October 17, 1997
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of ________________, 1997 is made by and
between KINDERCARE LEARNING CENTERS, INC., an Alabama corporation (hereinafter
referred to as the "Company"), and [_______________], an employee of the Company
or a Subsidiary (as defined below) or Affiliate (as defined below) of the
Company, hereinafter referred to as "Optionee".
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its $.01 par value Common Stock ("Common Stock");
WHEREAS, the Company wishes to carry out the Plan (as hereinafter
defined), the terms of which are hereby incorporated by reference and made a
part of this Agreement; and
WHEREAS, the Committee (as hereinafter defined), appointed to
administer the Plan, has determined that it would be to the advantage and best
interest of the Company and its stockholders to grant the Non-Qualified Options
provided for herein to the Optionee as an incentive for increased efforts during
his term of office with the Company or its Subsidiaries or Affiliates, and has
advised the Company thereof and instructed the undersigned officers to issue
said Options;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall
have the meaning specified in the Plan or below unless the context clearly
indicates to the contrary.
Section 1.1 - Affiliate
"Affiliate" shall mean, with respect to the Company, any corporation
directly or indirectly controlling, controlled by, or under common control with,
the Company or any other entity designated by the Board of Directors of the
Company in which the Company or an Affiliate has an interest.
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Section 1.2 - Cause
"Cause" shall mean (i) the Optionee's willful and continued failure to
perform Optionee's duties with respect to the Company or its Subsidiaries which
continues beyond ten days after a written demand for substantial performance is
delivered to Optionee by the Company and which could reasonably result in
demonstrable injury to the Company or (ii) misconduct by Optionee (x) involving
dishonesty or breach of trust in connection with Optionee's employment, (y)
which would be a reasonable basis for an indictment of Optionee for a felony or
a misdemeanor involving moral turpitude or (z) which results in demonstrable
injury to the Company.
Section 1.3 - Change of Control
"Change of Control" shall mean (i) a sale of all or substantially all
of the assets of the Company (other than in connection with financing
transactions, sale and leaseback transactions or other similar transactions) to
a Person who is not an Affiliate of Kohlberg Kravis Xxxxxxx & Co., L.P. ("KKR"),
(ii) a sale by KKR or any of its Affiliates resulting in more than 50% of the
voting stock of the Company being held by a Person or Group that does not
include KKR or any of its Affiliates or (iii)(a) a merger or consolidation of
the Company into another Person which is not an Affiliate of KKR or (b) any
dilution of KKR's interest in the Company which results in KKR and any of its
Affiliates owning less than 50% of the Common Stock of the Company; if, and only
if, any such event described in either (iii)(a) or (b) results in (A) the
inability of the KKR Partnerships to elect a majority of the Board of Directors
of the Company (or the resulting entity).
Section 1.4 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.5 - Commencement Date
"Commencement Date" shall mean __________ __, 199_ [which shall be the
later of February 14, 1997 and the date of hire of the Optionee].
Section 1.6 - Committee
"Committee" shall mean the Compensation Committee of the Company.
Section 1.7 - Group
"Group" shall mean two or more Persons acting together as a
partnership, limited partnership, syndicate or other group
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for the purpose of acquiring, holding or disposing of securities of the Company.
Section 1.8 - KKR
"KKR" shall mean Kohlberg Kravis Xxxxxxx & Co., L.P.
Section 1.9 - KKR Affiliate
"KKR Affiliate" shall mean, with respect to KKR, any corporation
directly or indirectly controlling, controlled by, or under common control with,
KKR.
Section 1.10 - Management Stockholder's Agreement
"Management Stockholder's Agreement" shall mean that certain
Management Stockholder's Agreement dated as of [________] [__], 1997 between the
Optionee and the Company.
Section 1.11 - Options
"Options" shall mean the non-qualified options.
Section 1.12 - Permanent Disability
The Optionee shall be deemed to have a "Permanent Disability" if the
Optionee is unable to engage in the activities required by the Optionee's
position by reason of any medically determined physical or mental impairment
which can be expected to result in death or which has lasted or can reasonably
be expected to last for a continuous period of not less than 12 months.
Section 1.13 - Person
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
Section 1.14 - Plan
"Plan" shall mean the 1997 Stock Purchase and Option Plan for Key
Employees of KinderCare Learning Centers, Inc. and Subsidiaries.
Section 1.15 - Pronouns
The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.
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Section 1.16 - Retirement
"Retirement" shall mean retirement at age 62 or over (or such other
age as may be approved by the Board of Directors of the Company) after having
been employed by the Company or a Subsidiary for at least three years after the
Purchase Date.
Section 1.17 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.18 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations, or group of
commonly controlled corporations, other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
ARTICLE II
GRANT OF OPTIONS
Section 2.1 - Grant of Options
For good and valuable consideration, on and as of the date hereof the
Company irrevocably grants to the Optionee an Option to purchase any part or all
of an aggregate of shares of the Company's $.01 par value Common Stock upon the
terms and conditions set forth in this Agreement.
Section 2.2 - Exercise Price
Subject to Section 2.4, the exercise price of the shares of stock
covered by the Options shall be $19 per share without commission or other
charge.
Section 2.3 - Consideration to the Company
In consideration of the granting of these Options by the Company, the
Optionee agrees to render faithful and efficient services to the Company or a
Subsidiary or Affiliate, with such duties and responsibilities as the Company
shall from time to time prescribe. Nothing in this Agreement or in the Plan
shall confer upon the Optionee any right to continue in the employ of the
Company or any Subsidiary or Affiliate or shall interfere with or restrict in
any way the rights of the Company and its Subsidiaries or Affiliates, which are
hereby expressly reserved, to terminate the employment of the Optionee at any
time for any reason whatsoever, with or without cause.
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Section 2.4 - Adjustments in Options
Subject to Section 9 of the Plan, in the event that the outstanding
shares of the stock subject to an Option are, from time to time, changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of a merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, combination of
shares, or otherwise, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares or other consideration as to which
such Option, or portions thereof then unexercised, shall be exercisable. Any
such adjustment made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
(a) Options shall become exercisable as follows:
Percentage of Option
Date Option Shares Granted As to Which
Becomes Exercisable Option Is Exercisable
------------------- ---------------------
After the first anniversary
of the Commencement Date 20%
After the second anniversary
of the Commencement Date 40%
After the third anniversary
of the Commencement Date 60%
After the fourth anniversary
of the Commencement Date 80%
After the fifth anniversary
of the Commencement Date 100%
Notwithstanding the foregoing, the Option shall become immediately
exercisable as to 100% of the shares of Common Stock subject to such Option
immediately prior to a Change of Control (but only to the extent such Option has
not otherwise terminated or become exercisable).
(b) Notwithstanding the foregoing, no Option shall become exercisable
as to any additional shares of Common Stock following the termination of
employment of the Optionee for any
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reason other than a termination of employment because of death or Permanent
Disability of the Optionee and any Option (other than as provided in the next
succeeding sentence) which is non-exercisable as of the Optionee's termination
of employment shall be immediately cancelled. In the event of a termination of
employment because of such death or Permanent Disability, the Options shall
immediately become exercisable as to all shares of Common Stock subject thereto.
Section 3.2 - Expiration of Options
The Options may not be exercised to any extent by Optionee after the
first to occur of the following events:
(a) The tenth anniversary of the Commencement Date; or
(b) The first anniversary of the date of the Optionee's termination of
employment by reason of death, Permanent Disability or Retirement; or
(c) The first business day which is fifteen calendar days after the
earlier of (i) 75 days after termination of employment of the Optionee for
any reason other than for Cause, death, Permanent Disability or Retirement
or (ii) the delivery of notice by the Company that it does not intend to
exercise its call right under Section 6 of the Management Stockholder's
Agreement; provided, however, that in any event the Options shall remain
exercisable under this subsection 3.2(c) until at least 45 days after
termination of employment of the Optionee for any reason other than for
death, Permanent Disability or Retirement; or
(d) The date the Option is terminated pursuant to Section 5, 6 or 8(b)
of the Management Stockholder's Agreement;
(e) The date of an Optionee's termination of employment by the Company
for Cause; or
(f) If the Committee so determines pursuant to Section 9 of the Plan,
the effective date of either the merger or consolidation of the Company
into another Person, or the exchange or acquisition by another Person of
all or substantially all of the Company's assets or 80% or more of its then
outstanding voting stock, or the recapitalization, reclassification,
liquidation or dissolution of the Company; provided, that if the Committee
deems it necessary to cancel the Options to facilitate a business
combination, the Optionee shall be paid, in cash or other consideration
that the shareholders receive pursuant to such business combination, the
excess of the fair market value of the Common Stock at the time of such
business combination over the exercise price for the cancelled Options
including any unvested Options which are being cancelled. At least ten
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(10) days prior to the effective date of such merger, consolidation,
exchange, acquisition, recapitalization, reclassification, liquidation or
dissolution, the Committee shall give the Optionee notice of such event if
the Option has then neither been fully exercised nor become unexercisable
under this Section 3.2.
ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
The Option, and any portion of the Option, may be exercised by
Optionee or any transferee permitted by Section 5.2. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when an
Option becomes unexercisable under Section 3.2, be exercised by Optionee's
personal representative or by any person empowered to do so under the Optionee's
will or under the then applicable laws of descent and distribution or by any
transferee permitted by Section 5.2.
Section 4.2 - Partial Exercise
Any exercisable portion of an Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes unexercisable under Section
3.2; provided, however, that any partial exercise shall be for whole shares of
Common Stock only.
Section 4.3 - Manner of Exercise
An Option, or any exercisable portion thereof, may be exercised solely
by delivering to the Secretary or his office all of the following prior to the
time when the Option or such portion becomes unexercisable under Section 3.2:
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion thereof, stating that the Option
or portion thereof is thereby exercised, such notice complying with all
applicable rules established by the Committee;
(b) Full payment (which shall be made (i) in cash, (ii) by check (iii)
by delivery of shares of Common Stock owned by the Optionee or a portion of
the Common Stock then being purchased; provided that any such shares of
Common Stock are not pledged or otherwise encumbered pursuant to a loan
agreement or otherwise, which Common Stock shall be valued at the fair
market value as determined in good faith by the Committee, or (iv) by a
combination thereof), for the shares with respect to which such Option or
portion thereof is exercised;
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(c) A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by the Optionee or other person then
entitled to exercise such Option or portion thereof, stating that the
shares of stock are being acquired for the holder's own account, for
investment and without any present intention of distributing or reselling
said shares or any of them except as may be permitted under the Securities
Act of 1933, as amended (the "Act"), and then applicable rules and
regulations thereunder, and that the Optionee or other person then entitled
to exercise such Option or portion thereof will indemnify the Company
against and hold it free and harmless from any loss, damage, expense or
liability resulting to the Company if any sale or distribution of the
shares by such person is contrary to the representation and agreement
referred to above; provided, however, that the Committee may, in its
absolute discretion, take whatever additional actions it deems appropriate
to ensure the observance and performance of such representation and
agreement and to effect compliance with the Act and any other federal or
state securities laws or regulations;
(d) Full payment to the Company of all amounts which, under federal,
state or local law, it is required to withhold upon exercise of the Option;
and
(e) In the event the Option or portion thereof shall be exercised
pursuant to Section 4.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
option.
Without limiting the generality of the foregoing, the Committee may require an
opinion of counsel acceptable to it to the effect that any subsequent transfer
of shares acquired on exercise of an Option does not violate the Act, and may
issue stop-transfer orders covering such shares. Share certificates evidencing
stock issued on exercise of this Option shall bear an appropriate legend
referring to the provisions of subsection (c) above and the agreements herein.
The written representation and agreement referred to in subsection (c) above
shall, however, not be required if the shares to be issued pursuant to such
exercise have been registered under the Act, and such registration is then
effective in respect of such shares.
Section 4.4 - Conditions to Issuance of Stock Certificates
The shares of stock deliverable upon the exercise of an Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of an Option or portion thereof prior to fulfillment of all of the
following conditions:
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(a) The obtaining of approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(b) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may from time to time establish for reasons
of administrative convenience.
Section 4.5 - Rights as Stockholder
The holder of an Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares purchasable
upon the exercise of the Option or any portion thereof unless and until
certificates representing such shares shall have been issued by the Company to
such holder.
ARTICLE V
MISCELLANEOUS
Section 5.1 - Administration
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee shall be final and binding upon the Optionee, the Company
and all other interested persons. No member of the Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or the Options. In its absolute discretion, the Board of
Directors may at any time and from time to time exercise any and all rights and
duties of the Committee under the Plan and this Agreement.
Section 5.2 - Transferability of Options
The Options may be transferred to the same extent that Common stock
subject to the Option may be transferred pursuant to the Management
Stockholder's Agreement. Except for such permitted transfers, neither the
Options nor any interest or right therein or part thereof shall be liable for
the debts, contracts or engagements of the Optionee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect.
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Section 5.3 - Shares to Be Reserved
The Company shall at all times during the term of the Options reserve
and keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Agreement.
Section 5.4 - Notices
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
5.4, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Optionee shall, if
the Optionee is then deceased, be given to the Optionee's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 5.4. Any notice shall
have been deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal
Service.
Section 5.5 - Titles
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
Section 5.6 - Applicability of Plan and Management Stockholder's
Agreement
The Options and the shares of Common Stock issued to the Optionee upon
exercise of the Options shall be subject to all of the terms and provisions of
the Plan and the Management Stockholder's Agreement, to the extent applicable to
the Options and such shares. In the event of any conflict between this Agreement
and the Plan, the terms of the Plan shall control. In the event of any conflict
between this Agreement or the Plan and the Management Stockholder's Agreement,
the terms of the Management Stockholder's Agreement shall control.
Section 5.7 - Amendment
This Agreement may be amended only by a writing executed by the
parties hereto which specifically states that it is amending this Agreement.
Section 5.8 - Governing Law
The laws of the State of Delaware (or if the Company reincorporates in
another state, the law of that state) shall
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govern the interpretation, validity and performance of the terms of this
Agreement regardless of the law that might be applied under principles of
conflicts of laws.
Section 5.9 - Jurisdiction
Any suit, action or proceeding against the Optionee, with respect to
this Agreement, or any judgment entered by any court in respect of any thereof,
may be brought in any court of competent jurisdiction in the State of Delaware
(or if the Company reincorporates in another state, in that state), and the
Optionee hereby submits to the non-exclusive jurisdiction of such courts for the
purpose of any such suit, action, proceeding or judgment. Nothing herein shall
in any way be deemed to limit the ability of the Company to serve any such
writs, process or summonses in any other manner permitted by applicable law or
to obtain jurisdiction over the Optionee, in such other jurisdiction and in such
manner, as may be permitted by applicable law. The Optionee hereby irrevocably
waives any objections which he may now or hereafter have to the laying of the
venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in any court of competent jurisdiction in the State of
Delaware (or if the Company reincorporates in another state, in that state), and
hereby further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in any inconvenient forum.
No suit, action or proceeding against the Company with respect to this Agreement
may be brought in any court, domestic or foreign, or before any similar domestic
or foreign authority other than in a court of competent jurisdiction in the
State of Delaware (or if the Company reincorporates in another state, in that
state), and the Optionee hereby irrevocably waives any right which he may
otherwise have had to bring such an action in any other court, domestic or
foreign, or before any similar domestic or foreign authority. The Company hereby
submits to the jurisdiction of such courts for the purpose of any such suit,
action or proceeding.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
KINDERCARE LEARNING CENTERS, INC.
By: _____________________________
__________________________________
[__________]
__________________________________
__________________________________
Address
Optionee's Taxpayer
Identification Number:
__________________________________
