Document:

exv4w1

 

Exhibit 4.1

Execution Copy

FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

     THIS FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
November 19, 2003 (this “Amendment”), is by and between CHILDTIME CHILDCARE,
INC., an Illinois corporation (the “Company”), and BANK ONE, NA, with its main
office in Chicago, Illinois, and successor by merger to Bank One, Michigan, a
Michigan banking corporation (the “Bank”).

INTRODUCTION

     A.     The Company and the Bank have entered into an Amended and Restated
Credit Agreement dated as of January 31, 2002, as amended by the First
Amendment to Amended and Restated Credit Agreement dated as of April 1, 2002,
the Second Amendment to Amended and Restated Credit Agreement dated as of July
19, 2002, the Third Amendment to Amended and Restated Credit Agreement dated as
of February 14, 2003, and the Fourth Amendment to Amended and Restated Credit
Agreement dated as of June 25, 2003 (the “Credit Agreement”).

     B.     The Company has requested the Bank to amend the Credit Agreement in
certain respects, and the Bank is willing to do so on the terms and conditions
set forth in this Amendment.

     NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein and in the Credit Agreement contained, the parties hereto
agree as follows:

ARTICLE 1. AMENDMENTS TO CREDIT AGREEMENT

     Effective the date (the “Amendment Date”) the conditions precedent set
forth in Article 3 are satisfied, the Credit Agreement hereby is amended as
follows:

          1.1 The following definitions of the terms “Fifth Amendment” and “Fifth
Amendment Date” are added to Section 1.1 in alphabetical order, respectively,
as follows:

		
	 	     “Fifth Amendment” means the Fifth Amendment to this Agreement
dated as of November 19, 2003.
	 
	 	     “Fifth Amendment Date” means the Amendment Date (as defined
in the Fifth Amendment).

          1.2 New subpart (vi) is added to Section 5.1(f), immediately following
subpart (v), as follows:

		
	 	              (vi) Exchange of Canton Property for Sterling Heights
Property, and Sale of Sterling Heights Property. Notwithstanding
anything to the

 

 

		
	 	contrary, (A) the Bank agrees to release from its
Mortgage the Company’s property commonly known as 3101 Lilley
Road, Canton, Michigan (the “Canton Property”), upon the exchange
by the Company of the Canton Property for the property commonly
known as 2171 15 Mile Rd., Sterling Heights, Michigan (the
“Sterling Heights Property”), such that the Company becomes the
fee owner of the Sterling Heights Property subject to no Liens
except Permitted Liens, if any, other than Permitted Liens under
Section 5.2(f)(vi), and (B) the Company shall not be required to
grant to the Bank a mortgage lien on the Sterling Heights Property
so long as by not later than April 2, 2004 the Company has sold
the Sterling Heights Property and applied the proceeds thereof as
required under this Agreement. If the Company has not sold the
Sterling Heights Property and so applied such proceeds by April 2,
2004, the Company immediately shall grant to the Bank a
first-priority mortgage lien on the Sterling Heights Property and
execute and deliver, or cause to be executed and delivered, to the
Bank all items of the types described in Section 5.1(f), all in
form and substance satisfactory to the Bank.

          1.3 Sections 5.2(a), (b) and (c) are amended and restated in full,
respectively, as follows:

		
	 	     (a) Tangible Capital Funds. Permit or
suffer Consolidated Tangible Capital Funds of the Parent Guarantor
and its Subsidiaries at any time to be less than the amount equal
to (i) at all times prior to the end of the Company’s fiscal year
ending on or about April 2, 2004, $8,000,000 and (ii) as of the
end of the Parent Guarantor’s fiscal year ending on or about April
2, 2004 and at all times thereafter, $9,000,000.
	 
	 	     (b) EBITDA. Permit or suffer
the Consolidated EBITDA of the Parent Guarantor and its
Subsidiaries to be less than (i) $795,000 as of the end of the
Parent Guarantor’s fiscal quarter ending on or about January 2,
2004, for the period of the fiscal quarter then ending, and (ii)
$3,010,400 as of the end of the Parent Guarantor’s fiscal year
ending on or about April 2, 2004, for the period of the two
consecutive fiscal quarters then ending.
	 
	 	     (c) Fixed
Charge Coverage Ratio. Permit or suffer the Consolidated Fixed
Charge Coverage Ratio of the Parent Guarantor and its Subsidiaries
to be less than (i) 0.925 to 1.00 as of the end of the Parent
Guarantor’s fiscal quarter ending on or about January 2, 2004, for
the period of the fiscal quarter then ending, and (ii) 1.00 to
1.00 as of the end of the Parent Guarantor’s fiscal quarter ending
on or about April 2, 2004, for the period of the two consecutive
fiscal quarters then ending.

          1.4 Section 5.2(h) is amended and restated in full as follows:

		
	 	     (h) Disposition
of Assets; Etc. Sell, lease, license, transfer, assign or otherwise dispose of
all or a substantial portion of its business, assets,

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	 	rights,
revenues or property, real, personal or mixed, tangible or
intangible, whether in one or a series of transactions, other than
(i) inventory sold in the ordinary course of business upon
customary credit terms and sales of scrap or obsolete material or
equipment, (ii) the sale of the Sale Properties (as defined in
Section 5.1(f)(v)) prior to June 30, 2003, either outright or
pursuant to sale/leaseback transactions on terms and conditions
satisfactory to the Bank, (iii) the sale by the Company in any
fiscal year of up to ten (10) childcare centers owned by it;
provided that, if any such center is subject to a Mortgage in
favor of the Bank, the Company shall first have obtained the prior
written consent of the Bank, which consent may be subject to such
conditions as the Bank may require in its sole discretion, and
(iv) the exchange of the Canton Property for the Sterling Heights
Property and the subsequent sale of the Sterling Heights Property
by not later than April 2, 2004, all in accordance with Section
5.1(f)(vi); provided that the Company shall apply the net proceeds
of such sale in an amount not less than $650,000 as follows:

		
	 	     either (A) if the sale of the Sterling Heights Property is
consummated by December 31, 2003 and the Company has received such
net proceeds, then not later than December 31, 2003 the Company
may use a portion of such net proceeds not to exceed $135,000 to
pay the accrued and unpaid interest on the Subordinated Debt
described in Section 5.2(e)(iii) (the “Rights Offering Sub Debt”)
due December 31, 2003 and the Company immediately shall use the
remainder of such net proceeds to prepay the Loans under this
Agreement, with the Commitment thereafter to be deemed permanently
reduced by the amount equal to the total amount of interest on the
Rights Offering Sub Debt paid at any time from the Fifth Amendment
Date through December 31, 2003 (notwithstanding any failure to
comply with the requirements of Section 2.2 in connection with
such reduction of the Commitment),
	 
	 	     or (B) if the sale of the Sterling Heights Property is not
consummated by December 31, 2003 or none of the proceeds of such
sale are used to pay interest on the Rights Offering Sub Debt in
accordance with clause (A) above, then the Company immediately
shall use the entire amount of such net proceeds to prepay the
Loans under this Agreement.

ARTICLE 2. REPRESENTATIONS AND WARRANTIES

     In order to induce the Bank to enter into this Amendment, the Company
represents and warrants that:

     2.1 The execution, delivery and performance by the Company of this
Amendment are within its corporate powers, have been duly authorized by all
necessary corporate action and are not in contravention of any law, rule or
regulation, or any judgment, decree, writ, injunction, order or award of any
arbitrator, court or governmental authority, or of the terms of the Company’s
charter or by-laws, or of any contract or undertaking to which the Company is a
party or by which the Company or its property is or may be bound or affected.

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          2.2 This Amendment is a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.

          2.3 No consent, approval or authorization of or declaration, registration
or filing with any governmental authority or any nongovernmental person or
entity, including without limitation any creditor or stockholder of the
Company, is required on the part of the Company in connection with the
execution, delivery and performance of this Amendment or the transactions
contemplated hereby or as a condition to the legality, validity or
enforceability of this Amendment.

          2.4 After giving effect to the amendments contained in Article 1 of this
Amendment, the representations and warranties contained in Article IV of the
Credit Agreement and in the Loan Documents are true on and as of the date
hereof with the same force and effect as if made on and as of the date hereof
and, except for the Known Defaults described in Article 4 of this Amendment, no
Default or Event of Default has occurred and is continuing; provided that such
representations and warranties contained in Section 4.6 of the Credit Agreement
shall be deemed made with respect to the most recent fiscal year-end and
interim financial statements, respectively, of the Parent Guarantor and its
Subsidiaries delivered pursuant to Section 5.1(d) of the Credit Agreement.

ARTICLE 3. CONDITIONS PRECEDENT

          The amendments set forth in Article 1 of this Amendment shall not become
effective until each of the following has been satisfied:

          3.1 This Amendment shall have been executed by a duly authorized officer
on behalf of the Company, and the acknowledgements at the end of this Amendment
shall have been executed by a duly authorized officer on behalf of each of the
Guarantors, in the respective spaces so provided, and this Amendment shall have
been delivered to the Bank.

          3.2 The Company shall have paid (a) to the Bank, a fee for this Amendment
in the amount of $15,000, which shall be deemed fully earned upon receipt and
nonrefundable and (b) to Dickinson Wright PLLC, counsel for the Bank, all
accrued and unpaid reasonable fees and expenses of Dickinson Wright PLLC in
connection with the Credit Agreement, including without limitation the Mortgage
collateral matters under Section 5.1(f) of the Credit Agreement, in connection
with the negotiation and preparation of this Amendment and the consummation of
the transactions contemplated hereby, and in connection with advising the Bank
as to its rights and responsibilities with respect thereto.

          3.3 The Company shall have all amounts owing to title insurance companies
in connection with the Mortgages delivered to the Bank under the Credit
Agreement.

          3.4 Such other documents, and evidence of completion of such other
matters, as the Bank may reasonably request shall have been duly executed, if
applicable, and delivered to the Bank.

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ARTICLE 4. CONDITIONAL LIMITED WAIVER

          The Company and the Guarantors have informed the Bank that Events of
Default have occurred due to breaches of Sections 5.2(b) and 5.2(c) of the
Credit Agreement as of the end of the Parent Guarantor’s fiscal quarters ended
on or about July 18, 2003 and October 10, 2003 (collectively, the “Known
Defaults”), and the Company and the Guarantors have requested that the Bank
waive the Known Defaults subject to the terms and conditions set forth herein.
So long as any Default or Event of Default has occurred and is continuing or
would be caused thereby, payment of interest on Subordinated Debt is
prohibited. Pursuant to the Company’s request, the Bank shall be deemed hereby
to have waived the Known Defaults, provided that (i) the Amendment Date shall
have occurred, (ii) on or before December 31, 2003, the Company shall have
consummated the sale of the Sterling Heights Property and applied a portion of
the proceeds thereof to the payment of interest on the Rights Offering Sub Debt
in accordance with Section 5.2(h) of the Credit Agreement (as amended by this
Amendment) or shall have through some other means of raising the necessary
funds as may be consented to by the Bank in writing in its sole discretion,
subject to such conditions as the Bank may require in its sole discretion, paid
all accrued and unpaid interest on the Rights Offering Sub Debt due December
31, 2003, and (iii) the Bank shall not be deemed hereby to have waived any
other Defaults or Events of Default, or such provisions of the Credit Agreement
as of any other compliance times, or any other provisions of the Credit
Agreement. The Company and the Guarantors acknowledge and agree that the
waiver contained herein is a limited, conditional waiver, limited to the
specific Known Defaults described above and subject to the conditions described
above. Such waiver (a) shall not waive any other term, covenant or agreement
of the Credit Agreement or any other Loan Document, (b) shall not be deemed to
be a waiver of any other term, covenant or agreement of the Credit Agreement or
any other Loan Document, and (c) shall not be deemed to prejudice any present
or future right or rights which the Bank now has or may have thereunder.
Additionally, this limited, conditional waiver shall not be deemed to waive any
Default or Event of Default, whether now existing or hereafter existing,
whether known, unknown or otherwise, except as specifically set forth herein.

ARTICLE 5. MISCELLANEOUS

          5.1 If the Company shall fail to perform or observe any term, covenant or
agreement in this Amendment, or any representation or warranty made by the
Company in this Amendment shall prove to have been incorrect in any material
respect when made, such occurrence shall be deemed to constitute an Event of
Default.

          5.2 All references to the Credit Agreement in any other document,
instrument or certificate referred to in the Credit Agreement or delivered in
connection therewith or pursuant thereto hereafter shall be deemed references
to the Credit Agreement, as amended hereby

          5.3 The Company represents and warrants that it is aware of no claims or
causes of action against the Bank or any of its officers, directors, employees
or agents. Notwithstanding

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such representation and warranty, and as further
consideration for the agreements set forth in this Amendment, each of the
Company and the Guarantors, for itself and its successors and assigns, releases
the Bank, and its officers, directors, employees, agents, attorneys,
affiliates, subsidiaries, and successors and assigns, from any liability,
claim, right or cause of action which now exists or hereafter arises, whether
known or unknown, arising from or in any way related to facts in existence as
of the date hereof.

          5.4 Each party hereto, after consulting or having had the opportunity to
consult with counsel, knowingly, voluntarily, and intentionally waives any
right any of them may have to a trial by jury in any litigation based upon or
arising out of this Amendment, or any agreement referenced herein or other
related instrument or agreement, or any of the transactions contemplated by
this Amendment, or any course of conduct, dealing, statements (whether oral or
written) or actions of any of them. None of the parties hereto shall seek to
consolidate, by counterclaim or otherwise, any such action in which a jury
trial has been waived with any other action in which a jury trial cannot be or
has not been waived. These provisions shall not be deemed to have been
modified in any respect or relinquished by any party hereto except by a written
instrument executed by all of them.

          5.5 This Amendment and the other agreements and documents executed in
connection with this Amendment constitute the entire understanding of the
parties with respect to the subject matter hereof. This Amendment is binding
on the parties hereto and their respective successors and assigns, and shall
inure to the benefit of the parties hereto and their respective successors and
assigns. If any of the provisions of this Amendment are in conflict with any
applicable statute or rule or law or otherwise unenforceable, such offending
provisions shall be null and void only to the extent of such conflict or
unenforceability, but shall be deemed separate from and shall not invalidate
any other provision of this Amendment.

          5.6 No course of dealing on the part of the Bank, nor any delay or failure
on the part of the Bank in exercising any right, power or privilege hereunder
shall operate as a waiver of such right, power or privilege or otherwise
prejudice the Bank’s rights and remedies hereunder or under the Credit
Agreement, the Note, any Security Document, any other Loan Document or any
other agreement or instrument of the Company or any of the Guarantors with or
in favor of the Bank; nor shall any single or partial exercise thereof preclude
any further exercise thereof or the exercise of any other right, power or
privilege. No right or remedy conferred upon or reserved to the Bank under
this Amendment or under the Credit Agreement, the Note, any Security Document,
any other Loan Document or any other agreement or instrument of the Company or
any Guarantor with or in favor of the Bank is intended to be exclusive of any
other right or remedy, and every right and remedy shall be cumulative and in
addition to every other right or remedy granted thereunder or now or hereafter
existing under any applicable law. Every right and remedy granted by this
Amendment or under the Credit Agreement, the Note, any Security Document, any
other Loan Document or any other agreement or instrument of the Company or any
Guarantor with or in favor of the Bank or by applicable law to the Bank may be
exercised from time to time and as often as may be deemed expedient by the
Bank.

          5.7 The Loan Documents and, subject to the amendments herein provided, the
Credit Agreement shall in all respects continue in full force and effect.

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          5.8 Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement.

          5.9 This Amendment shall be governed by and construed in accordance with
the laws of the State of Michigan.

          5.10 The Company agrees to pay the reasonable fees and expenses of
Dickinson Wright PLLC, counsel for the Bank, in connection with the negotiation
and preparation of this Amendment and the consummation of the transactions
contemplated hereby, and in connection with advising the Bank as to its rights
and responsibilities with respect thereto.

          5.11 This Amendment may be executed upon any number of counterparts with
the same effect as if the signatures thereto were upon the same instrument.

[The remainder of this page intentionally left blank.]

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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first-above written.

	 	 	 	 	 
	 	 	CHILDTIME CHILDCARE, INC.
	 	 	 	 	 
	 	 	
By: 
	/s/ Frank Jerneycic
	 	 	
 
	

	 	 	 	 	 
	 	 	Its Vice President and Chief Financial Officer
	 	 	 	 	 
	 	 	BANK ONE, NA
	 	 	 	 	 
	 	 	
By: 
	/s/ Richard C. Ellis
	 	 	
 
	

	 	 	 	 	 
	 	 	Its First Vice
President

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GUARANTOR ACKNOWLEDGEMENT

     Each of the undersigned hereby acknowledges that it has reviewed and fully
consents to the foregoing Fifth Amendment to Amended and Restated Credit
Agreement (the “Amendment”), that the Guaranty Agreements and all other Loan
Documents made by each of the undersigned in favor of the Bank continue in full
force and effect and each of the undersigned acknowledges and agrees that it
has no defenses, counterclaims or offsets with respect thereto. All references
to the Credit Agreement in the Guaranty Agreements and in all other Loan
Documents or any other document, instrument or certificate referred to in the
Credit Agreement or delivered in connection therewith or pursuant thereto,
hereafter shall be deemed references to the Credit Agreement, as amended by the
Amendment. Except as otherwise expressly set forth herein, capitalized terms
used but not defined herein shall have the respective meanings ascribed thereto
in the Amendment or the Credit Agreement, as the case may be.

	 	 	 	 	 
	 	 	CHILDTIME LEARNING CENTERS, INC.
	 	 	 	 	 
	 	 	
By: 
	/s/ Frank Jerneycic
	 	 	
 
	

	 	 	 	 	 
	 	 	Its Vice President and Chief Financial Officer
	 	 	 	 	 
	 	 	CHILDTIME CHILDCARE-PMC, INC.
	 	 	 	 	 
	 	 	
By: 
	/s/ Frank Jerneycic
	 	 	
 
	

	 	 	 	 	 
	 	 	Its Vice President and Chief Financial Officer
	 	 	 	 	 
	 	 	CHILDTIME CHILDCARE-MICHIGAN, INC.
	 	 	 	 	 
	 	 	
By: 
	/s/ Frank Jerneycic
	 	 	
 
	

	 	 	 	 	 
	 	 	Its Vice President and Chief Financial Officer
	 	 	 	 	 
	 	 	TUTOR TIME LEARNING CENTERS, LLC

(formerly known as TT Acquisition LLC)
	 	 	 	 	 
	 	 	
By: 
	/s/ Frank Jerneycic
	 	 	
 
	

	 	 	 	 	 
	 	 	Its Vice President and Chief Financial Officer
	 	 	 	 	 

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	 	 	TUTOR TIME INTERNATIONAL LEARNING
CENTERS, INC. (formerly known as CTT
Acquisition Corp.)
	 	 	 	 	 
	 	 	
By: 
	/s/ Frank Jerneycic
	 	 	
 
	

	 	 	 	 	 
	 	 	Its Vice President and Chief Financial Officer
	 	 	 	 	 

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Exhibit 10.1

September 9, 2003

Ms. Kathryn Winkelhaus

5040 Oak Tree Court

Ann Arbor MI 48108

Dear Kathryn:

I am pleased to offer you the position of Vice President and Chief Operating
Officer for Childtime Learning Centers Inc. and to confirm the following
details regarding your compensation, benefits and other information:

	 	1.	 	You will report directly to William Davis, President and Chief
Executive Officer, and will begin employment on a mutually agreed upon
start date.
	 
	 	2.	 	Your starting base salary will be $190,000 per annum payable in
biweekly installments.
	 
	 	3.	 	You will have the opportunity to earn an annual cash bonus (the
“Annual Bonus”) payable within 90 days after the end of each fiscal
year in an amount up to a maximum of 75% of your annual earned base
salary. You may start earning this bonus when the Company reaches 95.1%
of budgeted EBITDA and may earn a bonus of up to (a) 50% on a pro-rata
basis for achieving up to 100% of budgeted EBITDA or (b) 75% on a pro
rata basis for achieving more than 100%, up to 120% of budgeted EBITDA.
	 
	 	4.	 	For the fiscal year 2004 (fiscal year ending March 2004), you will
be paid a minimum of a $50,000 Annual Bonus contingent upon achieving
certain business objectives. These objectives will be determined
within 60 days of your hire date.
	 
	 	5.	 	Within six months after your acceptance of this offer, and upon
your request, the Company’s senior management will recommend that the
Compensation Committee approve the grant to you of (a) the right to
purchase (the “Purchase Award”) of up to $100,000 of the common stock
of the Company, based on the closing price of the common stock on the
date of grant, for the 10 day period after the date of grant, and (b)
Options to purchase four times the number of
shares subject to the Purchase Award, at the option exercise price equal
to the closing price of the Corporation’s common stock on the grant date.
The Options would be non-qualified options granted in accordance with
the Company’s 2003 Equity Compensation Plan. These Options would become
exercisable and vest at the rate of 20% per year, commencing on the
one-year anniversary of the date of grant for five years. These Options
would expire if not exercised by the anniversary of the grant date in the
year 2009. The vesting of these Options would be further subject to your
purchase of shares under the Purchase Award, with the number of shares
that may be purchased under the Options to equal four times the number of
shares purchased under the Purchase Award. These Options would also be
subject to such other terms and provisions applicable to the Company’s
standard option grants and to the Plan.

 

 

	 	6.	 	You will be eligible for participation in the Company’s
contributory medical, vision, dental and life insurance plans effective
November 1, 2003.
	 
	 	7.	 	You will be eligible for four weeks of vacation per anniversary
year. You will also be eligible for participation in the Company’s
401(k) program.
	 
	 	8.	 	Your employment will be “At Will” and you will serve at the
pleasure of the President and CEO of the company.

	Please sign your acknowledgement of your receipt and understanding of this
letter below, and return to me as soon as possible. Please do not hesitate
to contact me should you have any questions.
	 
	We at both Childtime and Tutor Time are looking very forward to having you
as a part of our team during this exciting time, and trust that your
employment with us will be both challenging and rewarding.

Very truly yours,

/s/ Scott W. Smith

Scott W. Smith

Vice President Human Resources

Childtime Learning Centers, Inc.

	 	 	 	 	 
	ACKNOWLEDGED:	 	
/s/ Kathryn Winkelhaus
	 	Date:9/15/03     
	 	 	
    
	 	 
	 	 	
Kathryn Winkelhaus

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