-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LuopXQcq4FX2TxfucfUckWldeODQajI9ze0PSzPm+PwX+y6WmO7L3Omg4XkSDCKY Pl+P43QTt+qr9bV4752PVw== 0000950144-96-006734.txt : 19961001 0000950144-96-006734.hdr.sgml : 19961001 ACCESSION NUMBER: 0000950144-96-006734 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960930 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KINDERCARE LEARNING CENTERS INC /DE CENTRAL INDEX KEY: 0000832812 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CHILD DAY CARE SERVICES [8351] IRS NUMBER: 630941966 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-17098 FILM NUMBER: 96637149 BUSINESS ADDRESS: STREET 1: 2400 PRESIDENTS DR CITY: MONTGOMERY STATE: AL ZIP: 36116 BUSINESS PHONE: 3342775090 MAIL ADDRESS: STREET 1: P O BOX 20960 CITY: MONTGOMERY STATE: AL ZIP: 36120-0960 10-K/A 1 KINDERCARE LEARNING CENTERS, INC. 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM 10-K/A ----------------------- (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED MAY 31, 1996 OR [ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE TRANSITION PERIOD FROM TO ------ ------ COMMISSION FILE NUMBER 0-17098 KINDERCARE LEARNING CENTERS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 63-0941966 (State or other (I.R.S. Employer jurisdiction of incorporation) Identification No.) 2400 PRESIDENTS DRIVE MONTGOMERY, ALABAMA 36116 (Address of principal executive offices) (334)-277-5090 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $.01 PAR VALUE PER SHARE (Title of class) WARRANTS TO PURCHASE COMMON STOCK, $.01 PAR VALUE PER SHARE (Title of class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to this form 10-K. [ ] The aggregate market value of the Class A Common Stock held by non-affiliates of the Registrant (assuming, for purposes of this calculation, without conceding, that all executive officers and directors are "affiliates"), was $139,641,963 at July 26, 1996, based on the average bid and asked price of $15.25 for the Common Stock on such date, as reported by the Nasdaq National Market. The number of shares of Registrant's Class A Common Stock, $.01 par value per share, outstanding at July 26, 1996 was 19,172,588. Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan of confirmation by the court. Yes X No ----- ----- ================================================================================ 2 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT CERTAIN INFORMATION CONCERNING NOMINEES AND EXECUTIVE OFFICERS Board of Directors The following table sets forth the names of the nominees, their ages, the year in which each was first elected a director, their positions with the Company, their principal occupations and employers for at least the last five years and any other directorships held by them in companies that are subject to the reporting requirements of the Securities Exchange Act of 1934 or any company registered as an investment company under the Investment Company Act of 1940.
NAME AND YEAR FIRST ELECTED DIRECTOR AGE POSITION WITH COMPANY, PRINCIPAL OCCUPATION DURING AT LEAST THE LAST FIVE YEARS, AND OTHER DIRECTORSHIPS Sandra W. Scarr, Ph.D. 60 Dr. Scarr was elected Chief Executive Officer on (1990) June 16, 1995. She was elected a Director in June 1990 and Chairman of the Board of Directors in July 1994. She was a Commonwealth Professor, Department of Psychology of the University of Virginia, from September 1983 until joining the Company. Dr. Scarr is a past President of the Society for Research in Child Development, a past President of the Behavior Genetics Association, a Director of the American Psychological Society and a Fellow of the American Association for the Advancement of Science. During 1996-1997 she is serving as President of the American Psychological Society. She is also an elected member of the American Academy of Arts and Sciences and the author of numerous books and journal articles on child development. Thomas E. Bronson 60 Mr. Bronson was elected a Director in March 1992. (1992) Mr. Bronson is currently Chairman of the Board of Directors of Independent Aggregates in Inglis, Florida and Chairman of the Board of Directors of Meridian Aggregates in Denver, Colorado. He has held these positions since 1990 and 1991, respectively. From 1986 through 1989, Mr. Bronson served as President, Chief Executive Officer, and Chairman of the Board of Directors of Ideal Basic Industries, Inc., a cement manufacturing company.
-1- 3 M. Taylor Dawson, Jr. 67 Mr. Dawson was elected a Director in March 1989. (1989) Mr. Dawson has been the President of Andrew and Dawson, Inc., a regional general contractor engaged in commercial and industrial construction, for more than five years. He is a Director of First Alabama Bank of Montgomery. He is also a past Chairman of the Board of the Alabama Shakespeare Festival, and a past Chairman of the Advisory Board of Auburn University at Montgomery. Jeffrey S. Halis 41 Mr. Halis became a Director on March 31, 1993. He (1993) is a General Partner of Tyndall Partners, L.P. and Madison Avenue Partners, L.P., which he founded in 1991 and which invest in securities. From 1986 to 1990, Mr. Halis was employed by Gollust, Tierney & Oliver, leaving as an Executive Vice President where his primary responsibility was the management of Sabre Associates, L.P., an investment partnership, and its affiliates. Malcolm T. Hopkins 68 During the 1996 Fiscal Year, Mr. Hopkins was (1990) elected Lead Director. As Lead Director, Mr. Hopkins presides at Board meetings in the absence of the Chairman. Mr. Hopkins first became a Director in June 1990. He has been a private investor since retiring in October 1984 as Vice Chairman and Chief Financial Officer and a member of the Board of Directors of the former St. Regis Corporation. Mr. Hopkins is a Director of The Columbia Gas System, Inc., a natural gas production, transmission and distribution company, MAPCO, Inc., an energy and energy-related products company, Metropolitan Series Fund, Inc. and State Street Research Portfolios, Inc., investment funds of The Metropolitan Life Insurance Company, U.S. Home Corporation, a residential home construction company, EMCOR Group, Inc. a mechanical/electrical contractor, and Phar-Mor, Inc. a retail drug store chain.
-2- 4 Bruce A. Karsh 40 Mr. Karsh became a Director on March 31, 1993. He (1993) is the President and a Principal of Oaktree Capital Management, LLP which he co-founded in April 1995. Oaktree Capital Management, LLP provides investment management credit services pursuant to a sub- advisory agreement with TCW Asset Management Company, the general partner of TCW Special Credits Fund V-The Principal Fund. Previously, Mr. Karsh was a Managing Director of Trust Company of the West and TCW Asset Management Company, both wholly- owned subsidiaries of the TCW Group, Inc., which he joined in 1987. He has also been a general partner of TCW Special Credits since September 1988. Mr. Karsh presently serves on the Board of Directors of Furniture Brands International, the parent company of the Broyhill, Lane and Thomasville furniture companies and of Littelfuse, Inc., a manufacturer of fuses for electronic products and automobiles. Stephen A. Kaplan 37 Mr. Kaplan became a Director in January of 1996. (1996) He has been a Principal of Oaktree Capital Management, LLP since 1995. Oaktree Capital Management, LLP provides investment management credit services pursuant to a sub-advisory agreement with TCW Asset Management Company, the general partner of TCW Special Credits Fund V-The Principal Fund. Mr. Kaplan was a Managing Director of Trust Company of the West from 1993 to 1995. Prior thereto, Mr. Kaplan was a partner with the law firm of Gibson, Dunn & Crutcher. Mr. Kaplan is a member of the Board of Directors of Chief Auto Parts, Inc. Vision Hardware Group, Inc., Stratagene Holding Corporation, and Decorative Home Accents, Inc.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership of such securities with the Securities and Exchange Commission and the National Association of Securities Dealers, Inc. Officers, directors and greater than ten percent beneficial owners are required by applicable regulations to furnish the Company with copies of all Section 16(a) forms they file. -3- 5 The Company is required to describe in this report whether it has knowledge that any person required to file such a report may have failed to do so in a timely manner. In this regard, all of the Company's directors, all officers subject to the reporting requirements and each beneficial owner of more than ten percent of any class of the Company's Common Stock satisfied all applicable filing requirements except for the following: M. Taylor Dawson, Jr. failed to timely file an annual report disclosing the exercise of stock options during the fiscal year; Bob Willey failed to timely file an initial report upon becoming an officer in June of 1995 and failed to timely file a monthly report upon purchase of Common Stock in September 1995; and Joe Cooper failed to timely file an initial report upon becoming an officer in May of 1996. The foregoing is based upon reports furnished to the Company and, in some cases, written representations and information provided to the Company by the persons required to make such filings. ITEM 11. EXECUTIVE COMPENSATION. The following table presents certain summary information concerning compensation paid or accrued by the Company for services rendered in all capacities for the fiscal year ended May 31, 1996, the fiscal year ended June 2, 1995, and the fiscal year ended June 3, 1994, for (i) the Chief Executive Officer of the Company and (ii) each of the five other most highly compensated executive officers of the Company (determined as of May 31, 1996) (collectively, the "Named Executive Officers"). [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -4- 6 SUMMARY COMPENSATION TABLE
LONG TERM --------- COMPENSATION ------------ ANNUAL COMPENSATION AWARDS ------------------- ------ FISCAL SALARY BONUS OTHER ANNUAL SECURITIES ALL OTHER NAME AND ------ ------ ----- COMPENSATION UNDERLYING COMPENSATION(A) PRINCIPLE POSITION YEAR ------------ OPTIONS(#) --------------- ------------------ ---- ---------- SANDRA W. SCARR, PH.D. 1996 $339,242 $151,637(b) -- 100,000(c) $12,064 Chief Executive Officer 1995 -- -- -- -- -- and Chairman of the 1994 -- -- -- -- -- Board PHILIP L. MASLOWE 1996 226,923 63,000 -- -- 11,361 Executive Vice President 1995 211,288 90,000 97,683(d) 25,000(c) -- and Chief Financial 1994 173,077 86,400 49,337(e) 50,000(c) -- Officer REBECCA S. BRYAN 1996 98,484 24,555 -- -- -- Vice President/General 1995 90,019 20,475 -- -- -- Counsel/Corporate 1994 89,692 20,790 -- -- -- Secretary WILLIAM BAILEY 1996 84,980 20,739 -- -- -- Vice President/Controller 1995 78,057 18,225 -- -- -- 1994 73,384 17,010 -- -- -- JERRY HILL 1996 90,692 20,356 -- -- -- Vice President of Human 1995 85,173 19,345 -- -- -- Resources 1994 83,067 19,254 -- -- -- BOB WILLEY 1996 98,280 24,344 -- 10,000(c) -- Vice President of 1995 -- -- -- -- -- Information Services 1994 -- -- -- -- --
_______________________ (a) Term life insurance premiums paid by the Company for the benefit of the listed Executive Officers. (b) Includes payment of a sign-on bonus in the amount of $29,137 pursuant to Dr. Scarr's employment agreement. (c) Stock options granted under the Company's 1993 Stock Option and Incentive Plan. (d) Payment of relocation expenses in the amount of $92,665 and the value of the personal use of an automobile in the amount of $5,018. (e) Payment of relocation expenses in the amount of $48,503 and the value of the personal use of an automobile in the amount of $834. -5- 7 The following table shows information regarding option grants during the fiscal year ended May 31, 1996 for the Named Executive Officers.
OPTION GRANTS IN FISCAL YEAR ENDED MAY 31, 1996 INDIVIDUAL GRANTS ------------------------------------------------------------------------------------------------- % OF TOTAL OPTIONS POTENTIAL REALIZABLE VALUE AT NUMBER OF GRANTED TO EXERCISE ASSUMED ANNUAL RATES OF STOCK SECURITIES EMPLOYEES OR PRICE UNDERLYING IN THE BASE APPRECIATION FOR OPTION TERM (B) OPTIONS FISCAL PRICE EXPIRATION -------------------------------- NAME GRANTED YEAR (A) ($/SH) DATE 5% 10% ---- ------- -------- ------ ---- -- --- Sandra W. Scarr, Ph.D. 100,000(c) 40.8% $13.625 June 16, 2005 $376,434 $831,820 Philip L. Maslowe - - - - - - Rebecca S. Bryan - - - - - - William Bailey - - - - - - Jerry Hill - - - - - - Bob Willey 10,000(a) 4.1% $12.875 July 17, 2000 $ 35,571 $ 78,603
(a) These options were granted under the Company's 1993 Stock Option and Incentive Plan. The Stock Options become exercisable in five equal annual installments of 2,000 shares, with the first and second installments exercisable on July 17, 1995 and 1996, respectively, and with one the remaining installments becoming exercisable each July 17 in the following three years. (b) The stock prices at 5 and 10 percent annual appreciation are for illustrative purposes only and are not intended to indicate what future performance will be. During the fiscal year ended May 31, 1996, the Company's Common Stock traded at a high of $15.40 per share and a low of $11.75 per share. On September 20, 1996 the closing price of a share of Common Stock was approximately $15.25 per share. (c) These options were granted under the Company's 1993 Stock Option and Incentive Plan. The Stock Options become exercisable in five equal installments of 20,000 shares, with the first and second installments exercisable on June 16, 1995 and 1996, respectively, and with one of the remaining installments becoming exercisable each June 16 in the following three years. -6- 8 AGGREGATED 1996 FISCAL YEAR END OPTION VALUES During the 1996 fiscal year, the Named Executive Officers exercised no options. The following table shows the number of unexercised options held as of May 31, 1996, by the persons named in Summary Compensation Table as the Named Executive Officers. Also reported are the values for "in-the-money" options which represent a positive spread between the exercise price of any such existing options and the fiscal year-end price of the Common Stock covered by the option. These figures are based upon the market price of $15.25 per share, which was the closing price per share of Common Stock on the Nasdaq National Market on May 31, 1996, less the option exercise price payable per share.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT MAY 31, 1996 (#) AT MAY 31, 1996 ($) ------------------- ------------------- NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- ------------- ----------- ------------- Sandra W. Scarr, Ph.D. 26,400 81,600 $ 66,100 $138,400 Philip L. Maslowe 40,000 35,000 149,700 112,300 Rebecca S. Bryan 8,000 2,000 42,000 10,500 William Bailey 4,800 1,200 25,200 6,300 Jerry Hill 4,800 1,200 25,200 6,300 Bob Willey 2,000 8,000 4,750 19,000
COMPENSATION OF DIRECTORS During the 1996 fiscal year non-employee directors received, as direct compensation for their services as directors, $12,000 in annual base compensation, $2,500 per regular or special directors' meeting attended in person, $1,000 per regular or special directors' meeting attended via conference call, $1,000 for serving as a committee chairman, $1,000 per committee meeting attended in person, $500 per committee meeting attended via conference call, and $2,000 to serve as Lead Director. Directors who are employees of the Company were not paid any additional compensation for their services as directors. For the 1996 fiscal year, the following amounts were paid to the following non-employee directors of the Company: Dr. Scarr (prior to becoming Chief Executive Officer in June of 1995): $19,000; Mr. Bronson: $48,000; Mr. Dawson: $42,000; Mr. Halis: $35,500; Mr. Hopkins: $60,000; Mr. Karsh: $42,500 (these fees were paid to TCW Special Credits and/or TCW Asset Management Company); and Mr. Kaplan: $20,500 (these fees paid to TCW Asset Management Company). All directors were reimbursed for travel and other expenses incurred in connection with the performance of these duties. -7- 9 Employment Contracts Sandra W. Scarr, Ph.D. In June of 1995, the Company entered into an employment agreement with Sandra W. Scarr, Ph.D., which provides for a two-year term. In the event the Company does not renew the agreement and Dr. Scarr's employment is subsequently terminated without cause, Dr. Scarr shall be entitled to severance in an amount equal to three quarters of her base salary, together with reimbursement of relocation expenses and out placement services commensurate with those provided to other senior executives of the Company upon a termination without cause. Pursuant to the agreement, the Company paid Dr. Scarr a $25,000 signing bonus. Under the agreement, Dr. Scarr agreed to serve as Chief Executive Officer of the Company at an annual base salary of $350,000 for the first year which was increased to $400,000 as of June 15, 1996. The contract also provides for an annual incentive bonus based upon a formula to be developed by Dr. Scarr and approved by the Board of Directors, or if an agreement is not reached on such formula, the Company's presently existing formula governing incentive bonus payments to senior executives will be used. The maximum bonus Dr. Scarr is entitled to receive under the agreement is 50% of her base salary. The agreement further provides for participation in presently existing or future benefits plans, pension plans, health and accident plans, or other arrangements made generally available to senior executives with the Company. The Company is also required to use its best efforts to purchase life insurance for Dr. Scarr in an amount not less than three times her annual base compensation, a like amount of accidental death coverage, and a disability income policy in amount not less that 60% of her base compensation. Under the terms of the employment agreement, Dr. Scarr was granted options under the Company's 1993 Stock Option Plan to purchase an aggregate of 100,000 shares of Common Stock. All unexercised options expire as of the tenth anniversary of the date of the contract. Upon termination of the agreement in the event of Dr. Scarr's death, her estate is entitled to receive any base salary installments, any accrued incentive bonus payment and any approved reimbursable expenses for a period of three months. In the case of termination of the agreement by the Company "without cause" or if Dr. Scarr terminates her employment for "good reason" as those terms are defined by the agreement, which includes certain events following a "change of control" or a "potential change of control," as those terms are defined by the agreement, the Company is required to pay Dr. Scarr an amount equal to (i) her full base salary and accrued annual incentive bonus payment and any accrued reimbursable expenses, only through the date of termination, plus (ii) an amount equal to 1/52nd of her annual base salary in effect on the date of termination multiplied by the number of weeks (or portions of a week) remaining in the term of the agreement if the agreement would not have been terminated prior to the expiration of the term, plus (iii) an amount equal to the total annual incentive bonus opportunity which would have been payable to Dr. Scarr for the year in which the date of termination occurred multiplied by the number of years remaining or portions thereof (including the year in which the date of termination occurs) remaining in the term of the agreement. Upon termination of Dr. Scarr's employment under either of such circumstances, the Company is also obligated to continue to provide other benefits under the contract, and all outstanding unvested options immediately vest. Any options which vest pursuant to such termination shall expire if not exercised within one year of such vesting. The agreement also contains a confidentiality provision and a noncompetition provision prohibiting Dr. Scarr during the term of the agreement and for a period of 12 months thereafter from competing with, owning, managing or having any financial interest in any business which competes with the Company. Philip L. Maslowe In May of 1995, the Company entered into an employment agreement with Mr. Maslowe, which provides for a two-year term with automatic renewals unless terminated by at least three month's notice. Upon termination, Mr. Maslowe is entitled to certain severance payments and benefits. Under the agreement, Mr. Maslowe agrees to serve as Executive Vice President and Chief Financial Officer of the Company at an annual base salary of $225,000. In June of 1996, the Board approved a $25,000 base salary increase for Mr. Maslowe. In addition, Mr. Maslowe is to receive an annual incentive bonus payment based on a formula approved by the Board which currently provides for an annual incentive target bonus payment of 40% of his base salary. The agreement further provides that Mr. Maslowe is entitled to participate in or receive benefits under any presently existing or future benefit plans, pension plans, health and accident plans or other arrangements made generally available to senior executive officers of the Company. The Company is also required to use its best efforts to purchase life insurance 10 for Mr. Maslowe in an amount not less than three times his annual base compensation, an equal amount of accidental death coverage and a disability income policy in an amount not less than 60% of his base compensation. In addition, the Company agreed to provide a housing allowance in the amount of $1,250 per month until May of 1996. Under the terms of the employment agreement, Mr. Maslowe was granted options under the Company's 1993 Stock Option Plan to purchase an aggregate of 25,000 shares of Common Stock. All unexercised options expire on the fifth anniversary of the contract. In the case of termination of the agreement by the Company "without cause" or if Mr. Maslowe terminates his employment for "good reason" as those terms are defined by the agreement, which includes certain events defined by the agreement, the Company is required to pay to Mr. Maslowe an amount equal to (i) his full base salary and accrued annual incentive bonus payment and any accrued reimbursable expenses, through the date of termination, plus (ii) an amount equal to two times his annual base salary in effect on the date of termination, plus (iii) an amount equal to two times the annual incentive bonus which would have been payable to Mr. Maslowe for the year in which the termination occurs. Upon termination of Mr. Maslowe's employment under either of such circumstances, the Company is also obligated to continue to provide other benefits under the contract, and all outstanding unvested options immediately vest. Any options which vest pursuant to such a termination shall expire if not exercised within one year of such vesting. In addition, the agreement contains a noncompetition clause prohibiting Mr. Maslowe during the term of the agreement and for a period of 12 months thereafter from competing with, owning, managing, or having any financial interest in a company which competes with the Company. Compensation Committee Interlocks and Insider Participation The following directors served on the Company's Compensation Committee between June 2, 1995 (fiscal year 1995 end) and February 1996: Ken Miller (resigned from the Board of Directors on February 12, 1996), Mark Dickstein (resigned from the Board of Directors on February 9, 1996), Jeffrey S. Halis, Bruce A. Karsh, and Geraldine B. Laybourne (resigned from Board of Directors on January 5, 1996). The following directors served on the Company's Compensation Committee beginning February 1996 to May 31, 1996 (fiscal year 1996 end): Bruce A. Karsh, Thomas E. Bronson, Malcolm T. Hopkins (joined Compensation Committee in May of 1996), Stephen A. Kaplan (joined Compensation Committee in May of 1996), and Sandra Scarr, Ph.D. The Company, from time to time, has made loans or advances to its executive officers, primarily for relocation expenses. On August 14, 1995, the Company loaned Dr. Sandra W. Scarr, Chief Executive Officer and Chairman of the Board the amount of $125,000. No interest accrued on this loan and $107,000 was repaid to the Company in August of 1996. The balance of the loan was forgiven by the Company pursuant to Dr. Scarr's relocation package. With the exception of this loan, the Company believes that the above-described transactions were on terms as favorable as those which might have been obtained from unaffiliated parties. In connection with the Company's plan of reorganization, the Company entered into Registration Rights Agreements for the benefit of specified Selling Security Holders (as defined in the Registration Rights Agreements), with each agreement dated March 31, 1993. The Registration Rights Agreements provide for shelf demand and piggy-back registration rights for certain Selling Security Holders of Common Stock. The Selling Security Holders include: TCW Group, Inc., including Mr. Karsh and Mr. Kaplan, both Directors of the Company, who may be deemed to beneficially own the shares of Common Stock held by Trust Company of the West. Mr. Karsh and Mr. Kaplan disclaim beneficial ownership of any shares of Common Stock deemed to be held by Trust Company of the West. The Registration Rights Agreements also provide for the indemnification of the Selling Security Holders by the Company for certain liabilities, as well as payment of any and all expenses related to the performance of the Registration Rights Agreements. -2- 11 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth, as of August 9, 1996 certain information concerning ownership of shares of Common Stock by: (i) persons who are known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock; (ii) each director of the Company; (iii) each Named Executive Officer of the Company; and (iv) all directors and executive officers of the Company as a group.
BENEFICIAL PERCENTAGE OF OWNERSHIP OF CLASS NAME OF BENEFICIAL OWNER COMMON STOCK OUTSTANDING (A) ------------------------ ------------ --------------- Sandra W. Scarr, Ph.D. 49,323(b) * Thomas E. Bronson 13,610(c) * M. Taylor Dawson, Jr. 7,218(d) * Jeffrey S. Halis 11,400(e) * Malcolm T. Hopkins 7,900(f) * Bruce A. Karsh 10,852,636(g)(h) 54.2% Stephen A. Kaplan 10,847,621(g) 54.1% Philip L. Maslowe 54,000(i) * William E. Bailey 4852(j) * Rebecca S. Bryan 8332(k) * Jerry Hill 4943(l) * Bob Willey 5000(m) * ICM Asset Management, Inc. 601 W. Main Ave., Suite 917 Spokane, WA 99201 1,230,100(n) 6.4% Tweedy, Browne Company, L.P. ("TBC") 52 Vanderbilt Avenue 967,130(n) 5.0% New York, NY 10017 Cowen & Company Financial Square 1,163,400(n) 6.0% New York, NY 10005
-3- 12
BENEFICIAL PERCENTAGE OF OWNERSHIP OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK OUTSTANDING (A) ------------------------------------ ------------ -------------- The TCW Group, Inc. (and certain affiliated entities as general partner of limited partnerships, trustee of trusts or investment manager for certain third party accounts ("TCW"))(q) 865 South Figueroa Street Los Angeles, California 90017 10,847,621(g) (n) 54.1% All directors and executive officers as 11,030,100(o) 54.6% group (19 persons) - --------------------
* Less than 1%. (a) The amounts and percentage of Common Stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Commission, a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power," which includes the power to vote or to direct the voting of such security, or "investment power," which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he has no economic interest. The percentage of class outstanding is based on the 19,175,578 shares of Common Stock outstanding as of August 9, 1996, and except as otherwise noted, assumes no exercise of any options or Warrants to purchase shares of Common Stock. (b) Consists of options to purchase 46,400 shares of Common Stock which are immediately exercisable and 2,923 shares of Common Stock. (c) Consists of Warrants to purchase 3,630 shares of Common Stock which are immediately exercisable, options to purchase 6,400 shares of Common Stock which are immediately exercisable, and 3,580 shares of Common Stock (d) Includes 82 shares of Common Stock, which as the trustee, Mr. Dawson has sole voting and investment power; Warrants to purchase 478 shares of Common Stock which are immediately exercisable, of which Warrants to purchase 115 shares are held by the trust; options to purchase 4,400 shares of Common Stock which are immediately exercisable and 2,258 shares of Common Stock. (e) Consists of options to purchase 6,400 shares of Common Stock which are immediately exercisable and 5000 shares of Common Stock which are owned jointly with Mr. Halis' spouse. (f) Includes options to purchase 6,400 shares of Common Stock which are immediately exercisable and 1,500 shares of Common Stock. -4- 13 (g) Consists of shares of Common Stock held by the TCW Group, Inc. and its affiliates which have voting and dispositive powers over 9,877,465 of such shares as a fiduciary on behalf of the separate accounts, trusts and limited partnerships including, TCW Special Credits Fund V-The Principal Fund; TCW Special Credits, as the general partner of four limited partnerships; TCW Special Credits, as investment manager of third party accounts; Trust Company of the West, as trustee of certain trusts; and Oaktree Capital Management, LLP which has voting and dispositive powers over 111,473 of such shares as a fiduciary on behalf of certain separate accounts. In addition, Oaktree is an investment subadvisor to TAMCO with respect to the Principal Fund. Includes Warrants to purchase 858,683 shares of Common Stock which are immediately exercisable. To the extent Mr. Karsh and Mr. Kaplan participate in the process to vote or dispose of any such shares, Mr. Karsh and Mr. Kaplan may be deemed under such circumstances for the purpose of Section 13 of the Securities and Exchange Act of 1934 to be the beneficial owner of such shares. (h) Includes 5,015 shares of Common Stock owned individually by Mr. Karsh. (i) Includes options to purchase 50,000 shares of Common Stock which are immediately exercisable and 4,000 shares of Common Stock. (j) Includes Warrants to purchase 30 shares of Common Stock which are immediately exercisable; options to purchase 4800 shares of Common Stock which are immediately exercisable and 22 shares of Common Stock. (k) Includes Warrants to purchase 194 shares of Common Stock which are immediately exercisable; options to purchase 8000 shares of Common Stock which are immediately exercisable and 138 shares of Common Stock. (l) Includes options to purchase 4800 shares of Common Stock which are immediately exercisable and 143 shares of Common Stock. (m) Includes options to purchase 4000 shares of Common Stock which are immediately exercisable and 1000 shares of Common Stock. (n) Based upon filings with the Securities and Exchange Commission provided to the Company by the listed stockholders. (o) Includes Warrants to purchase 863,211 shares of Common Stock which are immediately exercisable; options to purchase 149,200 shares of Common Stock which are immediately exercisable, and 10,017,689 shares of Common Stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The spouse of Ms. Rebecca S. Bryan, the Company's Vice President, General Counsel and Secretary, was a partner in a law firm that received $144,401 in fees from the Company for legal services rendered during the 1996 fiscal year. The Company and the law firm have negotiated an hourly billing rate which was approved by the Audit Committee of the Board of Directors and ratified by the Board. For a discussion of additional transactions between the Company and its directors and officers, see "Item 11. Executive Compensation--Compensation Committee Interlocks and Insider Participation." -5- 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on September 30, 1996. KINDERCARE LEARNING CENTERS, INC. BY: /s/ Sandra W. Scarr ----------------------- Sandra W. Scarr, Ph.D. Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----