OPTION AND SUPPORT AGREEMENT
OPTION AND SUPPORT AGREEMENT dated as of March 27, 1998 (this "AGREEMENT")
by and among Knowledge Beginnings, Inc., a Delaware corporation ("PARENT"),
Children's Discovery Centers of America, Inc., a Delaware corporation (the
"COMPANY"), and the other parties signatory hereto (each a "STOCKHOLDER").
RECITALS
A. Concurrently herewith, Parent, KBI Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Parent ("PURCHASER"), and the Company
are entering into an Agreement and Plan of Merger of even date herewith (as such
agreement may be amended from time to time, the "MERGER AGREEMENT"; terms used
but not defined herein which are defined in the Merger Agreement shall have the
meanings set forth in the Merger Agreement) pursuant to which (and subject to
the terms and conditions specified therein) Purchaser will be merged with and
into the Company (the "MERGER"), whereby each share of common stock, par value
$.01 per share, of the Company ("COMMON STOCK") issued and outstanding
immediately prior to the effective time of the Merger will be converted into the
right to receive $12.25 in cash, other than (i) shares of Common Stock owned,
directly or indirectly, by the Company, Parent or Purchaser or any of their
wholly-owned subsidiaries and (ii) any shares of Common Stock owned by
Dissenting Stockholders.
B. In furtherance of the Merger, Parent and the Company desire that as
soon as practicable (and no later than five business days) after the execution
and delivery of the Merger Agreement, Purchaser commence a cash tender offer to
purchase all outstanding shares of Common Stock, including all of the Shares (as
defined in Section 1(a) below) on the terms and subject to the conditions set
forth in the Merger Agreement.
C. As a condition and inducement to its willingness to enter into the
Merger Agreement, Parent has required that the Company grant to Parent an option
to purchase 1,342,155 shares of Common Stock, upon the terms and subject to the
conditions hereof.
D. As a condition to Parent's entering into the Merger Agreement, Parent
has required that each Stockholder enter into, and each such Stockholder has
agreed to enter into, this Agreement with Parent providing, among other things,
for such Stockholder's agreement to tender pursuant to the Offer all shares of
Common Stock owned by it and to support the Merger and the grant by each such
Stockholder to Parent of an option to purchase such Stockholder's shares of
Common Stock, in each case upon the terms and subject to the conditions hereof.
AGREEMENT
To implement the foregoing and in consideration of the mutual agreements
contained herein and in the Merger Agreement, the parties hereby agree as
follows:
1. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS. Each Stockholder
severally and not jointly hereby represents and warrants to Parent as follows:
(a) OWNERSHIP OF SHARES.
(i) Such Stockholder is the record holder or beneficial owner
(as defined in Section 14(j) hereof) of the number of shares of Common Stock as
is set forth opposite such Stockholder's name on Schedule I hereto (as to each
Stockholder, such shares shall constitute the "EXISTING SHARES," and together
with any shares of Common Stock acquired of record or beneficially by such
Stockholder in any capacity after the date hereof and prior to the termination
hereof, whether upon exercise of options, warrants or rights, conversion of
convertible securities, purchase, exchange, dividend, distribution or otherwise,
shall constitute the "SHARES").
(ii) On the date hereof, the Existing Shares constitute all of
the shares of Common Stock owned of record or beneficially by such Stockholder,
and such Stockholder does not own or have the right to acquire any options,
warrants, convertible or exchangeable securities or other rights to acquire any
shares of Common Stock.
(iii) Such Stockholder has sole power of disposition, sole
voting power, sole power to issue instructions with respect to the matters set
forth in Sections 5, 10 and 11 hereof and sole power to demand dissenter's or
appraisal rights, in each case with respect to all of the Existing Shares, with
no restrictions on such rights, subject to applicable federal securities laws
and the terms of this Agreement.
(iv) Such Stockholder will have sole power of disposition, sole
voting power, sole power to issue instructions with respect to the matters set
forth in Sections 5, 10 and 11 hereof and sole power to demand dissenter's or
appraisal rights, in each case with respect to all Shares other than Existing
Shares, if any, which become beneficially owned by such Stockholder with no
restrictions on such rights, subject to applicable federal securities laws and
the terms of this Agreement.
(b) ORGANIZATION. Such Stockholder has been duly organized and is
validly existing and in good standing under the laws of the jurisdiction of its
formation.
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(c) POWER; BINDING AGREEMENT. Such Stockholder has the
organizational power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. This Agreement has been duly
and validly authorized, executed and delivered by such Stockholder and
constitutes a valid and binding agreement of such Stockholder, enforceable
against such Stockholder in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(d) NO CONFLICTS. (A) No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority by such
Stockholder is necessary for the execution of this Agreement by such Stockholder
and the consummation by such Stockholder of the transactions contemplated hereby
and (B) neither the execution and delivery of this Agreement by such Stockholder
nor the consummation by such Stockholder of the transactions contemplated hereby
nor compliance by such Stockholder with any of the provisions hereof shall (x)
conflict with or result in any breach of any partnership agreement or other
organizational documents applicable to such Stockholder, (y) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which such Stockholder is a party or by which such
Stockholder or any of such Stockholder's properties or assets may be bound or
(z) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to such Stockholder.
(e) ENCUMBRANCES. Such Stockholder's Shares and the certificates
representing such Shares are now and at all times during the term hereof will be
held by such Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, free and clear of all liens, claims, security interests, proxies,
voting trusts or agreements, understandings or arrangements or any other
encumbrances whatsoever, except for any such encumbrances arising hereunder.
The transfer by such Stockholder of its Shares in the Offer or hereunder shall
pass to and unconditionally vest in Purchaser good and valid title to all
Shares, free and clear of all claims, liens, restrictions, security interests,
pledges, limitations and encumbrances whatsoever.
(f) FEES. Except as set forth in the Merger Agreement, no broker,
investment banker, financial adviser or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of such Stockholder in its capacity as such.
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(g) RELIANCE. Such Stockholder understands and acknowledges that
Parent and Purchaser are entering into the Merger Agreement and commencing the
Offer in reliance upon such Stockholder's execution and delivery of this
Agreement.
2. REPRESENTATIONS AND WARRANTIES OF PARENT TO THE COMPANY AND THE
STOCKHOLDERS. Parent hereby represents and warrants to the Company and each
Stockholder as follows:
(a) ORGANIZATION. Parent is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
formation.
(b) POWER; BINDING AGREEMENT. Parent has the corporate power and
authority to enter into and perform all of Parent's obligations under this
Agreement. This Agreement has been duly and validly authorized, executed and
delivered by Parent and constitutes a valid and binding agreement of Parent,
enforceable against Parent in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(c) NO CONFLICTS. (A) Other than in connection with or in compliance
with the provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976,
as amended, and the rules and regulations thereunder (the "XXXX-XXXXX-XXXXXX
ACT"), the Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "SECURITIES ACT"), the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "EXCHANGE ACT"), the blue
sky laws of any State or the rules and regulations of NASDAQ, no filing with,
and no permit, authorization, consent or approval of, any state or federal
public body or authority by Parent is necessary for the execution of this
Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby and (B) neither the execution and delivery of this Agreement
by Parent nor the consummation by Parent of the transactions contemplated hereby
nor compliance by Parent with any of the provisions hereof shall (x) conflict
with or result in any breach of the certificate of incorporation or bylaws of
Parent, (y) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which Parent is a party or by
which Parent or any of Parent's properties or assets may be bound or (z) violate
any order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to Parent.
3. REPRESENTATIONS AND WARRANTIES OF PARENT TO THE COMPANY. Parent
hereby represents and warrants to the Company that if and when Parent exercises
the Company Option, it will be acquiring the Company Shares issuable upon the
exercise thereof for its own account
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and not with a view to distribution or resale in any manner which would be in
violation of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY TO PARENT. The Company
hereby represents and warrants to Parent as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the requisite
corporate power and authority to enter into and perform this Agreement.
(b) The execution and delivery of this Agreement by the Company and
the consummation by it of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Company, which constitutes the only
corporate actions necessary to authorize the execution and delivery of this
Agreement and consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by a duly authorized officer of
the Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(c) The Company has taken all necessary corporate action to authorize
and reserve the Company Shares issuable upon exercise of the Company Option and
the Company Shares, when issued and delivered by the Company upon exercise of
the Company Option in accordance with the terms hereof, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights and
other encumbrances, liens and restrictions, except those imposed by federal
securities laws.
(d) Except as otherwise required by the Xxxx-Xxxxx-Xxxxxx Act and
other than any filings required under the blue sky laws of any states or by
NASDAQ, the execution and delivery of this Agreement by the Company and the
issuance of Company Shares upon exercise of the Company Option do not require
the consent, waiver, approval or authorization of or any filing with any Person
or public authority.
(e) (A) Other than in connection with or in compliance with the
provisions of the Xxxx-Xxxxx-Xxxxxx Act, the Securities Act, the Exchange Act,
the blue sky laws of any State or the rules and regulations of NASDAQ, no filing
with, and no permit, authorization, consent or approval of, any state or federal
public body or authority by the Company is necessary for the execution of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby and (B) neither the execution and delivery of this Agreement
by the Company nor the consummation by the Company of the transactions
contemplated hereby
Page 5
nor compliance by the Company with any of the provisions hereof shall (x)
conflict with or result in any breach of the certificate of incorporation or
bylaws of the Company, (y) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to
any third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which the Company is a party or by which the Company or any of the Company's
properties or assets may be bound or (z) violate any order, writ, injunction,
decree, judgment, statute, rule or regulation applicable to the Company.
(f) No "fair price", "moratorium", "control share acquisition" or
other form of antitakeover statute or regulation (including, without limitation,
the restrictions on "business combinations" set forth in Section 203 of the
Delaware Law) is or shall be applicable to execution of this Agreement or the
consummation of the transactions contemplated hereby, including without
limitation, the acquisition of any Stockholder's Shares or the Company Shares
pursuant to this Agreement (and the Board of Directors of the Company has taken
all action to approve the acquisition of the Company Shares and all
Stockholders' Shares to the extent necessary to avoid such application).
5. OPTION GRANTED TO PARENT BY THE STOCKHOLDERS.
(a) Each Stockholder, severally and not jointly, hereby grants to
Parent an irrevocable option to purchase, in whole and not in part, all of such
Stockholder's respective Shares, on the terms and subject to the conditions set
forth herein (with respect to each Stockholder's Shares, the "STOCKHOLDER
OPTION").
(b) Each Stockholder Option may be exercised by Parent, in whole or
in part, at any time, or from time to time, during the period commencing
immediately after the occurrence of a Trigger Event and ending on, and
including, the date which is nine months after the termination of the Merger
Agreement. As used herein, "Trigger Event" shall mean (i) the termination of
the Merger Agreement pursuant to Section 8.1(c)(ii) or 8.1(b)(iii) or (ii) the
termination of the Merger Agreement for any other reason (other than pursuant to
Section 8.1(b)(ii)) and during the period commencing on the date hereof and
ending on, and including, the date which is nine months after the termination of
the Merger Agreement an Alternative Transaction (as defined inn the Merger
Agreement) is consummated.
(c) If Parent wishes to exercise a Stockholder Option, Parent shall
send a written notice to such Stockholder (to the address set forth herein) of
Parent's irrevocable election to exercise such Stockholder Option, specifying
the place, and, if then known, the time and the date (the "OPTION CLOSING DATE")
of the closing of the purchase of such Stockholder's
Page 6
Shares (the "OPTION CLOSING"). 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
5(f) hereof.
(d) At the Option Closing, the subject Stockholder shall deliver to
Parent (or its designee) all of such Stockholder's Shares by delivery of a
certificate or certificates evidencing such Shares, duly endorsed to Parent or
accompanied by stock powers duly executed in favor of Parent, with all necessary
stock transfer stamps affixed, free and clear of all liens, encumbrances and
restrictions, except for restrictions imposed by federal securities laws.
(e) At the Option Closing, Parent shall pay to the subject
Stockholder, by wire transfer in immediately available funds to the account of
such Stockholder specified in writing no less than two days prior to the Option
Closing, an amount equal to the product of $12.25 (as adjusted as provided in
Section 5(g)) (the "PURCHASE PRICE") and the number of shares of Common Stock
purchased pursuant to the exercise of the subject Stockholder Option.
(f) The purchase of Shares pursuant to each Stockholder Option shall
be subject to the satisfaction of each of the following conditions:
(i) no domestic court, arbitrator or governmental body, agency
or official shall have issued any order, decree or ruling (which has not been
stayed or suspended pending appeal) and there shall not be any effective
domestic statute, rule or regulation prohibiting the consummation of the
purchase and sale of Shares pursuant to the exercise of the such Stockholder
Option; and
(ii) any waiting period applicable to the consummation of the
purchase and sale of the Shares pursuant to the exercise of such Stockholder
Option under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or been terminated.
(g) In the event of a stock dividend or distribution, or any change
in the Common Stock by reason of any stock dividend, stock split, spin-off,
reorganization, recapitalization, reclassification, consolidation, combination,
exchange of shares or the like, the term "SHARES" as used in this Agreement
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any securities or other property into which or
for which any or all of the Shares may be changed or exchanged, and the Purchase
Price shall be proportionately adjusted. In the event of any merger or
consolidation of the Company into another corporation, the exchange of all or
substantially all of the assets of the Company for the securities of another
corporation, or the recapitalization, reclassification, liquidation or
dissolution of the Company, or other adjustment or event which results in shares
of Common
Page 7
Stock being exchanged for or converted into cash, securities or other
property, "Shares" shall refer to the kind and amount of cash, securities
and/or other property receivable by each Stockholder as a result of such
event and each Stockholder Option shall be exercisable for such cash,
securities and/or other property and the Purchase Price shall be
proportionately adjusted.
6. OPTION GRANT TO PARENT BY THE COMPANY.
(a) Subject to the other terms and conditions set forth herein, the
Company hereby grants to Parent an irrevocable option (the "COMPANY OPTION") to
purchase up to 1,342,155 (as adjusted as provided herein) shares of Common Stock
(the "COMPANY SHARES") at a per share cash purchase price equal to $10.125 (as
adjusted as provided in Section 6(c)) (the "COMPANY PURCHASE PRICE").
(b) The Company Option may be exercised by Parent, in whole or in
part, at any time, or from time to time, during the period commencing
immediately after the occurrence of a Trigger Event and ending on, and
including, the date which is nine months after the termination of the Merger
Agreement
(c) In the event of any change in the number of issued and
outstanding shares of Common Stock by reason of any stock dividend, stock split,
split-up, reclassification, recapitalization, merger or other change in the
corporate or capital structure of the Company, the number of Company Shares
subject to the Company Option and the purchase price per Company Share shall be
appropriately adjusted to restore Parent to its rights hereunder, including its
right to purchase Company Shares representing 19.9% of the capital stock of the
Company entitled to vote generally for the election of the directors of the
Company which is issued and outstanding immediately prior to the exercise of the
Company Option at an aggregate purchase price equal to the Company Purchase
Price multiplied by 1,342,155. In the event that any additional shares of
Common Stock are issued after the date of this Agreement (other than pursuant to
an event described in the preceding sentence), the number of Company Shares
subject to the Company Option shall be increased by 19.9% of the number of the
additional shares of Common Stock so issued (and such additional Company Shares
shall have a purchase price per share equal to the Company Purchase Price).
(d) In the event Parent wishes to exercise all or a portion of the
Company Option, Parent shall send a written notice to the Company (the "STOCK
EXERCISE NOTICE") specifying a date not later than 10 business days and not
earlier than the three business days following the date such notice is given for
the closing of such purchase.
(e) If at any time the Company Option is then exercisable pursuant to
the terms of Section 6(b) hereof, Parent may elect, in lieu of exercising the
Company Option to
Page 8
purchase Company Shares provided in Section 6(a) hereof, to send a written
notice to the Company (the "CASH EXERCISE NOTICE") specifying a date not
later than 20 business days and not earlier than 10 business days following
the date such notice is given on which date the Company shall pay to Parent
an amount in cash equal to the Spread (as hereinafter defined) multiplied by
all or such portion of the Company Shares subject to the Company Option as
Parent shall specify. As used herein "SPREAD" shall mean the excess, if any,
over the Company Purchase Price of the HIGHER of (x) if applicable, the
highest price per share of Common Stock (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by any Person in an
Acquisition Transaction (as defined in Section 6.5 of the Merger Agreement)
(the "ALTERNATIVE PURCHASE PRICE") or (y) the closing sales price of the
shares of Common Stock on NASDAQ on the last trading day immediately prior to
the date of the Cash Exercise Notice (the "CLOSING PRICE"). If the
Alternative Purchase Price includes any property other than cash, the
Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if
any, included in the Alternative Purchase Price plus (ii) the fair market
value of such other property. If such other property consists of securities
with an existing public trading market, the average of the closing sales
prices (or the average of the closing bid and asked prices if closing sales
prices are unavailable) for such securities in their principal public trading
market on the five trading days ending five days prior to the date of the
Cash Exercise Notice shall be deemed to equal the fair market value of such
property. If such other property consists of something other than cash or
securities with an existing public trading market and, as of the payment date
for the Spread, agreement on the value of such other property has not been
reached, the Alternative Purchase Price shall be deemed to equal the Closing
Price. Upon exercise of Parent's right to receive cash pursuant to this
Section 6(e) and the payment of such cash to Parent, the obligations of the
Company to deliver the Company Shares pursuant to Section 6(g) shall be
terminated with respect to such number of Company Shares for which the Parent
shall have elected to be paid the Spread.
(f) The closing of the Company Option 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 (which has not been
stayed or suspended pending appeal) and there shall not be any effective
statute, rule or regulation, restraining, enjoining or prohibiting the
consummation of the purchase and sale of the Company Shares pursuant to the
exercise of the Company Option; and
(ii) any waiting period applicable to the consummation of the
purchase and sale of the Company Shares pursuant to the exercise of the Company
Option under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or been terminated.
Page 9
(g) Any closing hereunder shall take place on the date specified by
Parent in its Stock Exercise Notice or Cash Exercise Notice, as the case may be,
at 8:00 A.M., local time, at the offices of Xxxxxx & Xxxxxxx, 00 Xxxxxx Xxxx,
Xxxxx Xxxx, XX 00000, or, if the conditions set forth in Section 6(f) have not
then been satisfied, on the second business day following the satisfaction of
such conditions, or at such other time and place as the parties hereto may agree
(the "CLOSING DATE"). On the Closing Date, (i) in the event of a closing
pursuant to Section 6(d) hereof, the Company will deliver to Parent a
certificate or certificates representing the Company Shares in the denominations
designated by Parent in its Stock Exercise Notice and Parent will purchase such
Company Shares from the Company at the price per Share equal to the Company
Purchase Price or (ii) in the event of a closing pursuant to Section 6(e)
hereof, the Company will deliver to Parent the cash in an amount determined
pursuant to Section 6(e) hereof. Any payment made by Parent to the Company, or
by the Company to the Parent, pursuant to this Agreement shall be made by
certified or official bank check or by wire transfer of federal funds to a bank
designated by the party receiving such funds.
(h) The certificates representing the Company Shares may bear an
appropriate legend relating to the fact that such Company Shares have not been
registered under the Securities Act.
7. LISTING OF COMPANY SHARES; REGULATORY FILINGS AND APPROVALS. Subject
to applicable law and the rules and regulations of NASDAQ, the Company will
promptly file an application to list the Company Shares on NASDAQ and will use
its best efforts to obtain approval of such listing and to file any necessary
filings by the Company under the Xxxx-Xxxxx-Xxxxxx Act; provided, however, that
if the Company is unable to effect such listing on NASDAQ by the Closing Date,
the Company will nevertheless be obligated to deliver the Company Shares upon
the Closing Date. The Company and Parent will use their best efforts to obtain
consents of all third parties and all regulatory approvals, if any, necessary to
the consummation of the closing of the sale of the Company Shares (or payment of
the Spread) upon exercise of the Company Option.
8. PROFIT LIMITATION. Notwithstanding any other provision of this
Agreement, in no event shall Parent's Total Profit (as defined below) exceed $5
million and, if it does exceed such amount, Parent, at its sole election, shall,
within five business days, either (a) deliver to the Company for cancellation
Company Shares (valued, for the purposes of this Section 8, at the closing sales
price of the Common Stock on NASDAQ on the day of delivery) previously purchased
by Parent, (b) pay cash or other consideration to the Company or (c) undertake
any combination thereof, so that Parent's Total Profit shall not exceed $5
million after taking into account the foregoing actions.
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As used herein, the term "TOTAL PROFIT" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by
Parent pursuant to Section 8.2(b) of the Merger Agreement and Section 6(e)
hereof, PLUS (ii)(x) the amount received by Parent pursuant to the sale of
Company Shares acquired upon exercise of the Company Option (or any other
securities into which such Company Shares are converted or exchanged), LESS (y)
Parent's purchase price for such Company Shares, LESS (iii) any amounts paid or
Company Shares (valued, for the purposes of this Section 8, at the closing sales
price of the Common Stock on NASDAQ on the day of delivery) delivered to the
Company pursuant to this Section 8 or other reimbursement obligation, including,
without limitation, pursuant to Section 16 of the Exchange Act.
9. REGISTRATION RIGHTS FOR COMPANY SHARES.
(a) If Parent shall desire to sell any of the Company Shares within
two years after the purchase of such Company Shares pursuant hereto, at Parent's
request, the Company will cooperate with Parent and any underwriters in
registering such Company Shares for resale, including, without limitation,
promptly filing a registration statement which complies with the requirements of
applicable federal and state securities laws, entering into an underwriting
agreement with such underwriters upon such terms and conditions as are
customarily contained in underwriting agreements with respect to secondary
distributions; provided that the Company shall not be required to have declared
effective more than two registration statements hereunder and shall be entitled
to delay the filing or effectiveness of any registration statement for up to 60
days if the offering would, in the judgment of the Board of Directors of the
Company, require premature disclosure of any material corporate development or
otherwise interfere with or adversely affect any pending or proposed offering of
securities of the Company or any other material transaction involving the
Company.
(b) If any Company Shares are registered pursuant to the provisions
of this Section 9, the Company agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Company Shares covered thereby in
such numbers as Parent may from time to time reasonably request and (ii) if any
event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep effective for at least 90 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
Parent such numbers of copies of the registration statement and prospectus as
amended or supplemented as may reasonably be requested. The Company shall bear
the cost of the registration, including, but not limited to, all registration
and filing fees, printing expenses, and fees and disbursements of counsel and
accountants for the Company, except that Parent shall pay the fees and
disbursements of its counsel, the underwriting fees and selling commissions
applicable to the shares of Common
Page 11
Stock sold by Parent. The Company shall indemnify and hold harmless Parent,
its affiliates and its officers, directors and controlling persons from and
against any and all losses, claims, damages, liabilities and expenses arising
out of or based upon any statements contained or incorporated by reference
in, and omissions or alleged omissions from, each registration statement
filed pursuant to this paragraph; provided, however, that this provision does
not apply to any loss, liability, claim, damage or expense to the extent it
arises out of any untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by Parent, its
affiliates and its officers expressly for use in any registration statement
(or any amendment thereto) or any preliminary prospectus filed pursuant to
this paragraph. The Company shall also indemnify and hold harmless each
underwriter and each person who controls any underwriter within the meaning
of either the Securities Act or the Securities Exchange Act of 1934, as
amended, against any and all losses, claims, damages, liabilities and
expenses arising out of or based upon any statements contained or
incorporated by reference in, and omissions or alleged omissions from, each
registration statement filed pursuant to this paragraph; provided, however,
that this provision does not apply to any loss, liability, claim, damage or
expense to the extent it arises out of any untrue statement or omission made
in reliance upon and in conformity with written information furnished to the
Company by the underwriters expressly for use in any registration statement
(or any amendment thereto) or any preliminary prospectus filed pursuant to
this paragraph.
10. TENDER OF SHARES; STOCKHOLDERS' AGREEMENT TO VOTE.
(a) TENDER OF SHARES. Each Stockholder, severally and not jointly,
hereby agrees to validly tender (and not to withdraw) pursuant to and in
accordance with the terms of the Offer (provided that the Offer is not amended
in a manner prohibited by the Merger Agreement), in a timely manner for
acceptance by Purchaser of the Offer, its respective Shares. Such Stockholder
hereby acknowledges and agrees that Parent's obligation to accept for payment
and pay for Common Stock in the Offer, including such Stockholder's Shares, is
subject to the terms and conditions of the Offer. Each Stockholder hereby
agrees to permit Parent and Purchaser to disclose in any press release or public
announcement related to the Offer, Merger or Merger Agreement, publish and
disclose in the Offer Documents and, if approval of the stockholders of the
Company is required under applicable law, the Proxy Statement (including all
documents and schedules filed with the Commission) its identity and ownership of
Common Stock and the nature of its commitments, arrangements and understandings
under this Agreement.
(b) VOTING. Each Stockholder, severally and not jointly, hereby
agrees that, until the Termination Date (as defined in Section 13), at any
meeting of the stockholders of the Company, however called, or in connection
with any written consent of the stockholders of the Company, such Stockholder
shall vote (or cause to be voted), including by way of written consent, the
shares of Common Stock held of record or beneficially owned, from time to time
by
Page 12
such Stockholder (i) in favor of the Merger, the adoption of the Merger
Agreement and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance hereof and thereof; (ii) against any action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or this Agreement; and (iii) except as specifically requested in
writing by Parent in advance, against the following actions (other than the
Merger and the transactions contemplated by the Merger Agreement): (A) any
Acquisition Transaction, including without limitation, any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or any of its subsidiaries, a sale, lease
or transfer of a material amount of assets of the Company or any of its
subsidiaries or a reorganization, recapitalization, dissolution or
liquidation of the Company or any of its subsidiaries; or (B) (1) the
election of any Person to, or other change in the size or composition of, the
board of directors of the Company; (2) any material change in the present
capitalization of the Company or any amendment of the Company's Certificate
of Incorporation or By-Laws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action which is intended,
or could reasonably be expected, to impede, interfere with, delay, postpone,
discourage or materially adversely affect the Offer, the Merger or the
transactions contemplated by the Merger Agreement or this Agreement or the
contemplated economic benefits of any of the foregoing. Such Stockholder
shall not enter into any agreement or understanding which is inconsistent
with clauses (i), (ii) or (iii) of the preceding sentence.
11. CERTAIN COVENANTS OF STOCKHOLDERS. Except in accordance with the
terms of this Agreement, each Stockholder severally and not jointly, hereby
covenants and agrees as follows:
(a) NO SOLICITATION. Prior to the Termination Date, no Stockholder
shall, in its capacity as such, directly or indirectly solicit, initiate,
facilitate or encourage any inquiries or the making of any proposal with respect
to any tender offer, exchange offer, merger, consolidation, sale of assets,
sales or capital stock or other business combination involving the Company or
its subsidiaries or the acquisition of 20% or more of the assets or capital
stock of the Company and its subsidiaries taken as a whole (an "ACQUISITION
TRANSACTION"), or negotiate, explore or otherwise communicate in any way with,
or provide or furnish any information to, any Person (other than Parent or the
Purchaser) with respect to any Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Offer or the Merger or any other transaction contemplated
by the Merger Agreement or this Agreement; provided, however, that the foregoing
shall not restrict a Stockholder who is also a director of the Company from
taking actions in such Stockholder's capacity as a director to the extent and in
the circumstances permitted by Section 6.5 of the Merger Agreement. Such
Stockholder shall immediately advise Parent in writing of the receipt by such
Stockholder or any of its agents or representatives of any request for
information,
Page 13
inquiries, indications of interest, offers or proposals relating to
an Acquisition Transaction and any actions taken pursuant to Section 6.5 of the
Merger Agreement, which notice shall include the identity of the Person making
such request, inquiry, indication of interest, offer or proposal and the terms,
if any, of such Acquisition Transaction. Such Stockholder and its agents and
representatives will upon the execution of this Agreement, cease any discussion
or negotiations with, and shall cease to provide any information to or otherwise
cooperate or encourage, any Person with respect to an Acquisition Transaction.
(b) RESTRICTION ON TRANSFER, PROXIES AND NONINTERFERENCE. Prior
to the expiration of the Stockholder Option, no Stockholder shall, directly
or indirectly: (i) except pursuant to the terms of the Merger Agreement and
this Agreement, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of (including by merger or otherwise by operation
of law) or enter into any contract, option or other arrangement or
understanding with respect to, or consent to the offer for sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, or exercise
any discretionary powers to distribute, any or all of such Stockholder's
Shares or any interest therein; (ii) grant any proxies or powers of attorney
with respect to any shares of Common Stock beneficially owned by it, deposit
any shares of Common Stock beneficially owned by it into a voting trust or
enter into a voting agreement with respect to any shares of Common Stock
beneficially owned by it; or (iii) take any action that would make any
representation or warranty of such Stockholder contained herein untrue or
incorrect or have the effect of preventing or disabling such Stockholder from
performing such Stockholder's obligations under this Agreement.
(c) WAIVER OF APPRAISAL AND DISSENTER'S RIGHTS. Each Stockholder
hereby waives any rights of appraisal or rights to dissent from the Merger that
such Stockholder may have.
(d) ATTACHMENT. Each Stockholder agrees that this Agreement and the
obligations of such Stockholder hereunder shall attach to such Stockholder's
Shares and shall be binding upon any Person to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or otherwise.
Each Stockholder agrees, if so requested by Parent, to promptly submit to the
Company or its agent the certificates representing such Stockholder's Shares so
that legends referencing the restrictions imposed by this Agreement may be
placed on the certificates.
(e) STOP TRANSFER. Each Stockholder agrees with, and covenants to,
Parent that such Stockholder shall not request that the Company register the
transfer (book-entry or otherwise) of any certificate or uncertificated interest
representing any of such Stockholder's Shares, unless such transfer is made in
compliance with this Agreement. The Company acknowledges the foregoing and
agrees in furtherance thereof to issue stop transfer instructions
Page 14
to the transfer agent for the Common Stock, at the request of Parent, to
enforce the foregoing agreement.
12. FURTHER ASSURANCES. From time to time, at the another party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
13. TERMINATION. The obligations of the Stockholders under Section 10,
Section 11(a) and 11(b) shall terminate upon the first to occur of (a) the
effective time of the Merger and (b) the date the Merger Agreement is terminated
in accordance with its terms (the "TERMINATION DATE"). The representations and
warranties of the parties hereto shall survive the consummation of the
transactions contemplated hereby and by the Merger Agreement and the Termination
Date. The agreements and obligations of the parties hereto shall survive in
accordance with their respective terms.
14. MISCELLANEOUS.
(a) ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (i) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (ii)
shall not be assigned by operation of law or otherwise without the prior written
consent of the other parties, provided that Parent may assign, in its sole
discretion, its rights and obligations hereunder to any subsidiary or affiliate
of Parent, but no such assignment shall relieve Parent of its obligations
hereunder if such assignee does not perform such obligations. Subject to the
foregoing limitations, this Agreement shall be binding upon and inure to the
benefit of the permitted successors and permitted assigns of the parties hereto.
(b) AMENDMENTS. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by Parent and the parties hereto that are affected directly by such
amendment. Schedule I may be supplemented by Parent by adding the name and
other relevant information concerning any stockholder of the Company who is or
agrees to be bound by the terms of this Agreement without the agreement of any
other party hereto, and thereafter such added stockholder shall be treated as a
"Stockholder" for all purposes of this Agreement.
(c) NOTICES. All notices and other communications hereunder shall be
in writing and shall be delivered personally, by next-day courier or mailed by
registered or certified mail (return receipt requested), first class postage
prepaid, or telecopied with confirmation of
Page 15
receipt to the parties at the addresses specified below (or at such other
addresses as shall be specified by the parties by like notice; provided,
however, that notices of a change of address shall be effective only upon
receipt thereof). Any such notice shall be effective upon receipt, if
personally delivered or telecopied, one day after delivery to a courier for
next-day delivery, or three days after mailing, if deposited in the U.S.
mail, first class postage prepaid.
If to the Company: Children's Discovery Centers of America, Inc.
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, Xxxxxxxxxx 00000
Telecopy: 000-000-0000
Attn: President
copy to: Xxxxxxx Xxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopy: 000-000-0000
Attn: Xxxxx Xxxxxxx
If to a Stockholder: at the address set forth on Schedule I
If to Parent: Knowledge Beginnings, Inc.
000 Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopy: 000-000-0000
Attn: President
copy to: Xxxxxx & Xxxxxxx
00 Xxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telecopy: 000-000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
(d) 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 laws
thereof.
(e) 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
Page 16
specifically the terms and provisions of this Agreement in addition to any
other remedy at law or in equity. The parties further agree to waive any
requirements for proving actual damages and for securing or posting of any
bond in connection with obtaining any such equitable relief. If the Company
or any Stockholder shall fail to perform any of its obligations under this
Agreement, it hereby agrees that all reasonable fees and expenses, including
reasonable attorneys' fees, which may be incurred by Parent in enforcing this
Agreement shall be paid by the Company or such Stockholder, as the case may
be.
(f) COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
both of which shall constitute one and the same Agreement. This Agreement, and
all of the provisions contained herein, shall not become effective until
executed by all of the parties hereto.
(g) DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(h) SEVERABILITY. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any provision or
portion of any provision in any other jurisdiction or any other provision or
portion of any provision in such same jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(i) EXPENSES. Each party shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
(j) DEFINITIONS. For purposes of this Agreement: "BENEFICIALLY OWN"
or "BENEFICIAL OWNERSHIP" and similar terms with respect to any securities shall
mean having "beneficial ownership" of such securities (as determined pursuant to
Rule 13d-3 under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities beneficially
owned by a Person shall include securities beneficially owned by all other
Persons with whom such Person would constitute a "group" as described in Section
13(d)(3) of the Exchange Act.
Page 17
IN WITNESS WHEREOF, Parent, the Company and each Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
Knowledge Beginnings, Inc.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Title: Treasurer
Name: Xxxxxx X. Xxxxxxx
Children's Discovery Centers of America, Inc.
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Title: Vice President
Name: Xxxxxxx X. Xxxxxxxx
STOCKHOLDERS
Proactive Partners, L.P.
By: /s/ Xxxxxxx X. XxXxxxxxxx
-------------------------------
Title: General Partner
Name: Xxxxxxx X. XxXxxxxxxx
Fremont Proactive Partners, L.P.
By: /s/ Xxxxxxx X. XxXxxxxxxx
-------------------------------
Title: General Partner
Name: Xxxxxxx X. XxXxxxxxxx
Lagunitas Partners, L.P.
By: /s/ X. Xxxxxxxxx XxXxxxx
-------------------------------
Title: General Partner
Name: X. Xxxxxxxxx McBaine
Page 18
SCHEDULE I
Record Holder or
Beneficial Owner Number of Shares Address for Notices
-------------------------- ---------------- -----------------------
Lagunitas Partners, L.P. 691,100 Xxxxxxx XxXxxxxxxx
XxXxxxxxxx, Xxxx & Co., Inc.
00 Xxxxxx Xxxxx, Xxxxxxxxx
Xxx Xxxxxxxxx, XX 00000
Proactive Partnes, L.P. 649,600 Xxxxxxx XxXxxxxxxx
XxXxxxxxxx, Xxxx & Co., Inc.
00 Xxxxxx Xxxxx, Xxxxxxxxx
Xxx Xxxxxxxxx, XX 00000
Fremont Proactive 23,000 Xxxxxxx XxXxxxxxxx
Partners, x.X. XxXxxxxxxx, Wick & Co., Inc.
00 Xxxxxx Xxxxx, Xxxxxxxxx
Xxx Xxxxxxxxx, XX 00000
