EX-99.4
Exchange Agent Agreement
EXCHANGE AGENT AGREEMENT
February __, 1997
ChaseMellon Shareholder Services
00 Xxxxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Reorganization Department
KCLC Acquisition Corp., a Delaware corporation ("KCLC") and a subsidiary
of KLC Associates, L.P. (the "Partnership"), and KinderCare Learning Centers,
Inc., a Delaware corporation (the "Company" or "KinderCare"), have entered into
an Agreement and Plan of Merger, dated as of October 3, 1996 and as amended as
of December 27, 1996 (as the same may be further amended, the "Merger
Agreement"), pursuant to which KCLC will be merged with and into the Company
(the "Merger"), with the Company to be the surviving corporation. At the
Effective Time, subject to certain provisions as described in the Merger
Agreement with respect to shares owned by the Company, any subsidiary of the
Company, KCLC or any subsidiary of KCLC, and with respect to fractional shares
and Dissenting Shares, (i) each share of Common Stock, par value $.01 per share,
of the Company (the "Company Common Stock") issued and outstanding (other than
Electing Shares, as defined below) will be converted into the right to receive
in cash from KinderCare following the Merger an amount equal to $19.00 (the
"Cash Election Price") and (ii) each issued and outstanding share of Company
Common Stock with respect to which an election has been made and not withdrawn
in accordance with the Merger Agreement (an "Electing Share") will be converted
into the right to retain one fully paid and nonassessable share of Company
Common Stock (a "Non-Cash Election Share"). At the Effective Time, each issued
and outstanding warrant to purchase shares of Company Common Stock (a "Company
Warrant") will be converted into the right to receive in cash from KinderCare
following the Merger an amount equal to $6.58 (the "Warrant Consideration").
Capitalized terms not otherwise defined herein shall have the meanings given to
such terms in the Merger Agreement.
The Merger Agreement and the Proxy Statement/Prospectus dated January __,
1997 (the "Proxy Statement") (which constitutes a part of a Registration
Statement on Form S-4 of the Company with respect to 1,381,579 shares of the
Company Common Stock) and the related proxy cards and Non-Cash Election Form
have previously been delivered to you.
You have agreed to act as exchange agent (the "Exchange Agent") in
connection with the Merger in accordance with the terms of the Merger Agreement,
the Proxy Statement and this Exchange Agent Agreement (this "Agreement").
Without limiting the generality of the preceding sentence, your specific
responsibilities as Exchange Agent shall be as follows:
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1. Proration of Non-Cash Election Shares. The Company hereby
notifies you that the Non-Cash Election Number referred to in Section 2.4
of the Merger Agreement is 1,381,579. If the number of Electing Shares
exceeds the Non-Cash Election Number, the (i) the number of Electing
Shares covered by each Non-Cash Election to be converted into the right to
retain Non-Cash Election Shares will be determined by multiplying the
total number of Electing Shares covered by such Non-Cash Election by a
proration factor (the "Non-Cash Proration Factor") determined by dividing
the Non-Cash Election Number by the total number of Electing Shares and
(ii) such number of Electing Shares will be so converted. All Electing
Shares, other than those shares converted into the right to retain
Non-Cash Election Shares as described in the immediately preceding
sentence, will be converted into cash (on a consistent basis among
stockholders who made the election to retain Non-Cash Election Shares, pro
rata to the number of shares as to which they made such election) as if
such shares were not Electing Shares.
If the number of Electing Shares is less than the Non-Cash Election
Number, then (i) all Electing Shares will be converted into the right to
retain Non-Cash Election Shares in accordance with the Merger Agreement,
(ii) additional shares of Company Common Stock, other than Electing Shares
and Dissenting Shares, will be converted into the right to retain Non-Cash
Election Shares, which number of additional shares shall be determined by
multiplying the total number of shares, other than Electing Shares and
Dissenting Shares, by a proration factor (the "Cash Proration Factor")
determined by dividing (x) the difference between the Non-Cash Election
Number and the number of Electing Shares by (y) the total number of shares
of Company Common Stock, other than Electing Shares and Dissenting Shares,
and (iii) such additional shares of Company Common Stock shall be
converted into the right to retain Non-Cash Election Shares in accordance
with the Merger Agreement (on a consistent basis among stockholders who
held shares of Company Common Stock as to which they did not make the
Non-Cash Election, pro rata to the number of shares as to which they did
not make such election).
2. Merger Consideration. As soon as reasonably practicable as of or
after the Effective Time:
(a) The Company shall deliver to the transfer agent and registrar
for the Company Common Stock (the "Company Transfer Agent"), duly executed
certificates for Company Common Stock to be countersigned and re-issued as
Non-Cash Election Shares.
(b) Upon or as soon as practicable after the Effective Time, the
Company (either directly, or indirectly through
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its financing sources) shall deposit or cause to be deposited in an Escrow
Account, pursuant to an Escrow Agreement, dated as of _________ __, 1997
(the "Escrow Agreement"), between The Chase Manhattan Bank (the "Escrow
Agent"), ChaseMellon Shareholder Services, L.L.C. and the Company,
immediately available funds (the "Escrow Fund") in an aggregate amount
equal to the sum of (i) the product of (A) the Cash Election Price and (B)
each issued and outstanding share of Company Common Stock (other than
Electing Shares and Dissenting Shares) converted into the right to receive
the Cash Election Price pursuant to Section 2.1(c) of the Merger Agreement
and (ii) the product of (A) the Warrant Consideration and (B) each issued
and outstanding Company Warrant converted into the right to receive the
Warrant Consideration pursuant to Section 2.6 of the Merger Agreement.
Pursuant to the Escrow Agreement, the Escrow Fund shall be held in a
segregated account the principal of which is held in trust for the benefit
of (i) the holders of each issued and outstanding share of Company Common
Stock (other than Electing Shares and Dissenting Shares) converted into
the right to receive the Cash Election Price pursuant to Section 2.1(c) of
the Merger Agreement and (ii) the holders of each issued and outstanding
Company Warrant converted into the right to receive the Warrant
Consideration pursuant to Section 2.6 of the Merger Agreement. Any
interest and other income with respect to the Escrow Fund shall be paid to
the Company as and when requested by the Company. Amounts other than such
interest and other income shall be withdrawn from the Escrow Fund by the
Exchange Agent to make cash payments pursuant to the Merger Agreement in
respect of shares of Company Common Stock or Company Warrants, as the case
may be, in accordance with Section 6 below or any required tax
withholdings. The Exchange Agent shall not use the Escrow Fund for any
other purpose unless specifically so directed by the Company in writing.
Pursuant to the Escrow Agreement, the Escrow Fund shall terminate, and all
funds therein will be remitted to the Company, upon either (i) the earlier
of (a) delivery by the Exchange Agent of the entire principal amount of
the Escrow Fund pursuant to this Agreement and (b) __________ __, 1997 or
(ii) such date following ________ __, 1997 but no later than ________ __,
1997, as shall be communicated in writing by the Company to the Escrow
Agent (such date, the "Escrow Termination Date").
(c) In the event the Escrow Agreement is terminated, from the Escrow
Termination Date until ________ __, 1997, the Exchange Agent shall make
cash payments pursuant to the Merger Agreement (the "Post-Escrow
Payments") to holders of Company Common Stock in respect of shares of
Company Common Stock or to holders of Company Warrants in respect of
Company Warrants, as the case may be, in accordance with Section 6 below
or any required tax withholdings. Until ________ __, 1997, the Company
shall make weekly remittances
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to the Exchange Agent in an amount sufficient, as communicated to the
Company by the Exchange Agent, to satisfy the Post-Escrow Payments.
3. Non-Cash Election Form. Attached hereto as Exhibit A-1 is a
Non-Cash Election Form (the "Form of Election") to be used by holders of
shares of Company Common Stock who elect to retain Non-Cash Election
Shares.
4. Transmittal Letters. Attached hereto as Exhibit B-1 is a Letter
of Transmittal (the "Stock Transmittal Letter") to be used by holders of
shares of Company Common Stock (other than holders who properly submit
Forms of Election with respect to such shares) to surrender such shares
(and the certificates evidencing such shares) in exchange for the Cash
Election Price. Attached hereto as Exhibit B-2 is a Letter of Transmittal
(the "Warrant Transmittal Letter" and together with the Stock Transmittal
Letter, the "Transmittal Letters") to be used by holders of Company
Warrants to surrender such Company Warrants in exchange for the Warrant
Consideration. Promptly following the closing of the Merger, Company shall
notify you in writing that the Effective Time has occurred. As soon as
reasonably practicable thereafter, you shall address and mail and
otherwise make available the Stock Transmittal Letter to each holder of
shares of Company Common Stock as of the Effective Time (other than
holders who properly submit Forms of Election with respect to such shares)
and the Warrant Transmittal Letter to each holder of Company Warrants as
of the Effective Time.
5. Examination of Documents. (a) Upon receipt thereof, you agree to
examine Forms of Election, Transmittal Letters, certificates representing
shares of Company Common Stock ("Stock Certificates"), certificates
representing Company Warrants ("Warrant Certificates", and together with
the Stock Certificates, "Certificates") and other documents delivered to
you by or for holders of Company Common Stock or Company Warrants, as the
case may be, in connection with such Forms of Election and/or Transmittal
Letters to ascertain whether (i) such Forms of Election and/or the
Transmittal Letters are duly executed and properly completed in accordance
with the instructions set forth therein (including, in the case of Forms
of Election, whether such Forms have been received by you by 5:00 p.m.,
New York city time, on ___________, 1997 (the "Election Deadline")), (ii)
the Certificates are in proper form for surrender and (iii) any other
required documents submitted to you are in proper form. In addition, you
are to examine surrendered Certificates to ascertain whether any stop
transfer orders are in effect with respect thereto.
(b) If a Form of Election or Transmittal Letter or other document
has been improperly executed or completed, or
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is otherwise not in proper form or is subject to any other irregularity
(including any irregularity relating to a stop transfer order), you are to
take such action as you deem appropriate to notify the tendering
stockholder or warrantholder, as the case may be, of such irregularity and
to request that such irregularity be corrected; provided, that with
respect to any irregularity in or relating to a Form of Election of which
you become aware following the Election Deadline, you shall notify the
stockholder who submitted such Form of Election of such irregularity,
shall advise such stockholder in such notice to execute and complete a
Transmittal Letter in order to receive the Cash Election Price in the
Merger and shall provide such stockholder with a Transmittal Letter. If
any such irregularity is not corrected within a reasonable period of time
after you notify the tendering stockholder or warrantholder, as the case
may be, of such irregularity, you are to notify the Company and await
further written instructions from Company. The Company reserves the right
to waive any defect or irregularity in the form of delivery of
Certificates and accompanying Forms of Election and/or Transmittal
Letters.
6. Payment of the Merger Consideration.
(a) As soon as practicable following the Effective Time, you shall,
with respect to each Electing Share converted through election or
proration into the right to receive Non-Cash Election Shares pursuant to
Section 2.1(c) of the Merger Agreement, (i) arrange for the issuance by
the Company Transfer Agent and the delivery of stock certificates in the
name of the person or persons entitled thereto representing the number of
whole shares of Company Common Stock issuable in respect of such shares
pursuant to the Merger Agreement (it being understood that no certificates
or scrip representing fractional shares of Company Common Stock shall be
issued upon the surrender for exchange of Certificates representing shares
of Company Common Stock), (ii) arrange for the sale of the shares of
Company Common Stock representing all such fractional interests and (iii)
subject to the effect of any applicable laws, distribute the net proceeds
from such sale (following the deduction of applicable transaction costs)
to the holders of shares of Company Common Stock entitled thereto pursuant
to the Merger Agreement.
(b) As soon as practicable following the Effective Time, you shall,
with respect to shares of Company Common Stock (other than Dissenting
Shares and Electing Shares converted into the right to receive Non-Cash
Election Shares pursuant to Section 2.1(c) of the Merger Agreement), upon
receipt of the Stock Certificate(s) covering such shares, together with a
duly executed and completed Stock Transmittal Letter and any other
required documents with
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respect to such shares, make the cash payment in respect of such shares
required pursuant to the Merger Agreement on a basis consistent with the
requirements of the Merger Agreement. Each such cash payment shall be made
with funds withdrawn from the Escrow Fund.
(c) As soon as practicable following the Effective Time, you shall,
with respect to Company Warrants, upon receipt of the Warrant
Certificate(s) covering such Company Warrants, together with a duly
executed and completed Warrant Transmittal Letter and any other required
documents with respect to such Company Warrants, make the cash payment in
respect of each such Company Warrant required pursuant to the Merger
Agreement on a basis consistent with the requirements of the Merger
Agreement. Each such cash payment shall be made with funds withdrawn from
the Escrow Fund. (d) You will execute and deliver to the Company Transfer
Agent, at least twice weekly, a written notice and appropriate computer
materials indicating the certificates for Company Common Stock necessary
for payment of the Merger Consideration and setting forth the number of
shares to be represented by each such certificate and the name in which
each certificate should be issued.
(e) No interest shall be paid to holders of shares of Company Common
Stock or holders of Company Warrants, as the case may be, on or with
respect to any amount payable upon surrender of Certificates in respect
thereof. Insofar as required by any governmental agency or authority, you
shall provide all information and file all forms or returns with regard to
the payments made pursuant to this Agreement, including, without
limitation, information and forms and returns relating to income taxes.
7. Records of Company Common Stock Received. Unless otherwise
required pursuant to this Agreement, all Forms of Election and Stock
Transmittal Letters (and related documentation) shall be recorded by you
as to date and time of receipt and shall be preserved and retained by you.
8. Records of Company Warrants Received. Unless otherwise required
pursuant to this Agreement, all Warrant Transmittal Letters (and related
documentation) shall be recorded by you as to date and time of receipt and
shall be preserved and retained by you.
9. Cancellation of Shares; Notation. Upon delivering the Merger
Consideration in exchange for any shares of Company Common Stock, you
shall cancel or arrange for the cancellation of all such shares and
related Stock Certificates, and such Stock Certificates shall be retained
by you pending further instructions from the Company. You shall make the
appropriate notation on such Certificate(s)
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and other appropriate records in the event a holder voluntarily indicates
Stock Certificate numbers in the space provided in the third footnote to
Box I on the Form of Election and/or Stock Transmittal Letter.
10. Cancellation of Company Warrants; Notation. Upon delivering the
Warrant Consideration in exchange for any Company Warrants, you shall
cancel or arrange for the cancellation of all such Company Warrants and
related Warrant Certificates, and such Warrant Certificates shall be
retained by you pending further instructions from the Company. You shall
make the appropriate notation on such Warrant Certificate(s) and other
appropriate records in the event a holder voluntarily indicates Warrant
Certificate numbers in the space provided in the third footnote to Box I
on the Warrant Transmittal Letter.
11. Lost Certificates. After the Effective Date of the Merger, if
any holder of Company Common Stock or Company Warrants, as the case may
be, shall report to you that his failure to surrender Certificates
registered in his name is due to the loss, misplacement or destruction of
such Certificates, you shall require such holder to furnish an appropriate
affidavit of loss and a bond of indemnity of a recognized surety company,
which shall include indemnification of you, the Company and all transfer
agents and registrars of Company Common Stock and Company Warrants, all in
such form as shall have been approved by counsel for the Company. Upon
receipt by you of the foregoing, you are authorized to transmit the Merger
Consideration or Warrant Consideration, as the case may be, to such holder
without surrender by him of Certificates.
12. Request for Information. You will comply with telephone requests
for information with respect to Forms of Election, Transmittal Letters,
Certificates, the surrender of shares of Company Common Stock or Company
Warrants and payment therefor; provided, that any telephone or written
request for information concerning dissenters' rights shall be referred to
the Company. In addition, you will transmit by telephone, and promptly
thereafter confirm in writing to, such persons as Company may designate,
any information which such persons reasonably request.
13. Dissenting Shares. Following the Effective Time, the Company
shall notify you of the names of holders of shares of Company Common Stock
who have preserved, and the number of shares of Company Common Stock with
respect to which there have been preserved, statutory rights of dissenting
stockholders. If you receive certificates representing shares of Company
Common Stock owned by any such holders you are authorized to, and you
shall, after consultation with Company, endorse or stamp such certificates
with a statement that such shares are
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Dissenting Shares and the certificates shall be returned to such holders.
To the extent that shares of Company Common Stock as to which dissenters'
rights have been demanded are deemed to be converted into the Merger
Consideration pursuant to Section 2.2 of the Merger Agreement, the Company
shall promptly notify you of the names of the holders of such shares and
number of shares deemed to be so converted, and you shall, as soon as
practicable upon receipt of Stock Transmittal Letters and certificates
with respect to such shares, deliver to the holders thereof the Merger
Consideration in accordance with the Merger Agreement.
14. Exchange Agent Fees. For your services as Exchange Agent
hereunder, the Company shall pay you the fees set forth in Exhibit C. The
Company shall also reimburse you for your reasonable out-of-pocket
expenses incurred in connection with your services hereunder after
submission to the Company of an itemized statement in reasonable detail.
15. Termination. Promptly following the date which is one year after
the Effective Time, upon request of the Company, you shall deliver to the
Company all cash, Certificates, stock lists and stock records of the
Company and other instruments in your possession relating to the
transactions described herein, accompanied by an accounting for all
payments made by you pursuant to this Agreement, and your duties shall
thereupon terminate. If any Certificates are surrendered to you for
payment after such termination, you will promptly forward such
Certificates, together with the related Transmittal Letters and any other
documents, to the Company, or as the Company may otherwise direct.
16. Indemnity, Etc. (a) We agree to indemnify you for, and to hold
you harmless against, any loss, liability or expense (including without
limitation any loss, liability, damage or expense incurred for submitting
for transfer shares of Company Common Stock tendered without a signature
guarantee pursuant to the Stock Transmittal Letter, or in connection with
any communication or message transmitted or purported to be transmitted
through electronic means to or from a Book-Entry Transfer Facility, and
the fees and expenses of counsel) incurred by you without gross
negligence, bad faith or willful failure on your part in the performance
of your duties as Exchange Agent in accordance with these instructions and
such further instructions as we may deliver to you from time to time in
writing, or as a result of defending yourself against any claim or
liability resulting from your actions as Exchange Agent pursuant hereto.
Anything in this agreement to the contrary notwithstanding, in no event
shall you be liable for special, indirect or consequential loss or damage
of any kind whatsoever (including but no limited to lost profits), even if
you have been advised of the likelihood of such loss or damage and
regardless of the form of action.
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(b) In no case shall the Company be liable under this indemnity with
respect to any claim against you unless the Company shall be notified by
you, by letter or by cable or telex confirmed by letter, of the written
assertion of a claim against you or of any action commenced against you,
promptly after you shall have received any such written assertion of a
claim or shall have been served with the summons or other first legal
process giving information as to the nature and basis of the claim, but
failure to so notify the Company shall not relieve the Company from any
liability which it may have otherwise than on account of this Section 16,
except to the extent that such failure prejudices the Company's rights
with respect to such claim. The Company shall be entitled to participate
at its own expense in the defense of any such claim, and if the Company so
elects at any time after receipt of such notice, it shall assume the
defense of any suit brought to enforce any such claim. In the event of
such assumption, the Company shall not be liable for any fees and expenses
of counsel thereafter incurred by you.
17. Depository Trust Company. You shall make arrangements with
respect to delivery of shares of Company Common Stock and Company Warrants
and Certificates by the Depository Trust Company in connection with the
Merger in accordance with your customary procedures for such transfer not
inconsistent with the terms of this Agreement.
18. Further Information. Should you have any questions which are not
covered by these instructions, you will consult with representatives of
KCLC and act in accordance with their instructions.
19. Notices. All notices and other communications hereunder shall be
delivered to the respective parties at the following addresses:
If to the Company: KinderCare Learning Centers, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
If to the Exchange
Agent: ChaseMellon Shareholder Services
00 Xxxxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Reorganization
Department
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20. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the law of the State of New
York, without regard to the conflicts of law rules thereof.
Please confirm your agreement to act as Exchange Agent by signing in
the space indicated below.
Very truly yours,
KINDERCARE LEARNING CENTERS, INC.
By: _______________________________
Title:
The undersigned hereby accepts its appointment as Exchange Agent on
the terms set forth above as of the date first above written.
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By: ________________________________
Title:
