998 Stock Option Plan and Stock Option Agreement for LPA Holding
               Corp. dated as of May 18, 1998.

10.7(i)        Preferred Stock Registration Rights Agreement between LPA Holding
               Corp. and LPA Investment LLC dated May 11, 1998.

10.8(i)        Registration Rights Agreement among LPA Holding Corp., Vestar/LPT
               Limited Partnership, the stockholders listed therein and LPA
               Investment LLC, dated May 11, 1998.

10.9(i)        Credit Agreement dated as of May 11, 1998 among La Petite
               Academy, Inc., LPA Holding Corp., Nationsbank, N.A., and The
               Chase Manhattan Bank.

10.10(i)       Pledge Agreement among La Petite Academy, Inc., LPA Holding
               Corp., Subsidiary Pledgors and Nationsbank, N.A. dated as of May
               11, 1998.

10.11(i)       Security Agreement among La Petite Academy, Inc., LPA Holding
               Corp., Subsidiary Guarantors and Nationsbank, N.A. dated as of
               May 11, 1998.

10.12(i)       Parent Company Guarantee Agreement among LPA Holding Corp. and
               Nationsbank, N.A. dated as of May 11, 1998.

10.13(i)       Subsidiary Guarantee Agreement among Subsidiary Guarantor of La
               Petite Academy, Inc., LPA Services, Inc. and Nationsbank, N.A.
               dated as of May 11, 1998.

10.14(i)       Indemnity, Subrogation and Contribution Agreement among La Petite
               Academy, Inc., LPA Services, Inc., as Guarantor and Nationsbank,
               N.A. dated as of May 11, 1998.

10.15(xvi)     1999 Stock Option Plan for Non-Employee Directors.

10.16(iii)     Agreement and Plan of Merger By and Between La Petite Academy,
               Inc., LPA Acquisition Co. Inc., and Bright Start, Inc.

10.17(v)       Amendment No. 1, Consent and Waiver dated as of December 13,
               1999, to the Credit Agreement dated as of May 11, 1998 among LPA
               Holding Corp., La Petite Academy, Inc., Bank of America, N.A.
               (formerly known as NationsBank, N.A.) as Administrative Agent,
               Documentation Agent and Collateral Agent for the Lenders and The
               Chase Manhattan Bank as Syndication Agent.

10.18(v)       Warrant No. 2 dated as of December 15, 1999, issued by LPA
               Holding Corp. to LPA Investment LLC.

10.19(v)       Amendment No. 1 and Consent dated as of April 8, 1999, among LPA
               Holding Corp., Vestar/LPT Limited Partnership, LPA Investment LLC
               and the management stockholders named therein, to the
               Stockholders Agreement dated as of May 11, 1999, among LPA
               Holding Corp., Vestar/LPT Limited Partnership, LPA Investment LLC
               and the management stockholders named therein.

10.20(v)       Amendment No. 1 to the LPA Holding Corp. 1999 Stock Option Plan
               for Non-Employee Directors.

10.21(vii)     Employment Agreement among LPA Holding Corp., La Petite Academy,
               Inc., and Judith A. Rogala.
</TABLE>


                                       63
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                    DESCRIPTION
-------                                   -----------
<S>            <C>
10.22(viii)    Amendment No. 2, Consent and Waiver dated as of June 29, 2000, to
               the Credit Agreement dated as of May 11, 1998, as amended, among
               LPA Holding Corp., La Petite Academy, Inc., Bank of America, N.A.
               (formerly known as NationsBank, N.A.) as Administrative Agent,
               Documentation Agent and Collateral Agent for the Lenders and The
               Chase Manhattan Bank as Syndication Agent.

10.23(viii)    Amendment No. 3, Consent and Waiver dated as of November 14,
               2001, to the Credit Agreement dated as of May 11, 1998, as
               amended, among LPA Holding Corp., La Petite Academy, Inc., Bank
               of America, N.A. (formerly known as NationsBank, N.A.) as
               Administrative Agent, Documentation Agent and Collateral Agent
               for the Lenders and Chase Bank of Texas, National Association
               (formerly known as The Chase Manhattan Bank) as Syndication
               Agent.

10.24(viii)    Guarantee, dated as of November 15, 2001, by J.P. Morgan Partners
               (23A SBIC), LLC for the benefit of the Lenders (as defined in the
               Credit Agreement, dated as of May 11, 1998, as amended), among
               LPA Holding Corp., La Petite Academy, Inc., the Lenders party
               thereto, Bank of America, N.A. (formerly known as NationsBank,
               N.A.) as Administrative Agent, Documentation Agent and Collateral
               Agent for the Lenders and Chase Bank of Texas (formerly known as
               The Chase Manhattan Bank) as Syndication Agent.

10.25(viii)    Securities Purchase Agreement, dated as of November 14, 2001,
               among LPA Holding Corp., LPA Investment, LLC and the other
               parties thereto.

10.26(viii)    Warrant No. 3, dated as of November 14, 2001, issued by LPA
               Holding Corp. to LPA Investment, LLC.

10.27(ix)      First Limited Waiver dated as of May 20, 2002 to Credit Agreement
               dated as of May 11, 1998, as amended, among LPA Holding Corp., La
               Petite Academy, Inc., Bank of America, N.A. (formerly known as
               NationsBank, N.A.) as Administrative Agent, Documentation Agent
               and Collateral Agent for the Lenders and as Issuing Bank and
               Swingline Lender and Chase Bank of Texas, National Association,
               (formerly known as The Chase Manhattan Bank) as Syndication
               Agent.

10.28(ix)      Second Limited Waiver dated as of August 15, 2002 to Credit
               Agreement dated as of May 11, 1998, as amended, among LPA Holding
               Corp., La Petite Academy, Inc., Bank of America, N.A. (formerly
               known as NationsBank, N.A.) as Administrative Agent,
               Documentation Agent and Collateral Agent for the Lenders and as
               Issuing Bank and Swingline Lender and Chase Bank of Texas,
               National Association, (formerly known as The Chase Manhattan
               Bank) as Syndication Agent.

10.29(x)       Third Limited Waiver dated as of September 30, 2002 to Credit
               Agreement dated as of May 11, 1998, as amended, among LPA Holding
               Corp., La Petite Academy, Inc., Bank of America, N.A. (formerly
               known as NationsBank, N.A.) as Administrative Agent,
               Documentation Agent and Collateral Agent for the Lenders and as
               Issuing Bank and Swingline Lender and Chase Bank of Texas,
               National Association, (formerly known as The Chase Manhattan
               Bank) as Syndication Agent.

10.30(xi)      Extension to Third Limited Waiver dated as of November 1, 2002 to
               Credit Agreement dated as of May 11, 1998, as amended, among LPA
               Holding Corp., La Petite Academy, Inc., Bank of America, N.A.
               (formerly known as NationsBank, N.A.) as Administrative Agent,
               Documentation Agent and Collateral Agent for the Lenders and as
               Issuing Bank and Swingline Lender and Chase Bank of Texas,
               National Association, (formerly known as The Chase Manhattan
               Bank) as Syndication Agent.

10.31(xii)     Second Extension to Third Limited Waiver dated as of November 15,
               2002 to Credit Agreement dated as of May 11, 1998, as amended,
               among LPA Holding Corp., La Petite Academy, Inc., Bank of
               America, N.A. (formerly known as NationsBank, N.A.) as
               Administrative Agent, Documentation Agent and Collateral Agent
               for the Lenders and as Issuing Bank and Swingline Lender and
               Chase Bank of Texas, National Association, (formerly known as The
               Chase Manhattan Bank) as Syndication Agent.
</TABLE>


                                       64
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                    DESCRIPTION
-------                                   -----------
<S>            <C>
10.32(xiii)    Third Extension to Third Limited Waiver dated as of December 2,
               2002 to Credit Agreement dated as of May 11, 1998, as amended,
               among LPA Holding Corp., La Petite Academy, Inc., Bank of
               America, N.A. (formerly known as NationsBank, N.A.) as
               Administrative Agent, Documentation Agent and Collateral Agent
               for the Lenders and as Issuing Bank and Swingline Lender and
               Chase Bank of Texas, National Association, (formerly known as The
               Chase Manhattan Bank) as Syndication Agent.

10.33(xiii)    Fourth Extension to Third Limited Waiver dated as of December 6,
               2002 to Credit Agreement dated as of May 11, 1998, as amended,
               among LPA Holding Corp., La Petite Academy, Inc., Bank of
               America, N.A. (formerly known as NationsBank, N.A.) as
               Administrative Agent, Documentation Agent and Collateral Agent
               for the Lenders and as Issuing Bank and Swingline Lender and
               Chase Bank of Texas, National Association, (formerly known as The
               Chase Manhattan Bank) as Syndication Agent.

10.34(xiv)     Fourth Limited Waiver dated as of December 16, 2002 to Credit
               Agreement dated as of May 11, 1998, as amended, among LPA Holding
               Corp., La Petite Academy, Inc., Bank of America, N.A. (formerly
               known as NationsBank, N.A.) as Administrative Agent,
               Documentation Agent and Collateral Agent for the Lenders and as
               Issuing Bank and Swingline Lender and Chase Bank of Texas,
               National Association, (formerly known as The Chase Manhattan
               Bank) as Syndication Agent.

10.35(xvi)     Amendment No. 2 and Consent dated as of December 11, 2002 to
               Stockholders Agreement among LPA Holding Corp., Vestar/LPT
               Limited Partnership, LPA Investment LLC and the management
               stockholders.

10.36(xiv)     Separation Agreement dated as of December 11, 2002 among LPA
               Holding Corp., La Petite Academy, Inc. and Judith A. Rogala.

10.37(xvi)     Consent, Waiver and Amendment dated as of August 26, 2002 to
               Employment Agreement among LPA Holding Corp., La Petite Academy,
               Inc. and Judith A. Rogala.

10.38(xvi)     Amendment No. 1 to 1998 Stock Option Plan for LPA Holding Corp

10.39(xvi)     Employment Letter Agreement dated as of September 5, 2002 among
               La Petite Academy, Inc and Michael F. Czlonka.

10.40(xvi)     Amendment No. 5 to Credit Agreement and Waiver dated as of
               February 10, 2003, among LPA Holding Corp., La Petite Academy,
               Inc., U.S. Bank National Association, as Administrative Agent,
               and the Lenders signatory thereto.

10.41(xvi)     Securities Purchase Agreement dated as of February 10, 2003,
               among LPA Holding Corp., LPA Investment LLC, and the other
               persons signatory thereto from time to time.

10.42(xv)      Extension to Fourth Limited Waiver dated as of December 16, 2002
               to Credit Agreement dated as of May 11, 1998, as amended, among
               LPA Holding Corp., La Petite Academy, Inc., Bank of America, N.A.
               (formerly known as NationsBank, N.A.) as Administrative Agent,
               Documentation Agent and Collateral Agent for the Lenders and as
               Issuing Bank and Swingline Lender and Chase Bank of Texas,
               National Association, (formerly known as The Chase Manhattan
               Bank) as Syndication Agent.

10.43(xvii)    Fifth Limited Waiver dated as of April 22, 2003, to Credit
               Agreement dated as of May 11, 1998, as amended, among LPA Holding
               Corp., La Petite Academy, Inc., U.S. Bank National Association,
               as Administrative Agent, Documentation Agent and Collateral Agent
               for the Lenders and as Issuing Bank and Swingline Lender.

10.44(xviii)   Sixth Limited Waiver dated as of May 30, 2003, to Credit
               Agreement dated as of May 11, 1998, as amended, among LPA Holding
               Corp., La Petite Academy, Inc., U.S. Bank National Association,
               as Administrative Agent, Documentation Agent and Collateral Agent
               for the Lenders and as Issuing Bank and Swingline Lender.

10.45(xix)     Seventh Limited Waiver dated as of June 30, 2003, to Credit
               Agreement dated as of May 11, 1998, as amended, among LPA Holding
               Corp., La Petite Academy, Inc., U.S. Bank National Association,
               as Administrative Agent, Documentation Agent and Collateral Agent
               for the Lenders and as Issuing Bank and Swingline Lender.
</TABLE>


                                       65
<PAGE>
<TABLE>
<CAPTION>
   EXHIBIT
   NUMBER                                 DESCRIPTION
   -------                                -----------
<S>            <C>
10.46(xx)      Amendment No. 6 to Credit Agreement and Waiver dated as of July
               31, 2003 among La Petite Academy, Inc., LPA Holding Corp., and
               U.S. Bank National Association, as Administrative Agent,
               Documentation Agent and Collateral Agent for the Lenders and as
               Issuing Bank and Swingline Lender.

10.47(xx)      Amendment No. 1, dated as of July 31, 2003, to the Securities
               Purchase Agreement dated as of February 10, 2003 among LPA
               Holding Corp., LPA Investment LLC, and the other parties
               signatory thereto.

10.48(xx)      Support Center Bonus Plan, effective June 29, 2003

10.49(xxi)     Amendment No. 7 to the Credit Agreement effective as of November
               30, 2004, among La Petite Academy, Inc., LPA Holding Corp., U.S.
               Bank National Association, as Resigning Administrative Agent, and
               Heritage Bank, SSB, as Successor Administrative Agent.

10.50(xxi)     Amendment No. 2 to the Securities Purchase Agreement effective as
               of November 30, 2004, among LPA Holding Corp., LPA Investment
               LLC, and the other parties signatory thereto.

10.51(xxii)    Amendment No. 8 to Credit Agreement dated as of April 13, 2005,
               among LPA Holding Corp., La Petite Academy, Inc., Heritage Bank,
               SSB, as Administrative Agent and as Resigning Issuing Bank and
               Bank of America, N.A. as Successor Issuing Bank.

10.52*         Fourth Amended and Restated Operating Agreement of LPA
               Investment, LLC dated as of September 28, 2005, among LPA
               Investment, LLC and its Members.

10.53*         Amended and Restated Employment Agreement dated as of September
               28, 2005 among LPA Holding Corp., La Petite Academy, Inc. and
               Gary A. Graves.

12.1*          Statement regarding computation of ratios.

21.1(vi)       Subsidiaries of Registrant.

31.1*          CFO Section 302 certifications.

31.2*          CEO Section 302 certifications.

32*            CEO and CFO Section 906 certifications.

(i)            Incorporated by reference to the Exhibits to La Petite Academy,
               Inc.'s Registration Statement on Form S-4, Registration No.
               333-56239, filed with the Securities and Exchange Commission on
               June 5, 1998.

(ii)           Incorporated by reference to the Exhibits to LPA Holding Corp.'s
               Form 10-K for the Fiscal Year ended August 29, 1998, filed with
               the Securities and Exchange Commission on November 24, 1998.


(iii)          Incorporated by reference to the Exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               December 7, 1999.

(iv)           Incorporated by reference to the Exhibits to LPA Holding Corp.'s
               Form 10-Q/A for the 16 weeks ended October 23, 1999, filed with
               the Securities and Exchange Commission on December 16, 1999.

(v)            Incorporated by reference to the Exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               December 21, 1999.

(vi)           Incorporated by reference to the Exhibits to LPA Holding Corp.'s
               Form S-4 Post Effective Amendment #1, filed with the Securities
               and Exchange Commission on December 23, 1999.

(vii)          Incorporated by reference to the Exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               February 16, 2000.

(viii)         Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               November 16, 2001.

(ix)           Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               August 21, 2002.

(x)            Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               October 2, 2002.

(xi)           Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               November 5, 2002.
</TABLE>


                                       66
<PAGE>
<TABLE>
<S>            <C>
(xii)          Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               November 20, 2002.

(xiii)         Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               December 9, 2002.

(xiv)          Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               December 20, 2002.

(xv)           Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               February 6, 2003.

(xvi)          Incorporated by reference to the Exhibits to LPA Holding Corp.'s
               Form 10-K for the Fiscal Year ended June 29, 2002 filed with the
               Securities and Exchange Commission on February 21, 2003.

(xvii)         Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               April 24, 2003.

(xviii)        Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               June 4, 2003.

(xix)          Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               July 3, 2003.

(xx)           Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 10-K for the Fiscal Year ended June 28, 2003 filed with the
               Securities and Exchange Commission on September 26, 2003.


(xxi)          Incorporated by reference to the Exhibits to LPA Holding Corp.'s
               Form 10-Q for the 16 weeks ended October 23, 2004, filed with the
               Securities and Exchange Commission on December 7, 2004.

(xxii)         Incorporated by reference to the exhibits to LPA Holding Corp.'s
               Form 8-K, filed with the Securities and Exchange Commission on
               April 18, 2005

(*)            Filed herein
</TABLE>

(b)  Supplemental information to be furnished with reports filed pursuant to
     Section 15(d) of the Act by Registrants, which have not registered
     securities pursuant to Section 12 of the Act

               Except for a copy of this Annual Report on Form 10-K, no annual
               report to security holders covering the registrants' last fiscal
               year or proxy materials will be sent to security holders.


                                     67
<PAGE>
LPA HOLDING CORP.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                              JULY 2,     JULY 3,
BALANCE SHEETS                                                                  2005        2004
--------------                                                               ---------   ---------
<S>                                                                          <C>         <C>
ASSETS:                                                                      $      --   $      --
                                                                             =========   =========
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
   Payable to La Petite Academy, Inc.                                           33,376      34,386
                                                                             ---------   ---------
      Total current liabilities                                                 33,376      34,386

Long-term liabilities:
   Equity in net loss of La Petite Academy,                                    143,003     142,418
      Inc in excess of investment
   Series A 12% mandatorily redeemable preferred
      stock (Note 8)                                                            91,699      79,866
                                                                             ---------   ---------
      Total long-term liabilities                                              234,702     222,284

Series B 5% convertible redeemable participating preferred stock
   ($0.01 par value per share); 13,645,000 shares authorized,
   10,006,550 shares and 9,541,968 shares issued and outstanding;
   aggregate liquidation preference of $24.9 million and $22.7
   million, as of July 2, 2005 and July 3, 2004, respectively                   24,934      22,747

Stockholders' deficit:
   Class A common stock ($0.01 par value per share); 17,500,000
   shares authorized; and 773,403 shares issued and outstanding
   as of July 2, 2005 and July 3, 2004.                                              8           8
   Class B common stock ($0.01 par value per share); 20,000 shares
   authorized, issued and outstanding as of July 2, 2005 and July 3, 2004.
   Common stock warrants                                                         8,596       8,596
   Accumulated other comprehensive income                                            0          74
   Accumulated deficit                                                        (301,616)   (288,095)
                                                                             ---------   ---------
      Total stockholders' deficit                                             (293,012)   (279,417)
                                                                             ---------   ---------
                                                                             $      --   $      --
                                                                             =========   =========
</TABLE>

         See notes to consolidated financial statements included in Part
                     II of this Annual Report on Form 10-K.


                                       68
<PAGE>
LPA HOLDING CORP.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                   52 WEEKS ENDED   53 WEEKS ENDED   52 WEEKS ENDED
                                                                       JULY 2,          JULY 3,         JUNE 28,
STATEMENTS OF OPERATIONS                                                2005             2004             2003
------------------------                                           --------------   --------------   --------------
<S>                                                                <C>              <C>              <C>
Equity in net income (loss) of La Petite Academy, Inc.                $   (511)        $  1,576         $(15,948)
                                                                      --------         --------         --------
Interest expense
   Dividends and accretion on Series A preferred stock (Note 8)        (11,833)         (10,489)              --
                                                                      --------         --------         --------
Net loss                                                               (12,344)          (8,913)         (15,948)
                                                                      --------         --------         --------
Other comprehensive income (loss):
   Derivative adjustments reclassified into operations                     (74)             (86)             (86)
                                                                      --------         --------         --------
      Total other comprehensive income (loss)                              (74)             (86)             (86)
                                                                      --------         --------         --------
Comprehensive loss                                                    $(12,418)        $ (8,999)        $(16,034)
                                                                      ========         ========         ========
</TABLE>

         See notes to consolidated financial statements included in Part
                     II of this Annual Report on Form 10-K.


                                       69
<PAGE>
LPA HOLDING CORP.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                  52 WEEKS ENDED   53 WEEKS ENDED   52 WEEKS ENDED
                                                                      JULY 2,          JULY 3,         JUNE 28,
STATEMENTS OF CASH FLOWS                                               2005             2004             2003
------------------------                                          --------------   --------------   --------------
<S>                                                               <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                          $(12,344)        $(8,913)         $(15,948)
   Adjustments to reconcile net loss to net cash from
      operating activities:
   Dividends and accretion on Series A preferred stock (Note 8)        11,833          10,489                --
   Non cash items                                                         (74)            (86)              (86)
   Equity in net comprehensive loss of La Petite Academy, Inc.
   in excess of investment.                                               585          (1,490)           16,034
                                                                     --------         -------          --------
      Net cash from operating activities                                   --              --                --
                                                                     --------         -------          --------
CASH FLOWS FROM INVESTING ACTIVITIES
   Investment in La Petite Academy, Inc.                               (1,010)         (5,001)             (745)
                                                                     --------         -------          --------
      Net cash used in investing activities                            (1,010)         (5,001)             (745)
                                                                     --------         -------          --------
CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of common stock, redeemable preferred
      stock and warrants, net of expenses                               1,010           5,001               745
                                                                     --------         -------          --------
      Net cash provided by financing activities                         1,010           5,001               745
                                                                     --------         -------          --------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                    --              --                --
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                           --              --                --
CASH AND CASH EQUIVALENTS AT END OF PERIOD                           $     --         $    --          $     --
                                                                     ========         =======          ========
</TABLE>

         See Notes to Consolidated Financial Statements included in Part
                     II of this Annual Report on Form 10-K.


                                       70
<PAGE>
LPA HOLDING CORP. AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                  BALANCE AT   CHARGED TO                BALANCE AT
                                    JULY 3,     COSTS AND                  JULY 2,
DESCRIPTION                          2004       EXPENSES    WRITE-OFFS      2005
-----------                       ----------   ----------   ----------   ----------
<S>                               <C>          <C>          <C>          <C>
Allowance for doubtful accounts      $501        $1,526       $1,460        $567
                                     ----        ------       ------        ----
</TABLE>

<TABLE>
<CAPTION>
                                  BALANCE AT   CHARGED TO                BALANCE AT
                                   JUNE 28,     COSTS AND                  JULY 3,
DESCRIPTION                          2003       EXPENSES    WRITE-OFFS      2004
-----------                       ----------   ----------   ----------   ----------
<S>                               <C>          <C>          <C>          <C>
Allowance for doubtful accounts      $496        $2,490       $2,485        $501
                                     ----        ------       ------        ----
</TABLE>

<TABLE>
<CAPTION>
                                  BALANCE AT   CHARGED TO                BALANCE AT
                                   JUNE 29,     COSTS AND                 JUNE 28,
DESCRIPTION                          2002       EXPENSES    WRITE-OFFS      2003
-----------                       ----------   ----------   ----------   ----------
<S>                               <C>          <C>          <C>          <C>
Allowance for doubtful accounts      $914        $2,802       $3,220        $496
                                     ----        ------       ------        ----
</TABLE>

     See notes to consolidated financial statements included in Part II of
                        this Annual Report on Form 10-K

                                                                     (continued)


                                       71
<PAGE>
LPA HOLDING CORP. AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                               BALANCE AT   CHARGED TO                BALANCE AT
                                 JULY 3,     COSTS AND   CHARGED TO     JULY 2,
DESCRIPTION                       2004       EXPENSES      RESERVE       2005
-----------                    ----------   ----------   ----------   ----------
<S>                            <C>          <C>          <C>          <C>
Reserve for Closed Academies     $1,576        $122         $661        $1,037
                                 ------        ----         ----        ------
</TABLE>

<TABLE>
<CAPTION>
                               BALANCE AT   CHARGED TO                BALANCE AT
                                JUNE 28,     COSTS AND   CHARGED TO     JULY 3,
DESCRIPTION                       2003       EXPENSES      RESERVE       2004
-----------                    ----------   ----------   ----------   ----------
<S>                            <C>          <C>          <C>          <C>
Reserve for Closed Academies     $4,466       $(864)       $2,026       $1,576
                                 ------       -----        ------       ------
</TABLE>

<TABLE>
<CAPTION>
                               BALANCE AT   CHARGED TO                BALANCE AT
                                JUNE 29,     COSTS AND   CHARGED TO    JUNE 28,
DESCRIPTION                       2002       EXPENSES      RESERVE       2003
-----------                    ----------   ----------   ----------   ----------
<S>                            <C>          <C>          <C>          <C>
Reserve for Closed Academies     $4,598       $4,908       $5,040       $4,466
                                 ------       ------       ------       ------
</TABLE>

     See notes to consolidated financial statements included in Part II of
                        this Annual Report on Form 10-K


                                       72
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned; thereunto duly authorized, on September 30, 2005.

                                        LPA Holding Corp.


                                        /s/ Neil P. Dyment
                                        ----------------------------------------
                                        By: Neil P. Dyment
                                        Chief Financial Officer and duly
                                        authorized representative of the
                                        registrant

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed by the following persons on
behalf of the registrant and in the capabilities indicated on September 30,
2005.


/s/ Gary A. Graves                      /s/ Stephen P. Murray
-------------------------------------   ----------------------------------------
By: Gary A. Graves                      By: Stephen P. Murray
Chief Executive Officer, President,     Chairman of the Board and Director
Chief Operating Officer, and Director


/s/ Glenn H. Gage                       /s/ Terry D. Byers
-------------------------------------   ----------------------------------------
By: Glenn H. Gage                       By: Terry D. Byers
Director                                Director


/s/ Ronald L. Taylor                    /s/ Kevin G. O'Brien
-------------------------------------   ----------------------------------------
By: Ronald L. Taylor                    By: Kevin G. O'Brien
Director                                Director


                                       73
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned; thereunto duly authorized, on September 30, 2005.

                                        La Petite Academy, Inc.


                                        /s/ Neil P. Dyment
                                        ----------------------------------------
                                        By: Neil Dyment
                                        Chief Financial Officer and duly
                                        authorized representative of the
                                        registrant

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed by the following persons on
behalf of the registrant and in the capabilities indicated on September 30,
2005.


/s/ Gary A. Graves                      /s/ Stephen P. Murray
-------------------------------------   ----------------------------------------
By: Gary A. Graves                      By: Stephen P. Murray
Chief Executive Officer, President      Chairman of the Board and Director
Chief Operating Officer, and Director


/s/ Glenn H. Gage                       /s/ Terry D. Byers
-------------------------------------   ----------------------------------------
By: Glenn H. Gage                       By: Terry D. Byers
Director                                Director


/s/ Ronald L. Taylor                    /s/ Kevin G. O'Brien
---------------------------             ----------------------------------------
By: Ronald L. Taylor                    By: Kevin G. O'Brien
Director                                Director


                                       74