June 24, 1997
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of February 14, 1997 is made by and between
KINDERCARE LEARNING CENTERS, INC., an Alabama corporation (hereinafter referred
to as the "Company"), and XXXXX X. XXXXXXX, an employee of the Company or a
Subsidiary (as defined below) or Affiliate (as defined below) of the Company,
hereinafter referred to as "Optionee".
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its $.01 par value Common Stock ("Common Stock");
WHEREAS, the Company wishes to carry out the Plan (as hereinafter
defined), the terms of which are hereby incorporated by reference and made a
part of this Agreement; and
WHEREAS, the Committee (as hereinafter defined), appointed to
administer the Plan, has determined that it would be to the advantage and best
interest of the Company and its stockholders to grant the Non-Qualified Options
provided for herein to the Optionee as an incentive for increased efforts during
his term of office with the Company or its Subsidiaries or Affiliates, and has
advised the Company thereof and instructed the undersigned officers to issue
said Options;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall
have the meaning specified in the Plan or below unless the context clearly
indicates to the contrary.
Section 1.1 - Affiliate
"Affiliate" shall mean, with respect to the Company, any corporation
directly or indirectly controlling, controlled by, or under common control with,
the Company or any other entity designated by the Board of Directors of the
Company in which the Company or an Affiliate has an interest.
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Section 1.2 - Cause
"Cause" shall mean (i) the Optionee's willful and continued failure to
perform Optionee's duties with respect to the Company or its Subsidiaries which
continues beyond ten days after a written demand for substantial performance is
delivered to Optionee by the Company and which could reasonably result in
demonstrable and substantial injury to the Company or (ii) misconduct by
Optionee (x) involving dishonesty or breach of trust in connection with
Optionee's employment, (y) which would be a reasonable basis for an indictment
of Optionee for a felony or a misdemeanor involving moral turpitude or (z) which
results in demonstrable and substantial injury to the Company.
Section 1.3 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.4 - Committee
"Committee" shall mean the Compensation Committee of the Company.
Section 1.5 - Grant Date
"Grant Date" shall mean the date on which the Options provided for in
this Agreement were granted.
Section 1.6 - KKR
"KKR" shall mean Kohlberg Kravis Xxxxxxx & Co., L.P.
Section 1.7 - KKR Affiliate
"KKR Affiliate" shall mean, with respect to KKR, any corporation
directly or indirectly controlling, controlled by, or under common control with,
KKR.
Section 1.8 - Management Stockholder's Agreement
"Management Stockholder's Agreement" shall mean that certain
Management Stockholder's Agreement dated as of February 14, 1997 between the
Optionee and the Company.
Section 1.9 - Options
"Options" shall mean the non-qualified options.
Section 1.10 - Permanent Disability
The Optionee shall be deemed to have a "Permanent Disability" when the
majority of the Board of Directors of the
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Company shall, in good faith, determine that the Optionee is unable to engage in
the activities required by the Optionee's position by reason of any medically
determined physical or mental impairment which can be expected to result in
death or which has lasted or can reasonably be expected to last for a continuous
period of not less than 12 months.
Section 1.11 - Plan
"Plan" shall mean the 1997 Stock Purchase and Option Plan for Key
Employees of KinderCare Learning Centers, Inc. and Subsidiaries.
Section 1.12 - Pronouns
The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.
Section 1.13 - Purchase Date
"Purchase Date" shall mean the date hereof.
Section 1.14 - Retirement
"Retirement" shall mean retirement at age 62 or over (or such other
age as may be approved by the Board of Directors of the Company) after having
been employed by the Company or a Subsidiary for at least three years after the
Purchase Date.
Section 1.15 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.16 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations, or group of
commonly controlled corporations, other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
ARTICLE II
GRANT OF OPTIONS
Section 2.1 - Grant of Options
For good and valuable consideration, on and as of the date hereof the
Company irrevocably grants to the Optionee an Option to purchase any part or all
of an aggregate of [421,052] shares of the Company's $.01 par value Common Stock
upon the terms and conditions set forth in this Agreement.
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Section 2.2 - Exercise Price
The exercise price of the shares of stock covered by the Options shall
be $19 per share without commission or other charge.
Section 2.3 - Consideration to the Company
In consideration of the granting of these Options by the Company, the
Optionee agrees to render faithful and efficient services to the Company or a
Subsidiary or Affiliate, with such duties and responsibilities as the Company
shall from time to time prescribe. Nothing in this Agreement or in the Plan
shall confer upon the Optionee any right to continue in the employ of the
Company or any Subsidiary or Affiliate or shall interfere with or restrict in
any way the rights of the Company and its Subsidiaries or Affiliates, which are
hereby expressly reserved, to terminate the employment of the Optionee at any
time for any reason whatsoever, with or without cause.
Section 2.4 - Adjustments in Options
Subject to Section 9 of the Plan, in the event that the outstanding
shares of the stock subject to an Option are, from time to time, changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of a merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, combination of
shares, or otherwise, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares or other consideration as to which
such Option, or portions thereof then unexercised, shall be exercisable. Any
such adjustment made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
(a) Options shall become exercisable as follows:
Percentage of Option
Date Option Shares Granted As to Which
Becomes Exercisable Option Is Exercisable
------------------- ---------------------
After the first anniversary
of the Grant Date 20%
After the second anniversary
of the Grant Date 40%
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After the third anniversary
of the Grant Date 60%
After the fourth anniversary
of the Grant Date 80%
After the fifth anniversary
of the Grant Date 100%
Notwithstanding the foregoing, the Option shall become immediately
exercisable as to 100% of the shares of Common Stock subject to such Option
immediately prior to a Change of Control (but only to the extent such Option has
not otherwise terminated or become exercisable). A "Change of Control" means (i)
a sale of all or substantially all of the assets of the Company (other than in
connection with financing transactions, sale and leaseback transactions or other
similar transactions) to a Person who is not an Affiliate of Kohlberg Kravis
Xxxxxxx & Co., L.P. ("KKR"), (ii) a sale by KKR or any of its Affiliates
resulting in more than 50% of the voting stock of the Company being held by a
Person or Group that does not include KKR or any of its Affiliates or (iii) (a)
a merger or consolidation of the Company into another Person which is not an
Affiliate of KKR or (b) any dilution of KKR's interest in the Company which
results in KKR and any of its Affiliates owning less than 50% of the Common
Stock of the Company; if and only if any such event described in either (iii)
(a) or (b), results in the inability of the KKR Partnerships to elect a majority
of the Board of Directors of the Company (or the resulting entity). "Person"
means an individual, partnership, corporation, business trust, joint stock
company, trust, unincorporated association, joint venture, governmental
authority or other entity of whatever nature. "Group" means two or more Persons
acting together as a partnership, limited partnership, syndicate or other group
for the purpose of acquiring, holding or disposing of securities of the Company.
(b) Notwithstanding the foregoing, no Option shall become exercisable
as to any additional shares of Common Stock following the termination of
employment of the Optionee for any reason other than a termination of employment
because of death or Permanent Disability of the Optionee and any Option (other
than as provided in the next succeeding sentence) which is non-exercisable as of
the Optionee's termination of employment shall be immediately cancelled. In the
event of a termination of employment because of such death or Permanent
Disability, the Options shall immediately become exercisable as to all shares of
Common Stock subject thereto.
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Section 3.2 - Expiration of Options
The Options may not be exercised to any extent by Optionee after the
first to occur of the following events:
(a) The tenth anniversary of the Grant Date; or
(b) The first anniversary of the date of the Optionee's termination of
employment by reason of death, Permanent Disability or Retirement; or
(c) The first business day which is fifteen calendar days after the
earlier of (i) 75 days after termination of employment of the Optionee for
any reason other than for Cause, death, Permanent Disability or Retirement
or (ii) the delivery of notice by the Company that it does not intend to
exercise its call right under Section 6 of the Management Stockholder's
Agreement; provided, however, that in any event the Options shall remain
exercisable under this subsection 3.2(c) until at least 45 days after
termination of employment of the Optionee for any reason other than for
death, Permanent Disability or Retirement; or
(d) The date the Option is terminated pursuant to Section 5, 6 or 8(b)
of the Management Stockholder's Agreement;
(e) The date of an Optionee's termination of employment by the Company
for Cause; or
(f) If the Committee so determines pursuant to Section 9 of the Plan,
the effective date of either the merger or consolidation of the Company
into another Person, or the exchange or acquisition by another Person of
all or substantially all of the Company's assets or 80% or more of its then
outstanding voting stock, or the recapitalization, reclassification,
liquidation or dissolution of the Company; provided, that if the Committee
deems it necessary to cancel the Options to facilitate a business
combination, the Optionee shall be paid, in cash or other consideration
that the Shareholders receive pursuant to such business combination, the
excess of the fair market value of the Common Stock at the time of such
business combination over the exercise price for the cancelled Options
including any unvested Options which are being cancelled. At least ten (10)
days prior to the effective date of such merger, consolidation, exchange,
acquisition, recapitalization, reclassification, liquidation or
dissolution, the Committee shall give the Optionee notice of such event if
the Option has then neither been fully exercised nor become unexercisable
under this Section 3.2.
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ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
The Option, and any portion of the Option, may be exercised by
Optionee or any transferee permitted by Section 5.2. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when an
Option becomes unexercisable under Section 3.2, be exercised by Optionee's
personal representative or by any person empowered to do so under the Optionee's
will or under the then applicable laws of descent and distribution or by any
transferee permitted by Section 5.2.
Section 4.2 - Partial Exercise
Any exercisable portion of an Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes unexercisable under Section
3.2; provided, however, that any partial exercise shall be for whole shares of
Common Stock only.
Section 4.3 - Manner of Exercise
An Option, or any exercisable portion thereof, may be exercised solely
by delivering to the Secretary or his office all of the following prior to the
time when the Option or such portion becomes unexercisable under Section 3.2:
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion thereof, stating that the Option
or portion thereof is thereby exercised, such notice complying with all
applicable rules established by the Committee;
(b) Full payment (which shall be made (i) in cash, (ii) by check,
(iii) by delivery of shares of Common Stock owned by the Optionee or a
portion of the Common Stock then being purchased, which Common Stock shall
be valued at the fair market value as determined in good faith by the
Committee, or (iv) by a combination thereof), for the shares with respect
to which such Option or portion thereof is exercised;
(c) A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by the Optionee or other person then
entitled to exercise such Option or portion thereof, stating that the
shares of stock are being acquired for the holder's own account, for
investment and without any present intention of distributing or reselling
said shares or any of them except as may be permitted under the Securities
Act of 1933, as amended (the
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"Act"), and then applicable rules and regulations thereunder, and that the
Optionee or other person then entitled to exercise such Option or portion
thereof will indemnify the Company against and hold it free and harmless
from any loss, damage, expense or liability resulting to the Company if any
sale or distribution of the shares by such person is contrary to the
representation and agreement referred to above; provided, however, that the
Committee may, in its absolute discretion, take whatever additional actions
it deems appropriate to ensure the observance and performance of such
representation and agreement and to effect compliance with the Act and any
other federal or state securities laws or regulations;
(d) Full payment to the Company of all amounts which, under federal,
state or local law, it is required to withhold upon exercise of the Option;
and
(e) In the event the Option or portion thereof shall be exercised
pursuant to Section 4.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
option.
Without limiting the generality of the foregoing, the Committee may require an
opinion of counsel acceptable to it to the effect that any subsequent transfer
of shares acquired on exercise of an Option does not violate the Act, and may
issue stop-transfer orders covering such shares. Share certificates evidencing
stock issued on exercise of this Option shall bear an appropriate legend
referring to the provisions of subsection (c) above and the agreements herein.
The written representation and agreement referred to in subsection (c) above
shall, however, not be required if the shares to be issued pursuant to such
exercise have been registered under the Act, and such registration is then
effective in respect of such shares.
Section 4.4 - Conditions to Issuance of Stock Certificates
The shares of stock deliverable upon the exercise of an Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of an Option or portion thereof prior to fulfillment of all of the
following conditions:
(a) The obtaining of approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(b) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may
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from time to time establish for reasons of administrative
convenience.
Section 4.5 - Rights as Stockholder
The holder of an Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares purchasable
upon the exercise of the Option or any portion thereof unless and until
certificates representing such shares shall have been issued by the Company to
such holder.
ARTICLE V
MISCELLANEOUS
Section 5.1 - Administration
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee shall be final and binding upon the Optionee, the Company
and all other interested persons. No member of the Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or the Options. In its absolute discretion, the Board of
Directors may at any time and from time to time exercise any and all rights and
duties of the Committee under the Plan and this Agreement.
Section 5.2 - Transferability of Options
The Option may be transferred to the same extent that Common Stock
subject to the Option may be transferred pursuant to the Stockholder's
Agreement. Except for such permitted transfers, neither the Options nor any
interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of the Optionee or his successors in interest or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect.
Section 5.3 - Shares to Be Reserved
The Company shall at all times during the term of the Options reserve
and keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Agreement.
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Section 5.4 - Notices
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
5.4, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Optionee shall, if
the Optionee is then deceased, be given to the Optionee's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 5.4. Any notice shall
have been deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal
Service.
Section 5.5 - Titles
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
Section 5.6 - Applicability of Plan and Management Stockholder's
Agreement
The Options and the shares of Common Stock issued to the Optionee upon
exercise of the Options shall be subject to all of the terms and provisions of
the Plan and the Management Stockholder's Agreement, to the extent applicable to
the Options and such shares. In the event of any conflict between this Agreement
and the Plan, the terms of the Plan shall control. In the event of any conflict
between this Agreement or the Plan and the Management Stockholder's Agreement,
the terms of the Management Stockholder's Agreement shall control.
Section 5.7 - Amendment
This Agreement may be amended only by a writing executed by the
parties hereto which specifically states that it is amending this Agreement.
Section 5.8 - Governing Law
The laws of the State of Delaware (or if the Company reincorporates in
another state, the law of that state) shall govern the interpretation, validity
and performance of the terms of this Agreement, regardless of the law that might
be applied under principles of conflicts of laws.
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Section 5.9 - Jurisdiction
Any suit, action or proceeding against the Optionee with respect to
this Agreement, or any judgment entered by any court in respect of any thereof,
may be brought in any court of competent jurisdiction in the State of Delaware
(or if the Company reincorporates in another state, in that state) or the state
in which the Company's headquarters is located, and the Optionee hereby submits
to the non-exclusive jurisdiction of such courts for the purpose of any such
suit, action, proceeding or judgment. Nothing herein shall in any way be deemed
to limit the ability of the Company to serve any such writs, process or
summonses in any other manner permitted by applicable law or to obtain
jurisdiction over the Optionee, in such other jurisdiction and in such manner,
as may be permitted by applicable law. The Optionee hereby irrevocably waives
any objections which he may now or hereafter have to the laying of the venue of
any suit, action or proceeding arising out of or relating to this Agreement
brought in any court of competent jurisdiction in the State of Delaware (or if
the Company reincorporates in another state, in that state) or the state in
which the Company's headquarters is located, and hereby further irrevocably
waives any claim that any such suit, action or proceeding brought in any such
court has been brought in any inconvenient forum. No suit, action or proceeding
against the Company with respect to this Agreement may be brought in any court,
domestic or foreign, or before any similar domestic or foreign authority other
than in a court of competent jurisdiction in the State of Delaware (or if the
Company reincorporates in another state, in that state) or the state in which
the Company's headquarters is located, and the Optionee hereby irrevocably
waives any right which he may otherwise have had to bring such an action in any
other court, domestic or foreign, or before any similar domestic or foreign
authority. The Company hereby submits to the jurisdiction of such courts for the
purpose of any such suit, action or proceeding.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
KINDERCARE LEARNING CENTERS, INC.
By: XXXXXX X. XXXXXXXXXX
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Xxxxxx X. Xxxxxxxxxx
Vice President, Human Resources
XXXXX X. XXXXXXX
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Xxxxx X. Xxxxxxx
00000 XX Xxxxxxxxx Xxxx
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Xxxxxxxx, XX 00000
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Address
Optionee's Taxpayer
Identification Number:
###-##-####
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