Annual Report — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K Annual Report 74 377K
2: EX-10.A Revolving Credit Agreement 109 453K
12: EX-10.AA Lease Agreement 59 232K
3: EX-10.B Guarantee 15 52K
13: EX-10.BB Form of Letter Re Fy04 Management Bonus 2 17K
4: EX-10.C Pledge Agreement 22 85K
5: EX-10.D Material Contract -- security_agreement 39 126K
6: EX-10.E Material Contract -- formof_mortgage 29 78K
7: EX-10.J 2002 Stock Purchase and Option Plan 9 39K
8: EX-10.N Form of Term Note 2 14K
9: EX-10.W Material Contract -- loan_agreement 104 433K
10: EX-10.X First Amendment to Loan Agreement 6 20K
11: EX-10.Y Management Agreement 28 120K
14: EX-21 Subsidiaries 1 7K
15: EX-23 Consent of Experts or Counsel -- auditors_consent 1 8K
16: EX-31.A Certification of CEO 2 12K
17: EX-31.B Certification of CFO 2 12K
18: EX-32.A Section 1350 Certification of CEO 1 9K
19: EX-32.B Section 1350 Certification of CFO 1 9K
EX-10.J — 2002 Stock Purchase and Option Plan
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2002 STOCK PURCHASE AND OPTION PLAN
FOR KEY CALIFORNIA EMPLOYEES OF
KINDERCARE LEARNING CENTERS, INC. AND SUBSIDIARIES
1. Purpose of Plan
The 2002 Stock Purchase and Option Plan for Key California Employees of
KinderCare Learning Centers, Inc. and Subsidiaries (the "Plan") is designed:
(a) to promote the long term financial interests and growth of KinderCare
Learning Centers, Inc. (the "Corporation") and its Subsidiaries by attracting
and retaining management personnel with the training, experience and ability to
enable them to make a substantial contribution to the success of the
Corporation's business;
(b) to motivate management personnel by means of growth-related incentives
to achieve long range goals; and
(c) to further the identity of interests of participants with those of the
stockholders of the Corporation through opportunities for increased stock, or
stock-based, ownership in the Corporation.
2. Definitions
As used in the Plan, the following words shall have the following meanings:
(a) "Grant" means an award made to a Participant pursuant to the Plan and
described in Paragraph 5.
(b) "Grant Agreement" means an agreement between the Corporation and a
Participant that sets forth the terms, conditions and limitations applicable to
a Grant.
(c) "Board of Directors" means the Board of Directors of the Corporation.
(d) "Committee" means the Compensation Committee of the Board of Directors.
(e) "Common Stock" or "Share" means common stock of the Corporation which
may be authorized but unissued, or issued and reacquired.
(f) "Employee" means a person, including an officer, in the regular
full-time employment of the Corporation or one of its Subsidiaries who, in the
opinion of the Committee, is, or is expected, to be primarily responsible for
the management, growth or protection of some part or all of the business of the
Corporation.
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(g) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(h) "Fair Market Value" means such value of a Share as reported for stock
exchange transactions and/or determined in accordance with any applicable
resolutions or regulations of the Committee in effect at the relevant time.
(i) "Participant" means an Employee, or other person having a unique
relationship with the Corporation or one of its Subsidiaries, to whom one or
more Grants have been made and such Grants have not all been forfeited or
terminated under the Plan; provided, however, that a non-employee director of
the Corporation or one of its Subsidiaries may not be a Participant.
(j) "Stock-Based Grants" means the collective reference to the grant of
Stock Appreciation Rights, Dividend Equivalent Rights, Purchase Stock,
Restricted Stocks and Other Stock Based Grants.
(k) "Stock Options" means the collective reference to "Incentive Stock
Options" and "Other Stock Options".
(l) "Subsidiary" means any corporation other than the Corporation in an
unbroken chain of corporations beginning with the Corporation if each of the
corporations other than the last corporation in the unbroken chain owns 50% or
more of the voting stock in one of the other corporations in such chain.
3. Administration of Plan
(a) The Plan shall be administered by the Committee. The members of the
Committee shall qualify to administer the Plan for purposes of Rule 16b-3 (and
any other applicable rule) promulgated under Section 16(b) of the Exchange Act
to the extent that the Corporation is subject to such rule. The Committee may
adopt its own rules of procedure, and the action of a majority of the Committee,
taken at a meeting or taken without a meeting by a writing signed by such
majority, shall constitute action by the Committee. The Committee shall have the
power and authority to administer, construe and interpret the Plan, to make
rules for carrying it out and to make changes in such rules. Any such
interpretations, rules, and administration shall be consistent with the basic
purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer and to other
senior officers of the Corporation its duties under the Plan subject to such
conditions and limitations as the Committee shall prescribe except that only the
Committee may designate and make Grants to Participants who are subject to
Section 16 of the Exchange Act.
(c) The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Corporation, and the
officers and directors of the Corporation shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Participants, the Corporation and all other
interested
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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 Grants, and all members of the Committee shall be fully protected by the
Corporation with respect to any such action, determination or interpretation.
4. Eligibility
The Committee may from time to time make Grants under the Plan to such
Employees or other persons having a relationship with Corporation or any of its
Subsidiaries, and in such form and having such terms, conditions and limitations
as the Committee may determine. No Grants may be made under this Plan to
non-employee directors of Corporation or any of its Subsidiaries. Grants may be
granted singly, in combination or in tandem. The terms, conditions and
limitations of each Grant under the Plan shall be set forth in a Grant
Agreement, in a form approved by the Committee, consistent, however, with the
terms of the Plan; provided, however, that such Grant Agreement shall contain
provisions dealing with the treatment of Grants in the event of the termination,
death or disability of a Participant, and may also include provisions concerning
the treatment of Grants in the event of a change of control of Corporation.
5. Grants
From time to time, the Committee will determine the forms and amounts of
Grants for Participants. Such Grants may take the following forms in the
Committee's sole discretion:
(a) Incentive Stock Options - These are stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended ("Code"), to
purchase Common Stock. In addition to other restrictions contained in the Plan,
an option granted under this Paragraph 5(a), (i) must be granted within ten
years from the earlier of (A) the date the Plan is adopted and (B) the date the
Plan is approved by the stockholders, (ii) may not be exercised more than 10
years after the date it is granted, (iii) may not have an option price less than
the Fair Market Value of Common Stock on the date the option is granted, except
that the price shall not be less than 110% of the fair value in the case of any
person who owns securities possessing more than 10% of the total combined voting
power of all classes of securities of the Corporation or its parent or
Subsidiaries possessing voting power, (iv) must otherwise comply with Code
Section 422 and (v) must be designated as an "Incentive Stock Option" by the
Committee. The maximum aggregate Fair Market Value of Common Stock (determined
at the time of each Grant) with respect to which any Participant may first
exercise Incentive Stock Options under this Plan and any Incentive Stock Options
granted to the Participant for such year under any plans of the Corporation or
any Subsidiary in any calendar year is $100,000. Payment of the option price
shall be made in cash or in shares of Common Stock, or a combination thereof, in
accordance with the terms of the Plan, the Grant Agreement, and of any
applicable guidelines of the Committee in effect at the time.
(b) Other Stock Options - These are options to purchase Common Stock which
are not designated by the Committee as "Incentive Stock Options." At the time of
the Grant the Committee shall determine, and shall have contained in the Grant
Agreement or other Plan rules,
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the option exercise period, the option price, and such other conditions or
restrictions on the grant or exercise of the option as the Committee deems
appropriate, which may include the requirement that the grant of options is
predicated on the acquisition of Purchase Shares under Paragraph 5(e) by the
Optionee. In addition to other restrictions contained in the Plan, an option
granted under this Paragraph 5(b), (i) may not be exercised more than 10 years
after the date it is granted and (ii) may not have an option exercise price less
than 85% of the Fair Market Value of Common Stock on the date the option is
granted, except that the exercise price may not be less than 110% of the fair
value on the case of any person who owns securities possessing more than 10% of
the total combined voting power of all classes of securities of the Corporation
of its parent or Subsidiaries possessing voting power. Payment of the option
price shall be made in cash or in shares of Common Stock, or a combination
thereof, in accordance with the terms of the Plan and of any applicable
guidelines of the Committee in effect at the time.
(c) Stock Appreciation Rights - These are rights that on exercise entitle
the holder to receive the excess of (i) the Fair Market Value of a share of
Common Stock on the date of exercise over (ii) the Fair Market Value on the date
of Grant (the "base value") multiplied by (iii) the number of rights exercised
as determined by the Committee. Stock Appreciation Rights granted under the Plan
may, but need not be, granted in conjunction with an Option under Paragraph 5(a)
or 5(b). The Committee, in the Grant Agreement or by other Plan rules, may
impose such conditions or restrictions on the exercise of Stock Appreciation
Rights as it deems appropriate, and may terminate, amend, or suspend such Stock
Appreciation Rights at any time. No Stock Appreciation Right granted under this
Plan may be exercised less than 6 months or more than 10 years after the date it
is granted except in the event of death or disability of a Participant. To the
extent that any Stock Appreciation Right that shall have become exercisable, but
shall not have been exercised or cancelled or, by reason of any termination of
employment, shall have become non-exercisable, it shall be deemed to have been
exercised automatically, without any notice of exercise, on the last day of
which it is exercisable, provided that any conditions or limitations on its
exercise are satisfied (other than (i) notice of exercise and (ii) exercise or
election to exercise during the period prescribed) and the Stock Appreciation
Right shall then have value. Such exercise shall be deemed to specify that the
holder elects to receive cash and that such exercise of a Stock Appreciation
Right shall be effective as of the time of automatic exercise.
(d) Restricted Stock - Restricted Stock is Common Stock delivered to a
Participant with or without payment of consideration with restrictions or
conditions on the Participant's right to transfer or sell such stock; provided
that the price of any Restricted Stock delivered for consideration and not as
bonus stock may not be less than 85% of the Fair Market Value of Common Stock on
the date such Restricted Stock is granted or on the date the Restricted Stock
purchase is consummated, except that the purchase price for such Restricted
Stock may not be less than 100% of the fair market value of the Restricted
Stock, either at the time the person is granted due right to purchase securities
under the Plan or at the time the purchase is consummated, in the case of any
person who owns securities possessing more than 10% of the total combined voting
power of all classes of securities of the Corporation or its parent or
Subsidiaries possessing voting power. If a Participant irrevocably elects in
writing in the calendar year preceding a Grant of Restricted Stock, dividends
paid on the Restricted Stock
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granted may be paid in shares of Restricted Stock equal to the cash dividend
paid on Common Stock. The number of shares of Restricted Stock and the
restrictions or conditions on such shares shall be as the Committee determines
and shall be set forth in the Grant Agreement, and the certificate for the
Restricted Stock shall bear evidence of the restrictions or conditions. No
Restricted Stock may have a restriction period of less than 6 months, other than
in the case of death or disability.
(e) Purchase Stock - Purchase Stock are shares of Common Stock offered to a
Participant at such price as determined by the Committee, the acquisition of
which will make the Participant eligible to receive under the Plan, including,
but not limited to, Other Stock Options; provided, however, that the price of
such Purchase Shares may not be less than 85% of the Fair Market Value of the
Common Stock on the date such shares of Purchase Stock are offered or on the
date the Purchase Stock purchase is consummated, except that the purchase price
for the Purchase Stock may not be less than 100% of the fair market value of the
Purchase Stock, either at the time the person is granted the right to purchase
securities under the Plan or at the time the purchase is consummated, in the
case of any person who owns securities possessing more than 10% of the total
combined voting power of all classes of securities of the Corporation or its
parent or Subsidiaries possessing voting power.
(f) Dividend Equivalent Rights - These are rights to receive cash payments
from the Corporation at the same time and in the same amount as any cash
dividends paid on an equal number of shares of Common Stock to shareholders of
record during the period such rights are effective. The Committee, in the Grant
Agreement or by other Plan rules, may impose such restrictions and conditions on
the Dividend Equivalent Rights, including the date such rights will terminate,
as it deems appropriate, and may terminate, amend, or suspend such Dividend
Equivalent Rights at any time.
(g) Other Stock-Based Grants - The Committee may make other Grants under
the Plan pursuant to which shares of Common Stock (which may, but need not, be
shares of Restricted Stock pursuant to Paragraph 5(d)), are or may in the future
be acquired, or Grants denominated in stock units, including ones valued using
measures other than market value. Other Stock-Based Grants may be granted with
or without consideration; provided, however, that the price of any such Grant
made for consideration that provides for the acquisition of shares of Common
Stock or other equity securities of the Corporation may not be less than 85% of
the Fair Market Value of the Common Stock or such other equity securities on the
date of grant of such Grant or on the date the purchase of the Other Stock-Based
Grants is consummated, except that the purchase price for the Other Stock-Based
Grants may not be less than 100% of the fair market value of the Other Stock
Based Grants, either at the time the person is granted the right to purchase
securities under the Plan or at the time the purchase is consummated, in the
case of any person who owns securities possessing more than 10% of the total
combined voting power of all classes of securities of the Corporation or its
parent or Subsidiaries possessing voting power. Such Other Stock-Based Grants
may be made alone, in addition to or in tandem with any Grant of any type made
under the Plan and must be consistent with the purposes of the Plan.
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6. Limitations and Conditions
(a) The number of Shares available for Grants under this Plan shall be
100,000 shares of the authorized Common Stock as of the effective date of the
Plan. The number of Shares subject to Grants under this Plan to any one
Participant shall not be more than 1,000,000 shares. Unless restricted by
applicable law, Shares related to Grants that are forfeited, terminated,
cancelled or expire unexercised, shall immediately become available for Grants.
(b) At the time a Grant is made or amended or the terms or conditions of a
Grant are changed, the Committee may provide for limitations or conditions on
such Grant.
(c) Nothing contained herein shall affect the right of the Corporation to
terminate any Participant's employment at any time or for any reason.
(d) Deferrals of Grant payouts may be provided for, at the sole discretion
of the Committee, in the Grant Agreements.
(e) Except as otherwise prescribed by the Committee, the amounts of the
Grants for any employee of a Subsidiary, along with interest, dividend, and
other expenses accrued on deferred Grants shall be charged to the Participant's
employer during the period for which the Grant is made. If the Participant is
employed by more than one Subsidiary or by both the Corporation and a Subsidiary
during the period for which the Grant is made, the Participant's Grant and
related expenses will be allocated between the companies employing the
Participant in a manner prescribed by the Committee.
(f) Other than as specifically provided with regard to the death of a
Participant, or as specifically provided in a Grant Agreement or by the
Committee, no benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any attempt to do so shall be void. No such benefit shall, prior to
receipt thereof by the Participant, be in any manner liable for or subject to
the debts, contracts, liabilities, engagements, or torts of the Participant.
(g) Participants shall not be, and shall not have any of the rights or
privileges of, stockholders of the Corporation in respect of any Shares
purchasable in connection with any Grant unless and until certificates
representing any such Shares have been issued by the Corporation to such
Participants.
(h) No election as to benefits or exercise of Stock Options, Stock
Appreciation Rights, or other rights may be made during a Participant's lifetime
by anyone other than the Participant except by a legal representative appointed
for or by the Participant, or as specifically provided in a Grant Agreement.
(i) Absent express provisions to the contrary, any grant under this Plan
shall not be deemed compensation for purposes of computing benefits or
contributions under any retirement plan of the Corporation or its Subsidiaries
and shall not affect any benefits under any other
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benefit plan of any kind or subsequently in effect under which the availability
or amount of benefits is related to level of compensation. This Plan is not a
"Retirement Plan" or "Welfare Plan" under the Employee Retirement Income
Security Act of 1974, as amended.
(j) Unless the Committee determines otherwise, no benefit or promise under
the Plan shall be secured by any specific assets of the Corporation or any of
its Subsidiaries, nor shall any assets of the Corporation or any of its
Subsidiaries be designated as attributable or allocated to the satisfaction of
the Corporation's obligations under the Plan.
(k) Notwithstanding anything else in this Plan or any Grant Agreement,
subject to Section 7, each Grant of an option under this Plan to a person who is
not an officer, director or consultant of the Company shall become exercisable
at the rate of at least 20 percent of the shares covered by the option per year
over the first five years after the date of the Grant.
(l) If, in connection with shares sold pursuant to the Plan (including
shares sold upon exercise of options granted pursuant to the Plan) to persons
other than officers, directors or consultants of the Corporation, the Board of
Directors or the Committee establishes provisions giving the Corporation a right
to repurchase such shares, the repurchase rights shall be limited to a right to
repurchase the shares at the original purchase price, provided that such right
lapses at the rate of at least 20% of the shares per year over five years from
the date the shares are sold or the option is granted (without respect to the
date the option was exercised or became exercisable). Any such right to
repurchase may only be exercised for cash or cancellation of a promissory note
given as payment for the shares and only within 90 days of termination of the
person's employment (or in the case of shares issued upon exercise of options
after the date of termination, within 90 days after the date of the exercise).
7. Termination of Employment or Service
(a) Unless the Committee determines otherwise, if a Participant's
employment or service with the Corporation terminates for any reason other than
because of termination for cause, permanent disability or death, as provided in
Sections 7(b) and 7(c), Participant's option may be exercised at any time before
the expiration date of the option or the expiration of 30 days after the date of
termination, whichever is the shorter period, but only if and to the extent the
Participant was entitled to exercise the option at the date of termination;
provided, however, that, except with a Participant's employment is terminated
for cause, the Committee may not provide for a post-termination exercise period
of less than 30 days.
(b) Unless the Committee determines otherwise, Participant's option shall
terminate and no longer be exercisable upon the date of Participant's
termination of employment by the Corporation for cause.
(c) Unless the Committee determines, otherwise, Participant's option shall
terminate and no longer be exercisable upon the first anniversary of the date of
Participant's termination of employment by reason of death or permanent
disability; provided, however, that the Committee may not provide for a
post-termination exercise period of less than six months.
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(d) For purposes of the Plan, unless the Committee determines otherwise:
(i) a transfer of a Participant's employment without an intervening period of
separation among the Corporation and any Subsidiary shall not be deemed a
termination of employment, and (ii) a Participant who is granted in writing a
leave of absence shall be deemed to have remained in the employ of the
Corporation during such leave of absence.
8. Adjustments
Subject to Section 9 herein, in the event of any change in the outstanding
Common Stock by reason of a stock split, reverse stock split, spin-off, stock
dividend, stock combination or reclassification, recapitalization or merger,
change of control, or similar event, the Committee shall make an appropriate and
equitable adjustment in the number and kind of Shares available for Grants under
the Plan and in all other share amounts set forth in the Plan. In addition, the
Committee shall make appropriate adjustment in the number and kind of shares to
which outstanding options, or portions hereof then unexercised, shall be
exercisable, so that the Participant's proportionate interest before and after
the occurrence of the event is maintained. Any such adjustment made by the
Committee shall be final and binding upon the Participant, the Corporation and
all other interested persons.
9. Merger, Consolidation, Exchange, Acquisition, Liquidation or Dissolution
In its absolute discretion, and on such terms and conditions as it deems
appropriate, coincident with or after the grant of any Stock Option or any
Stock-Based Grant, the Committee may provide that such Stock Option or
Stock-Based Grant cannot be exercised after the merger or consolidation of the
Corporation into another corporation, the exchange of all or substantially all
of the assets of the Corporation for the securities of another corporation, the
acquisition by another corporation of 80% or more of the Corporation's then
outstanding shares of voting stock or the recapitalization, reclassification,
liquidation or dissolution of the Corporation, and if the Committee so provides,
it shall, on such terms and conditions as it deems appropriate in its absolute
discretion, also provide, either by the terms of such Stock Option or
Stock-Based Grant or by a resolution adopted prior to the occurrence of such
merger, consolidation, exchange, acquisition, recapitalization,
reclassification, liquidation or dissolution, that, for some period of time
prior to such event, such Stock Option or Stock-Based Grant shall be exercisable
as to all shares subject thereto, notwithstanding anything to the contrary
herein (but subject to the provisions of Paragraph 6(b)) and that, upon the
occurrence of such event, such Stock Option or Stock-Based Grant shall terminate
and be of no further force or effect; provided, however, that the Committee may
also provide, in its absolute discretion, that even if the Stock Option or
Stock-Based Grant shall remain exercisable after any such event, from and after
such event, any such Stock Option or Stock-Based Grant shall be exercisable only
for the kind and amount of securities and/or other property, or the cash
equivalent thereof, receivable as a result of such event by the holder of a
number of shares of stock for which such Stock Option or Stock-Based Grant could
have been exercised immediately prior to such event.
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10. Amendment and Termination
The Committee shall have the authority to make such amendments to any terms
and conditions applicable to outstanding Grants as are consistent with this Plan
provided that, except for adjustments under Paragraph 8 or 9 hereof, no such
action shall modify such Grant in a manner adverse to the Participant without
the Participant's consent except as such modification is provided for or
contemplated in the terms of the Grant.
The Board of Directors may amend, suspend or terminate the Plan at any time
from time to time.
11. Foreign Options and Rights
The Committee may make Grants to Employees who are subject to the laws of
nations other than the United States, which Grants may have terms and conditions
that differ from the terms thereof as provided elsewhere in the Plan for the
purpose of complying with foreign laws.
12. Withholding Taxes
The Corporation shall have the right to deduct from any cash payment made
under the Plan any federal, state or local income or other taxes required by law
to be withheld with respect to such payment. It shall be a condition to the
obligation of the Corporation to deliver shares upon the exercise of an Option
or Stock Appreciation Right, upon payment of Performance units or shares, upon
delivery of Restricted Stock or upon exercise, settlement or payment of any
Other Stock-Based Grant that the Participant pay to the Corporation such amount
as may be requested by the Corporation for the purpose of satisfying any
liability for such withholding taxes. Any Grant Agreement may provide that the
Participant may elect, in accordance with any conditions set forth in such Grant
Agreement, to pay a portion or all of such withholding taxes in shares of Common
Stock.
13. Effective Date and Termination Date
The Plan shall be effective on and as of the date of its approval by the
stockholders of the Corporation and shall continue until the earlier of (i) the
date the Plan is terminated by the Board of Directors pursuant to Paragraph 10;
or (ii) 10 years from the date the Plan is approved by the stockholders.
14. Financial Statements
Financial statements of the Corporation will be provided annually to each
Participant under the Plan and to each person who holds Common Stock acquired
pursuant to the Plan; provided, however, that this requirement shall not apply
to key employees whose duties in connection with the Corporation assure them
access to equivalent information.
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