SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
(X) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Kiddie Academy International, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed: January 27, 1997
<PAGE>
[KAI letterhead]
February 12, 1997
Dear Stockholder:
This year's annual meeting of stockholders will be held on Tuesday,
March 11, 1997 at 10:00 a.m. at Kiddie Academy's corporate headquarters at 108
Wheel Road, Bel Air, Maryland 21015. You are cordially invited to attend.
The Notice of Annual Meeting of Stockholders and a Proxy Statement,
which describe the formal business to be conducted at the meeting, are enclosed
herewith.
After reading the Proxy Statement, please promptly mark, sign and
return the enclosed proxy card in the prepaid envelope to assure that your
shares will be represented. Your shares cannot be voted unless you date, sign,
and return the enclosed proxy card or attend the annual meeting in person.
Regardless of the number of shares you own, your careful consideration of, and
vote on, the matters before our stockholders is important.
A copy of the Company's Annual Report to Stockholders is also enclosed
for your information. At the annual meeting we will review Kiddie Academy's
activities over the past year and our plans for the future. The Board of
Directors and Management look forward to seeing you at the annual meeting.
Very truly yours,
/s/ George Miller
George Miller
Chairman and Chief Executive Officer
<PAGE>
[KAI letterhead]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 11, 1997
Notice is hereby given that the Annual Meeting of Stockholders of
Kiddie Academy International, Inc. (the "Company") will be held at the Company's
corporate headquarters at 108 Wheel Road, Bel Air, Maryland 21015 on Tuesday,
March 11, 1997 at 10:00 a.m. for the following purposes:
1. To elect six directors to serve until their terms of office
expire and until their successors are duly elected and
qualified.
2. To consider and approve the adoption of amendments to the
Company's 1995 Incentive Compensation Plan, as set forth in
the Second Amendment and Restatement of the Company's 1995
Incentive Compensation Plan, a copy of which is annexed to
the enclosed Proxy Statement.
3. To consider and ratify the appointment of Deloitte & Touche
LLP as the Company's independent auditors for fiscal year
1997.
4. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February 11,
1997 as the record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting or any adjournments or postponements
thereof.
Your Proxy Statement and Proxy are enclosed. You are encouraged to
complete, date, sign and return promptly the Proxy in the envelope provided even
though you may plan to attend the Annual Meeting. No postage is necessary for
mailing in the United States. Returning the Proxy will not limit your right to
vote in person or to attend the Annual Meeting, but will insure your
representation if you cannot attend. If you attend the Annual Meeting, you may
revoke your Proxy and vote in person.
By Order of the Board of Directors
/s/ Michael J. Miller
MICHAEL J. MILLER
Corporate Secretary
Bel Air, Maryland
February 12, 1997
<PAGE>
[ KAI LETTERHEAD ]
PROXY STATEMENT
INTRODUCTION
This Proxy Statement and accompanying form of Proxy are furnished on or
about February 12, 1997 to stockholders of Kiddie Academy International, Inc.
(the "Company") in connection with the solicitation of proxies by the Company's
Board of Directors to be used at the annual meeting of stockholders described in
the accompanying notice and at any adjournments or postponements thereof. The
purposes of the meeting are set forth in the accompanying notice of annual
meeting of stockholders.
Proxies and Voting
The accompanying proxy is solicited by the Board of Directors of the
Company. The Board of Directors has selected George Miller and Michael J.
Miller, or either of them, to act as proxies with full power of substitution.
Any stockholder executing a proxy has the power to revoke the proxy at any time
before it is voted. This right of revocation is not limited or subject to
compliance with any formal procedure. Any stockholder may attend the meeting and
vote in person whether or not he or she has previously given a proxy.
The record of stockholders entitled to notice of and to vote at the
annual meeting was taken as of the close of business on February 11, 1997. At
that date there were outstanding and entitled to vote 2,025,000 shares of common
stock, par value $.01 per share (the "Common Stock"). In the election of
directors each share is entitled to one vote for each director to be elected.
For all other matters, each share is entitled to one vote.
The cost of solicitation of proxies and preparation of proxy materials
will be borne by the Company. The solicitation of proxies will generally be by
mail and by directors, officers and employees of the Company without additional
compensation to them. In some instances solicitation may be made by telephone or
telegraph, the costs of which will be borne by the Company. The Company may also
reimburse brokers, custodians, nominees and other fiduciaries for reasonable
out-of-pocket and clerical expenses for forwarding proxy materials to
principals.
The Annual Report of the Company on Form 10-KSB, including financial
statements for fiscal year 1996, has been mailed to all stockholders with this
Proxy Statement. All references herein to fiscal year 1996 are to the 52 weeks
ended September 29, 1996.
<PAGE>
ELECTION OF DIRECTORS
Directors are elected by a plurality of the votes cast by the holders
of shares of Common Stock present in person or represented by proxy at the
meeting with a quorum present. Abstentions and broker non-votes are considered
present at the Annual Meeting for purposes of a quorum but are not considered to
be votes cast.
Nominees
Unless otherwise indicated in the enclosed proxy, the persons named in
such proxy intend to nominate and vote for the election of the following six
nominees for the office of director of the Company, to serve as directors for
one year or until their respective successors have been duly elected and
qualified: Angelo D. Bizzarro, Carl J. Meil, Jr., George Miller, Michael J.
Miller, James A. Mitarotonda and Julian R. Siegel. All such nominees are
currently serving as directors. The Board of Directors is not aware that any
nominee named herein will be unable or unwilling to accept nomination or
election. Should any nominee for the office of director become unable to accept
nomination or election, the persons named in the proxy will vote for the
election of such other persons, if any, as the Board of Directors may recommend.
The Company has agreed, for a three-year period which commenced
December 13, 1995, to nominate and use its best efforts (including the
solicitation of proxies) to elect two designees of Barington Capital Group,
L.P., the managing underwriter of the Company's initial public offering, to the
Board of Directors of the Company. Directors Mitarotonda and Siegel are those
designees.
The Board of Directors recommends a vote "For" the nominees named
below.
The names and ages (as of January 17, 1997) of the Company's current
directors (which includes all of the nominees) and executive officers, their
principal occupations and business experience for the past five years, and
certain other information are set forth below.
DIRECTORS
Angelo D. Bizzarro
Director
Background Information
Angelo D. Bizzarro is 55 years old and has been a director of the Company
since September 1995. On October 18, 1996, Mr. Bizzarro was named Chief
Executive Officer of the Company. His appointment is expected to take effect
on or before February 20, 1997. Mr. Bizzarro currently serves as President
and CEO of Caterair International, Inc., an airline catering company, a
position he has held
2
<PAGE>
since September 1995. He previously served as Executive Vice President and
Chief Operating Officer of Caterair International Corporation ("Caterair")
and Caterair Holdings (January 1993 - September 1995). From December 1989
until January 1993, Mr. Bizzarro served as Chief Financial Officer of
Caterair. Prior to joining Caterair, Mr. Bizzarro worked at Marriott
Corporation, where he served as Vice President of Finance and Development
of Marriott's airline catering business. Mr. Bizzarro received a Bachelor
of Science degree in Accounting from Monmouth College in 1963 and a Masters
of Business Administration degree from Lehigh University in 1978. Mr.
Bizzarro completed the Harvard Business School Program for Management
Development in 1982.
Carl J. Meil, Jr.
Director
Background Information
Carl J. Meil, Jr. is 61 years old and has been a director of the Company since
September 1995. Since 1963, he has been President of Carl J. Meil, Jr., Inc.,
the largest provider of casualty insurance for the child care industry in
Maryland. He is a member of the Maryland Child Care Association, Trustee of
the Living Classroom Foundation and serves on several other not-for-profit
boards of directors. Mr. Meil attended the University of Baltimore School of
Law.
George Miller
Chief Executive
Officer and
Chairman
Background Information
George Miller is 63 years old and has been Chief Executive Officer and
Chairman of the Board of Directors of the Company since its formation. On
October 18, 1996, Mr. Miller resigned as Chief Executive Officer, such
resignation to be effective the date on which Angelo D. Bizzarro, the
Company's recently appointed Chief Executive Officer, takes office (which
is expected to occur on or before February 20, 1997). Since 1990, Mr. Miller
has held various executive positions with or acted as a consultant to the
Company's subsidiaries. Mr. Miller was Controller of Rouse Company, a
national real estate development firm, from 1970 until 1975, and was an auditor
for C.W. Amos Company, an independent accounting firm, from 1964 to 1969.
Mr. Miller attended Johns Hopkins University from 1961 to 1963 where he
majored in Accounting and Finance, and the University of Baltimore from 1957 to
1959 where he majored in Economics. Mr. Miller is the author and publisher
of several books on the management and marketing of accounting services. Mr.
Miller is the father of Michael J. Miller.
3
<PAGE>
Michael J. Miller
President, Chief
Operating Officer
& Director
Background Information
Michael J. Miller is 35 years old and has been President and a director of the
Company since its formation. In December 1996, Mr. Miller was also elected as
the Company's Chief Operating Officer. Since 1982, Mr. Miller has served in
various management positions at the Company's subsidiaries. Mr. Miller
introduced the franchising concept to the Company and was instrumental in
creating the Company's concept and systems. In 1985 he designed and
implemented the accounting and business management system currently used
throughout the chain. Mr. Miller graduated from Towson State University in
1984 with a Bachelor of Science degree in Business and Finance. Mr. Miller is
the son of George Miller.
James A. Mitarotonda
Director
Background Information
Mr. Mitarotonda is 42 years old and is the Chairman, President and Chief
Executive Officer of Barington Capital Group, L.P., an investment banking firm,
a position he has held since he founded the firm in November 1991. From May 1989
until November 1991, he was a partner with Commonwealth Associates, an
investment banking firm. He has served as a director of the Company since
January 1996 and also serves as a member of the Board of Directors of
Xenometrix, Inc.
Julian R. Siegel
Director
Background Information
Mr. Siegel is 60 years old and has been a director of the Company since January
1996. He is President of Tradeway, Inc., a business consulting firm he founded
in 1985. From 1991 to 1993 and from 1985 to 1988, he served, respectively, as
Vice President of Operations and Vice President, General Manager of OPT
Industries, an electronic manufacturing firm. From 1974 to 1984 he was President
of Kenyon Magnetics, Inc., a manufacturer of electronic components. In 1984 Mr.
Siegel served as Vice President and member of the Board of Directors of the RMS
Electronics, Inc., a manufacturer of cable TV components. From 1972 to 1974 he
served as Director of Marketing of Intelectron Corporation, a medical device
manufacturer. From 1969 to 1972 Mr. Siegel was a corporate executive of Gulton
Industries, a diversified manufacturing company. From 1958 to 1968, he designed
and developed earth satellites and space probes at Airborne Instruments
Laboratory and at RCA Aerospace Systems Division where he received a NASA
commendation for contributions to the Ranger moon probe program. Mr. Siegel
received a Bachelor of Electrical Engineering degree from the City College of
New York in 1958.
4
<PAGE>
EXECUTIVE OFFICERS
Elizabeth T. Howard
Executive Vice
President
Background Information
Ms. Howard is 31 years old and has been an Executive Vice President of the
Company since its formation. Since March 1994, Ms. Howard has been Vice
President of the Company's subsidiary, Kiddie Academy Franchising Systems, Inc.
Prior to joining Kiddie Academy, Ms. Howard headed the Department of Public
Programs for Children's and Adult Education for the Walters Art Gallery in
Baltimore, Maryland from September 1991 to January 1993. From March 1989 through
September 1991, she served as General Manager of the Mid-Shore Center for the
Performing Arts in Easton, Maryland. Ms. Howard serves on the Board of Directors
of Library Theater, a volunteer children's literary organization, and the
Marketing Advisory Council for Center Stage, a theater located in Baltimore,
Maryland. In 1994, she received her Masters of General Administration degree in
Business Management from the University of Maryland's Graduate School of
Management and Technology, and is a member of the Phi Kappa Phi Honor Society.
She received her Bachelor of Arts degree in 1989 from Washington College.
Guy A. Matta
Executive Vice
President and
Chief Financial
Officer
Background Information
Mr. Matta is 40 years old and has been Chief Financial Officer of the Company
since its formation. In December 1996 he was elected to the additional position
of Executive Vice President. From 1990 through April 1995, Mr. Matta was
Regional Controller for Domino's Pizza Corporation. From 1989 to 1990, he held
the position of Corporate Controller, Senior Financial Officer for Lusk Metals
and Plastics, Inc. of Hayward, California. From 1982 to 1989, he was Senior
Financial Officer for Cal West Periodicals, Inc., a magazine and book
wholesale/distribution company, and, from 1978 to 1982, he served as Senior
Staff Auditor for KPMG Peat Marwick, Certified Public Accountants. Mr. Matta
received his Bachelor of Science degree from California State University in
1978.
5
<PAGE>
Cynthia L. Spell
Corporate Counsel,
Executive Vice
President and Assistant Secretary
Background Information
Ms. Spell is 39 years old and currently serves as the Company's Corporate
Counsel, Executive Vice President and Assistant Secretary. She has been employed
as an attorney with the Company and its subsidiaries since September 1993. Ms.
Spell was previously an attorney at Shapiro and Olander in Baltimore, Maryland
from 1985 to 1993 where, in 1991, she was made Of Counsel to the firm. She
graduated in 1979 from St. Mary's College of Maryland (B.A. with honors) and in
1985 from the University of Maryland School of Law (J.D. with honors). She was
an Assistant Editor of the Maryland Law Review and was elected to the Order of
the Coif. She is a member of the American Bar Association and the Maryland State
Bar Association.
Board and Committee Meetings
The Board of Directors held four regular meetings and one special
meeting during fiscal year 1996. Each director attended all of such meetings, as
well as all meetings of each committee of which he was a member. The Audit
Committee is the Board of Director's sole standing committee. It held one
meeting during the past fiscal year and consisted of Directors Meil and
Bizzarro. The Audit Committee is responsible for overseeing the Company's
internal accounting controls; recommending to the Board of Directors the
selection of the Company's independent auditors; reviewing and approving the
planned scope, proposed fee arrangements and results of the independent audit;
and initiating other special reviews when deemed necessary. The Board has no
standing Nomination or Compensation Committee.
Compensation of Directors
Non-employee directors of the Company received $1,000 for each regular
or special Board meeting attended during fiscal year 1996. Members of the Audit
Committee receive an additional annual stipend of $250. Total director fees paid
by the Company during fiscal year 1996 was $12,000.
Certain Relations and Related Transactions
From January 1995 through June 1995, Kiddie Academy Child Care Learning
Centers, Inc. ("Kiddie Centers"), a wholly owned subsidiary of the Company,
borrowed an aggregate of $65,895 from George Miller, Chairman, Chief Executive
Officer and a stockholder of the Company, to fund certain of the Company's
working capital needs and expenses. This loan, which bore interest at the rate
of 8% per annum, was repaid in full in December 1995.
Pursuant to a lease dated September 25, 1995 with an effective date of
October 1, 1995 (the "Corporate Office Lease"), Kiddie Centers, Kiddie
Franchising Centers, Inc. ("Kiddie Franchising"), a wholly owned subsidiary of
Kiddie Centers, and Kid's Craft, Inc. ("Kid's Craft"), a wholly owned subsidiary
of the Company, lease from Penguin Properties Corporation ("PPC"),
6
<PAGE>
an entity owned by Michael J. Miller (90% owner), George Miller (5% owner),
and Pauline Miller (5% owner) (collectively, the "Principal Stockholders"), the
premises at which the Company's headquarters is located, 108 Wheel Road, Bel
Air, Maryland. The initial term of the lease is five years, expiring on
September 30, 2000, with four five-year renewal options. The annual base
rent was $98,646 for the first year of the initial term and escalates annually
throughout the initial term and during any renewal term in accordance with
the consumer price index. The tenants under the Corporate Lease are also
responsible for all real estate taxes and/or special governmental assessments,
all insurance and maintenance expenses incurred by the landlord thereunder,
and certain charges in connection with the common areas of the premises. Kiddie
Centers, Kiddie Franchising and Kid's Craft paid an aggregate of $119,242
in lease payments to PPC in fiscal year 1996 with respect to the Corporate
Lease.
On October 18, 1996, the Corporate Lease was amended (the "Amendment")
pursuant to which the remainder of the building comprising the Company's
headquarters (the "Expansion Space") was leased to the Company's affiliates. The
term of lease with respect to the Expansion Space commenced on November 1, 1996
and will terminate simultaneously with the term of the Corporate Lease. The
annual base rent with respect to the Expansion Space is initially $21,708, and
escalates on October 1 annually, throughout the initial term and all renewal
terms, in accordance with the consumer price index. The Amendment further
provides that the tenant will pay all real estate taxes and/or special
governmental assessments, all insurance and maintenance expenses incurred by the
landlord with respect to the Expansion Space.
Pursuant to a lease dated September 25, 1995 with an effective date of
October 1, 1995 (the "Bel Air Lease"), Kiddie Centers also leases from PPC the
premises on which a company-owned center, located at 2235 Old Emmorton Road, Bel
Air, Maryland, is situated. The initial term of the lease is five years,
expiring on September 30, 2000, with four five-year renewal options. The annual
base rent escalates from $92,176 for the first year of the initial term annually
throughout the initial term and during any renewal term in accordance with the
consumer price index. Kiddie Centers, as tenant under the lease, is also
responsible for all real estate taxes and/or special governmental assessments,
and all insurance and maintenance expenses incurred by the landlord thereunder.
Kiddie Centers paid a total of $95,633 in lease payments to PPC in fiscal year
1996 with respect to the Bel Air Lease.
Pursuant to a lease dated October 2, 1995 for a term which commenced on
November 15, 1995 (the "Liberty Lease"), Kiddie Centers also leases from PPC the
premises on which an additional company-owned center, located at 3609 Milford
Mill Road, Baltimore, Maryland, is situated. The initial term of the lease is
five years, expiring on November 30, 2000, with four five-year renewal options.
The annual base rent escalates from $49,440 for the first year of the initial
term annually throughout the initial term and during any renewal term in
accordance with the consumer price index. Kiddie Centers, as tenant under the
lease, is also responsible for all real estate taxes and/or special governmental
assessments, and all insurance and maintenance expenses incurred by the landlord
thereunder. Kiddie Centers paid a total of $51,294 in lease payments to PPC in
fiscal year 1996 with respect to the Liberty Lease.
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<PAGE>
Pursuant to an Assignment of Lease dated November 4, 1996 entered into
between Kiddie Centers, as assignee, and TAG, Incorporated ("TAG"), as assignor,
Kiddie Centers has assumed all of the obligations of TAG, as tenant, under the
Lease Agreement dated September 30, 1994 entered into between TAG, as tenant,
and PPC, as landlord (the "Kent Island Lease"). The lease pertains to the
premises at which the Kiddie Academy Center, located at Route 18, Village of
Benton's Crossing, Stevensville, Maryland (the "Kent Island Center"), is
situate. The initial term of the Kent Island Lease is 10 years, expiring on
approximately November 30, 2004, with two five-year renewal terms. The basic
annual rent escalates from $68,959, currently, throughout the initial term and
any renewal terms in accordance with the consumer price index. Kiddie Centers,
as assignee tenant under the Lease, is also responsible for all real estate
taxes and/or special governmental assessments, and all insurance and maintenance
expenses incurred by the landlord thereunder.
In September 1995, PPC refinanced certain outstanding loan obligations
with a loan from Sparks State Bank. Pursuant to such loan agreement, the Company
has guaranteed the obligations of Kiddie Centers, Kiddie Franchising and Kid's
Craft under the Corporate Office Lease and the respective obligations of Kiddie
Centers and independent franchisees under their leases with PPC for child care
centers. As of September 29, 1996, $1,424,999 was outstanding under the Sparks
State Bank loan. In addition, each of Pauline Miller, Michael J. Miller and
Kiddie Franchising guaranteed the obligations of Kiddie Centers under a Line of
Credit Agreement with Harford National Bank. Such line of credit was repaid in
full in December 1995.
James A. Mitarotonda, a director of the Company, is the Chairman,
President and Chief Executive Officer and a partner of Barington Capital Group,
L.P. ("Barington"), managing underwriter in the Company's initial public
offering which was consummated in December 1995. Under the terms of the
Underwriting Agreement, the Company agreed to pay Barington an underwriting fee
of 10% of the aggregate offering price and a non-accountable expense allowance
of 3% of the aggregate offering price of the securities offered pursuant to the
initial public offering and further agreed to employ Barington as an investment
banker and financial consultant for a two-year period commencing upon the
consummation of the IPO for a fee of $100,000. Total fees of $711,425 were paid
to Barington during fiscal year 1996.
Carl J. Meil, Jr., a director of the Company, is the President and sole
stockholder of Carl J. Meil, Jr., Inc., the largest provider of casualty
insurance for the child care industry in Maryland. The Company and its
subsidiaries paid a total of approximately $160,000 to Carl J. Meil, Jr., Inc.
during fiscal year 1996 for various insurance products.
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<PAGE>
PRINCIPAL BENEFICIAL OWNERS OF THE
COMPANY'S COMMON STOCK
As of February 11, 1997, the record date, there were outstanding and
entitled to vote 2,025,000 shares of Common Stock.
Principal Owners
No persons were known by the Company to own beneficially, directly or
indirectly, more than 5% of the company's Common Stock outstanding on January
17, 1997 except as follows:
<TABLE>
<CAPTION>
Name and Amount and Nature Percent of Class
Address of of Beneficial
Beneficial Owner Ownership
<S> <C>
George Miller 613,380 (1) 30.29%
c/o Kiddie Academy International, Inc.
Kiddie Academy Corporate Center
108 Wheel Road
Bel Air, Maryland 21015
Michael J. Miller 836,906 41.33%
c/o Kiddie Academy International, Inc.
Kiddie Academy Corporate Center
108 Wheel Road
Bel Air, Maryland 21015
Pauline Miller 613,380 (2) 30.29%
c/o Kiddie Academy International, Inc.
Kiddie Academy Corporate Center
108 Wheel Road
Bel Air, Maryland 21015
Barington Capital Group, L.P. 176,000 (3) 8.00%
888 Seventh Avenue
17th Floor
New York, New York 10019
</TABLE>
(1) Includes 44,047 shares of Common Stock owned by Pauline Miller, wife of
George Miller, and 523,286 shares of Common Stock owned by Michael J. Miller,
son of George Miller (as to which voting power is shared pursuant to the
agreement described below), with respect to which George Miller disclaims
beneficial ownership.
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<PAGE>
(2) Includes 46,047 shares of Common Stock owned by George
Miller, husband of Pauline Miller, and 523,286 shares of Common Stock owned by
Michael J. Miller, son of Pauline Miller (as to which voting power is shared
pursuant to the agreement described below), with respect to which Pauline Miller
disclaims beneficial ownership.
(3) Includes 220,000 shares of Common Stock issuable upon exercise of certain
warrants.
The Principal Stockholders are parties to a Voting Agreement pertaining
to the Common Stock dated August 8, 1995 (the "Voting Agreement") pursuant to
which Michael J. Miller has agreed to vote the shares of Common Stock received
by him on the date thereof, other than 52,381 shares, in the manner in which
52,381 shares of Common Stock owned by each of the Principal Stockholders
(collectively, the "Primary Shares") are voted, in the same proportion in which
the Primary Shares are voted. The Voting Agreement will terminate on the first
to occur of the following: (i) the sale of all of the Primary Shares or (ii) the
mutual consent of the Principal Stockholders.
Beneficial Ownership of Executive Officers, Directors and Nominees
The following table lists the number of shares of Common Stock of the
Company beneficially owned by directors and executive officers of the Company
directly or indirectly as of January 17, 1997:
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Amount and Nature of Percent of Class
Beneficial Ownership
<S> <C>
George Miller 613,380 (1) 30.29%
c/o Kiddie Academy International, Inc.
Kiddie Academy Corporate Center
108 Wheel Road
Bel Air, Maryland 21015
Michael J. Miller 836,906 41.33%
c/o Kiddie Academy International, Inc.
Kiddie Academy Corporate Center
108 Wheel Road
Bel Air, Maryland 21015
James A. Mitarotonda 176,000 (2) 8.00%
c/o Barington Capital Group, L.L.P.
888 Seventh Avenue, 17th Floor
New York, New York 10019
All directors and executive officers 1,103,000 50.11%
(9 persons)
</TABLE>
10
<PAGE>
(1) Includes 44,047 shares of Common Stock owned by Pauline Miller, wife of
George Miller, and 523,286 shares of Common Stock owned by Michael J. Miller,
son of George Miller (as to which voting power is shared pursuant to the Voting
Agreement described above), with respect to which George Miller disclaims
beneficial ownership.
(2) Represents shares of Common Stock owned by Barington Capital Group,
L.P. ("Barington") which Barington has the right to acquire within 60 days
pursuant to warrants currently exercisable. Mr. Mitarotonda is Chairman,
President, Chief Executive Officer and a partner of Barington.
EXECUTIVE COMPENSATION
Summary Compensation Table
The table below presents a summary of compensation for the last three
fiscal years of the chief executive officer of the Company and the other most
highly paid executive officers of the Company whose total annual salary and
bonus exceeded $100,000 during fiscal year 1996.
<TABLE>
<CAPTION>
Annual
Compensation
Name and
Principal Position
-------------------------------------------------------
Fiscal Year Salary ($) Other Annual
Compensation ($)
<S> <C>
- ------------------------------------------- ---------------- ----------------- --------------------
George Miller, CEO and Chairman (1) 1996 $120,000 ----
1995 $ 28,600 ----
1994 $ 8,400 $800 (2)
- ------------------------------------------- ---------------- ----------------- --------------------
Michael J. Miller, President 1996 $110,000 ----
</TABLE>
(1) Reflects compensation received by George Miller in his capacity as the
President of Kiddie Centers and Vice President of Kiddie Franchising for the
fiscal years ended 1995 and 1994.
(2) Reflects payments received by George Miller as reimbursement for business
related automobile expenses and insurance.
(3) Michael J. Miller's salary and other annual compensation were less than
$100,000 for each of the fiscal years ended 1995 and 1994.
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<PAGE>
Stock Options Granted in Fiscal 1996
There were no grants of options to purchase the Company's Common Stock
to the persons named in the Summary Compensation table during the fiscal year
ended September 29, 1996. However, on October 18, 1996, Angelo D. Bizzarro, in
connection with his appointment as the Company's Chief Executive Officer, was
granted the option to purchase 75,000 non-qualified options to purchase the
Company's Common Stock, and 25,000 incentive stock options. The stock options
will vest in stages, the first of which will not be exercisable until December
31 of the calendar year in which Mr. Bizzarro's employment commences, or the
first year anniversary of his commencement date, whichever first occurs.
Additionally, the Board of Directors has adopted, subject to stockholder
approval, an amendment to the 1995 Incentive Compensation Plan to increase the
maximum number of shares that may be issued under the 1995 Incentive
Compensation Plan from 100,000 shares to 300,000. See Incentive Compensation
Plan--Approval of Proposed Amendment. The Company has further agreed that if the
Company's stockholders approve an increase in the number of shares available to
be issued under the 1995 Incentive Compensation Plan, then Mr. Bizzarro will be
granted the option to purchase an additional 100,000 shares of the Company's
Common Stock. Grants under the 1995 Incentive Compensation Plan are made at the
discretion of the Board of Directors. Accordingly, no other future grants under
the 1995 Incentive Compensation Plan are yet determinable.
Option Exercises and Fiscal 1996 Year-End Values
No persons named in the Summary Compensation table owned options to
purchase the Company's Common Stock as of September 29, 1996; nor did any of the
persons named in the Summary Compensation table exercise options to purchase the
Company's Common Stock during the fiscal year ended September 29, 1996.
Employment Contracts
The Company entered into a three-year employment agreement dated
October 1, 1995 with George Miller pursuant to which (i) he will receive an
annual base salary of $120,000, for the first year of such employment (with such
base salary to increase $10,000 each year thereafter), (ii) he will be entitled
to an aggregate bonus equal to 5% of the Company's pretax profits, and (iii) he
will be entitled to a severance payment equal to the greater of the remaining
payment of salary and bonus due under such employment agreement and 1.75 times
his annual base salary and last year's bonus if terminated other than for cause
(as defined in his employment agreement); provided however, that the severance
payment shall not be payable (x) under circumstances under which George Miller
and Michael J. Miller, or their representatives on the Board of Directors,
initiate such termination, or (y) in the event George Miller shall have disposed
of in excess of 25% of the shares of Common Stock owned by him on December 12,
1995. On October 18, 1996, the Company entered into an Amendment to the
employment agreement pursuant to which the term of his agreement shall terminate
simultaneously with the
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termination, including after any renewal terms, of the Employment Agreement
entered into with Angelo D. Bizzarro, as described below.
The Company entered into a three-year employment agreement dated
October 1, 1995 with Michael J. Miller pursuant to which (i) he will received an
annual base salary of $110,000 for the first year of such employment (with such
base salary to increase $10,000 each year thereafter), (ii) he will be entitled
to aggregate bonuses equal to 5% of the Company's pretax profits, and (iii) he
will be entitled to a severance payment equal to the greater of the remaining
payment of salary and bonus due under such employment agreement and 1.75 times
his annual base salary and last year's bonus if terminated other than for cause
(as defined in his employment agreement); provided however, that the severance
payment shall not be payable (x) under circumstances under which George Miller
and Michael J. Miller, or their representatives on the Board of Directors,
initiate such termination, or (y) in the event Michael J. Miller shall have
disposed of in excess of 25% of the shares of Common Stock owned by him on
December 12, 1995. On October 18, 1996, the Company entered into an Amendment to
the employment agreement pursuant to which the term of his agreement shall
terminate simultaneously with the termination, including after any renewal
terms, of the Employment Agreement entered into with Angelo D. Bizzarro, as
described above.
The Company entered into a three-year Employment Agreement with Angelo
D. Bizzarro dated October 18, 1996 (the "Bizzarro Agreement") pursuant to which
Mr. Bizzarro will assume duties as the Company's Chief Executive Officer. Mr.
Bizzarro is required under the Bizzarro Agreement to assume his duties on or
before February 20, 1997 or the contract will terminate. Under the Bizzarro
Agreement, Mr. Bizzarro will receive (i) an annual base salary of $295,000, (ii)
an annual performance bonus equal to 5% of the Company's pretax profits, and
(iii) a severance payment equal to $295,000 if his employment is terminated
without cause, or if the contract is not renewed following the initial three
year term for any reason other than cause. The Bizzarro Agreement further
provides that Mr. Bizzarro will be entitled to terminate such agreement and
receive the severance payment, and an immediate vesting of various stock
options, if the Company is sold and, (x) as a result of such disposition, there
is a substantial, material and adverse change in the terms or conditions of Mr.
Bizzarro's employment and (y) the Company meets specified financial criteria. In
addition to his basic salary and performance bonus, Mr. Bizzarro has been
granted 75,000 non-qualified stock options (which will vest on December 31 of
the calendar year in which his commencement date occurs), and 25,000 incentive
stock options, effective as of his commencement date, that will vest in stages
on each anniversary of his commencement date. The Bizzarro Agreement further
provides that the Company intends to issue Mr. Bizzarro an additional 100,000
stock purchase options, but that this grant is contingent upon the stockholders
of the Company increasing the number of shares available to be issued under the
Company's 1995 Incentive Compensation Plan from 100,000 to 300,000. If such
stockholder approval is not obtained by March 30, 1997, then the Company will be
required to grant Mr. Bizzarro 100,000 shares of phantom stock for purposes of
granting to Mr. Bizzarro substantially the same financial benefits as those that
would have been granted to Mr. Bizzarro pursuant to the additional 100,000 stock
purchase options.
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APPROVAL OF PROPOSED AMENDMENTS TO INCENTIVE COMPENSATION PLAN
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's 1995 Incentive Compensation Plan (the "Plan") to
increase the maximum number of shares or options to purchase shares that may be
issued under the Plan from 100,000 to 300,000, and to establish 250,000 as the
maximum number of shares or options to purchase shares that may be granted in
any one calendar year to any individual under the Plan. The proposed amendments
are set forth in the Company's Second Amendment and Restatement of 1995
Incentive Compensation Plan, a copy of which is attached hereto. As of January
14, 1997, a total of 100,000 shares or options to purchase shares were
authorized for issuance under the Plan, of which all have been granted to Mr.
Bizzarro, or reserved for issuance to Mr. Bizzarro, pursuant to the terms of his
Employment Agreement. Accordingly, as of the date hereof, there are no shares
available for future grants under the Plan.
The Plan was designed to provide additional incentives for directors,
officers and other key employees of the Company to promote the success of the
business and to enhance the Company's ability to attract and retain the services
of persons who are experienced, highly qualified and in a position to make
material contributions to the Company's success. The Company believes that stock
options are critical in attracting and retaining these key contributors. The
Plan is intended to offer a significant incentive by enabling directors and key
employees to acquire options to purchase the Company's Common Stock at a price
equal to its fair market value on the date the option is granted. The options
will become valuable to the recipients only if the price of the Company's common
stock appreciates following the grant and when such options have vested. By
providing directors and key employees with the opportunity to acquire an equity
interest in the Company over time and because benefit is only received through
improved stock performance, the Company believes that stock options serve to
align the interests of directors and key employees closely with other
stockholders.
The Company believes that an adequate reserve of shares for issuance
under the Plan is necessary to enable it to successfully compete with other
companies and is essential to the Company's ability to retain experienced
employees and to recruit additional qualified individuals. In September 1996,
subject to stockholder approval being received at the Annual Meeting, the Board
of Directors unanimously adopted an amendment to the Plan to increase the number
of shares of Common Stock reserved for issuance upon the exercise of options
granted under the Plan by 200,000 shares to a total of 300,000 shares and in
December 1996, subject to stockholders approval, unanimously adopted an
additional amendment which established 250,000 as the maximum number of shares
or options to purchase shares that may be granted in any one calendar year to
any individual under the Plan.
The following table sets forth the grants of stock options under the
Plan, to the extent currently known, if the proposed amendment to increase the
number of shares available to be issued under the Plan is approved.
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NEW PLAN BENEFITS
1995 Incentive Compensation Plan
Exercise Price
Name and Position (Per Share) Number of Shares
Angelo D. Bizzarro
Chief Executive Officer-elect (1) 100,000
Executive Group (1) 100,000
(1) Exercise price will be determined as of the date Mr. Bizzarro commences
employment as Chief Executive Officer, which is expected to occur on or before
February 20, 1997.
Summary
The following summary of the Plan, including the proposed amendments
requiring stockholder approval, is qualified in its entirety by the specific
language of the Plan.
Incentive Compensation Plan
The Plan is administered by the Board of Directors or by a compensation
committee of the Board of Directors (the "Committee") which is authorized to
grant to management (approximately six persons as of the date of this Proxy
Statement), other key employees (approximately eight persons as of the date of
this Proxy Statement), directors of the Company (currently six persons) and
consultants engaged by the Company restricted stock, incentive stock options and
non-qualified stock options. A maximum of 300,000 shares of Common Stock will be
available for issuance under the Plan. The market price per share of such shares
as of January 17, 1997 was $3.375. The Plan will expire on, and no awards may be
granted thereunder after, the tenth anniversary of the initial adoption of the
Plan, subject to the right of the Board of Directors to terminate the Plan at
any time prior thereto. The Board of Directors may amend the Plan at any time,
except no such amendment may impair the rights of recipients of previous grants
without such grantees' consent.
Restricted stock awards typically will be granted at no purchase price,
although if required under applicable corporate law, the Board of Directors or
the Committee may establish a purchase price set at the par value of the Common
Stock, payable in cash or by other means, including recognition of past
employment. Shares of restricted stock are shares of Common Stock which the
grantee is not entitled to sell or otherwise transfer until ownership of the
shares vests. The vesting schedule for restricted stock will be determined by
the Board of Directors or by the Committee upon grant. If so determined by the
Board of Directors or by the Committee upon grant, recipients of restricted
stock may receive certain other rights attaching to shares of Common Stock
generally, such as dividend and voting rights, as of the date of grant or such
later
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date as the Committee may determine (but not later than the date of
vesting for such stock). If the recipient of restricted stock ceases to be
employed by the Company or any subsidiary or affiliate of the Company before the
vesting date, the restricted stock will be forfeited to the Company.
An option enables the optionee to purchase shares of Common Stock at
the option exercise price. The per share exercise price of any options granted
under the Plan shall be determined by the Board of Directors or the Committee at
the time of grant and, in the case of an incentive stock option, may not be less
than the fair market value of the Common Stock at the time the option is
granted, provided that, with respect to an incentive stock option granted to an
optionee who is or will be the beneficial owner of more than 10% of the combined
voting power of all classes of the Company's stock, the exercise price may not
be less than 110% of the fair market value of the Common Stock on the date of
grant. In order to obtain the shares, a participant must pay the exercise price
to the Company at the time of exercise of the option. The exercise price may be
paid in cash or, with the consent of the Board of Directors or the Committee,
stock of the Company, including stock acquired under the same option. Incentive
stock options are intended to qualify under Section 422 of the Code.
Incentive stock options and non-qualified stock options may be granted
with terms of no more than ten years from the date of grant, provided that in
the case of an incentive stock option granted to an optionee who is or will be
the beneficial owner of more than 10% of the combined voting power of all
classes of the Company's stock, the term of such option may not exceed five
years. Options will survive for a limited period of time after the optionee's
death, disability or normal retirement from the Company. Any shares as to which
an option expires, lapses unexercised, or is terminated or canceled may be
subject to a new option.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences to participants and the Company of stock options granted under the
Plan. The summary is based on the provisions of the Internal Revenue Code, as in
effect on the date of this document and on existing and proposed regulations and
rulings thereunder, all of which are subject to change. Each participant is
urged to consult his tax advisor prior to the conversion of a stock award,
exercise of an option and sale or other disposition of shares acquired under the
Plan.
Incentive Stock Options
An optionee will not recognize income upon the grant of an incentive
stock option or, unless the optionee is subject to the alternative minimum tax
as described below, upon the exercise of an incentive stock option. An optionee
who exercises an incentive stock option more than three months after retirement
or other termination of employment (one year in the event of a termination on
account of disability) will recognize income at the time of exercise as if the
option were a non-qualified stock option, as described below.
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Upon sale of the shares acquired upon exercise of an incentive stock
option, an optionee generally will recognize long-term capital gain in an amount
equal to the difference between the sale price of the shares and the exercise
price of the option, if the sale of such shares occurs more than two years from
the date the incentive stock option was granted and more than one year from the
date the shares were transferred to him upon exercise of the option. Under the
Plan, the shares acquired upon exercise of an incentive stock option cannot be
disposed of by the optionee prior to the expiration of such holding periods
without the written consent of the Company.
If the shares acquired upon exercise of the incentive stock option are
sold or disposed of prior to the expiration of the holding periods described in
the previous paragraph, the transaction constitutes a disqualifying disposition
and the optionee generally will recognize ordinary income on the date of
disposition in an amount equal to the lesser of (i) the excess of the fair
market value of the shares on the date the option was exercised over the
exercise price or (ii) the excess of the amount realized upon such disposition
over the exercise price. If the amount realized on a sale exceeds the fair
market value of the shares on the date of exercise, the excess will be treated
as long-term capital gain if the shares have been held for more than one year or
will be treated as short-term capital gain if the shares have been held for one
year or less. If the amount realized on the sale is less than the exercise
price, the loss will be treated as long-term capital loss if the shares have
been held for more than one year or will be treated as short-term capital loss
if the shares have been held for one year or less.
The Company will not be entitled to any deduction for federal income
tax purposes at the time an incentive stock option is granted or exercised or,
unless a disqualifying disposition has occurred, at the time the shares acquired
upon exercise of an incentive stock option are sold. If an optionee makes a
disqualifying disposition, the Company generally will be entitled to a deduction
at the same time and in the same amount as the optionee is considered to have
recognized ordinary income, subject to certain limitations regarding
compensation deductions.
Non-Qualified Stock Options
An optionee generally will not recognize income for federal income tax
purposes at the time a non-qualified stock option is granted. Except as
described below, an optionee will recognize ordinary income upon exercise of a
non-qualified stock option in an amount equal to the difference between the fair
market value of the shares on the exercise date and the exercise price.
Certain officers of the Company may be subject to potential liability
for "short-swing profits" under Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). If an officer subject to such potential
liability exercises a non-qualified stock option within six months of the grant
date of the option, the officer will recognize ordinary income on the date which
is six months from the grant date in an amount equal to the fair market value of
the shares on such date less the exercise price. For this purpose, the grant
date is the later of the date on which the option was initially granted or the
date of any material modification of the option. An
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officer subject to potential liability under Section 16(b) of the Exchange Act
who exercises an option less than six months after the grant date may make a
Section 83(b) Election to recognize income on the exercise date rather than
the date which is six months after the grant date, in an amount equal to the
fair market value of the shares on the exercise date less the exercise price.
An optionee's tax basis in shares received upon exercise of a
non-qualified stock option generally is the sum of the exercise price paid and
the ordinary income recognized as a result of exercising the non-qualified stock
option. This sum is generally equal to the fair market value of the shares on
the date the optionee recognizes ordinary income. An optionee's holding period
for shares received upon exercise of a non-qualified stock option begins on the
date on which ordinary income is recognized.
When shares acquired upon exercise of a non-qualified stock option are
sold, the optionee will recognize gain (or, under certain conditions, loss) at
the time of sale equal to the difference between the amount realized and the
optionee's tax basis in the shares. The gain (or loss) will be a long-term
capital gain (or loss) if more than one year has elapsed between the date on
which ordinary income was recognized and the date of sale, and short-term gain
(or loss) if one year or less has elapsed.
The Company generally will be entitled to a deduction for federal
income tax purposes upon exercise by an optionee of a non-qualified stock option
provided any applicable income reporting requirements are satisfied and subject
to certain limitations regarding compensation deductions. The deduction will
correspond in timing and amount to the recognition of ordinary income by the
optionee.
Alternative Minimum Tax
A taxpayer may be subject to an alternative minimum tax which is
payable to the extent that such alternative minimum tax exceeds the taxpayer's
regular income tax for the year. The alternative minimum tax is imposed at a
flat rate of 26% on the taxpayer's alternative minimum taxable income up to
$175,000 in excess of an exemption amount, and at a rate of 28% on the
taxpayer's alternative minimum taxable income greater than $175,000 above the
exemption amount. In computing a taxpayer's alternative minimum taxable income,
the excess of the fair market value of the shares on the exercise date of an
incentive stock option (or, in the case of an officer potentially subject to
liability under Section 16(b) of the Exchange Act who exercises an option within
six months of the grant date, on the date six months from the grant date, unless
the officer elects to make an election pursuant to the Treasury Regulations to
be taxed on the exercise date) over the exercise price is included in
alternative minimum taxable income. If, however, a disqualifying disposition
occurs in the year in which the option is exercised, the maximum amount that is
included in alternative minimum taxable income is the gain realized on the
disposition of the shares. The portion of a taxpayer's alternative minimum tax
attributable to certain items included in the computation of alternative minimum
taxable income (including amounts attributable to the exercise of an incentive
stock option) may be credited against the
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taxpayer's regular tax liability in later years to the extent that the regular
tax liability exceeds the alternative minimum tax.
Board of Directors' Recommendation
The Board of Directors believes that the proposed amendments to the
Plan are in the best interests of the Company and its stockholders for the
reasons stated above. Therefore, the Board of Directors unanimously recommends a
vote "For" the amendments to the Plan, as set forth in the attached Second
Amendment and Restatement of the Company's 1995 Incentive Compensation Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who beneficially own more than 10% of the
Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms filed by such persons. Based solely on the Company's
review of such forms furnished to the Company and written representations from
certain reporting persons, as of January 22, 1997, the Company believes that
during fiscal year 1996, each director, executive officer and 10% beneficial
owner failed to file Form 3 on a timely basis, although the Company knows of no
transactions that were not reported on a timely basis as a result of such
omissions. All such omissions were corrected as of November 12, 1996, except for
that of Robert Benowitz (the Company's Chief Operating Officer from September
18, 1995 - January 3, 1996) and Dennis Urner (the Company's Chief Operating
Offer from January 4 March 8, 1996). Additionally, to the Company's knowledge,
Messrs. Benowitz and Urner have not filed a Form 5 as of the date of this Proxy
Statement.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected Deloitte & Touche
LLP, independent public accountants, to audit the Company's financial statements
for fiscal year 1997. Deloitte & Touche LLP has performed the annual audits of
the Company since the Company's inception in 1995. A representative of Deloitte
& Touche LLP is expected to attend the Annual Meeting and will be available to
answer appropriate questions. The representative will have the opportunity to
make a statement at the meeting if the representative so desires. The Board of
Directors unanimously recommends a vote "For" the appointment of Deloitte &
Touche LLP as the Company's independent public auditors for the 1997 fiscal
year.
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OTHER MATTERS
The Board of Directors of the Company knows of no matters to be
presented for action at the Annual Meeting other than those mentioned above;
however, if any other matters properly come before the Annual Meeting, it is
intended that the persons named in the accompanying proxy will vote on such
other matters in accordance with their judgment of the best interests of the
Company. Other than the election of directors, each matter to be submitted to
the stockholders requires the affirmative vote of a majority of all the shares
voted at the meeting in person or by proxy. Abstentions and broker non-votes are
treated as shares presented but not voted.
STOCKHOLDER PROPOSALS
All stockholder proposals intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company not later than November
11, 1997, and satisfy the conditions established by the SEC for inclusion in the
Company's proxy statement and proxy relating to that meeting.
REPORT ON FORM 10-KSB
Additional copies of the Annual Report on Form 10-KSB and applicable
exhibits are available to stockholders free of charge upon written request.
Requests should be sent to Kiddie Academy International, Inc., 108 Wheel Road,
Bel Air, Maryland 21015, Attention: Michael J. Miller.
By Order of the Board of Directors
/s/ Michael J. Miller
Michael J. Miller
Corporate Secretary
February 12, 1997
Annex: Second Amendment and Restatement of 1995 Incentive Compensation Plan
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SECOND AMENDMENT AND RESTATEMENT OF
KIDDIE ACADEMY INTERNATIONAL, INC.
1995 INCENTIVE COMPENSATION PLAN
PREAMBLE
On September 18, 1995, the Board of Directors (the "Board") of
Kiddie Academy International, Inc. (the "Company") adopted the Kiddie Academy
International, Inc. 1995 Incentive Compensation Plan (the "Plan"). In September,
1996, the Board amended and restated the Plan in its entirety. Pursuant to
resolutions duly adopted by the Board, the Plan has been fully amended and
restated a second time and is embodied in this document.
1. Purpose
The purpose of this Plan is to encourage and enable selected
management, other key employees, directors and consultants of the Company and
its Affiliates (as hereinafter defined) to acquire a proprietary interest in the
Company through the ownership of common stock of the Company. Such ownership
will provide such individuals with a more direct stake in the future welfare of
the Company and encourage them to remain with the Company or an Affiliate of the
Company. It is also expected that the Plan will encourage qualified persons to
seek and accept employment with the Company or an Affiliate of the Company.
Pursuant to the Plan, such employees will be offered the opportunity to acquire
such common stock through the grant of Incentive Stock Options, "non-qualified"
stock options and stock awards. All options shall be separately designated as
Incentive Stock Options or "non-qualified" stock options at the time of the
grant.
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As used herein, the term "Affiliate" shall mean any parent or
subsidiary corporation of the Company, whether now or hereafter existing, as
those terms are defined in Sections 424(e) and (f) of the Internal Revenue Code
of 1986, as amended (the "Code").
2. Administration of the Plan
The Plan shall be administered by the Board of Directors of
the Company (the "Board) or by a stock option committee, which may also be the
compensation committee (the "Committee"), appointed from time to time by the
Board, which Committee shall consist of not less than two members of the Board
and all of the members of which Committee shall be "Non-Employee Directors"
within the meaning of Rule 16b-3 as from time to time in effect under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and
"Outside Directors" within the meaning of Section 162(m) of the Code.
The Board or Committee may adopt such rules and regulations,
as it deems necessary, desirable or appropriate, for the administration of the
Plan. The interpretation and decision with regard to any question arising under
the Plan made by the Board or Committee shall be final and conclusive on all
employees, directors and consultants of the Company or an Affiliate of the
Company participating or eligible to participate in the Plan. The Board or
Committee shall determine, among other things, the individuals to whom, and the
time or times at which, grants shall be made, the number of options or shares of
stock to be included in the grants, whether options granted shall be Incentive
Stock Options or non-qualified stock options, the option price, and all other
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terms and conditions of any such grant (which terms and conditions shall be
consistent with the provisions of the Plan).
3. Shares of Stock Subject to the Plan
The number of shares available for stock awards, or which may
be issued or transferred pursuant to the exercise of options granted under the
Plan, shall not exceed 300,000 shares of the common stock, par value $.01 per
share, of the Company (the "Common Stock"). Such shares may be authorized and
unissued shares or previously issued shares acquired or to be acquired by the
Company and held in treasury. Any shares subject to an option which for any
reason expires or is terminated unexercised as to such shares may again be
subject to a stock award or option under the Plan.
The maximum number of shares of Common Stock which may be
awarded or for which options may be granted under the Plan during any one
calendar year to any one individual shall be limited to 250,000. For purposes of
applying this limitation, if an award or option is terminated, surrendered or
canceled, the shares or underlying shares in the case of an option shall
continue to be counted against the maximum number of shares that may be awarded
or for which options may be granted during any one calendar year to any one
individual.
4. Eligibility
Stock awards and options may be granted only to management,
other key employees who are employed by the Company and its Affiliates,
directors of the Company or any of its Affiliates and consultants engaged by the
Company or any of its Affiliates. Incentive Stock Options may be granted only to
management and other key employees who are employed by the Company and its
Affiliates. A director or officer
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shall in no event be eligible to receive stock awards or options under the Plan
unless at the time discretion is exercised in the selection of such person as a
person to whom stock may be awarded or options may be granted, or in the
determination of the number of shares which may be covered by any such award
or option, (i) the Board has delegated its discretionary authority over
the Plan to a Committee which consists solely of Non-Employee Directors and such
discretion is exercised by such Committee, or (ii) the grant of such stock award
or option otherwise complies with the requirements of Rule 16b-3.
5. Granting of Stock Awards
The Board or the Committee may grant stock awards under the
Plan in Common Stock or denominated in units of Common Stock. Such awards may be
granted either alone, in addition to, or in tandem with any other type of award
granted under the Plan. The Board or the Committee, in its discretion, may make
such awards either noncontingent or contingent upon attainment of certain
performance objectives to be achieved during a period of time, or upon continued
service with the Company. The measure of whether and to what degree such
objectives have been attained and the resulting awards will be determined by the
Board or the Committee in its discretion. The Board or the Committee may choose,
at the time of the grant of the award, or any time thereafter up to the time of
payment of the award, to include as part of such award an entitlement to receive
dividends or dividend equivalents, subject to such terms as the Board or the
Committee may establish. All dividends or dividend equivalents which are not
paid currently may, at the Board's or the Committee's discretion, accrue
interest and be paid to the participant if and when and to the extent that such
award is paid. The grant
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of any such stock awards shall be evidenced by stock award agreements in such
form, not inconsistent with this Plan, as the Board or the Committee shall
approve from time to time.
6. Terms and Conditions of Options
No option pursuant to this Plan shall be exercisable after the
expiration of 10 years from the date it was granted. The date of the grant of
any option shall be the date on which the Board or the Committee, as the case
may be, authorizes the grant of such option. Options shall be evidenced by stock
option agreements in such form, not inconsistent with this Plan, as the Board or
the Committee shall approve from time to time, which agreements need not be
identical and shall contain in substance the following terms and conditions:
(a) Option Price. The purchase under each Incentive Stock
Option shall be 100% of the fair market value of the Common Stock at
the time the option is granted but in no case less than the par value
of such Common Stock. In the case of an Incentive Stock Option granted
to an employee owning more than 10% of the total combined voting power
of all classes of stock of the Company or any of its Affiliates,
actually or constructively under Section 424(d) of the Code (a "10%
Stockholder"), the option price shall not be less than 110% of the fair
market value of the Common Stock subject to the option at the time of
its grant and the option shall not be exercisable after the expiration
of five years from the date of grant. The fair market value of the
Common Stock on such date shall be determined in a manner consistent
with the requirements of the Code. The purchase price under each
non-qualified stock option shall be specified by the Board or the
Committee but in no case shall be less than the par value of the Common
Stock subject to the non-qualified stock option.
(b) Medium and Time of Payment. The vested portion of an
option may be exercised, in whole or in part, by delivering written
notice to the Board or Committee in such form as the Board or Committee
may require from time to time. Such notice shall specify the number of
shares of Common Stock subject to the option as to which the option is
being exercised, and shall be accompanied by full payment of the
exercise price of the shares of Common Stock as to which the option is
being exercised. Payment of the exercise price shall be made in cash.
In the Board or Committee's sole and absolute discretion, the Board or
Committee
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may authorize payment of the exercise price to be made, in whole or in
part, by such other means as the Board or Committee may prescribe.
The Option may be exercised only in multiples of whole shares and
no partial shares shall be issued.
If the Common Stock is registered under Section 12(b) or 12(g)
of the Securities Exchange Act of 1934, the Board or Committee, subject
to such limitations as it may determine, may authorize payment of the
exercise price, in whole or in part, by delivery of a properly executed
exercise notice, together with irrevocable instructions, to: (i) a
brokerage firm designated by the Company to deliver promptly to the
Company the aggregate amount of sale or loan proceeds to pay the
exercise price and any withholding tax obligations that may arise in
connection with the exercise, and (ii) the Company to deliver the
certificates for such purchased shares directly to such brokerage firm.
Upon receipt of written notice of exercise and payment, the
Company shall deliver to the person exercising the option a certificate
or certificates for such shares. It shall be a condition to the
performance of the Company's obligation to issue or transfer Common
Stock upon exercise of this option that the optionee pay, or make
provision satisfactory to the Company for the payment of, any taxes
(other than stock transfer taxes) which the Company is obligated to
collect with respect to the issue or transfer of Common Stock upon
exercise.
(c) Rights as a Stockholder. A recipient of options shall have
no rights as a stockholder with respect to any shares issuable or
transferable upon exercise thereof until such shares have been issued
upon the due exercise of the option. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or
other rights for which the record date is prior to the date such stock
certificate is issued.
(d) Non-Assignability of Options. No option shall be
assignable or transferable by the recipient except by will or by the
laws of descent and distribution. During the lifetime of a recipient,
options shall be exercisable only by him or during the period he is
under legal disability, by his guardian or legal representative.
(e) Vesting. The term during which each option may be
exercised shall be determined by the Board or Committee. In no event
shall a stock option be exercisable more than ten years from the date
it is granted. In the case of an Incentive Stock Option granted to a
10% Stockholder (as defined in subparagraph 6(a) hereof), such option,
by its terms, shall be exercisable only within five years from the date
it is granted.
(f) Restrictions as to Incentive Stock Options. To the extent
that the aggregate fair market value (determined at the time of grant)
of stock with respect to which Incentive Stock Options are exercisable
for the first time by any option holder during any calendar year under
all plans of the Company and its Affiliates
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exceeds $100,000, the options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be
treated as non-qualified stock options.
(g) Securities Law Compliance. The Company may require any
option holder, or any person to whom an option is transferred under
subparagraph (d) hereof, as a condition of exercising any such option,
(i) to give written assurances satisfactory to the Company as to the
option holder's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the
merits and risks of exercising the option; and (ii) to give written
assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the option for such person's own account
and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to
such requirements, shall be inoperative if (A) the issuance of the
shares upon the exercise of the option has been registered under a then
currently effective registration statement under the Securities Act of
1933, as amended, or (B) as to any particular requirement, a
determination is made by counsel for the Company that such requirement
need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as
such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends
restricting the transfer of stock.
(h) Effect of Termination of Relationship with the Company or
an Affiliate or Death. No option shall be exercisable after termination
of such holder's relationship with the Company or any Affiliate of the
Company as an employee, director or consultant unless such termination
occurs by reason of retirement with the consent of the Company,
disability (within the meaning of Section 22(e)(3) of the Code) or
death. In the event of the retirement of a recipient of options with
the consent of the Company, the options or unexercised portions thereof
which were otherwise exercisable on the date of retirement shall expire
unless exercised within a period of three months after the date of
retirement. Option rights shall not be affected by any change of
employment as long as the recipient continues to be employed by either
the Company or an Affiliate of the Company. In the event of the
termination of a recipient's employment due to disability, the options
or unexercised portions thereof which were otherwise exercisable on the
date of termination shall expire unless exercised within one year after
the date of termination pursuant to Section 22(e)(3) of the Code. In
the event of the death of a recipient of options while an employee,
director or consultant of the Company or an Affiliate of the Company or
in the event of the death of the recipient within the three-month
period following termination of such relationship by reason of
retirement with the consent of the
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Company, the options which were otherwise exercisable on the date of
termination of such relationship shall be exercisable by his
personal representatives, heirs, or legatees at any time prior to the
expiration of one year from the date of his death. In no event,
however, shall an option be exercisable after 10 years from the date
it is granted (five years in the case of an option granted to a 10%
Stockholder). In the event that an option holder's relationship with
the Company or of any Affiliate of the Company ceases for any reason,
including death or retirement, prior to the lapse of the applicable
waiting period, his option shall terminate and be null and void. The
Board or the Committee may, if it determines that to do so would be in
the Company's best interests, provide in a specific case or cases
for the exercise of options which would otherwise terminate upon
termination of the holder's relationship with the Company or an
Affiliate of the Company for any reason, upon such terms and conditions
as the Committee determines to be appropriate.
(i) Leave of Absence. In the case of a recipient on an
approved leave of absence, the Committee may, if it determines that to
do so would be in the best interests of the Company, provide in a
specific case for continuation of options during such leave of absence,
such continuation to be on such terms and conditions as the Committee
determines to be appropriate, except that in no event shall an option
be exercisable after 10 years from the date it is granted (five years
in the case of an option granted to a 10% Stockholder).
(j) Dividends; Recapitalization. In the event that dividends
payable in Common Stock during any fiscal year of the Company exceed in
the aggregate five percent of the Common Stock issued and outstanding
at the beginning of the year, or in the event there is during any
fiscal year of the Company one or more splits, subdivisions, or
combinations of shares of Common Stock resulting in an increase or
decrease by more than five percent of the shares outstanding at the
beginning of the year, the number of shares available under the Plan
shall be increased or decreased proportionately, as the case may be,
and the number of shares deliverable upon the exercise thereafter of
any options theretofore granted shall be increased or decreased
proportionately, as the case may be, without change in the aggregate
purchase price. Common Stock dividends, splits, subdivisions, or
combinations during any fiscal year which do not exceed in the
aggregate five percent of the Common Stock issued and outstanding at
the beginning of such year shall be ignored for purposes of the Plan.
All adjustments shall be made as of the day such action necessitating
such adjustment becomes effective.
(k) Sale or Reorganization. In case the Company is merged or
consolidated with another corporation, or in case the property or stock
of the Company is acquired by another corporation, or in case of a
separation, reorganization or liquidation of the Company, the Board, or
the board of directors of any corporation assuming the obligations of
the Company hereunder, shall either (i) make appropriate provisions for
the protection of any outstanding
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<PAGE>
options by the substitution on an equitable basis of appropriate
stock of the Company, or appropriate stock of the merged, consolidated
or otherwise reorganized corporation, provided only that any such
adjustment shall be subject to the requirements of Section 424 of
the Code, or (ii) give written notice to recipients that their options,
which will become immediately exercisable notwithstanding any vesting
period otherwise prescribed by the Committee, must be exercised within
60 days of the date of such notice or they will be terminated.
(l) General Restrictions. Each option granted under the Plan
shall be subject to the requirement that, if at any time the Board
shall determine, in its discretion, that the listing, registration or
qualification of the shares issuable or transferable upon exercise
thereof upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the
granting of such option or the issue, transfer or purchase of shares
thereunder, such option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to
the Board.
7. Termination and Amendment of the Plan
The Board shall have the right to amend, suspend or terminate
the Plan at any time; provided, however, that no such action shall affect or in
any way impair the rights of a recipient under any option right or stock award
theretofore granted under the Plan; and, provided, further, that unless first
duly approved by the holders of Common Stock entitled to vote thereon at a
meeting (which may be the annual meeting) duly called and held for such purpose,
except as provided in subparagraphs 6(j) and 6(k) hereof, no amendment or change
shall be made in the Plan to: (i) increase the total number of shares which may
be issued or transferred under the Plan; (ii) change the purchase price
hereinbefore specified for the shares subject to options; (iii) extend the
period during which options may be granted or exercised under the Plan; (iv)
change the designation of employees eligible to receive options or stock awards
under the Plan; or (v) modify the Plan in any other way if such modification
requires stockholder approval in order for the
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Plan to satisfy the requirements of Section 422 of the Code or to comply with
the requirements of Rule 16b-3 under the Exchange Act.
8. Restriction on Sale of Shares
Without the written consent of the Company, no stock acquired
by an optionee upon exercise of an Incentive Stock Option granted hereunder
shall be disposed of by the optionee within two years from the date such
Incentive Stock Option was granted, nor within one year after the transfer of
such stock to the optionee; provided, however, that a transfer to a trustee,
receiver, or other fiduciary in any insolvency proceeding, as described in
Section 422(c)(3) of the Code, shall not be deemed to be such a disposition.
9. Miscellaneous
(a) The Board shall have the power to accelerate the time at
which an option may first be exercised or the time during which an option or any
part thereof will vest pursuant to subparagraph 6(e) hereof, notwithstanding the
provisions in the option agreement stating the time at which it may first be
exercised or the time during which it will vest.
(b) Nothing in the Plan or any instrument executed or option
granted pursuant thereto shall confer upon any employee, director or optionee
any right to continue in the employ of the Company or any Affiliate (or continue
to act as a director) or shall affect the right of the Company or any Affiliate
to terminate the employment or relationship as a director of any employee,
director or optionee with or without cause.
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10. Effective Date of the Plan
This Plan shall become effective on the date of its adoption
by the favorable vote of the majority of the Board, subject, however, to
approval by the stockholders of the Company within 12 months next following such
adoption by the Board; and if such approval is not obtained, the Plan shall
terminate and any and all options granted during such interim period shall also
terminate and be of no further force or effect. The Plan shall, in all events,
terminate on September 18, 2005, or such earlier date as the Board of Directors
of the Company may determine. Any option outstanding at the termination date
shall remain outstanding until it has either expired or has been exercised.
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REVOCABLE PROXY
KIDDIE ACADEMY INTERNATIONAL, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Kiddie Academy International, Inc. hereby
appoints George Miller or Michael J. Miller, or either of them, the lawful
attorneys and proxies of the undersigned, with several powers of substitution,
to vote all shares of Common Stock of Kiddie Academy International, Inc. which
the undersigned is entitled to vote at the Annual Meeting of Stockholders to be
held March 11, 1997, and at any and all adjournments and postponements thereof.
Any and all proxies heretofore given are hereby revoked.
Please be sure to sign and date this Proxy in the box below.
1. Election of Directors For Withhold For all except
[ ] [ ] [ ]
A. Bizzarro, C. Meil, Jr., G. Miller, M. Miller
J. Mitarotonda, R. Siegel
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
2. Amendments to 1995 Incentive Compensation Plan
For Against Abstain
[ ] [ ] [ ]
3. Appointment of Deloitte & Touche LLP
For Against Abstain
[ ] [ ] [ ]
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR Proposals 1 through 3 and in the best judgement of the proxy
holders on all other matters.
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Date
Stockholder sign above Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
KIDDIE ACADEMY INTERNATIONAL, INC.
The above signed acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement furnished therewith.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
