Execution Copy
VOTING AGREEMENT
This AGREEMENT dated as of October 3, 1996, between KCLC Acquisition
Corp., a Delaware corporation ("Newco"), on the one hand, and TCW Special
Credits Fund II, TCW Special Credits Fund IIb, TCW Special Credits Fund III, TCW
Special Credits Fund IIIb (collectively, the "Special Credits Limited
Partnerships"), TCW Special Credits Fund V - The Principal Fund, a California
limited partnership ("Fund V"), two trusts for which Trust Company of the West
is trustee (the TCW Special Credits Trust and the TCW Special Credits Trust IIIb
(collectively the "TCW Trusts")), three special accounts managed by TCW Special
Credits, a California general partnership (the Common Fund Account, the
Weyerhaeuser Company Master Retirement Trust Account and the Delaware State
Employees Retirement Trust Account (collectively, the "Special Credit
Accounts")), one special account managed by Oaktree Capital Management, LLC
("Oaktree") (the OCM Inland Steel Industries Separate Account (the "Oaktree
Account; and together with the Special Credits Limited Partnerships, Fund V, the
TCW Trusts and the Special Credit Accounts, the "Funds")), and Oaktree, a
California limited liability company (the "Stockholder"), as investment manager
of the Funds, on the other hand.
WHEREAS Newco and KinderCare Learning Centers, Inc., a Delaware
corporation (the "Company"), propose to enter into an Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement"; capitalized terms
used but not defined herein shall have the meanings set forth in the Merger
Agreement; provided that the terms Merger and Merger Agreement shall not include
any amendments or modifications thereto unless such amendments and modifications
have been approved in writing by the Stockholder) providing for a merger (the
"Merger") of Newco with and into the Company, upon the terms and subject to the
conditions set forth in the Merger Agreement; and
WHEREAS the Stockholder beneficially owns 9,988,936 shares of Company
Common Stock, which are held of record by the Funds as set forth on Schedule A
(such shares of Company Common Stock, together with any other shares of Company
Common Stock that the Stockholder or any Fund acquires beneficial ownership of
after the date hereof and during the term of this Agreement, whether upon the
exercise of options, warrants or rights, the conversion or exchange of
convertible or exchangeable securities, or by means of purchase, dividend,
distribution or otherwise, being collectively referred to herein as the "Subject
Shares"); and
WHEREAS the Stockholder beneficially owns Warrants to purchase 858,683
shares of Company Common Stock, which are held of record by the Funds as set
forth on Schedule A (such warrants, together with any other warrants that the
Stockholder or any Fund acquires beneficial ownership of after the date hereof
and during the term of this Agreement, being collectively referred to herein
2
as the "Subject Warrants", and together with the Subject Shares, the "Subject
Securities"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Newco has requested that the Stockholder and the Funds enter into
this Agreement.
NOW, THEREFORE, to induce Newco to enter into, and in consideration of
its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER AND THE FUNDS.
(a) REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Newco as of the date hereof
as follows:
(i) ORGANIZATION. The Stockholder is a limited liability
company duly organized, validly existing and in good standing under
the laws of the State of California.
(ii) AUTHORITY; NO CONFLICTS. The Stockholder has all requisite
power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and
delivered by the Stockholder and constitutes a valid and binding
obligation of the Stockholder enforceable in accordance with its
terms. Except for the filings required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (i) no
filing with, and no permit, authorization, consent or approval of, any
Governmental Entity or any other person is necessary for the execution
of this Agreement by the Stockholder and the consummation by the
Stockholder of the transactions contemplated hereby and (ii) none of
the execution and delivery of this Agreement by the Stockholder, the
consummation of the transactions contemplated hereby and compliance
with the terms hereof by the Stockholder will conflict with, or result
in any violation of, or default (with or without notice or lapse of
time or both) under any provision of, the certificate of
incorporation, by-laws or analogous documents of the Stockholder, any
trust agreement, loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, notice, decree, statute, law,
ordinance, rule or regulation applicable to the Stockholder or to the
Stockholder's property or assets.
3
(iii) THE SUBJECT SECURITIES. The Stockholder is the beneficial
owner of the Subject Securities. All of the Subject Warrants are
fully vested and freely exercisable by the Stockholder to acquire any
and all shares of Company Common Stock underlying the Subject Warrants
at its option. The Stockholder does not beneficially own any shares
of capital stock of the Company or securities convertible or
exchangeable for shares of capital stock of the Company, other than
the Subject Securities. The Stockholder has the sole right and power
to vote and dispose of the Subject Securities, and none of such
Subject Securities is subject to any voting trust or other agreement,
arrangement or restriction with respect to the voting or transfer of
any of the Subject Securities, except as contemplated by this
Agreement.
(b) REPRESENTATIONS AND WARRANTIES OF THE FUNDS. Each Fund hereby,
severally and not jointly, represents and warrants to Newco as of the date
hereof in respect of itself as follows:
(i) ORGANIZATION. Such Fund is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
organization.
(ii) AUTHORITY; NO CONFLICTS. Such Fund has all requisite power
and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by
such Fund and constitutes a valid and binding obligation of such Fund
enforceable in accordance with its terms. No filing with, and no
permit, authorization, consent or approval of, any Governmental
Authority or any other person is necessary for the execution of this
Agreement by such Fund and the consummation by such Fund of the
transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by such Funds, the consummation of the
transactions contemplated hereby and compliance with the terms hereof
by such Fund will conflict with, or result in any violation of, or
default (with or without notice or lapse of time or both) under any
provision of, the certificate of incorporation, by-laws or analogous
documents of such Fund, any trust agreement, loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to such
Fund or to such Fund's property or assets.
4
(iii) THE SUBJECT SECURITIES. Such Fund is the record holder of
the number of Subject Shares and Subject Warrants set forth opposite
its name on Schedule A hereto. Such Fund has good and marketable
title to the Subject Securities set forth opposite its name on
Schedule A hereto and at all times during the term hereof and on the
Closing Date and on the Option Closing Date will have good and valid
title to its Subject Shares, free and clear of all liens, claims,
security interests or other charges or encumbrances, and, upon
delivery thereof to Newco against delivery of the consideration
therefor pursuant to this Agreement, good and valid title thereto,
free and clear of all liens, claims, security interests or other
charges or encumbrances (other than any arising as a result of actions
taken or omitted by Newco), will pass to Newco. Such Fund does not
own of record any shares of capital stock of the Company or securities
convertible or exchangeable for shares of capital stock of the
Company, other than the Subject Securities. The Stockholder has the
sole right and power to vote and dispose of the Subject Securities
owned of record by such Fund, except as contemplated by this
Agreement.
(iv) ERISA. Neither the execution and delivery of this Agreement
and the Merger Agreement nor the consummation of any of the
transactions contemplated hereby or thereby (the "Transactions") is or
will result in any nonexempt prohibited transaction under either
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code") or any liability under Section 404 or
502(l) of ERISA that would, in any such event (A) require any of the
Transactions to be rescinded or to be materially and adversely
modified, or (B) result in material liability to the Company, Newco or
any Newco stockholder, assuming for these purposes that neither Newco
nor any stockholder of Newco is a "party in interest" (within the
meaning of Section 3(14) of ERISA) or a "disqualified person" (within
the meaning of Section 4975(e) of the Code) with respect to any of the
Funds.
2. REPRESENTATIONS AND WARRANTIES OF NEWCO. Newco hereby represents
and warrants to the Stockholder and the Funds that Newco is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
Newco and constitutes a valid and binding obligation of Newco enforceable in
accordance with its terms. Except for the filings required under the HSR Act,
(i) no
5
filing with, and no permit, authorization, consent or approval of, any
Governmental Entity or any other person is necessary for the execution of this
Agreement by Newco and the consummation by Newco of the transactions
contemplated hereby and (ii) none of the execution and delivery of this
Agreement by Newco, the consummation of the transactions contemplated hereby nor
the compliance with the terms hereof by Newco will conflict with, or result in
any violation of, or default (with or without notice or lapse of time or both)
under any provision of, the certificate of incorporation, by-laws or analogous
documents of Newco, any trust agreement, loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, notice, decree, statute, law, ordinance,
rule or regulation applicable to Newco or to Newco's property or assets. If the
Option is exercised, the Subject Securities will be acquired for investment for
Newco's own account, not as a nominee or agent and not with a view to the
distribution of any part thereof. Newco has no present intention of selling,
granting any participation in or otherwise distributing the same nor does Newco
have any contract, undertaking, agreement or arrangement with any person with
respect to any of the Subject Securities. Newco further understands that the
Subject Securities may not be sold, transferred or otherwise disposed of without
registration under the Securities Act or pursuant to an exemption therefrom.
3. COVENANTS OF THE STOCKHOLDER AND THE FUNDS. Until the
termination of this Agreement in accordance with Section 10, the Stockholder and
each Fund agree as follows:
(a) VOTING OF SUBJECT SHARES. At any meeting of stockholders of the
Company called to vote upon the Merger and the Merger Agreement or at any
adjournment thereof or in any other circumstances upon which a vote or
other approval with respect to the Merger and the Merger Agreement is
sought, the Funds shall (and the Stockholder shall cause the Funds to) vote
the Subject Shares in favor of the Merger, the adoption by the Company of
the Merger Agreement and the approval of the terms thereof and each of the
other transactions contemplated by the Merger Agreement. The agreements
set forth in the immediately preceding sentence shall equally apply if such
approvals were to be sought by the solicitation of written consents. If
requested by Newco and consented to by the Company, the Stockholder shall
initiate a written consent solicitation to approve the Merger and the
Merger Agreement.
At any meeting of stockholders of the Company or at any adjournment
thereof or in any other circumstances upon which the Stockholder's or any
Fund's vote, consent or other approval is sought, the Funds shall (and the
Stockholder shall cause the Funds to) vote the Subject Shares against (i)
any action or agreement that would result in a breach in any material
respect of any covenant, representation or
6
warranty or any other obligation or agreement of the Company under the
Merger Agreement and (ii), except with the prior written consent of Newco,
any action or agreement that would impede, interfere with, delay, postpone
or attempt to discourage the Merger or the Debt Offer, including, but not
limited to: (A) the adoption by the Company of a proposal regarding (1) the
acquisition of the Company by merger, tender offer or otherwise by any
person other than Newco or any affiliate thereof (a "Third Party"); (2) the
acquisition by a Third Party of 15% or more of the assets of the Company
and its subsidiaries, taken as a whole; (3) the acquisition by a Third
Party of more than 20% of the outstanding shares of Company Common Stock;
or (4) the repurchase by the Company or any of its subsidiaries of 15% or
more of the outstanding shares of Company Common Stock; (B) any amendment
of the Company's certificate of incorporation or by-laws or other proposal
or transaction involving the Company or any of its subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement, the Debt
Offer or any of the other transactions contemplated by the Merger Agreement
or change in any manner the voting rights of any class of the Company's
capital stock; (C) any change in the management or board of directors of
the Company; (D) any material change in the present capitalization or
dividend policy of the Company; or (E) any other material change in the
Company's corporate structure or business. The Stockholder and the Funds
further agree not to commit or agree to take any action inconsistent with
the foregoing.
(b) PROXIES. The Stockholder and each Fund hereby grant to Newco a
proxy to vote the Subject Shares as indicated in Section 3(a) above. The
Stockholder and each Fund agree that this proxy shall be irrevocable and
coupled with an interest and will take such further action or execute such
other instruments as may be necessary to effectuate the intent of this
proxy and hereby revoke any proxy previously granted by the Stockholder or
any Fund with respect to the Subject Shares.
(c) TRANSFER RESTRICTIONS. The Stockholder and each Fund agree not
to (i) sell, transfer, pledge, encumber, assign or otherwise dispose of
(including by gift) (collectively, "Transfer"), or enter into any contract,
option or other arrangement or understanding (including any profit sharing
arrangement) with respect to the Transfer of, any of the Subject Securities
to any person other than pursuant to the terms hereof or the Merger
Agreement, (ii) enter into any voting arrangement or understanding, whether
by proxy, voting agreement or otherwise, or (iii) take any action that
would make any of its representations or warranties contained herein untrue
or incorrect or have the
7
effect of preventing or disabling the Stockholder or any Fund from
performing its obligations under this Agreement.
(d) APPRAISAL RIGHTS. The Stockholder and each Fund hereby
irrevocably waive any rights of appraisal with respect to the Merger or
rights to dissent from the Merger that the Stockholder or such Fund may
have.
(e) REGISTRATION RIGHTS AGREEMENTS. Unless this Agreement is
terminated in accordance with its terms, the Stockholder and each Fund
hereby agree not to exercise any right any of them may have under the
Equity Registration Rights Agreement and the Warrant Registration Rights
Agreement referred to in Section 3.3 of the Merger Agreement. Subject to
the occurrence of the Effective Time, the Stockholder and each Fund hereby
irrevocably waive any and all rights which any of them may have, and
release the Company from all of its obligations, under the Equity
Registration Rights Agreement and the Warrant Registration Rights Agreement
referred to in Section 3.3 of the Merger Agreement.
(f) NO SOLICITATION. Neither the Stockholder, any Fund nor any of
their respective affiliates shall (whether directly or indirectly through
any officer, director, member, advisor, agent, representatives or other
intermediary), nor shall the Stockholder, any Fund or any of their
respective affiliates authorize or permit any of its officers, directors,
members, advisors, agents, representatives or other intermediaries to, (i)
solicit, initiate, encourage or take any action to facilitate any
submission of inquiries, proposals or offers from any person relating to
any acquisition or purchase of all or a material amount of assets of, or
any equity interest in, the Company (or any subsidiary or division thereof)
or any merger, consolidation, tender offer (including a self tender offer),
exchange offer, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company (or any subsidiary
or division thereof), other than the transactions contemplated by this
Agreement or the Merger Agreement, or any other transaction the
consummation of which would or could reasonably be expected to impede,
interfere with, prevent or materially delay the Debt Offer or the Merger or
which would or could reasonably be expected to materially dilute the
benefits to Newco of the transactions contemplated by the Merger Agreement
(collectively, "Transaction Proposals") or agree to or endorse any
Transaction Proposal, other than the transactions contemplated by the
Merger Agreement, or (ii) enter into or participate in any discussions or
negotiations regarding any of the foregoing, or furnish to any other person
any information with respect to the Company's business, properties or
assets or any of the foregoing, or otherwise cooperate in any way with, or
assist or
8
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. Notwithstanding anything in
this Agreement to the contrary, from and after the date hereof, the
Stockholder and the Funds shall promptly advise Newco orally and in writing
of the receipt by any of them (or any of the other entities or persons
referred to above) of any Transaction Proposal, or any inquiry which is
likely to lead to any Transaction Proposal, the material terms and
conditions of such Transaction Proposal or inquiry, and the identity of the
person making any such Transaction Proposal or inquiry. The Stockholder
and the Funds will keep Newco fully informed of the status and details of
any such Transaction Proposal or inquiry.
(g) ELECTION TO RETAIN COMPANY COMMON STOCK. Fund V agrees that it
shall make elections to retain Company Common Stock in the Merger pursuant
to Article 2 of the Merger Agreement with respect to an aggregate of at
least 1,296,296 shares of Company Common Stock. The aggregate actual
number of shares of Company Common Stock which Fund V retains pursuant to
Article 2 of the Merger Agreement is herein referred to as the "Retained
Shares".
(h) MERGER AGREEMENT. The Stockholder and the Funds agree that they
accept the terms and conditions of the Merger Agreement as it applies to
the holders of shares of Company Common Stock and the holders of Warrants.
(i) ERISA. From and after the date hereof, each Fund agrees that it
will not take any action or refrain from taking any action that would cause
its representation and warranty in Section 1(b)(iv) to cease being true and
correct in any material respect.
(j) AFFILIATE LETTER. The Stockholder and each Fund, which
immediately after the Effective Time will own Retained Shares, shall
deliver to Newco on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit A to the Merger Agreement.
4. OPTION. (a) The Stockholder and each Fund hereby grant to Newco
(or its designee, provided such designee is an affiliate of KKR & Co.) an
irrevocable option to purchase the Subject Securities, on the terms and subject
to the conditions set forth herein (the "Option").
(b) The Option may be exercised by Newco, as a whole and not in part,
at any time during the period commencing upon the occurrence of either of the
following events and ending on the date which is the 30th calendar day following
the first to occur of such events:
9
(i) the Merger Agreement shall have been terminated by either the
Company or Newco pursuant to Section 8.1(b) thereof; or
(ii) the Merger Agreement shall have been terminated by the Company
pursuant to Section 8.1(c) and on March 31, 1997 or thereafter there shall
have been in effect any of (A) an Extending Action, (B) a condition which
would permit the Merger Agreement to be terminated under Section 8.1(b)
thereof or (C) any statute, rule or regulation enjoining or prohibiting in
whole or in any significant respect the consummation of the Merger, the
Debt Offer or any of the transactions contemplated by the Merger Agreement
or this Agreement.
(c) If Newco wishes to exercise the Option, Newco shall send a
written notice to the Stockholder of its intention to exercise the Option,
specifying the place, and, if then known, the time and the date (the "Option
Closing Date") of the closing (the "Option Closing") of the purchase. The
Option Closing Date shall occur on the fifth business day (or such longer period
as may be required by applicable law or regulation) after the later of (i) the
date on which such notice is delivered and (ii) the satisfaction of the
conditions set forth in Section 4(f).
(d) At the Option Closing, the Stockholder and the Funds shall
deliver to Newco (or its designee) all of the Subject Securities by delivery of
a certificate or certificates evidencing such Securities duly endorsed to Newco
or accompanied by powers duly executed in favor of Newco, with all necessary
stock transfer stamps affixed.
(e) At the Option Closing, Newco shall pay to the Stockholder
pursuant to the exercise of the Option, by wire transfer, cash in immediately
available funds to the account of the Stockholder specified in writing no more
than two days prior to the Option Closing, (i) with respect to the Subject
Shares, an amount equal to the product of $20.25 and the number of Subject
Shares and (ii) with respect to the Subject Warrants, an amount equal to the
product of $7.75 and the number of Subject Warrants (collectively, the "Subject
Securities Purchase Price").
(f) The Option Closing shall be subject to the satisfaction of each
of the following conditions:
(i) no court, arbitrator or governmental body, agency or official
shall have issued any order, decree or ruling and there shall not be any
statute, rule or regulation, restraining, enjoining or prohibiting the
consummation of the purchase and sale of the Subject Securities pursuant to
the exercise of the Option;
(ii) any waiting period applicable to the consummation of the purchase
and sale of the Subject Securities pursuant
10
to the exercise of the Option under the HSR Act shall have expired or been
terminated; and
(iii) all actions by or in respect of, and any filing with, any
governmental body, agency, official, or authority required to permit the
consummation of the purchase and sale of the Subject Securities pursuant to
the exercise of the Option shall have been obtained or made and shall be in
full force and effect.
5. FURTHER AGREEMENTS OF NEWCO. (a) Newco hereby agrees that, in
the event that it purchases the Subject Securities pursuant to the Option, as
promptly as practicable thereafter, Newco will make a tender offer for the
remaining shares of Company Common Stock to the stockholders of the Company (the
consummation of which shall be subject only to the condition that no court,
arbitrator or governmental body, agency or official shall have issued any order,
decree or ruling and there shall not be any statute, rule or regulation,
restraining, enjoining or prohibiting the consummation of such tender offer)
pursuant to which the stockholders of the Company (other than the Company, any
direct or indirect subsidiary of the Company or Newco) will receive an amount of
cash consideration per share of Company Common Stock equal to $20.25, and will
take such actions as may be necessary or appropriate in order to effectuate such
tender offer at the earliest practicable time.
(b) Subject to the last sentence of this Section 5(b), if, after
purchasing the Subject Securities pursuant to the Option and complying with its
obligations under Section 5(a) hereof, Newco or any of its affiliates receives
any cash or non-cash consideration in respect of the Subject Securities in
connection with a Third Party Business Combination (as defined below) during the
period commencing on the date of the Option Closing and ending on the first
anniversary thereof, Newco shall promptly pay over to the Stockholder, as an
addition to the Subject Securities Purchase Price, (x) the excess, if any, of
such consideration over the aggregate Subject Securities Purchase Price paid for
the Subject Securities by Newco hereunder less (y) the sum of (I) the amount of
taxes payable or to be payable by Newco (as estimated by Newco in good faith) in
connection with such Third Party Business Combination and (II) the amount of
out-of-pocket expenses paid by Newco in connection with such Third Party
Business Combination; PROVIDED that, (i) if the consideration received by Newco
or such affiliates shall be securities listed on a national securities exchange
or traded on NASDAQ, the per share value of such consideration shall be equal to
the closing price per share listed on such national securities exchange or
NASDAQ on the date such transaction is consummated and (ii) if the consideration
received by Newco or such affiliates shall be in a form other than securities,
the per share value shall be determined in good faith as of the date such
transaction is consummated by Newco and the Stockholder, or, if Newco and the
Stockholder cannot reach agreement, by a nationally
11
recognized investment banking firm reasonably acceptable to the parties. The
term "Third Party Business Combination" of the Company means the occurrence of
any of the following events: (A) the Company or any subsidiary of the Company
is acquired by merger or otherwise by any person or group, other than Newco or
any affiliate thereof (a "Third Party"); (B) the Company or any subsidiary of
the Company enters into an agreement with a Third Party which contemplates the
acquisition of 20% or more of the total assets of the Company and its
subsidiaries, taken as a whole; (C) the Company or Newco enters into a merger or
other agreement with a Third Party which contemplates the acquisition of more
than 20% of the outstanding shares of the Company's capital stock; or (D) a
Third Party acquires more than 20% of the total assets of the Company and its
subsidiaries, taken as a whole. Notwithstanding the foregoing, in no event
shall the Stockholder be entitled to receive any payment pursuant to this
Section 5(b) if at any time prior to the consummation of such Third Party
Business Combination, either (i) affiliates of KKR & Co. shall, directly or
indirectly, beneficially own 80% or more of the Company Common Stock or (ii)
prior to such time affiliates of KKR & Co. beneficially own at least 80% of the
Company Common Stock, the Company has issued shares of voting stock such that
affiliates of KKR & Co. no longer have a majority of the issued and outstanding
shares of voting stock of the Company.
6. POST-MERGER AGREEMENTS. Immediately after the Effective Time,
Newco, the Stockholder, Fund V and those affiliates of KKR & Co. which own
shares of Company Common Stock shall enter into a stockholders' agreement in
substantially the form attached hereto as Exhibit A; provided that neither Newco
nor any affiliate of KKR & Co shall be under any obligation to execute such
stockholders' agreement if Fund V shall not have made elections to retain
Company Common Stock in the Merger pursuant to Article 2 of the Merger Agreement
with respect to an aggregate of at least 1,296,296 shares of Company Common
Stock and shall not own, immediately after giving effect to the Merger, a number
of Retained Shares in excess of 432,099.
7. FURTHER ASSURANCES. The Stockholder and the Funds will, from
time to time, execute and deliver, or cause to be executed and delivered, such
additional or further consents, documents and other instruments as Newco may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
8. STOP TRANSFER ORDER. The Stockholder and each Fund hereby
authorize the Company's counsel to notify the Company's transfer agent that
there is a stop transfer order with respect to all of the Subject Shares (and
that this Agreement places limits on the voting of the Subject Shares).
9. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other
12
parties, except that Newco may assign, in its sole discretion, any or all of its
rights, interests and obligations hereunder to any direct or indirect wholly
owned subsidiary of Newco. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
10. TERMINATION. Except as set forth in Sections 4 and 6 and except
for Newco's obligations pursuant to Section 5, this Agreement shall terminate,
and no party shall have any rights or obligations hereunder and this Agreement
shall become null and void and have no further effect upon the first to occur of
(a) the Effective Time, (b) the 31st calendar day following the termination of
the Merger Agreement pursuant to Section 8.1(b) thereof or by the Company
pursuant to Section 8.1(c) thereof or (c) upon termination of the Merger
Agreement pursuant to Section 8.1(a) or 8.1(d) thereof or by Newco pursuant to
Section 8.1(c) thereof. Notwithstanding the foregoing, in the event the Option
shall have been exercised in accordance with Section 4, but the Option Closing
shall not have occurred, the provisions of Sections 1 and 3 shall survive until
the Option Closing. Nothing in this Section 10 shall relieve any party of
liability for breach of this Agreement.
11. GENERAL PROVISIONS.
(a) AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) NOTICE. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Newco in accordance with
Section 9.2 of the Merger Agreement and to the Stockholder and the Funds at
Oaktree Capital Management LLC, 000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, c/o Xx. Xxxxxxx X. Xxxxxx, with a copy to
Xxxxxx, Xxxx & Xxxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, X.X. 00000, Attn.:
Xxxxx X. Xxxxxx, Esq. (or at such other address for a party as shall be
specified by like notice).
(c) INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
(d) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered
13
one and the same agreement, and shall become effective when one or more of
the counterparts have been signed by each of the parties and delivered to
the other party, it being understood that each party need not sign the same
counterpart.
(e) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law thereof.
12. ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit such party to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that such party will not
bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than a Federal court sitting in the state of Delaware
or a Delaware state court and (iv) waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement
or any of the transactions contemplated hereby.
13. LIMITED LIABILITY. Notwithstanding any other provision hereof,
the obligations of each Fund under this Agreement shall not be an obligation of
any officer, director, limited or general partner (or future partner) of such
Fund. Any liability or obligation of a Fund arising out of this Agreement shall
be limited to and satisfied only out of the assets of such Fund.
14
IN WITNESS WHEREOF, each of Newco, the Stockholder and each Fund has
caused this Agreement to be signed by its signatory thereunto duly authorized,
as of the date first written above.
KCLC ACQUISITION CORP.
By:/s/ XXXXXXX X. XXXXXXX
-----------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
----------------------------------------
Title: President
---------------------------------------
TCW SPECIAL CREDITS FUND II
TCW SPECIAL CREDITS FUND IIb
TCW SPECIAL CREDITS FUND III
TCW SPECIAL CREDITS FUND IIIb
By: TCW SPECIAL CREDITS,
General Partner
By: TCW Asset Management Co.,
Managing General Partner
By: /s/ XXXXXXX XXXXX
-------------------------------------
Name: Xxxxxxx Xxxxx
Title: Authorized Signatory
By: /s/ XXXXX XXXXX
-------------------------------------
Name: Xxxxx Xxxxx
Title: Authorized Signatory
TCW SPECIAL CREDITS FUND V - THE PRINCIPAL FUND
By: TCW ASSET MANAGEMENT CO.,
General Partner
By: OAKTREE CAPITAL MANAGEMENT, LLC
Manager
By: /s/ XXXXXXX XXXXX
-------------------------------------
Name: Xxxxxxx Xxxxx
Title: Authorized Signatory
By: /s/ XXXXXXX XXXXXX
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Authorized Signatory
15
TCW SPECIAL CREDITS TRUST
TCW SPECIAL CREDITS TRUST IIIb
BY: TRUST COMPANY OF THE WEST,
Trustee
By: /s/ XXXXXXX XXXXX
-------------------------------------
Name: Xxxxxxx Xxxxx
Title: Authorized Signatory
By: /s/ XXXXX XXXXX
-------------------------------------
Name: Xxxxx Xxxxx
Title: Authorized Signatory
COMMON FUND ACCOUNT
WEYERHAEUSER COMPANY MASTER
RETIREMENT TRUST ACCOUNT
DELAWARE STATE EMPLOYEES RETIREMENT
TRUST ACCOUNT
By: TCW SPECIAL CREDITS,
Investment Manager
By: TCW Asset Management Co.,
Managing General Partner
By: /s/ XXXXXXX XXXXX
-------------------------------------
Name: Xxxxxxx Xxxxx
Title: Authorized Signatory
By: /s/ XXXXX XXXXX
-------------------------------------
Name: Xxxxx Xxxxx
Title: Authorized Signatory
16
OCM INLAND STEEL INDUSTRIES SEPARATE
ACCOUNT
By: OAKTREE CAPITAL MANAGEMENT, LLC,
Investment Manager
By: /s/ XXXXXXX XXXXX
-------------------------------------
Name: Xxxxxxx Xxxxx
Title: Authorized Signatory
By: /s/ XXXXXXX XXXXXX
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Authorized Signatory
OAKTREE CAPITAL MANAGEMENT, LLC,
By: /s/ XXXXXXX XXXXX
-------------------------------------
Name: Xxxxxxx Xxxxx
Title:
By: /s/ XXXXXXX XXXXXX
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title:
SCHEDULE A
Subject Subject
Fund Shares Warrants
---- ------ --------
TCW Special Credits Fund II 759,767 --
TCW Special Credits Fund IIb 695,883 --
TCW Special Credits Fund III 2,462,032 --
TCW Special Credits Fund IIIb 1,008,198 --
TCW Special Credits Fund V - The Principal Fund 2,710,238 858,683
TCW Special Credits Trust 747,159 --
TCW Special Credits Trust IIIb 402,105 --
Common Fund Account 338,524 --
Weyerhaeuser Company Master Retirement Trust 742,905 --
Delaware State Employees Retirement Trust Account 10,654 --
OCM Inland Steel Industries Separate Account 111,473 --
------- ------
Totals 9,988,938 858,683
--------- -------
--------- -------
EXHIBIT A
FORM OF STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (this "Agreement"), is entered into as of
_________ __, 199_ by and among KinderCare Learning Centers, Inc., a Delaware
corporation (the "Company"), TCW Special Credits Fund V The Principal Fund, a
California limited partnership ("Fund V"), Oaktree Capital Management, LLC, a
California limited liability company ("Oaktree"), and _________, a _________
(collectively, the "KKR Investor").
RECITALS
WHEREAS, KCLC Acquisition Corp. and the Company have entered into that
certain Agreement and Plan of Merger dated as of October 3, 1996 (the "Merger
Agreement"), pursuant to which the KKR Investor has acquired approximately 85%
of the outstanding shares of common stock, par value $.01 per share, of the
Company; and
WHEREAS, pursuant to the terms of the Merger Agreement, Fund V has
retained beneficial ownership of ____________ shares of Common Stock.
WHEREAS, that certain Voting Agreement entered into by an affiliate of
the KKR Investor, Oaktree, Fund V and certain other affiliates of Oaktree
requires that the parties hereto enter into a stockholders agreement in the form
of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the parties hereto
agree as follows:
Section 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
AFFILIATE: When used with respect to a specified Person, another
Person that, either directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified.
BOARD: The Board of Directors of the Company.
COMMON STOCK: The Common Stock, par value $.01 per share, of the
Company.
EXEMPT TRANSACTION: Has the meaning set forth in Section 2(c) hereof.
2
INITIAL OAKTREE SHARES: The shares of Common Stock owned by Fund V
immediately after giving affect to the consummation of the merger contemplated
by the Merger Agreement.
KKR AFFILIATE: With respect to the KKR Investor shall mean a Person
that directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with the KKR Investor; PROVIDED,
HOWEVER, that KKR Affiliate shall not in any event include the limited partners
of the KKR Investor or the limited partners of the general partner of the KKR
Investor.
KKR HOLDER: The KKR Investor and any Person to whom a KKR Holder
transfers shares of Common Stock which Person is required by this Agreement to
be bound by the provisions of this Agreement.
KKR SHARES: As of any date of determination, the shares of Common
Stock then held by the KKR Holders.
OAKTREE INVESTORS: As of any date of determination, Fund V and any
other investors for which Oaktree is the sole investment manager which then own
shares of Common Stock.
OAKTREE SHARES: As of any date of determination, the shares of Common
Stock then held by the Oaktree Investors.
PERSON: An individual, partnership, limited liability company, joint
venture, corporation, trust or unincorporated organization, a government or any
department, agency or political subdivision thereof or other entity.
PRIVATE SALE: Any sale of securities other than a sale made in a
public distribution pursuant to an effective registration statement under the
Securities Act.
SECURITIES ACT: The Securities Act of 1933, as amended from time to
time and the rules and regulations promulgated thereunder.
Section 2. (a) "TAG-ALONG" RIGHT WITH RESPECT TO PRIVATE SALES BY KKR
HOLDERS. (i) PRIVATE SALES OF SHARES BY KKR HOLDERS. Subject to the last
sentence of Section 3(a), with respect to any proposed Private Sale of any KKR
Shares by a KKR Holder or KKR Holders (collectively, for purposes of this
Section 2, the "KKR Holder") during the term of this Agreement to a Person (a
"Proposed Purchaser"), other than pursuant to an Exempt Transaction (as defined
in Section 2(c)), the Oaktree Investors shall have the right and option, but not
the obligation, to participate in such sale, on the same terms and subject to
the same conditions as the sale by the KKR Holder, for the number of Oaktree
Shares owned by the Oaktree Investors equalling the number derived by
multiplying the total number of KKR Shares which the KKR Holder proposes to sell
(the "Proposed Number of
3
Shares") by a fraction, the numerator of which is the total number of Oaktree
Shares and the denominator of which is the sum of (A) the total number of
Oaktree Shares, (B) the total number of KKR Shares, and (C) the total number of
shares of Common Stock (determined on a fully diluted basis) owned by Persons
entitled to the benefits of any other "tag-along" rights arising as a result of
such sale.
(ii) NOTICES. The KKR Holder shall notify, or cause to be notified,
Oaktree in writing of each proposed Private Sale subject to Section 2(a)(i)
above. Such notice shall set forth: (A) the Proposed Number of Shares, (B) the
name and address of the Proposed Purchaser, (C) the proposed amount of
consideration, the material terms and conditions of such sale (and if the
proposed consideration is not cash, the notice shall describe the terms of the
proposed consideration) and the proposed closing date of such sale, (D) the
total number of KKR Shares and the total number of shares of Common Stock
(determined on a fully diluted basis) owned by Persons entitled to the benefits
of any other "tag-along" rights arising as a result of such sale and (D) that
the Proposed Purchaser has been informed of the "tag-along" right provided for
in this Section 2(a) and has agreed to purchase Oaktree Shares held by the
Oaktree Investors in accordance with the terms hereof. The "tag-along" right
may be exercised by the Oaktree Investors by delivery of a written notice from
Oaktree to the KKR Holder (the "Tag-Along Notice") within 15 days following
receipt of the notice specified in the preceding sentence. The Tag-Along Notice
shall state the amount of Oaktree Shares that the Oaktree Investors propose to
include in such sale to the Proposed Purchaser. If Oaktree delivers a Tag-Along
Notice to the KKR Holder, the Oaktree Investors participating in the proposed
Private Sale shall (A) prior to closing of any such sale, execute and deliver
(or cause to be executed and delivered) any purchase agreement or other
documentation required by the Proposed Purchaser to consummate the sale
(including without limitation all legal opinions, cross-receipts and
certificates), which purchase agreement and other documentation shall be on
terms no less favorable in respect of any material term to such Oaktree
Investors than those executed by the KKR Holders and (B) at the closing of any
such sale, deliver to the Proposed Purchaser the certificate or certificates
representing the Oaktree Shares to be sold pursuant to such sale by such Oaktree
Investors, duly endorsed for transfer with signatures guaranteed, against
receipt of the purchase price thereof.
(iii) NUMBER OF SHARES TO BE SOLD. If a Tag-Along Notice is received
pursuant to Section 2(a)(ii), the Oaktree Investors shall be permitted to sell
to the Proposed Purchaser up to the number of Oaktree Shares determined as set
forth in Section 2(a)(i) above (the "Proposed Oaktree Shares"), and the KKR
Holder shall be permitted to sell to the Proposed Purchaser up to a number of
shares of Common Stock (the "Proposed KKR Shares") equal to the Proposed Number
of Shares, less the
4
aggregate number of Proposed Oaktree Shares and all other shares of Common Stock
being sold to such Proposed Purchaser in such transaction pursuant to tag-along
rights arising as a result of such sale; PROVIDED that the KKR Holder shall have
the right to sell a number of additional shares of Common Stock up to the excess
of the Proposed Number of Shares over the number of Proposed KKR Shares, if the
Proposed Purchaser wants to purchase such additional shares. If no Tag-Along
Notice is received by the KKR Holder pursuant to Section 2(a)(ii), the KKR
Holder shall have the right for a 120-day period to sell to the Proposed
Purchaser up to the Proposed Number of Shares on terms and conditions no more
favorable in any material respect to the KKR Holder than those stated in the
Tag-Along Notice.
(b) "TAG-ALONG" RIGHT WITH RESPECT TO PUBLIC SALES BY KKR HOLDERS.
(i) PUBLIC SALES OF SHARES BY KKR HOLDERS. Subject to the last sentence of
Section 3(a), with respect to any proposed sale of any KKR Shares by a KKR
Holder during the term of this Agreement made in a public distribution pursuant
to an effective registration statement under the Securities Act, other than
sales described in clause (iv) of the definition of Exempt Transaction, the
Oaktree Investors shall have the right and option, but not the obligation, to
participate in such public distribution on the same terms and subject to the
same conditions as the sale by the KKR Holder for a number of Oaktree Shares
owned by the Oaktree Investors as determined pursuant to Section 2(b)(iii)
below.
(ii) The KKR Holder shall notify, or cause to be notified, Oaktree in
writing (a "Notice") of each proposed public distribution pursuant to an
effective registration statement under the Securities Act (a "Proposed
Registration"). Such notice may be given before the filing of such registration
statement and need not specify any price or other terms or conditions of such
sale. If within 10 days of the delivery of such Notice to Oaktree, the KKR
Holder receives from Oaktree a written request (a "Request") to register shares
of Common Stock held by the Oaktree Investors (which Request will be
irrevocable), shares of Common Stock will be so registered as and to the extent
provided in this Section 2(b) if KKR Shares are so registered. If Oaktree
delivers a Request to the KKR Holder, the Oaktree Investors will participate in
such public distribution, if any, at the same price and on the same terms and
conditions as the KKR Holder, which price and other terms and conditions will be
determined on behalf of the KKR Holder and the Oaktree Investors by the KKR
Holder in its sole discretion. Nothing in this Agreement shall create any
obligation on the part of the KKR Holder to cause a registration statement to
become effective under the Securities Act or to sell any shares of Common Stock
pursuant to an effective registration statement under the Securities Act.
(iii) The maximum number of shares of Common Stock which will be
registered pursuant to a Request will equal the
5
number derived by multiplying the total number of KKR Shares which the KKR
Holder proposes to sell in such public distribution by a fraction, the numerator
of which is the total number of Oaktree Shares and the denominator of which is
the sum of (A) the total number of Oaktree Shares, (B) the total number of KKR
Shares, and (C) the total number of shares of Common Stock (determined on a
fully diluted basis) owned by Persons entitled to the benefits of any other
"tag-along" rights arising as a result of such distribution; provided that in
the event that the aggregate number of shares of Common Stock to be sold in any
such public distribution is increased or decreased, then the number of shares of
Common Stock which the Oaktree Investors shall sell in such public distribution
shall be increased or decreased by the product of (i) the number of shares of
Common Stock by which the total number of shares of Common Stock in such public
distribution is increased or decreased and (ii) a fraction the numerator of
which equals the number of Oaktree Shares originally so registered and the
denominator of which is the total number of shares of Common Stock originally so
registered.
(iv) Upon delivery of a Request, the participating Oaktree Investors
will, if requested by the KKR Holder, execute and deliver to the KKR Holder a
custody agreement and power of attorney in form and substance reasonably
satisfactory to the KKR Holder with respect to the shares of Common Stock to be
registered pursuant to this Section 2(b) (a "Custody Agreement and Power of
Attorney"). The custodian and attorney-in-fact under the Custody Agreement and
Power of Attorney will be the KKR Holder or its designee. The Custody Agreement
and Power of Attorney will provide, among other things, that such Oaktree
Investors will deliver to and deposit in custody with the custodian and
attorney-in-fact named therein a certificate or certificates representing such
shares of Common Stock (duly endorsed in blank by the registered owner or owners
thereof or accompanied by duly executed stock powers in blank) and irrevocably
appoint said custodian and attorney-in-fact as such Oaktree Investors' agent and
attorney-in-fact with full power and authority to act under the Custody
Agreement and Power of Attorney on such Oaktree Investors' behalf with respect
to the matters specified therein (including without limitation executing an
underwriting agreement and cross-receipts).
(v) Oaktree, for itself and on behalf of each participating Oaktree
Investor, agrees that it will execute and deliver or cause to be executed and
delivered such other agreements and other documents (such as legal opinions,
cross-receipts and certificates) as the KKR Holder itself is delivering or as
the KKR Holder may otherwise reasonably request to implement the provision of
this Section 2(b).
(c) EXEMPT TRANSACTION DEFINED. As used herein, the term "Exempt
Transaction" shall mean (i) sales by the KKR Investor to any KKR Affiliates,
(ii) sales by any KKR Affiliate to another KKR Affiliate or to the KKR Investor,
(iii) transfers
6
by the KKR Investor and their respective KKR Affiliates to its partners or
members (and any subsequent sales by such partners or members) in the form of
dividends or distributions (whether upon liquidation or otherwise), (iv) sales
by the KKR Investor which, taken together with all prior sales by the KKR
Investor, equals a number of shares of Common Stock which is less than 10% of
the shares of Common Stock then outstanding on a fully diluted basis or (v) with
respect to Section 3 only, sales by any KKR Holders made in a public
distribution pursuant to an effective registration statement under the
Securities Act; PROVIDED that in the case of clauses (i) and (ii) above the
buyer agrees in writing to be bound by the provisions of this Agreement,
including this paragraph (c); PROVIDED, FURTHER that in the case of clause (iii)
above, if the transferee is an Affiliate of Kohlberg Kravis Xxxxxxx & Co., such
transferee agrees in writing to be bound by the provisions of this Agreement,
including this paragraph (c).
Section 3. "DRAG-ALONG" RIGHT WITH RESPECT TO OAKTREE SHARES. (a)
SALES BY KKR HOLDERS. In the event that the KKR Holder determines, during the
term of this Agreement, to transfer either (i) at least 50% of the outstanding
shares of Common Stock on a fully diluted basis at the time of such transfer or
(ii) at least 35% of the outstanding shares of Common Stock on a fully diluted
basis at the time of such transfer (provided that such percentage set forth in
this clause (ii) equals 100% of the KKR Shares at the time of such transfer) to
a Proposed Purchaser, other than in an Exempt Transaction (a "Drag-Along Sale"),
then upon the request of the KKR Holders, the Oaktree Investors will transfer to
such Proposed Purchaser all of the Oaktree Shares at the same price and upon the
same terms and conditions in respect of any material term as such transfer by
the KKR Holders. In the event that the KKR Holders own at least 15% of the
outstanding shares of the Common Stock on a fully diluted basis and have signed
an agreement, with respect to all KKR Shares, to vote in favor of or tender in
connection with (a "Transaction Agreement") a business combination transaction
entered into by the Company, then, upon the request of the KKR Holders, the
Oaktree Investors will execute a Transaction Agreement with the same terms and
conditions in all material respects as the Transaction Agreement signed by the
KKR Holder. In the event that both Sections 2 and 3 hereto apply to a single
transaction, the "drag-along" rights set forth in this Section 3 will have
priority over the "tag-along" rights set forth in Section 2 above, and the
"tag-along" rights set forth in Section 2 will become exercisable by the Oaktree
Investors following a determination by the KKR Holder not to exercise its rights
under this Section 3.
(b) NOTICE. Prior to making any Drag-Along Sale, the KKR Holders
shall, if they determine in their sole discretion that the Oaktree Investors
should participate in such transfer, provide Oaktree with written notice (the
"Drag-Along Notice") not less than 5 business days prior to the proposed date of
the Drag-Along Sale (the "Drag-Along Sale Date"). The Drag-Along Notice
7
shall set forth: (i) the name and address of the Proposed Purchaser; (ii) the
proposed amount and form of consideration to be paid per share of Common Stock
and the material terms and conditions of the transfer; (iii) the Drag-Along Sale
Date and the date upon which the Oaktree Investors shall deliver to the KKR
Holders the certificates representing the Oaktree Shares, duly endorsed, and the
power of attorney referred to below; and (iv) that the Proposed Purchaser has
been informed of the Drag-Along Sale rights and has agreed to acquire all of the
Oaktree Shares. The Oaktree Investors shall (i) prior to closing of any such
transfer, execute any purchase agreement or other documentation required by the
Proposed Purchaser to consummate the transfer, which purchase agreement and
other documentation shall be on terms no less favorable in respect of any
material term to the Oaktree Investors than those executed by the KKR Holders,
and (ii) at the closing of any such transfer, deliver to the Proposed Purchaser
the certificate or certificates representing the Oaktree Shares, duly endorsed
for transfer with signatures guaranteed, against receipt of the purchase price
thereof. Prior to entering into a Transaction Agreement, the KKR Holders shall,
if they determine in their sole discretion that the Oaktree Investors should
execute a Transaction Agreement, provide Oaktree with written notice (the
"Transaction Agreement Notice") not less than 5 business days prior to the
proposed date of the execution of the Transaction Agreement (the "Transaction
Agreement Date"). The Transaction Agreement Notice shall set forth: (i) the
name and address of the counter-parties to the Transaction Agreement; (ii) the
proposed form of Transaction Agreement; and (iii) the material terms and
conditions of the business combination with the Company to which the Transaction
Agreement relates. The Oaktree Investors shall, at the signing and closing of
such Transaction Agreement, execute and deliver all other documentation required
by such Transaction Agreement, which documents shall be on terms no less
favorable in respect of any material term to the Oaktree Investors than those
executed by the KKR Holder.
(c) EFFECT OF DRAG-ALONG SALE. If the Oaktree Investors receive their
proportionate share of the purchase price from a Drag-Along Sale, but have
failed to deliver certificates representing their shares of Common Stock as
described in this Section 3, they shall for all purposes be deemed no longer to
be stockholders of the Company, shall have no voting rights, shall not be
entitled to any dividends or other distributions with respect to the Common
Stock held by them, and shall have no other rights or privileges granted to
stockholders under law or this Agreement.
8
Section 4. ELECTION OF DIRECTOR; OTHER RIGHTS. (a) Subject to Fund
V's compliance with Section 3(g) of the Voting Agreement, if immediately after
giving effect to the merger contemplated by the Merger Agreement, Fund V owns in
excess of 432,099 shares of the Common Stock, then one representative of the
Oaktree Investors, who shall be either Xx. Xxxxxxx X. Xxxxxx or Xx. Xxxxx X.
Xxxxx, or in the event that both Xx. Xxxxxx and Xx. Xxxxx are not affiliated
with Oaktree or are permanently disabled, another individual selected by Oaktree
who is reasonably acceptable to the Company and the KKR Holder, shall (i) be
nominated by the Company for election to the Board and (ii) have the KKR Shares
voted in favor of his election to the Board, until such time as this Agreement
terminates in accordance with its terms. At such time as this Agreement
terminates in accordance with its terms, the Oaktree Investors will, upon notice
to Oaktree from the KKR Investor, cause their nominee to resign from the Board.
(b) VCOC AGREEMENTS. The Oaktree Investors shall have the right,
during the term of this Agreement, upon reasonable prior written notice to the
Company, to (i) discuss the business, operations, properties, financial and
other conditions and plans and prospects of the Company with any executive
officer or director of the Company or any subsidiary of the Company and (ii)
during normal business hours, to visit and inspect any of the properties of the
Company and its subsidiaries.
Section 5. TRANSFER. (a) The Oaktree Investors agree not to offer or
to transfer, sell, assign, pledge, hypothecate or otherwise dispose of
("Transfer") any of their shares of Common Stock unless such offer or Transfer
complies with the Securities Act and the rules and regulations thereunder and
the state securities laws of any applicable state.
(b) Any transferee of an Oaktree Investor will not acquire any rights
under this Agreement. Any Person which owns shares of Common Stock and which,
prior to the date of determination, was an Oaktree Investor, but, on the date of
determination, Oaktree is not the sole investment manager of, shall not be
entitled to any rights under this Agreement.
Section 6. MISCELLANEOUS. (a) TERMINATION OF AGREEMENT. The
provisions of this Agreement shall terminate upon the earliest of:
(i) the earliest of (A) if the number of Initial Oaktree Shares is
less than 864,198, such time as the Oaktree Investors own less than 90% of
the number of Initial Oaktree Shares; (B) if the number of Initial Oaktree
Shares is 864,198 or more, then at such time as the Oaktree Investors
transfer a number of shares of Common Stock such that (1) immediately
before giving effect to such transfer, the Oaktree Investors owned at least
10% of the shares of Common Stock on a fully diluted basis and (2)
immediately
9
after giving effect to such transfer, the Oaktree Investors owns less than
10% of the shares of Common Stock on a fully diluted basis or (C) if the
number of Initial Oaktree Shares is 864,198 or more and the number of
Oaktree Shares falls below 10% of the number of shares of Common Stock on a
fully diluted basis other than as a result of a transfer by the Oaktree
Investors, such time after such falling below as the Oaktree Investors
transfer any shares of Common Stock and thereafter the Oaktree Investors
own less than 90% of the number of Initial Oaktree Shares;
(ii) the date on which the KKR Holders in the aggregate own less than
15% of the shares of Common Stock on a fully diluted basis; or
(iii) the tenth anniversary of the date of this Agreement.
Notwithstanding the immediately preceding sentence, this Section 6 and the
last sentence of Section 4(a) shall survive the termination of this Agreement.
For the purpose of Section 6(a)(i), the term "transfer" shall include, with
respect to an Oaktree Investor, Oaktree no longer being the sole investment
manager of such Oaktree Investor.
(b) REPRESENTATION AND WARRANTY. The Oaktree Investors own, of
record or beneficially, no shares of Common Stock or securities convertible or
exchangeable for shares of Common Stock, other than the Oaktree Shares subject
to this Agreement.
(c) ASSIGNMENT, BINDING EFFECT. This Agreement shall not be
assignable by the parties hereto, except to any Person who in connection with a
transfer of KKR Shares is required by this Agreement, in connection with such
transfer, to agree to be bound by the provisions of this Agreement. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective legal representatives, heirs, legatees,
successors and permitted assigns.
(d) COSTS AND EXPENSES. All costs and expenses incurred in
connection with this Agreement and the consummation of any of the transactions
contemplated hereby shall be paid by the party incurring such expenses.
(e) AMENDMENTS. The provision of this Agreement, including the
provisions of this sentence, may be amended, modified or supplemented only by a
written instrument executed by holders of (i) at least a majority of the KKR
Shares, (ii) Oaktree and (iii) the Company.
(f) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without regard to
principles of conflict of
10
laws. Each of the parties hereto agrees to submit to the jurisdiction of the
courts of the State of New York in any action or proceeding arising out of or
relating to this Agreement.
(g) INTERPRETATION. The headings of the Sections contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not affect the meaning or interpretation of this
Agreement.
(h) NOTICES. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or by telecopy or seven days
after having been sent by certified mail, return receipt requested, postage
prepaid, to the parties to this Agreement at the following address or to such
other address as either party to this Agreement shall specify by notice to the
other:
(1) If to the KKR Investors or a KKR Holder, to it in care of:
Kohlberg Kravis Xxxxxxx & Co.
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
(2) If to Oaktree or to an Oaktree Investor, to it in care of:
Oaktree Capital Management, LLC
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
(3) If to the Company, to it in care of:
KinderCare Learning Centers, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
11
Vice President/General Counsel
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
(i) WAIVER AND CONSENT. No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained herein. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as waiver of any preceding
or succeeding breach and no failure by any party to exercise any right or
privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder. Each party hereto,
in addition to being entitled to exercise all rights provided herein, in the
charter or granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. Each party hereto
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(j) INSPECTION. Copies of this Agreement will be available for
inspection or copying by any party at the offices of the Company through the
Secretary of the Company.
(k) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to constitute one and the same agreement.
(l) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(m) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the rights of the Oaktree Investors herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matters.
12
(n) LIMITED LIABILITY OF PARTNERS. Notwithstanding anything that may
be expressed or implied in this Agreement, each KKR Holder and each Oaktree
Investor, by its acceptance of the benefits of this Agreement, covenants, agrees
and acknowledges that notwithstanding that the KKR Holder and the Oaktree
Investors are partnerships no recourse under this Agreement or any documents or
instruments delivered in connection with this Agreement shall be had against any
officer, agent or employee of any KKR Holder or any Oaktree Investor, against
any partner of any KKR Holder or Oaktree Investor or any director, officer,
employee, partner, affiliate or assignee of any of the foregoing, whether by the
enforcement of any assessment or by any legal or equitable proceeding, or by
virtue of any statute, regulation or other applicable law, it being expressly
agreed and acknowledged that no personal liability whatsoever shall attach to,
be imposed on or otherwise be incurred by an officer, agent or employee of any
KKR Holder or any Oaktree Investor or any partner of any KKR Holder or any
Oaktree Holder or any director, officer, employee, partner, affiliate or
assignee of any of the foregoing, as such for any obligations of any KKR Holder
or Oaktree Investor under this Agreement or any documents or instruments
delivered in connection with this Agreement or for any claim based on, in
respect of or by reason of such obligations or their creation.
IN WITNESS WHEREOF, the parties have executed this Stockholders'
Agreement as of the date first above written.
KINDERCARE LEARNING CENTERS, INC.
a Delaware corporation
By:
-------------------------------------
Name:
Title:
TCW SPECIAL CREDITS FUND V - THE
PRINCIPAL FUND
By: TCW ASSET MANAGEMENT CO.,
General Partner
By: OAKTREE CAPITAL
MANAGEMENT, LLC
Manager
By:
----------------------------------
Name: Xxxxxxx Xxxxx
Title: Authorized Signatory
13
By:
----------------------------------
Name: Xxxxxxx Xxxxxx
Title: Authorized Signatory
OAKTREE CAPITAL MANAGEMENT, LLC,
By:
-------------------------------------
Name: Xxxxxxx Xxxxx
Title:
By:
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title:
