Option Grant Letter Agreement between Childtime Learning Centers, Inc. and JP Acquisition Fund II, L.P. & JP Acquisition Fund III, L.P.

Summary

Childtime Learning Centers, Inc. grants JP Acquisition Fund II, L.P., JP Acquisition Fund III, L.P., and their co-investors options to purchase 400,000 shares of company stock at $5.00 per share. This grant is in exchange for their agreement to arrange standby purchasers for a $14 million rights offering. The options are exercisable after shareholder approval and completion of the rights offering, and expire on July 19, 2006. If the rights offering is not completed by July 19, 2003, the options are forfeited. The agreement also covers related registration rights and tax withholding provisions.

EX-10.1 6 k70969exv10w1.txt OPTION GRANT LETTER AGREEMENT EXHIBIT 10.1 Childtime Learning Centers, Inc. 38345 West Ten Mile Road, Suite 100 Farmington Hills, Michigan 48335 July 19, 2002 JP Acquisition Fund II, L.P. JP Acquisition Fund III, L.P. c/o Jacobson Partners 595 Madison Avenue, Suite 100 New York, New York 10022-1907 RE: GRANT OF OPTIONS Gentlemen: In consideration of the agreement of each of you and certain of your co-investors to arrange for standby purchasers in connection with the $14 million rights offering (the "Rights Offering") contemplated by Childtime Learning Centers, Inc. (the "Company"), as described on the attached Exhibit A, pursuant to the terms of that certain Standby Stock Purchase Agreement described on the attached Exhibit A to be entered into with the Company (the "Standby Commitment"), the Company agrees as follows: 1. Subject to the approval of the Company's shareholders and paragraph 3 below, the Company hereby grants to you and your designated co-investors (collectively, the "Optionees") options (the "Options") to acquire, in the aggregate, 400,000 shares of the Company's common stock, no par value (the "Common Stock"), at an exercise price of $5.00 per share. The Options may be exercised, in whole or in part, at any time, and from time to time, after the later of (a) the date the Options have been approved by the Company's shareholders and (b) the consummation of the Rights Offering, until July 19, 2006. 2. The registration rights granted pursuant to the Consulting Agreement to shares of Common Stock acquired by Jacobson Partners (and its affiliates or designees) will cover any such shares (a) issuable upon exercise of the Options, and (b) purchased by the Optionees pursuant to, or as a standby purchaser in connection with, the Rights Offering. 3. Notwithstanding anything to the contrary in this letter, in the event the Rights Offering does not take place or is not consummated in accordance with its terms (which terms will be not less favorable to the Company as those set forth on the attached Exhibit A) by July 19, 2003, the Options granted under paragraph 1 above will not become effective, but will be forfeited, and the Company will have no obligation hereunder. 4. In the event the Company is required to pay federal withholding taxes upon the exercise of any Option granted hereunder, the Company may, in the sole discretion of the Compensation Committee of the Company's Board of Directors, (a) require the exercising Optionee, as a condition to the issuance of the shares subject to the exercised option, to submit to the Company the amount of the applicable withholding tax or (b) retain a portion of the shares to be issued upon such exercise having a market value, as of the exercise date, approximating the amount of the applicable withholding tax. If the foregoing is acceptable, please so indicate by signing below. Very truly yours, CHILDTIME LEARNING CENTERS, INC. By: /s/ Leonard C. Tylka ------------------------------------ Leonard C. Tylka, Interim Chief Financial Officer Agreed to and Accepted by: JP Acquisition Fund II, L.P. JP Acquisition Fund III, L.P. By: JPAF, Limited Partnership, By: JPAF III, LLC, its general partner its general partner By: Jacobson Partners, By: Jacobson Partners, its general partner its sole member By: /s/ Benjamin R. Jacobson By: /s/ Benjamin R. Jacobson -------------------------- ------------------------- 2 Memorandum TO: Len Tylka FROM: Ben Jacobson DATE: 7/19/2002 RE: Rights Offering Term Sheet --------------------------------------------------------------------- The following represents the terms under which we prepare to underwrite a Rights Offering: Transaction: $14 million rights offering (75% in the form of equity and 25% in the form of subordinated debt) commenced shortly after completion of the Tutor Time deal, but in any event completed no later than July 19, 2003. Structure: Pro-rata offering to all Childtime shareholders. JP Back Stop: JP Acquisition Fund II, L.P., JP Acquisition Fund III, L.P., and other investors (collectively "JP Funds") will underwrite 100% of the offering. Price: $3.50 per share. JP Options: JP Funds will be granted 400,000 options at a price of $5.00 per share that will have a July 19, 2006 expiration date. The options can be exercised at any time after the rights offering, however, in the event the rights offering does not take place prior to July 19, 2003, the options will be terminated. Ability to Terminate: JP Funds will only be able to terminate its commitment to invest up to $14 million in the event of a Childtime bankruptcy filing. Childtime Election: Childtime must make the election to undertake the rights offering based on the terms herein within 30 days of closing of the Tutor Time transaction.