<PAGE> 1
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 (AMENDMENT NO. )
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
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CHILDTIME LEARNING CENTERS
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
CHILDTIME LEARNING CENTERS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 13, 1997
To the Shareholders:
PLEASE TAKE NOTICE that the Annual Meeting of Shareholders of Childtime
Learning Centers, Inc. (the "Company") will be held at Tam O'Shanter Country
Club, 5051 Orchard Lake Road, W. Bloomfield, MI 48325, on August 13, 1997, at
10:00 a.m., Eastern Daylight Time, to consider and act upon the following
matters:
(1) The election of two directors to serve until the 2000 Annual
Meeting of Shareholders and until their successors shall have been duly
elected and qualified.
(2) Such other business as may properly come before the meeting.
Only shareholders of record at the close of business on June 24, 1997 will
be entitled to vote at the meeting.
Your attention is called to the attached proxy statement and the
accompanying proxy. You are requested to sign and return the proxy in the
enclosed envelope, to which no postage need be affixed if mailed in the United
States. If you attend the meeting, you may withdraw your proxy and vote your own
shares.
A copy of the Annual Report of the Company for the fiscal year ended March
28, 1997 accompanies this Notice.
By Order of the Board of Directors
MICHAEL M. YEAGER
Secretary
Farmington Hills, Michigan
July 14, 1997
<PAGE> 3
CHILDTIME LEARNING CENTERS, INC.
38345 WEST 10 MILE ROAD, SUITE 100
FARMINGTON HILLS, MICHIGAN 48335
-------------------------
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 13, 1997
GENERAL INFORMATION
The Annual Meeting of Shareholders of Childtime Learning Centers, Inc. (the
"Company") will be held at Tam O'Shanter Country Club, 5051 Orchard Lake Road,
W. Bloomfield, MI 48325, on August 13, 1997, at 10:00 a.m., Eastern Daylight
Time, for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. The approximate mailing date for this proxy statement and proxy is
July 14, 1997.
It is important that your shares be represented at the meeting. If it is
impossible for you to attend the meeting, please sign and date the enclosed
proxy and return it to the Company. The proxy is solicited by the Board of
Directors of the Company. Shares represented by valid proxies in the enclosed
form will be voted if received in time for the Annual Meeting. Expenses in
connection with the solicitation of proxies will be borne by the Company and may
include requests by mail and personal contact by its directors, officers, and
employees. The Company will reimburse brokers or other nominees for their
expenses in forwarding proxy materials to principals. Any person giving a proxy
has the power to revoke it any time before it is voted.
All references in this Proxy Statement to "fiscal 1997" are references to
the Company's fiscal year ended March 28, 1997. Unless otherwise stated,
references to the "Company" mean Childtime Learning Centers, Inc. and its
wholly-owned subsidiary, Childtime Childcare, Inc.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Only holders of record of shares of the Company's Common Stock, no par
value (the "Common Stock"), at the close of business on June 24, 1997 (the
"Record Date") are entitled to notice of, and to vote at, the meeting or at any
adjournment or adjournments thereof, each share having one vote. On the Record
Date, there were issued and outstanding 5,227,811 shares of the Common Stock.
As of the Record Date, the only persons known to the Company to be the
beneficial owners of more than 5% of the Company's outstanding Common Stock were
Childcare Associates, KD Partners II and George A. Kellner, and Wellington
Management Company, LLP and its affiliate Wellington Trust Company, N.A.
Reference is made to the table (and, in particular, note 5 to such table) set
forth under the caption "Election of Directors" for the number of shares and
percentage of the Company's outstanding Common Stock beneficially owned by
Childcare Associates, KD Partners II and George A. Kellner. According to
Schedule 13G's filed with the Securities and Exchange Commission, Wellington
Management Company LLP beneficially owns 431,400 shares of the Company's Common
Stock (7.95%) and Wellington Trust Company, N.A. beneficially owns 277,500
shares (5.11%). The address of both of these shareholders is 75 State Street,
Boston, Massachusetts 92109.
I. ELECTION OF DIRECTORS
The Board of Directors proposes that Harold A. Lewis and Leonard C. Tylka
be elected as directors of the Company to hold office until the Annual Meeting
of the Shareholders in 2000, and in each case, until his successor is elected
and qualified.
The persons named in the accompanying proxy intend to vote all valid
proxies received by them for the election of the foregoing nominees, unless such
proxies are marked to the contrary. The two nominees receiving the greatest
number of votes cast at the meeting or its adjournment shall be elected.
Abstentions, withheld votes and broker non-votes will not be deemed votes cast
in determining which nominees receive the
<PAGE> 4
greatest number of votes cast, but they will be counted for purposes of
determining whether a quorum is present. If any nominee is unable or declines to
serve, which is not anticipated, it is intended that the proxies be voted in
accordance with the best judgment of the proxy holder. The following information
is furnished with respect to each nominee for election as a director, with
respect to each director whose term of office as a director will continue after
this meeting, and with respect to each executive officer of the Company named in
the Summary Compensation Table below:
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OF OUTSTANDING SHARES
COMMON STOCK OF THE COMPANY'S
POSITIONS AND OF THE COMPANY COMMON STOCK
NAME AND YEAR OFFICES WITH THE BENEFICIALLY BENEFICIALLY
FIRST BECAME COMPANY AND OTHER OWNED AS OF OWNED AS OF
A DIRECTOR(1) AGE PRINCIPAL OCCUPATIONS THE RECORD DATE(2) THE RECORD DATE
------------- --- --------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
DIRECTORS AND NOMINEES FOR ELECTION AS DIRECTORS
Milton H. Dresner (1995)............. 70 President of
Highland Companies,
(Southfield, Michigan)...... 8,500(3)(4) *
Jason K. Feld (1996)................. 42 Principal Research Scientist
at the University of
Arizona,
(Tucson, Arizona)........... 2,750(3) *
James W. Geisz (1995)................ 43 General Partner of
TGV Partners,
(Los Angeles, California)... 62,328(3) 1.2%
Benjamin R. Jacobson (1996).......... 51 Managing Partner
of Jacobson Partners,
(New York, New York)........ 2,500(3) *
George A. Kellner (1995)............. 52 Chairman of the Board
of the Company and
Managing Partner of
Kellner, DiLeo & Co.,
(New York, New York)........ 2,867,500(3)(5) 54.8
Harold A. Lewis (1995)............... 50 President and Chief
Executive Officer of
the Company................. 171,000(6) 3.3
Leonard C. Tylka (1995).............. 50 Manager of Corporate
Development, The Loewen
Group, Inc.,
(Trevose, Pennsylvania)..... 2,500(3)(7) *
OTHER EXECUTIVE OFFICERS
Michael M. Yeager........................................................ 38,250(6) *
Deborah D. Ludwig........................................................ 14,917(6) *
William H. Van Huis...................................................... 12,417(6)(8) *
Taylor V. Ward........................................................... 7,917(6) *
All directors and executive officers as a group (11 persons)............. 3,190,579(3)(6) 61.0%
</TABLE>
- -------------------------
* Less than 1%.
(1) All addresses are care of Childtime Learning Centers, Inc., 38345 West 10
Mile Road, Suite 100, Farmington Hills, Michigan 48335.
(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them.
2
<PAGE> 5
(3) Includes 2,500 shares of Common Stock, issuable pursuant to stock options
granted under the Company's Director Stock Option Plan, that are exercisable
within 60 days after the Record Date.
(4) Mr. Dresner is a minority investor in Childcare Associates. Mr. Dresner
disclaims beneficial ownership in the shares of Common Stock owned by such
shareholder.
(5) Includes 2,427,373 shares of Common Stock owned by Childcare Associates and
437,627 shares of Common Stock owned by KDPartners II. Mr. Kellner is the
managing partner of Childcare Associates and the managing partner of KD
Special Situations Partners, the investment general partner of KD Partners
II. The address for Childcare Associates is c/o Kellner, DiLeo & Co., 900
Third Avenue, 10th Floor, New York, New York 10022, and the address for KD
Partners II is c/o Ansbacher (Cayman) Limited, Jeannette Street, P.O. Box
887, Georgetown, Grand Cayman, Cayman Islands, British West Indies. Does not
include shares beneficially owned by Harold A. Lewis which, pursuant to a
voting agreement, are to be voted by Mr. Lewis as directed by Mr. Kellner
for the five-year period ending on February 6, 2001 or, if sooner, until
Childcare Associates and KD Partners II beneficially own, in the aggregate,
less than 25% of the then outstanding shares of Common Stock.
(6) Includes shares of Common Stock, issuable pursuant to stock options granted
to the executive officers of the Company pursuant to the Company's 1995
Stock Incentive Plan for Key Employees, that are exercisable within 60 days
after the Record Date, as follows: Harold A. Lewis -- 8,000 shares; Michael
M. Yeager -- 2,250 shares; Deborah D. Ludwig -- 1,667 shares; William H. Van
Huis -- 1,667; and Taylor V. Ward -- 1,667.
(7) Mr. Tylka is a minority investor in Childcare Associates. Mr. Tylka
disclaims beneficial ownership of the shares of Common Stock owned by such
shareholder.
(8) Includes 2,000 shares of Common Stock owned by the spouse of Mr. Van Huis.
The Company is a party to a shareholders agreement (the "Shareholders
Agreement") with Childcare Associates, KD Partners II, GCC Partners, Ltd. ("GCC
Partners"), Leonard B. Tessler and James W. Geisz, the general partners of GCC
Partners (collectively the "Holders"). Pursuant to the Shareholders Agreement,
until February 1997, Childcare Associates and KD Partners II (the "KD Holders")
were entitled to designate a majority of the nominees to the Board of Directors
of the Company and GCC Partners was entitled to designate one nominee to the
Board of Directors. The Shareholders Agreement required the Holders to vote for
such nominees. The members of the Board of Directors nominated by the KD Holders
were Messrs. Kellner, Tylka, Lewis, Dresner, Jacobson and Feld. The member of
the Board of Directors nominated by GCC Partners was Mr. Geisz. The foregoing
provisions of the Shareholders Agreement terminated in February 1997 and,
accordingly, are not applicable to the nominations, or the voting to occur, with
respect to the election of directors at the 1997 Annual Meeting of Shareholders.
OTHER INFORMATION RELATING TO DIRECTORS AND NOMINEES
The following is a brief account of the business experience during the past
five years of each member or nominee of the Board of Directors of the Company.
Milton H. Dresner has been a director of Childtime Childcare, Inc. since
November 1993. Mr. Dresner is a real estate developer and private investor with
his principal offices in Southfield, Michigan. Mr. Dresner also serves as a
director of Avatar Holdings, Inc., a real estate development company located in
Coral Gables, Florida; and Hudson General Corporation, an aviation services
company located in Great Neck, New York.
Jason K. Feld has been a research scientist at the University of Arizona
since 1987 specializing in the field of early childhood development and
education. In addition, since 1987, Dr. Feld has been a director and vice
president of Assessment Technology, Inc., a private, Tucson, Arizona based
corporation which conducts national research in child development and education
and provides multi-media and educational products and services.
James W. Geisz has been a director of Childtime Childcare, Inc. since June
1992. Since April 1990, Mr. Geisz has been primarily engaged as a general
partner of TGV Partners, a Los Angeles based investment
3
<PAGE> 6
partnership focusing on leveraged buyouts. In addition, in November 1992, Mr.
Geisz became the general counsel of Empire Kosher Poultry, Inc., a kosher food
manufacturer located in Mifflintown, Pennsylvania.
Benjamin R. Jacobson has been the managing general partner of Jacobson
Partners, a New York City based investment banking partnership since 1989. Mr.
Jacobson also serves as Chairman of the Board of the YMCA of Greater New York
and is a member of the Board of Trustees of Union College.
George A. Kellner has been a director and Chairman of the Board of
Childtime Childcare, Inc. since July 1990. Mr. Kellner is Managing Director of
K.D. Managers, LLC, a private New York City based partnership specializing in
merger arbitrage and a member firm of the New York and American Stock Exchanges.
Mr. Kellner is a Trustee of Milton Academy, Trinity College, Vice Chairman of
Phoenix House, and a Member of the Advisory Council of the Department of
Economics at Princeton University.
Harold A. Lewis has been the President and Chief Executive Officer and a
director of Childtime Childcare, Inc. since August 1991. From 1990 to 1991, he
was Chief Operating Officer International Operations of U.S. Travel Systems,
Inc., a national, multi-unit travel company headquartered in Rockville,
Maryland.
Leonard C. Tylka has been a director of Childtime Childcare, Inc. since
November 1990. From 1987 through May 15, 1997, Mr. Tylka, a certified public
accountant, served as the controller of KD Equities, a private equity investment
firm located in New York City. Subsequent to May 15, 1997, Mr. Tylka became
manager of corporate development for The Loewen Group, Inc., a publicly-held
funeral home and cemetery operator, headquartered in Burnaby, British Columbia,
Canada.
MEETINGS OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES AND COMPENSATION OF
DIRECTORS
The Board of Directors held four meetings during fiscal 1997. Each of the
directors attended 100% of the meetings of the Board of Directors and the
committees of the Board of Directors on which they serve, during the periods in
which they were members of the Board or of such committees.
The Board of Directors of the Company currently has an Audit Committee and
a Compensation Committee. The Board of Directors does not have a separate
nominating committee.
The duties of the Compensation Committee include recommending to the entire
Board of Directors of the Company the compensation arrangements for senior
management and directors of the Company and administration of the 1995 Stock
Incentive Plan For Key Employees. During fiscal 1997, the Compensation Committee
held one meeting. The members of the Compensation Committee are Milton H.
Dresner, James W. Geisz, George A. Kellner and Benjamin R. Jacobson.
The duties of the Audit Committee include reviewing the services provided
by the Company's independent auditors, consulting with such auditors on audits
and proposed audits and reviewing the need for internal auditing procedures and
the adequacy of internal controls. During fiscal 1997, the Audit Committee held
two meetings. The members of the Audit Committee are James W. Geisz, George A.
Kellner and Leonard C. Tylka.
The current standard arrangement for compensation of directors is as
follows: officers of the Company who are directors do not receive any additional
compensation for services as a director. Directors who are not employees of the
Company receive directors' fees of $6,000 per year, $500 for each Board meeting
attended and $250 for each Committee meeting attended. Such directors are also
participants in the Company's Director Stock Option Plan. Pursuant to such plan,
Options to purchase 2,500 shares were granted to each non-employee director in
connection with the Company's initial public offering and will automatically be
granted, subject to availability, to each non-employee director at each annual
meeting, starting with the 1997 Annual Meeting of Shareholders, where they are
elected or remain in office. Options for up to 75,000 shares are available for
grant under the Director Stock Option Plan, each of which becomes fully vested
and exercisable on the first anniversary of the date of grant. The exercise
price of options granted under the Plan will equal the market price of the
Common Stock at the time of grant.
4
<PAGE> 7
II. COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information for the fiscal years ended March
28, 1997, March 29, 1996 and March 31, 1995 concerning the compensation of the
Company's Chief Executive Officer and four of the Company's most highly
compensated executive officers whose annual salary and bonus exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------- --------------------------
FISCAL OTHER ANNUAL OPTIONS ALL OTHER
NAME AND POSITION YEAR SALARY BONUS(1) COMPENSATION(2) (SHARES) COMPENSATION(3)
----------------- ------ ------ -------- --------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Harold A. Lewis................. 1997 $200,000 $ 32,000 -- -- $2,439
President and Chief 1996 190,000 167,702 -- 24,000 2,476
Executive Officer 1995 180,000 191,708 -- -- 1,661
Michael M. Yeager............... 1997 $101,000 $ 17,000 $6,966 -- $1,809
Chief Financial Officer, 1996 96,000 69,111 6,211 6,750 1,133
Secretary and Treasurer 1995 91,000 78,758 6,211 -- 858
Deborah D. Ludwig............... 1997 $ 79,000 $ 13,500 -- -- $ 942
Vice President 1996 76,500 40,158 -- 5,000 937
-- Eastern Region 1995 73,500 45,955 -- -- 822
Taylor V. Ward.................. 1997 $ 63,000 $ 6,250 $5,100 -- $ 696
Vice President 1996 60,000 37,965 4,800 5,000 698
-- Western Region 1995 55,000 43,585 5,200 -- 578
William H. Van Huis............. 1997 $ 70,000 $ 11,250 -- -- $ 716
Vice President 1996 67,000 39,061 -- 5,000 714
-- Marketing 1995 64,250 44,772 -- -- 612
</TABLE>
- -------------------------
(1) Includes the bonus accrued in the year indicated, which was paid in the
following year.
(2) Includes reimbursement of expenses related to use of personal automobiles.
(3) Includes premiums paid in connection with life insurance policies and
contributions made by the Company to the Company's 401(k) plan.
OPTION GRANTS IN FISCAL 1996
No stock options were granted to the executive officers named in the above
Summary Compensation Table in the last fiscal year.
AGGREGATE OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning stock options
exercised during the fiscal year ended March 28, 1997, by the executive officers
named in the above Summary Compensation Table, as well as the
5
<PAGE> 8
value of unexercised options held by such persons on March 28, 1997, as measured
in terms of the closing price of the Common Stock on that date as quoted on the
NASDAQ National Market System ($8.88 per share).
<TABLE>
<CAPTION>
SHARES VALUE OF UNEXERCISED
ACQUIRED NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
UPON VALUE OPTIONS AT FISCAL YEAR-END AT 3/28/97
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- -------- -------------------------- -------------------------
<S> <C> <C> <C> <C>
Harold A. Lewis................. -- -- 8,000/16,000 --
Michael M. Yeager............... -- -- 2,250/ 4,500 --
Deborah D. Ludwig............... -- -- 1,667/ 3,333 --
Taylor V. Ward.................. -- -- 1,667/ 3,333 --
William H. Van Huis............. -- -- 1,667/ 3,333 --
</TABLE>
SENIOR EXECUTIVE BONUS ARRANGEMENTS
The executive officers named above in the Summary Compensation Table (the
"Officers") received bonuses during 1997 (which are reflected in the Summary
Compensation Table), under various incentive bonus arrangements offered by the
Company.
Standard Incentive Plan/Incentive Bonus Pool. During fiscal 1997, each of
the Officers participated in the Company's Standard Incentive Plan and Incentive
Bonus Pool, each of which would entitle the Officers to receive a bonus upon the
Company's reaching a predetermined target performance level based on the
Company's earnings per share. In 1997, the Company did not reach the
predetermined target level. Based on an analysis by an outside compensation
consultant during fiscal 1997 and other factors, the Company's Compensation
Committee has structured a new bonus plan for fiscal 1998, based upon a
three-pronged incentive formula tied to earnings per share increases, revenue
growth and quality improvements. For fiscal 1997, the Company's Compensation
Committee authorized a bonus tied to revenues and quality improvements, and,
accordingly, the Company paid incentive bonuses to the Officers in an aggregate
amount of $80,000. (See "Compensation Committee Report on Executive Compensation
- -- Bonuses").
Senior Management Subscription Agreement Bonus. Mr. Lewis, Mr. Yeager, Ms.
Ludwig and Mr. Van Huis have also participated, for a number of years, in a
bonus arrangement created under the terms of Senior Management Subscription
Agreements. The purchase price for shares of the Company's Common Stock
purchased under such Agreements was to be partially funded through bonus
payments. During the first quarter of fiscal 1997, all outstanding balances for
such stock purchases (an aggregate amount of $51,667 for the four Officers) were
paid in full through bonuses which were reflected as compensation during fiscal
1996.
EMPLOYMENT AGREEMENT
The Company entered into an Employment Agreement with Mr. Lewis in fiscal
1996. Under this agreement, the Company will employ Mr. Lewis for an initial two
year employment term, which term of employment will renew automatically every
two years thereafter until terminated by the Company or Mr. Lewis. The
Employment Agreement provides for a minimum base salary of $190,000 to be
reviewed annually by the Company's Board of Directors, and participation in
various management bonus incentive arrangements. The Employment Agreement also
provides for, among other things, Mr. Lewis' participation in the Company's 1995
Stock Incentive Plan for Key Employees and certain medical, death, disability
and other benefits available to the Company's senior management. The Employment
Agreement may be terminated by the Company upon the death of Mr. Lewis, upon his
permanent disability or with or without cause. If Mr. Lewis' employment is
terminated without cause, he will be entitled to receive the greater of (a)
one-year of salary or (b) the remainder of his salary to be paid during the
current employment term, and in either case, benefits and a pro-rata portion of
his bonus for the fiscal year in which such termination occurs. If Mr. Lewis is
terminated within six months after a change in control (as defined in the
Employment Agreement), including a constructive termination within such
six-month period, Mr. Lewis will be entitled to receive two-years of salary,
benefits and a pro-rata portion of his bonus for the fiscal year in which such
termination occurs. During the term of the agreement and for a period of 12
months thereafter (9 months in the event Mr. Lewis'
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<PAGE> 9
employment is terminated without cause), Mr. Lewis will be subject to
noncompetition and nonsolicitation restrictions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All the members of the Compensation Committee are non-employee directors of
the Company. The Compensation Committee currently consists of Messrs. Dresner,
Geisz, Kellner and Jacobson.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General
The Compensation Committee's overall compensation policy applicable to the
Company's executive officers is to provide a compensation program that will
attract and retain qualified executives for the Company and provide them with
incentives to achieve the Company's goals and increase shareholder value. The
Compensation Committee implements this policy through establishing salaries,
incentive bonuses and by granting stock options. The Compensation Committee's
current policy is not to provide significant pension or other retirement
benefits for the Company's executives.
During fiscal 1997, an outside compensation consultant was engaged to
analyze overall compensation practices utilized by similar sized,
multi-location, service oriented companies. The results of such consultant's
analysis were taken into consideration by the Compensation Committee in
recommending fiscal 1998 compensation levels.
Salaries
The Compensation Committee's policy is to provide salaries that are
generally competitive with those of comparable officers in comparably sized
companies in the child care and other industries. The Committee relies heavily
on the recommendations of the Company's Chief Executive Officer as well as its
members' own subjective judgments in setting individual salary levels.
In making his recommendations with regard to the fiscal 1997 salaries for
the executive officers, the Chief Executive Officer generally utilized a range
of 3%-6% for establishing salary increases or a higher percentage if he deemed
it necessary to provide a generally competitive salary for a particular officer.
The Chief Executive Officer's salary for fiscal 1997 was established by the
Compensation Committee in accordance with Mr. Lewis' employment agreement with
the Company and the Committee's subjective view of his individual performance
and contributions to the overall performance of the Company.
Bonuses
The Compensation Committee's policy is that a significant portion of the
executive's total compensation should be tied to incentive bonus plans. As a
result, the compensation of the Company's executive officers is directly related
to the overall financial and operating performance of the Company.
During fiscal 1997, each of the executive officers of the Company
participated in certain bonus pools which were predicated upon meeting certain
earnings per share levels. The Company did not achieve the required earnings per
share levels for fiscal 1997. The Compensation Committee has structured the
fiscal 1998 bonus plan based upon a three-pronged incentive formula tied to
earnings per share increase, revenue growth and quality improvements. For fiscal
1997, the Compensation Committee determined that a bonus tied to revenues and
quality improvements was warranted and, therefore, an $80,000 senior management
incentive bonus was authorized (maximum bonus pool available for fiscal 1997 was
$401,000).
The allocation of the incentive bonus pool amounts among the officers was
determined by the Chief Executive Officer and approved by the Chairman of the
Board. The portion allocated to the Chief Executive Officer was determined by
the Compensation Committee and equalled 41%, which was the same percentage
allocated in prior years to Mr. Lewis and reflected, in part, the desire to
provide total cash compensation to Mr. Lewis which was generally competitive in
the market. The Chief Executive Officer's allocation among the
7
<PAGE> 10
other officers was based on his subjective view of various factors, including
his perception of the relative contribution made by each of the officers to the
Company's overall performance and the need to provide generally competitive cash
compensation to each officer. The determination was not based on specific
objectives and no specific weight was given to any of the factors considered.
Stock Options
The Committee's policy is to award stock options to the Company's officers
and other key employees in amounts reflecting the participant's position and
ability to influence the Company's overall performance. Options are intended to
provide participants with an increased incentive to make contributions to the
long-term growth of the Company, to join the interests of participants with the
interests of shareholders of the Company, and to attract and retain qualified
employees. The Committee's policy has been to grant options with a term of up to
ten years (three year pro rata vesting) and to fix the exercise price of the
options at the fair market values of the underlying shares on the date of grant.
Such options will, therefore, only have value if the price of the underlying
shares increases.
No options were granted during fiscal 1997, due to the granting of options
in connection with the Company's initial public offering during the last quarter
of fiscal 1996. The Compensation Committee's general practice is to consider the
granting of stock options after the end of each fiscal year.
By the Compensation Committee
George A. Kellner, Chairman
Milton H. Dresner
James W. Geisz
Benjamin R. Jacobson
8
<PAGE> 11
PERFORMANCE GRAPH
The following line graph compares the yearly cumulative total shareholder
return (i.e., the change in share price plus the cumulative amount of dividends,
assuming dividend reinvestment, divided by the initial share price, expressed as
a percentage) on the Company's Common Stock from February 2, 1996 (date of
initial public offering) through March 28, 1997 with (i) the cumulative total
return of the NASDAQ Stock Market-US Index, (ii) the cumulative total return of
the "old peer group" consisting of KinderCare Learning Centers, Inc. and
Children's Discovery Centers, Inc. and with (iii) the cumulative total return of
the "new" peer group consisting of Children's Discovery Centers, Inc., Nobel
Education Dynamics, Inc., Sunrise Educational Services, Inc., Kiddie Academy
International, Inc. and New Horizon Kids Quest, Inc. The Company has established
a new peer group, removing KinderCare Learning Centers, Inc., due to the recent
sale of the company, and including other publicly-owned competitors, to create a
representative cross section of the child care industry.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG CHILDTIME LEARNING CENTERS, INC.,
THE NASDAQ STOCK MARKET-US INDEX AND A PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD CHILDTIME NEW PEER OLD PEER NASDAQ
(FISCAL YEAR COVERED) LEARNING GROUP GROUP STOCK
CENTERS, MARKET
INC. (U.S.)
<S> <C> <C> <C> <C>
2/02/96 100 100 100 100
3/96 82 103 98 103
3/97 80 63 143 115
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended March 29, 1996, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with.
9
<PAGE> 12
III. OTHER MATTERS
OTHER PROPOSALS
Neither the Company nor the members of its Board of Directors intend to
bring before the Annual Meeting any matters other than those set forth in the
Notice of Annual Meeting of Shareholders, and they have no present knowledge
that any other matters will be presented for action at the meeting by others. If
any other matters properly come before such meeting, however, it is the
intention of the persons named in the enclosed form of proxy to vote in
accordance with their best judgment.
A shareholder proposal which is intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company at its principal
executive offices, 38345 West 10 Mile Road, Suite 100, Farmington Hills,
Michigan 48335, by April 15, 1998.
AUDITORS
The Board of Directors has selected Coopers & Lybrand LLP to serve as the
Company's independent auditors for fiscal 1998. Coopers & Lybrand LLP has served
in such capacity since July 1990. Representatives from Coopers & Lybrand LLP
will be present at the Annual Meeting of Shareholders, will have an opportunity
to make a statement if they wish, and will be available to respond to
appropriate questions.
By Order of the Board of Directors
MICHAEL M. YEAGER
Secretary
Dated: July 14, 1997
10
<PAGE> 13
<TABLE>
<S><C>
PROXY PROXY
CHILDTIME LEARNING CENTERS, INC.
Proxy Solicited on Behalf of the Board of Directors
For The Annual Meeting of Stockholders - August 13, 1997
The undersigned appoints Harold A. Lewis and Michael M. Yeager, and each of them, as proxies, with full power of substitution
and revocation, to vote, as designated on the reverse side hereof, all the Common Stock of Childtime Learning Centers, Inc. which
the undersigned has power to vote, with all powers which the undersigned would possess if personally present, at the annual meeting
of stockholders thereof to be held on August 13, 1997, or at any adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of the nominees named.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
<TABLE>
<S><C>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY./ /
CHILDTIME LEARNING CENTERS, INC.
[ ]
For Withheld For All
All All Except
/ / / / / /
----------------------------
(Except Nominee written above)
1. Election of Directors
Harold A. Lewis
Leonard C. Tylka
Dated: , 1997
--------
Signature(s)
-------------------------------
------------------------------------------
Please sign exactly as your name(s) appear(s)
on this Proxy. Joint owners should indicate
capacity in which they are signing. Trustees,
Executors, etc. should indicate capacity in
which they are signing.
- ------------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
