-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DLzfl87+/IcW10NwdzPTbHy3Ob9ObQX3HaruZy6D6/YXsI2oB9w7xst+vlERQHqe NGh2VMIUqt+eE/74Po2zaQ== 0000912057-97-030816.txt : 19970918 0000912057-97-030816.hdr.sgml : 19970918 ACCESSION NUMBER: 0000912057-97-030816 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19970915 EFFECTIVENESS DATE: 19970915 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHILDRENS DISCOVERY CENTERS OF AMERICA INC CENTRAL INDEX KEY: 0000775820 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CHILD DAY CARE SERVICES [8351] IRS NUMBER: 061097006 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-35659 FILM NUMBER: 97680808 BUSINESS ADDRESS: STREET 1: 851 IRWIN ST STE 200 CITY: SAN RAFAEL STATE: CA ZIP: 94901 BUSINESS PHONE: 4152574200 MAIL ADDRESS: STREET 1: 851 IRWIN STREET STREET 2: SUITE 200 CITY: SAN RAFAEL STATE: CA ZIP: 94901 S-8 1 FORM S-8 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 15, 1997 REGISTRATION NO. 333-______ - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. (Exact name of Registrant as specified in its charter) -------------------------- DELAWARE 06-1097006 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 851 IRWIN STREET, SUITE 200, SAN RAFAEL, CALIFORNIA 94901 (Address of Principal Executive Offices) (Zip Code) CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. STOCK OPTION PLAN NON-PLAN OPTIONS (Full title of the plans) RICHARD A. NIGLIO CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. 851 IRWIN STREET, SUITE 200 SAN RAFAEL, CALIFORNIA 94901 (Name and address of agent for service) (415) 257-4200 (Telephone number, including area code, of agent for service) -----------------------------------
CALCULATION OF REGISTRATION FEE PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF SECURITIES TO BE AMOUNT TO BE OFFERING AGGREGATE OFFERING AMOUNT OF REGISTERED REGISTERED PRICE PER UNIT PRICE REGISTRATION FEE Common Stock, par value $.01 per share 772,464 shares (1) $4.90 (2) $3,785,074 $1,146.99 Common Stock, par value $.01 per share 27,536 shares (3) $7.69 (4) $ 211,683 $ 64.15 Common Stock, par value $.01 per share 83,626 shares (5) $5.42 (6) $ 453,253 $ 137.35 TOTAL: $1,348.49
(1) Constitutes shares issuable upon exercise of options previously granted under the Children's Discovery Centers of America, Inc. Stock Option Plan. (2) Represents the weighted average of the exercise prices of the options referred to in (1) above. (3) Constitutes the remainder of shares available for future grants of options under the Stock Option Plan. (4) Estimated solely for purposes of determining the registration fee in accordance with Rule 457(h) under the Securities Act of 1933, using the average of the high and low prices of the Registrant's Common Stock reported on the Nasdaq National Market on September 11, 1997. (5) Constitutes shares issuable upon exercise of options previously granted to employees and consultants outside the Stock Option Plan. (6) Represents the weighted average of the exercise prices of options referred to in (5) above. EXPLANATORY NOTE The document(s) containing the information specified in Part I of Form S-8 will be sent or given to participants in the Children's Discovery Centers of America, Inc. Stock Option Plan, as specified by Rule 428(b)(1) under the Securities Act of 1933, as amended. In accordance with the rules and regulations of the Securities and Exchange Commission (the "Commission"), such documents are not being filed with the Commission as part of this Registration Statement. The foregoing documents and the documents incorporated by reference in this Registration Statement pursuant to Item 3 of Part II of this Registration Statement, taken together, constitute a prospectus that meets the requirements of Section 10(a) of the Act. There is also included as part of Part I of this Registration Statement a Reoffer Prospectus relating to the reoffer and resale of 581,337 shares of the Company's Common Stock as permitted by General Instruction C of Form S-8. -2- CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. CROSS REFERENCE SHEET ITEM AND CAPTION PROSPECTUS CAPTION 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus. . . . . . . . . . Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus . . . . . . . . . . . . . . . . . . Table of Contents; Available Information; Documents Incorporated by Reference 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges . . . . . . . . . . . . Prospectus Summary; Risk Factors 4. Use of Proceeds . . . . . . . . . . . . . . . . . Use of Proceeds 5. Determination of Offering Price . . . . . . . . . * 6. Dilution. . . . . . . . . . . . . . . . . . . . . * 7. Selling Security Holders. . . . . . . . . . . . . Selling Stockholders 8. Plan of Distribution. . . . . . . . . . . . . . . Plan of Distribution 9. Description of Securities to be Registered. . . . Incorporation of Certain Documents by Reference 10. Interests of Named Experts and Counsel. . . . . . Experts; Legal Matters 11. Material Changes. . . . . . . . . . . . . . . . . * 12. Incorporation of Certain Information by Reference . . . . . . . . . . . . . . . . . . . . Incorporation of Certain Documents by Reference 13. Disclosure of Commission Position on Indemnification for Securities Act Liabilities. . Disclosure of Commission Position on Indemnification for Securities Act Liabilities - ------------------- * Not Applicable -3- PROSPECTUS 581,337 Shares CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. Common Stock (Par Value $.01 Per Share) This Prospectus relates to the sale of up to 581,337 shares (the "Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of Children's Discovery Centers of America, Inc. (the "Company" or "CDC") to be sold from time to time for the account of certain stockholders of the Company (the "Selling Stockholders") who may be deemed to be affiliates of the Company, or by pledgees, donees, transferees or other successors in interest of the Selling Stockholders. See "Selling Stockholders." The Shares are issuable to the Selling Stockholders upon exercise, if any, of options granted pursuant to the Children's Discovery Centers of America, Inc. Stock Option Plan (the "Stock Option Plan") and options issued other than pursuant to the Stock Option Plan. This Prospectus relates to the reoffer and resale of such Shares by the Selling Stockholders or by pledgees, donees, transferees or other successors in interest thereof. As none of the Selling Stockholders have advised the Company whether or not such he or she has any current intention of exercising any such options or of selling any of the Shares in the event of such exercise, the Company is unable to predict whether or when any of the Selling Stockholders will determine to exercise his or her options and, in the event of such exercise, proceed with the sale of the Shares, as such determination will be made solely at the discretion of each Selling Stockholder. All proceeds from any sales of such Shares will inure to the benefit of the Selling Stockholders. The Company will not receive any of the proceeds from the sale of any Shares, but will receive funds upon exercise of the options at the time of exercise, which funds will be used for working capital purposes. The Shares may be offered by the Selling Stockholders, or by pledgees, donees, transferees or other successors in interest thereof, from time to time, in transactions (which may include block transactions) on the Nasdaq National Market, the over-the-counter market, in private sales or negotiated transactions, through the writing of options on Shares, or a combination of such methods of sale, at fixed prices which may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, or at negotiated prices. See "Selling Stockholders" and "Plan of Distribution". The Company has agreed to bear all out-of-pocket expenses (other than selling discounts and commissions) in connection with the registration of all of the Shares which may be offered by the Selling Stockholders, estimated to be approximately $12,000. The Common Stock is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and is traded on the Nasdaq National Market under the trading symbol "CDCR". The last reported sale price per share of the Common Stock on Nasdaq National Market on September 11, 1997 was $7.75. THE SECURITIES WHICH MAY BE OFFERED HEREBY ARE SUBJECT TO CERTAIN RISKS WHICH SHOULD BE CAREFULLY CONSIDERED BY POTENTIAL INVESTORS. SEE "RISK FACTORS" (COMMENCING ON PAGE 4). THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is September 15, 1997. AVAILABLE INFORMATION This Prospectus constitutes a part of a Registration Statement on Form S-8 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") filed by the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company and the shares of Common Stock offered hereby, reference is hereby made to the Registration Statement. Statements contained herein concerning the provisions of any document are not necessarily complete, and each such statement is qualified in its entirety by reference to the copy of such document filed with the Commission. Additional updating information with respect to the Company may be provided in the future by means of appendices or supplements to this Prospectus. The Company is subject to the informational requirements of the Exchange Act and in accordance therewith files reports, proxy and information statements and other information with the Commission. Such reports, proxy and information statements and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, as well as the following regional offices of the Commission: Seven World Trade Center, 13th Floor, New York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. DOCUMENTS INCORPORATED BY REFERENCE The Company hereby incorporates by reference into this Prospectus the following documents filed with the Commission: (a) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996; (b) The Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997; (c) The Company's Quarterly Report on Form 10-Q for the quarterly period ended June 31, 1997; (d) The description of the Company's Common Stock contained in the Company's Registration Statement on Form 8-A dated March 27, 1986, as amended by Amendment No. 1 dated March 28, 1994 and by any further amendments or reports filed for the purpose of updating such description; and (e) All other reports and other documents filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act since December 31, 1996. All reports and other documents filed by the Company after the date of this Prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the filing of a post-effective amendment which indicates that all securities which may be offered hereby have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such reports and other documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. -2- The Company hereby undertakes to provide without charge to each person, including any beneficial owner of Common Stock, to whom a copy of this Prospectus has been delivered, upon the written or oral request of such person, a copy of any and all of the documents referred to above that have been or may be incorporated by reference in this Prospectus, except that exhibits to such document shall not be provided unless they are specifically incorporated by reference into such documents. Requests for such copies of any document should be directed to Mr. Frank A. Devine, Secretary, Children's Discovery Centers of America, Inc., 851 Irwin Street, Suite 200, San Rafael, California 94901, telephone number (415) 257-4200. -3- PROSPECTUS SUMMARY THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS OR IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. THE COMPANY Children's Discovery Centers of America, Inc. ("the Company") is the fourth largest operator of pre-schools in the United States, providing educational services for children of both pre-school and elementary school age. As of December 31, 1996, the Company operated 248 pre-schools in 22 states and the District of Columbia, with an aggregate licensed capacity of approximately 24,500 children. The Company provides programs to children primarily between 2 1/2 and six years of age, as well as after school programs for school age children and infant care. The Company's school age programs include private elementary programs for children in kindergarten through sixth grade, before and after school programs and summer camps. THE OFFERING Number of Shares Offered by the Selling Stockholders 581,337 Shares Outstanding Prior to the Sale of any Shares by Selling Stockholders 6,306,958 Shares Outstanding After the Sale of Shares by Selling Stockholders (assuming sale of all Shares) 6,888,295 NASDAQ Symbol CDCR THE COMPANY The Company is the fourth largest operator of pre-schools in the United States, providing educational services for children of both pre-school and elementary school age. As of December 31, 1996, the Company operated 248 pre-schools in 22 states and the District of Columbia, with an aggregate licensed capacity of approximately 24,500 children. The Company provides programs to children primarily between 2 1/2 and six years of age, as well as after school programs for school age children and infant care. The Company's school age programs include private elementary programs for children in kindergarten through sixth grade, before and after school programs and summer camps. The Company's strategy is to grow through acquiring independent, community-based pre-schools and chains, to expand in the growing employer-sponsored pre-school market and to increase programs and services in the growing school age market. In pursuit of this strategy, from the period from January 1, 1994 through December 31, 1996, the Company acquired or opened a total of 94 pre-schools (net of closings). As of December 31, 1996, 70 of the pre-schools operated by the company are operated in conjunction with employer-sponsors, either on a management contract basis or with one or more types of employer subsidies, such as tuition subsidies, free or reduced rent or through the provision of services. Also, as of December 31, 1996 the Company operated fourteen elementary schools in conjunction with twelve of its pre-schools, leased for operation two free-standing private elementary schools and also operated after school programs in nine other private schools (which are not included within the total numbers of Company centers set forth above). -4- The Company's proprietary computerized system monitors the staff-to-child ratio in all its pre-schools, enabling the Company to staff efficiently in response to shifts in occupancy levels. The Company believes its "Piaget Discovery Preschool Program" differentiates from its competitors and appeals to both employer-sponsors and parents. The Company's principal executive offices are located at 851 Irwin Street, Suite 200, San Rafael, California 94901, and its telephone number (415) 257-4200. RISK FACTORS PROSPECTIVE INVESTORS SHOULD GIVE CAREFUL CONSIDERATION TO THE FOLLOWING FACTORS, AMONG OTHERS, IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE MAKING A DECISION TO INVEST IN THE COMMON STOCK OFFERED HEREBY: GOVERNMENT REGULATION The child care industry is subject to various Federal, state and local government laws and regulations which may have a material impact on the Company. For example, each center must be licensed by the appropriate state and local authorities before it may begin operations and, in most jurisdictions, must renew its license periodically. Repeated failures to comply with applicable regulations can subject it to sanctions, which might include being placed on probation or, in more serious cases, suspension or revocation of the center's license to operate. To date, none of the Company's centers has ever been placed on probation or had its license suspended or revoked, and the Company believes that each of its centers is in substantial compliance with all licensing requirements. At the Federal level, the Company is subject to a number of laws and regulations affecting its business, including the Americans with Disabilities Act ("ADA"), which prohibits discrimination on the basis of disability in public accommodations and employment. While the Company believes that its centers are substantially in compliance with the requirements of the ADA and has not received any complaints concerning compliance with such requirements, the ADA has only been in effect since 1992 and, accordingly, there still is significant uncertainty concerning the full scope and impact of the statute. A determination that the Company is not in compliance with the ADA could result in the imposition of fines or an award of damages to private litigants, and could require significant expenditures by the Company to bring the Company's centers into compliance with the ADA. COMPETITION The child care industry is fragmented and highly competitive. In addition to competition from national chains, including some which are much larger than CDC, the Company competes with local community and church-affiliated and other non-profit child care centers, individually-owned proprietary child care centers, licensed child care homes and in-home individual child care providers. Some local nursery schools and day care centers charge less for their services than the Company charges. The Company also competes with businesses that provide child care for their employees utilizing their own personnel. DEPENDENCE ON KEY PERSONNEL The success of the Company depends to a large degree upon the efforts of Richard A. Niglio, its Chairman of the Board, President and Chief Executive Officer, the loss of whose services could have an adverse effect on the business and prospects of the Company. Mr. Niglio is party to an employment agreement with the Company which expired by its terms on December 31, 1996. A new agreement is being negotiated, although there can be no assurance that the parties will agree on the terms of and enter into such an agreement. The Company does not currently maintain "key man" life insurance on the life of Mr. Niglio. -5- ADVERSE PUBLICITY; INSURANCE As a result of adverse publicity concerning reported incidents of child abuse, many operators of child care centers have had difficulty obtaining liability insurance or have been able to obtain such insurance only at substantially higher rates. There can be no assurance that such insurance premiums will not increase in the future as a consequence of conditions in the insurance business generally, or that continuing publicity with respect to child abuse will not result in the Company being unable to obtain insurance. The Company's coverage for child physical and sexual abuse claims is subject to an annual aggregate limitation of $1,000,000. USE OF PROCEEDS All of the Shares which may be sold pursuant to this Prospectus will be sold, from time to time, by the Selling Stockholders for their own accounts or by pledgees, donees, transferees or other successors in interest thereof. None of the proceeds from the sale of the Shares will be received by the Company but the Company will receive funds upon the exercise of the options and at the time of exercise, which funds will be used for working capital purposes. SELLING STOCKHOLDERS Set forth in the following table is the name of each of the Selling Stockholders, the number of shares of the Common Stock owned beneficially by each of the Selling Stockholders as of the date of this Prospectus, the number of Shares which may be offered by each of the Selling Stockholders pursuant to this Prospectus, and the amount and percentage of shares of Common Stock to be owned by each of the Selling Stockholders assuming the sale of all the Shares. The number of Shares indicated includes in each case the number of shares of Common Stock issuable upon exercise of options, whether or not such options are currently exercisable (which for purposes of this Prospectus means options that may be exercised within 60 days following the date of this Prospectus).
SHARES TO BE BENEFICIALLY OWNED AFTER SALE OF SHARES OFFERED HEREBY SHARES BENEFICIALLY SHARES BEING PERCENT OF NAME OWNED REGISTERED AMOUNT OUTSTANDING(1) Richard A. Niglio 453,282(2) 415,282 92,900 1.5% Elanna S. Yalow 106,331(3) 166,055 10,600 0.2%
(1) Based on 6,306,958 shares of Common Stock outstanding. (2) Consists of 92,900 shares held by Mr. Niglio directly, 330,984 shares issuable upon exercise of options granted by the Company pursuant to the Stock Option Plan and 29,398 shares issuable upon exercise of options granted other than pursuant to the Stock Option Plan. Does not include an additional 54,900 shares issuable upon exercise options which are not currently exercisable. Mr. Niglio is Chairman, Chief Executive Officer and a director of the Company. (3) Consists of 10,600 shares held by Ms. Yalow directly, 82,976 shares issuable upon exercise of options to purchase Common Stock granted by the Company pursuant to the Stock Option Plan and 12,755 shares issuable upon exercise of options granted other than pursuant to the Stock Option Plan. The number indicated does not include an additional 70,324 shares issuable pursuant to options to purchase Common Stock granted by the Company which are not currently exercisable. Ms. Yalow is President, Chief Operating Officer of the Company and a director of the Company. -6- PLAN OF DISTRIBUTION The Shares are being registered in order to facilitate their sale from time to time by the Selling Stockholders, or by pledgees, donees, transferees or other successors in interest thereof. The Selling Stockholders may be deemed to be affiliates of the Company. The Shares are issuable to the Selling Stockholders upon exercise, if any, of options granted by the Company under the Stock Option Plan and other than pursuant to the Stock Option Plan. As none of the Selling Stockholders has advised the Company whether or not he or she has any current intention of exercising any such options or of selling any of the Shares in the event of such exercise, the Company is unable to predict whether or when any of the Selling Stockholders will determine to exercise such options and, in the event of such exercise, proceed with the sale of the Shares, as such determination will be made solely at the discretion of each Selling Stockholder. The sale of the Shares by the Selling Stockholders, or by pledgees, donees, transferees or other successors in interest thereof, may be effected, from time to time, in transactions (which may include block transactions) on the Nasdaq National Market, the over-the-counter market, in private sales or negotiated transactions, through the writing of options on Shares or a combination of such methods of sale, at fixed prices which may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Selling Stockholders may effect such transactions by selling Shares to or through broker-dealers and such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Stockholders and/or the purchasers of Shares for whom such broker-dealers may act as agent or to whom they sell as principal, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions). In addition, any shares covered by this Prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this Prospectus. The Selling Stockholders and any broker-dealers that act in connection with the sale of the Shares hereunder might be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act and any commissions received by them and any profit on the resale of Shares as principal might be deemed to be underwriting discounts and commissions under the Securities Act. All expenses incurred in connection with the registration of the Shares being offered hereby, estimated to be approximately $12,000, will be borne by the Company, except that commission expenses and brokerage fees, fees and expenses of counsel to any of the Selling Stockholders and applicable transfer taxes shall be payable individually by the Selling Stockholders. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Section 145 of the General Corporation Law of Delaware grants each corporation organized thereunder the power to indemnify its officers, directors, employees and agents on certain conditions against liabilities arising out of any action or proceeding to which any of them is a party by reason of being such officer, director, employee or agent. The Certificate of Incorporation also provides for the indemnification, to the fullest extent permitted by the General Corporation Law of Delaware, of such persons. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. -7- EXPERTS The financial statements included in the Company's Annual Report on Form 10-K incorporated by reference in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. LEGAL MATTERS The validity of the Shares has been passed upon by Frank A. Devine, Esq., General Counsel to the Company. -8- - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. - ----------------------------------- TABLE OF CONTENTS PAGE Available Information . . . . . . 2 Documents Incorporated by Reference. . . . . . . . . . . 2 Prospectus Summary. . . . . . . . 4 The Company . . . . . . . . . . . 4 Risk Factors. . . . . . . . . . . 5 Use of Proceeds . . . . . . . . . 6 Selling Stockholders. . . . . . . 6 Plan of Distribution. . . . . . . 7 Disclosure of Commission Position on Indemnification for Securities Act Liabilities 7 Experts . . . . . . . . . . . . . 8 Legal Matters . . . . . . . . . . 8 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ 581,337 SHARES CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. COMMON STOCK -------------------- PROSPECTUS -------------------- September 15, 1997 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE The following documents filed with the Securities and Exchange Commission are incorporated into this registration statement by reference: (a) The Registrant's Annual Report on Form 10-K for the year ended December 31, 1996; (b) The description of the Registrant's Common Stock, par value $.01 per share, contained in the Registrant's Registration Statement on Form 8-A dated March 27, 1986, as amended by Amendment No. 1 dated March 28, 1994; (c) All other reports filed by the Registrant pursuant to Section 13(c) or 15(d) of the Securities Exchange Act of 1934, as amended since December 31, 1996. All reports and other documents filed by the Registrant pursuant to sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this Registration Statement but prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of each such report or other document. Item 4. DESCRIPTION OF SECURITIES Not applicable Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL The validity of the securities being offered hereunder has been passed upon by Frank A. Devine. Mr. Devine is Secretary and General Counsel of the Registrant. Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the General Corporation Law of Delaware grants each corporation organized thereunder the power to indemnify its officers, directors, employees and agents on certain conditions against liabilities arising out of any action or proceeding to which any of them is a party by reason of being such officer, director, employee or agent. Section 102(b)(7) of the General Corporation Law permits a Delaware corporation, with the approval of its stockholders, to include within its Certificate of Incorporation a provision eliminating or limiting the personal liability of its directors to that corporation or its stockholders for monetary damages resulting from certain breaches of the directors' fiduciary duty of care, both in suits by or on behalf of the corporation and in actions by stockholders of the corporation. II - 1 The Company's Certificate of Incorporation includes an Article which allows the company to take advantage of Section 102(b)(7) of the Delaware General Corporation Law. The Certificate of Incorporation also provides for the indemnification, to the fullest extent permitted by the Delaware General Corporation Law, of officers and directors of the Company against all expenses (including attorneys' fees), liabilities, judgments, fines and amounts paid in settlement, and advance to each officer and director expenses (including attorneys' fees) incurred by such officer or director in defending a civil or criminal action, suit or proceeding upon receipt of an undertaking by or on behalf of such officer or director to repay such expenses if it is ultimately determined that such officer or director is not entitled to be indemnified by the Company. The Company's By-Laws include an Article which provides that any person made a party to any action, suit or proceeding, by reason of the fact that he, his testator or intestate representative is or was a director, officer or employee of the Company, or of any corporation in which he served as such at the request of the Company, shall be indemnified by the Company against the reasonable expenses, including attorneys' fees, actually and necessarily incurred by him in connection with the defense of such action , suit or proceedings, or in connection with any appeal therein, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding, or in connection with any appeal therein that such officer director or employee is liable for negligence or misconduct in the performance of his duties. The By-Laws of the Registrant provide for indemnification of its directors and officers to the full extent authorized by law. The Registrant has purchased $2,000,000.00 of directors and officers liability insurance coverage on a claims made basis. Item 7. EXEMPTION FROM REGISTRATION CLAIMED Not applicable Item 8. EXHIBITS The following is a list of Exhibits required by Item 601 of Regulation S-K filed as part of this Registration Statement. 4(a) The Children's Discovery Centers of America, Inc.'s Stock Option Plan (the "Stock Option Plan") 4(b) Form of Stock Option Agreement (Incentive Option) under the Stock Option Plan 4(c) Form of Stock Option Agreement (non-qualified options) under the Stock Option Agreement 4(d)(i) Certificate of Incorporation filed on December 23, 1983, filed as Exhibit 3(A) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994 Form 10-K"), which Exhibit is incorporated herein by reference. II - 2 4(d)(ii) Certificate of Amendment to Certificate of Incorporation filed on July 12, 1984, filed as Exhibit 3(B) to the 1994 Form 10-K, which Exhibit is incorporated herein by reference. 4(d)(iii) Certificate of Amendment to Certificate of Incorporation filed on January 25, 1985, filed as Exhibit 3(C) to the 1994 Form 10-K, which Exhibit is incorporated herein by reference. 4(d)(iv) Certificate of Amendment to Certificate of Incorporation filed on August 19, 1985, filed as Exhibit 3(D) to the 1994 Form 10-K, which Exhibit is incorporated herein by reference. 4(d)(v) Certificate of Amendment to Certificate of Incorporation filed on May 27, 1987, filed as Exhibit 3(E) to the 1994 Form 10-K, which Exhibit is incorporated herein by reference. 4(d)(vi) Certificate of Amendment to Certificate of Incorporation filed on June 2, 1988, filed as Exhibit 3(F) to the 1994 Form 10-K, which Exhibit is incorporated herein by reference. 4(d)(vii) Certificate of Amendment to Certificate of Incorporation filed on March 18, 1991, filed as Exhibit 3(G) to the 1994 Form 10-K, which Exhibit is incorporated herein by reference. 4(d)(viii) Certificate of Amendment to Certificate of Incorporation filed on October 10, 1991, filed as Exhibit 4(A) to Form S-2 Registration Statement No. 33-92533, which Exhibit is incorporated herein by reference. 4(d)(ix) Certificate of Amendment to Certificate of Incorporation filed on July 29, 1992, filed as Exhibit 3(H) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 ("1992 Form 10-K"), which Exhibit is incorporated herein by reference. 4(d)(x) Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock filed November 5, 1992 as Exhibit 4(D) to the 1992 Form 10-K, which Exhibit is incorporated herein by reference. 4(d)(xi) Certificate of Amendment to Certificate of Incorporation filed on December 6, 1993, filed as Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993, which Exhibit is incorporated herein by reference. 4(e) By-Laws of the Registrant filed as Exhibit (3)(g) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989, which Exhibit is incorporated herein by reference. 5 Opinion of Frank A. Devine, Esq. 24(a) Consent of Arthur Andersen LLP II - 3 24(b) Consent of Counsel, contained in the opinion filed as Exhibit 5.1 hereto 25 Power of Attorney (see page 7 of this Registration Statement) Item 9. UNDERTAKINGS The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act") (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; PROVIDED, HOWEVER, that paragraphs (1) (i) and (1) (ii) do not apply if the registration statement is on Form S-3, Form S-8 or form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the II - 4 Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling persons in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II - 5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Rafael, State of California, on September 12, 1997. CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. By: /s/ R.A. Niglio --------------------- R. A. Niglio Chairman of the Board KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints each of Richard A. Niglio and Randall A. Truelove, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. II - 6 Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ R.A. Niglio Chairman of the Board September 12, 1997 - ----------------------- (principal executive officer) R. A. Niglio /s/ Randall J. Truelove Controller (principal September 12, 1997 - ----------------------- financial and accounting Randall J. Truelove officer) /s/ Mark P. Clein Director September 12, 1997 - ----------------------- Mark P. Clein /s/ Michael J. Connelly Director September 12, 1997 - ----------------------- Michael J. Connelly /s/ Robert E. Kaufmann Director September 12, 1997 - ----------------------- Robert E. Kaufmann /s/ W. Wallace McDowell Director September 12, 1997 - ----------------------- W. Wallace McDowell /s/ Richard A. Niglio Director September 12, 1997 - ----------------------- Richard A. Niglio /s/ Myron A. Wick, III Director September 12, 1997 - ----------------------- Myron A. Wick, III /s/ Elanna S. Yalow Director September 12, 1997 - ----------------------- Elanna S. Yalow II - 7 EXHIBIT INDEX The following is a list of exhibits required by Item 601 of Regulation S-K filed as part of this Registration Statement. PAGE NUMBER IN RULE 403 EXHIBIT SEQUENTIAL NUMBERING SYSTEM NUMBER DESCRIPTION OF EXHIBIT WHERE EXHIBIT CAN BE FOUND 4(a) The Children's Discovery Centers of America, Inc.'s ______ Stock Option Plan (the "Stock Option Plan") 4(b) Form of Stock Option Agreement (Incentive Option) ______ under the Stock Option Plan 4(c) Form of Stock Option Agreement (for non-qualified options) ______ under the Stock Option Agreement 5 Opinion of Frank A. Devine, Esq. ______ 24(a) Consent of Arthur Andersen LLP ______ 24(b) Consent of Counsel, continued in the opinion filed as Exhibit 5 hereto ______ II - 8 EX-4.(A) 2 STOCK OPTION PLAN EXHIBIT 4(A) CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. STOCK OPTION PLAN 1. PURPOSE. The Children's Discovery Centers of America, Inc. Stock Option Plan ( the "Plan") is intended to provide a method whereby key salaried employees and other persons (including consultants) who perform services on behalf of Children's Discovery Centers of America, Inc. (the "Company") and its subsidiaries who are making and are expected to continue making substantial contributions to the successful management and growth of the Company may be offered an opportunity to acquire Common Stock, $0.01 par value per share (the "Common Stock"), of the Company in order to increase their proprietary interests in the Company and their incentive to remain in and advance in the employ of, or to continue their relationship with, the Company. Directors of the Company who are not employees of the Company shall not be eligible to receive options under the Plan. It is also the purpose of the Plan to strengthen the ability of the Company to attract and retain personnel of experience and ability by granting such persons an opportunity to acquire a proprietary interest in the Company. Accordingly, the Company may, from time to time, grant to such employees as may be selected in the manner hereinafter provided incentive stock options, as defined in Section 422A of the Internal Revenues Code of 1986 as amended (the "Code"), to purchase shares of Common Stock ("Incentive Stock Options"), or grant employees and such other persons may be selected in the manner hereinafter provided non-incentive stock options to purchase shares of Common Stock ("Non-Incentive Stock Options"), on the terms and conditions hereinafter established. Incentive Stock Options and Non-Incentive Stock Options are sometimes collectively referred to herein as "Stock Options". 2. ADMINISTRATION. The Plan shall be administered by a committee (the "Committee") appointed by the Board of Directors. The Committee shall consist of from two (2) to five (5) individuals who are "outside directors" within the meaning of Section 162(m) of the Code. In no event shall a director serve on the Committee who is or was at any time during the year immediately preceding such Committee membership eligible to receive Stock Options under the Plan. Subject to the terms and conditions of the Plan, the Committee shall have full authority in its discretion from time to time, and at any time, to select the persons to whom Stock Options shall be granted, and to determine whether a Stock Options shall be an Incentive Stock Option or a Non-Incentive Stock Option, the number of shares to be covered by each Stock Options, the time at which the Stock Options shall be granted, the terms and conditions of Option Agreements (as defined in Paragraph 14 below), and, except as hereinafter provided, the exercise price of any Stock Option and the term during which Stock Options may be exercised. The Board of Directors may at any time appoint or remove members of the Committee and may fill vacancies, however caused, in the Committee. The Committee shall select one of its members as its Chairman, and shall hold its meetings at such time and place as it shall deem advisable. A majority of its members shall constitute a quorum. All actions of the Committee shall be taken by a majority of its members and can be taken by written consent in lieu of a meeting. The Committee shall make such rules and regulations for the conduct of its business as it shall deem advisable. 3. INTERPRETATION AND AMENDMENT. The interpretation, construction or determination of any provisions of the Plan by the Committee shall be final and conclusive. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan. The Board of Directors may, at any time, amend, alter, suspend or terminate the Plan; provided, however, that any such action shall not impair any Stock Options theretofore granted under the Plan and provided further that without the approval of the holders of at least the majority of the voting stock of the Company present in person or by proxy at a duly held meeting: (a) the total number of shares of Common Stock which may be purchased under the Plan shall not be increased (except as permitted by Paragraph 11); (b) the minimum exercise price of any Stock Option shall not be changed (except as permitted by Paragraph 11); (c) the employees (or the class of employees) eligible to receive Incentive Stock Options under the Plan may not be modified; and (d) the option period during which outstanding Stock Options granted under the Plan may be exercised shall not be extended. 4. PARTICIPANTS. Participants in the Plan who shall be eligible to receive both Incentive Stock Options and Non-Incentive Stock Options shall be key employees of the Company (including key employees who are also officers and/or directors of the Company), and participants in the Plan who shall be eligible to receive solely Non-Incentive Stock Options shall be those other persons who perform services for the Company, including consultants, who are selected by the Committee from time to time. Members of the Committee shall not be eligible to participate in the Plan. No Incentive Stock Option shall be granted to an employee, who at the time the Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of capital stock of the Company; provided, however, that an Incentive Stock Option may be granted to such an employee if, at the time such Incentive Stock Option is granted, the option exercise price is at least 110 percent (110%) of the fair market value of the Common Stock subject to the Incentive Stock Option and such Incentive Stock Option is by its terms not exercisable after the expiration of five (5) years from the date such Incentive Stock Option is granted. No person eligible to receive Stock Options under the Plan shall be entitled to receive Stock Options for more than 150,000 shares of Common Stock (subject to 2 adjustment pursuant to Section 11 hereof in the case of a stock dividend, stock split or similar transaction) in any fiscal year of the Company. For purposes of the Plan, the fair market value ("Fair Market Value") of shares of Common Stock on any day shall be (i) in the event the Common Stock is publicly traded, the last sale price of a share of Common Stock as reported by the principal quotation service on which the Common Stock is listed, if available, or, if last sales prices are not reported with respect to the Common Stock, the mean of the high bid and low asked prices of a share of Common Stock as reported by such principal quotation service on such day, or if there is no report of last sale price or high bid and low asked prices (as applicable) by such quotation service for such day, such Fair Market Value shall be the last sale price (or, if last sale prices are not reported with respect to the Common Stock, the mean of the high bid and low asked prices) on the day next preceding such day for which there was a report, or (ii) in the event the Common Stock is not publicly traded, the Fair Market Value on such day as determined in good faith by the Committee. 5. COMMON STOCK. The Common Stock which may be issued and sold pursuant to Stock Options granted under the Plan from time to time shall not exceed in the aggregate eight hundred thousand (800,000) shares of Common Stock. The Common Stock issued and sold under the Plan may be the Company's authorized but unissued shares, or shares held in the Company's treasury. Should any Stock Option expire or terminate for any reason without having been exercised in full, the unsold shares covered thereby shall be added to the shares otherwise available for option hereunder. 6. LIMITATION ON OPTION AMOUNT. Notwithstanding any provision contained herein, the aggregate fair market value (determined as of the time such Incentive Stock Options are granted) of the Common Stock with respect to which Incentive Stock Option are first exercisable by any employee during any calendar year (under all stock option plans of the employee's employer corporation and its parent and subsidiary corporation within the meaning of Section 425 of the Code) shall not exceed $100,000. An Incentive Stock Option may be granted which exceeds this $100,000 limitation, as long as under then applicable law only the portion of such Incentive Stock Option which is exercisable for shares of Common Stock in excess of the $100,000 limitation shall be treated as a Non-Incentive Stock Option. The limit in this paragraph shall not apply to options which are designated as Non-Incentive Stock Options, and, except as otherwise provided herein, there shall be no limit on the amount of Non-Incentive Stock Options which may be first exercisable in any year. 7. TERMS AND CONDITIONS OF THE OPTION. Stock Options granted pursuant to the Plan shall be in such form and on 3 such terms as the Committee shall, from time to time, approve, but subject nevertheless to the following terms and conditions: (a) The Option Agreement shall state the total number of shares of Common Stock to which it relates. (b) The option exercise price per share shall be not less then one hundred percent (100%), in the case of Incentive Stock Option, and eighty-five percent (85%), in the case of Non-Incentive Stock Options, of the fair market value of the Common Stock covered by such option at the date such option is granted; provided, however, in the case of Incentive Stock Option, if at the time such option is granted, the individual optionee owns Common Stock possessing more than ten percent (10%) of the total voting power of all classes of the Company's Common Stock, then the option exercise price shall not be less than one hundred and ten percent (110%) of the fair market value of the Company's Common Stock as of the date of the grant and the option exercise period shall be limited to no more than five (5) years from the date of grant. (c) Except as provided in 7(b) above, notwithstanding any other provisions of the Plan, the term of an Incentive Stock Option shall be for a period of not more than ten (10) years from the date such option is granted. (d) An Incentive Stock Option must be granted on or before November 8, 1999. 8. SURRENDER OF OPTIONS. At the time of grant of any Stock Option under the Plan (or from time to time thereafter as the Committee, in its sole discretion, shall determine), the Committee in its sole discretion may grant to an optionee the right to offer to surrender the Stock Option to the Company in lieu of exercising all or any portion of the Stock Option and to receive in exchange an amount, in cash or in shares of the Company's Common Stock or partly in cash and partly in shares, equal to the excess of the fair market value of the shares covered by the Stock Option being surrendered at the date the offer is made by the optionee over the aggregate option price of those shares. The Committee shall have the full authority in its discretion to accept or reject the offer, whether in whole or in part, and if all or any portions of the offer is accepted, the Committee shall have the full authority to choose the form of payment. In no event shall the number of shares of the Company's Common Stock being delivered to an optionee upon the acceptance of any offer made pursuant to this Paragraph 8 exceed the number of shares the optionee could then purchase upon exercise of the Stock Option. Shares subject to Stock Option or portions thereof which have been surrendered shall not thereafter be available for option grants under the Plan. 4 9. TERMINATION OF EMPLOYMENT OF OTHER RELATIONSHIP WITH THE COMPANY. Any Stock Option granted pursuant to the Plan shall terminate and may no longer be exercised if the Optionee ceases to be an employee of the Company or any of its subsidiaries, or if the Optionee's relationship (such as a consulting relationship) terminates with the Company, except that (i) in the case of an employee to whom an Incentive Stock Option shall have been granted, if his employment shall have been terminated, then he may at any time within a period of three (3) months after such termination exercise such Incentive Stock Option to the extent that the Incentive Stock Option was exercisable by him on the date of the termination of his employment; (ii) in the case of an employee to whom an Incentive Stock Option shall have been granted, if the Optionee is disabled (within the meaning of Section 22(e)(3) of the Code) while an employee of the Company or any of its subsidiaries, then, to the extent that the Optionee was entitled to exercise the Incentive Stock Option on the date of his disability, the Incentive Stock Option may be exercised within one (1) year after his date of disability; (iii) in the case of an employee to whom an Incentive Stock Option shall have been granted, if the Optionee dies while an employee of the Company or any of its subsidiaries, then the Stock Option may be exercised by his estate or by the person or persons who shall have acquired the right to exercise the Stock Option by bequest or inheritance for a maximum period of one (1) year from the date of the Optionee's death; or (iv) in the case of an employee or any other person to whom a Non-Incentive Stock Option shall have been granted, as may otherwise be provided in such individual's Option Agreement. Notwithstanding the prior sentence, no Stock Option shall be exercisable after the expiration date of such option. 10. TERMINATION OF OPTION. In the event that the Plan or any Stock Option granted hereunder is determined by legal proceedings (including administrative proceedings) to be invalid as a matter of corporate law the Company may, in its sole discretion, and without incurring any liability therefore to the Optionee, terminate the Stock Option. 11. STOCK SPLITS, MERGERS, ETC. In case of any stock split, stock dividend or similar transactions which increase or decrease the number of outstanding shares of Common Stock, appropriate adjustment shall be made by the Board of Directors, whose determination shall be final, to the number of shares of Common Stock which may be purchased under the Plan and the number and option exercise price per share of Common Stock which may be purchased under any outstanding Stock Options. In the case of a merger, sale of assets or similar transaction which results in a replacement of the Company's Common Stock with stock of another corporation, the Company will make a reasonable effort, but shall not be required, to replace any outstanding Stock Options granted under the Plan with comparable options to purchase the stock of such other corporation, or will provide for immediate maturity of all outstanding Stock Options, with all Stock Options not being 5 exercised within the time period specified by the Board of Directors being terminated. 12. TRANSFERABILITY. Stock Options are not assignable or transferable except by will or by the laws of descent and distribution and, during an optionholder's lifetime, may be exercised only be him. 13. EXERCISE OF OPTIONS. An option holder electing to exercise a Stock Option shall give written notice to the Company of such election and of the number of shares of Common Stock that he has elected to acquire. 14. WRITTEN OPTION AGREEMENT. Agreements granting Stock Options under the Plan ("Option Agreement") shall be in writing, duly executed and delivered by or on behalf of the Company and the option holder and shall contain such terms and conditions as the Committee deems advisable. If there is any conflict between the terms and conditions of any Option Agreement and of the Plan, the terms and conditions of the Plan shall control. 15. PAYMENT. The option exercise price shall be payable in cash, check or in shares of Common Stock upon the exercise of the Stock Option. If shares of Common Stock are permitted to be tendered as payment of the option exercise price, the value for such shares shall be their fair market value as of the date of exercise. If such tender would result in the issuance of fractional shares of Common Stock, the Company shall instead return the difference in cash or by check to the employee. 16. TERM OF PLAN. The Plan shall terminate on November 8, 1999, and no Stock Options shall be granted pursuant to the Plan after that date. 17. APPLICATION OF FUNDS. The proceeds received by the Company from the sale of Common Stock pursuant to the exercise of Stock Options granted under the Plan will be used for general corporate purposes. 18. OBLIGATION TO EXERCISE OPTION. The granting of a Stock Option shall impose no obligation to the optionholder to exercise such option. 19. CONTINUANCE OF EMPLOYMENT. Neither the Plan nor the Option Agreement shall impose any obligation on the Company to continue the employment of, or other relationship with, any optionholder, and nothing in the Plan or in any Option Agreement shall confer upon any optionholder any right to continue in the employ of, or any other relationship with, the Company, or conflict with the right of the Company to terminate such employment or relationship at any time. 6 20. PRIOR GRANTS. Incentive Stock Options granted prior to the date of any amendment of the Plan shall be governed according to the Plan and laws in effect as of the date of such grant. 21. INSTALLMENT PAYMENT ARRANGEMENTS. Upon grant or exercise of a Stock Option, the Committee may, in its discretion, permit the payment of any exercise price, in whole or in part, in installments, subject to the terms of this Paragraph 21. Each such installment payment arrangement will be evidenced by a promissory note, the terms and conditions of which shall be determined by the Committee subject to the following: (a) the maximum term of any note shall be 10 years from date of the original payment obligation, (b) the minimum interest rate with respect to amounts loaned hereunder shall be such rate as may be determined by the Committee from time to time, but in no event shall such rate be less than the rate required to avoid imputation of interest (or original issue discount) under Section 483 or any similar provision of the Code, (c) the note shall be secured as and to the extent determined by the Committee, but the employee shall be personally liable despite any security pledged, (d) the note may be prepaid in full or in part at any time without penalty, and (e) the unpaid principal and interest of any note will become due and payable on the earlier to occur of the sale of any Shares in connection with which the payment obligation was incurred and thirty (30) days after the optionee's employment with the Company terminates (unless the Committee, in its discretion, extends the note for an additional period). In addition, the Committee may authorize the Company to make, guarantee, or arrange for a loan or loans to an optionee to enable the optionee to pay any federal, state, or local income or other taxes due in connection with the exercise of any Stock Option. The Committee shall have the authority to forgive repayment of, or waive rights relating to, any note or loan authorized hereunder, including interest thereon. Any arrangement under this Paragraph 21 entered into to permit an optionee to purchase or carry securities shall comply with the applicable provisions of Regulation G promulgated by the Federal Reserve Board, and arrangements shall be entered into and continue only to the extent that such arrangements otherwise shall comply with all applicable laws, regulations, and contractual obligations of the Company. 22. WITHHOLDING. A. In the event that the Company or any of its subsidiaries shall be required to withhold any amounts by reason of any federal, state, or local tax law, rule or regulation or by reason of the issuance or exercise of any Stock Option, or exercise of any right granted to an optionee pursuant to this Plan, the Company shall be entitled to deduct and withhold such amounts from any other cash payment or payments to be made by the Company to such person. In any such event, the optionee shall, except as otherwise permitted by 7 paragraph (B) below, make available to the Company, promptly when required, sufficient funds to meet the Company's requirement of such withholding; and the Company shall be entitled to take such steps as it may deem advisable in order to have such funds available to the Company at the required time or times, including the effectuation of an order of redelivery of any certificate or certificates representing Shares held by such optionee and the continuation of any stop orders that might be outstanding against such certificate or certificates. B. If, in connection with the exercise of any Stock Option or the exercise of any Stock Appreciation Right by an optionee, the Company is required to withhold any amounts by reason of federal, state or local tax, rule or regulation, the Committee may permit the optionee, subject to the restrictions herein contained, to satisfy, in whole or in part, the optionee's obligation to pay to the Company the amount of such tax or taxes by electing either (i) to have the Company withhold a portion of the shares of Common Stock which would otherwise be issuable to such optionee upon exercise of the Stock Option or Stock Appreciation Right, or (ii) to deliver and transfer to the Company shares of Common Stock previously owned by the optionee, or (iii) by a combination of the means specified in clauses (i) and (ii) above; PROVIDED HOWEVER, that the amount of federal, state and local income taxes that may be paid by delivery or withholding of shares of Common Stock shall not exceed the applicable maximum marginal rate. The amount of any withholding tax not paid by delivery or withholding of shares of Common Stock shall be paid by the optionee to the Company in cash. Shares of Common Stock delivered or withheld shall have a fair market value equal to the amount of tax required to be withheld, or such part of such tax that the optionee elects to pay with shares of Common Stock. The fair market value of the shares of Common Stock delivered to or withheld by the Company shall be determined as of the date the amount of tax to be withheld is determined. An election by an optionee to deliver shares of Common Stock or to have shares of Common Stock withheld to satisfy tax withholding requirements shall be subject to the following restrictions: (a) The election shall be in writing, shall be delivered to the Secretary of the Company and shall not be effective until so delivered; (b) the election shall be irrevocable and shall so state; and (c) the election shall be subject to such other terms and conditions as the Committee may, in its discretion, establish. 8 EX-4.(B) 3 STOCK OPTION AGREEMENT EXHIBIT 4(B) CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT is made as of this ____ day of _____, _____ between Children's Discovery Centers of America, Inc. (the "Company") and _____________, who is an employee of the Company (the "Optionee"), residing ________________________________. W I T N E S S E T H: WHEREAS, the Company desires, by affording the Optionee an opportunity to purchase shares of the Company's Common Stock, $0.01 par value per share (the "Common Stock"), as hereinafter provided, to encourage the Optionee to provide services to the Company; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter contained, the parties hereto mutually covenant and agree as follows: 1. GRANT OF OPTION. The Company hereby grants to the Optionee an option (the "Option") to purchase all or any part of an aggregate of __________ (_____) shares of Common Stock (such number being subject to adjustment as provided in Paragraph (7) on the terms and conditions hereinafter set forth, for a purchase price of $_____ per share (the "Option Price"). The Option may be exercisable by the Optionee as follows: the Optionee shall be entitled to purchase up to __________ (_____) shares of Common Stock subject to the Option, from the date of grant until ________ and thereafter an additional __________ (_____) shares of Common Stock on each following _______, until exhausted. 2. TERM OF OPTION. The term of the Option shall be for a period of five (5) years from ___________ (the "Date of Grant"), subject to earlier termination as provided herein, and in no event shall the Option be exercised after the expiration of such five (5) year period. Except as provided in Paragraph 5 hereof, the Option may not be exercised unless, at the time the Option is exercised or within ninety (90) days of the date of exercise, and at all times from the date it is granted, the Optionee shall have been an employee of the Company. 3. NONTRANSFERABILITY. The Option shall not be transferable otherwise than by will or the laws of descent and distribution to the extent provided in Paragraph 5, and the Option may be exercised, during the lifetime of the Optionee, only by the Optionee. Without limiting the generality of the foregoing, the Option may not be assigned, transferred (except as provided above), pledged or hypothecated in any way, shall not be assignable by operation of law, and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof and of the Plan shall be null and void and without effect, and, upon the levy of any execution, attachment, or similar process upon the Option, the Option shall hereupon be canceled and thereafter null and void. 4. TERMINATION OF OPTION. The Option shall terminate and may no longer be exercised if the Optionee ceases to be an employee of the Company or any of its subsidiaries, except that (i) Optionee may exercise this Option within ninety (90) days of the date the Optionee ceases employment with the Company, except if such employment has been terminated by the Company other than for cause (which for purposes hereof shall be the commission of any felony or a misdemeanor of the type or classification which would prevent the Optionee from working in a child care center) then the Optionee may at any time within a period of three (3) months after such termination exercise the Option to the extent that the Option was exercisable on the termination of such employment and (ii) if the Optionee is disabled (within the meaning of Section 105(d)(4) of the Internal Revenue Code) while an employee of the Company or any of its subsidiaries, then, to the extent that the Optionee was entitled to exercise the Option on the date of such disability, the Option may be exercised within one (1) year after the date of Optionee's disability; or (iii) if the Optionee dies while an employee of the Company or any of its subsidiaries, then, to the extent that the Option could have been exercised by the employee immediately prior to the date of his death, the Option may be exercised by the Optionee's estate or by the person or persons who shall have acquired the right to exercise the Option by bequest or inheritance for a maximum period of one (1) year from the date of the Optionee's death. Notwithstanding the foregoing provisions of this paragraph 4, no Option shall be exercisable after the expiration date of such Option. 5. OTHER TERMINATION. In the event that the Option is determined by legal proceeding (including administrative proceedings) to be invalid as a matter of law, the Company will, immediately after such determination, grant to the Optionee new options which are as similar as is practicable to those granted hereunder. 6. LEGEND ON CERTIFICATES. All certificates representing shares of Common Stock issued pursuant to the exercise of Options granted hereunder shall bear the following legend: 2 "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold, transferred, pledged, hypothecated or otherwise disposed of in the absence of (i) the effective registration statement for such securities under said act or (ii) an opinion of company counsel that such registration is not required." 7. STOCK SPLITS, MERGERS, ETC.. In case of any stock split, stock dividend or similar transaction which increases or decreases the number of outstanding shares of Common Stock, appropriate adjustment shall be made by the Board of Directors, whose determination shall be final, to the number of shares of Common Stock which may be purchased under the Option. In the case of a pending merger, sale of assets or similar transaction which will result in a replacement of the Common Stock with stock of another corporation, the period during which such Options may be exercised shall be not less than three months, but in no event shall any period longer than three months extend beyond the date of merger, sale of assets or similar transactions. 8. METHOD OF EXERCISING OPTIONS. Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice (the "Exercise Notice") from the Optionee delivered to the Company stating the election to exercise the Option and the number of shares of Common Stock in respect of which it is being exercised (which shall not be less than 100 or the remaining Common Stock covered by the Option), and shall be signed by the person so exercising the Option. The Exercise Notice shall be accompanied by the full Option Price for the Common Stock in respect of which the Option is being exercised. In the event the Option shall be exercised by any person or persons other than the Optionee, pursuant to Paragraph 4 hereof, such notice shall be accompanied by appropriate proof, reasonably satisfactory to the Company, of the right of such person or persons to exercise the Option. Payment of the Option Price may be made in cash, in shares of Common Stock of the Company, or a combination of cash and shares of stock of the Company. To the extent payment is made in cash, such payment shall be made by certified or bank cashier's check, or the equivalent thereof, payable to the order of the Company. In the event payment is made in Common Stock of the company, the amount of payment tendered the Company shall be measured by the fair market value of the average of the closing bid and ask price on the date immediately preceding the date of the exercise notice. The certificate or certificates for the Common Stock in respect of which the Option shall have been exercised shall be registered in the name of the person or persons exercising the Option, or, if the Option is exercised by the Optionee and if the Optionee shall so request in the exercise notice, shall be registered in the name of the Optionee and 3 another person jointly, with right of survivorship, and shall be delivered as provided above to or upon the written request of the person or persons exercising the Option. All of the common Stock purchased upon the exercise of the Option as provided herein shall, when issued, be fully paid and nonassessable. The Option shall not be exercisable for fractional shares. 9. UNDERTAKING. The Company may, at any time during the period in which this Option or any part thereof remains in existence, including the period immediately following any attempt to exercise the Option by the holder but, prior to the delivery of the Common Stock, require the person attempting to exercise the Option to execute one or more undertakings, in a form satisfactory to the company, that such shares of Common Stock are being acquired for investment and not for resale, acknowledging that no representations have been made by the Company and that the Company is relying on Optionee's representation. The Company may also require the person exercising this Option to deliver to the Company an acknowledgment that he or she has reviewed the Company's latest financial reports, has determined independently to exercise the Option, has carefully reviewed such material as has been made available to him or her, is aware that the shares of Common Stock being acquired are unregistered, that the company is not obligated to transfer the Common Stock acquired unless the transfer is in compliance with Federal Securities Law, pursuant to an effective registration statement. 10. GENERAL. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement, shall pay all original issue taxes with respect to the issuance of shares of Common Stock pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith. Notwithstanding the preceding sentence, the company shall have no obligation to pay any income tax incurred by the Optionee or those claiming through such Optionee, with respect to the exercise of the Option or any part thereof. 11. NOTICES. Each notice relating to this Agreement shall be in writing and delivered in person, by overnight courier or by first class mail, postage prepaid, to the proper address. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its then principal office, currently 851 Irwin Street, Suite 200, San Rafael, California 94901. Each notice to the Optionee or other person or persons then entitled to exercise the Option shall be addressed to the Optionee or such other person or persons at the Optionee's address set forth in the heading of this Agreement. Anyone to whom a notice may be given under this Agreement may designate a new address by notice to that effect given in accordance with this Paragraph 11. 4 12. ENFORCEABILITY. This Agreement shall be binding upon the Optionee, his estate, his personal representatives and beneficiaries and shall be governed by the laws of the State of California. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officers thereunto duly authorized, and the Optionee has hereunto set his hand all as of the day and year first above written. CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. By:_________________________ By:__________________________ ("Optionee") 5 EX-4.(C) 4 NON-EMPLOYEE DIRECTORS' STOCK OPTION AGREEMENT EXHIBIT 4(C) CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. NON-EMPLOYEE DIRECTORS' STOCK OPTION AGREEMENT NON-EMPLOYEE DIRECTORS' STOCK OPTION AGREEMENT (the "Agreement") made as of this ____ day of _________, ____, between Children's Discovery Centers of America, Inc. (the "Company") and ____________, who is a non-employee director of the Company (the "Participant"). W I T N E S S E T H: WHEREAS, the Company desires, by affording the Participant an opportunity to purchase shares of the Company's Common Stock, $0.01 par value per share (the "Common Stock"), as hereinafter provided, to carry out the purpose of the Company's Non-Employee Directors' Stock Option Plan (the "Plan"), as the same may be amended and supplemented from time to time; WHEREAS, the Plan provides for a grant of an option to purchase an additional 3,500 shares of the Common Stock of the Company (the "Annual Option") upon re-election as a non-employee director following each annual meeting of the Company's Stockholders; WHEREAS, the participant was re-elected as a non-employee director at the annual meeting of stockholders held June 19, 1996; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter contained, the parties hereto mutually covenant and agree as follows: 1. GRANT OF ANNUAL OPTION. This option agreement memorializes the annual option grant to the participant as provided in the Plan, and is hereby granted an option to purchase 3,500 shares of the Common Stock on the terms and conditions hereof, and subject to the Plan. 2. OPTION PRICE. The option price of the shares of Common Stock issuable upon the exercise of each Option (the "Option Price") shall be $7.625 which is the closing sale price per share of the Company's Common Stock as reported by the NASDAQ National Market System on June 19, 1996 (Grant Date). 3. VESTING OF OPTION. Options granted hereunder, shall not be exercisable until they become vested. All Options shall vest in a Participant as follows: (i) with respect to 30% of the shares subject to this Option, on the date which is six months following the date of grant, (ii) with respect to an additional 23-1/3% of the shares subject to such Option, on the first anniversary of the date of grant, (iii) with respect to an additional 23-1/3% of the shares subject to this Option, on the second anniversary of the date of grant, and (iv) with respect to the final 23-1/3% of the shares subject to such Option, on the third anniversary of the date of grant; PROVIDED, HOWEVER, that the vesting of any portion of an Option on any particular date is conditioned on the Participant having continuously served as a member of the Board of Directors through such date. The number of shares as to which an Option may be exercised shall be cumulative, so that once the Option shall become exercisable as to any shares, it shall continue to be exercisable as to said shares until expiration or termination of the Option as provided in this Agreement. 4. TERM AND EXERCISE OF OPTIONS. The term of the Options shall be for a period of ten (10) years from each date of grant, subject to earlier termination as provided in Paragraph 6 and 7 hereof and in no event shall the Option be exercised after the expiration of such ten (10) year period. Except to the extent necessary to govern outstanding Options issued, this Agreement shall terminate on, and no additional Options shall be granted after June 18, 2006, unless earlier terminated by the Board of Directors in accordance with Section 7. Except as provided in Paragraph 6, the Options may not be exercised unless, at the time the Options are exercised and at all times from the date they are granted, the Participant shall then be and shall have been a non-employee director of the Company. 5. NONTRANSFERABILITY. The Options shall not be transferable otherwise than pursuant to a qualified domestic relations order or by will or the laws of descent and distribution to the extent provided in Paragraph 6, and the Options may be exercised, during the lifetime of the Participant, only by him. Without limiting the generality of the foregoing, the Options may not be assigned, transferred (except as provided above), pledged or hypothecated in any way, shall not be assignable by operation of law, and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Options contrary to the provisions hereof and of the Plan shall be null and void and without effect, and, upon the levy of any execution, attachment, or similar process upon the Options, the Options shall hereupon be canceled and thereafter null and void. 2 6. TERMINATION OF OPTION. In the event a Participant ceases to be a member of the Board of Directors for any reason other than cause, any then unexercised portion of Options granted to such Participant, to the extent not vested on the date the Participant ceases to be a director (the "Termination Date"), will immediately terminate and become void; any portion of an Option which is vested on the Termination Date but has not yet been exercised may be exercised, to the extent it is vested on the Termination Date, within one year after the Termination Date. In the event of the Participant's death, the Option may be exercised, if and to the extent that such deceased Participant was entitled to exercise the Option at the time of death, by the person or persons to whom the deceased Participant's rights pass by will or by the laws of descent and distribution of the state of his or her domicile at the time of his or her death. In the event that a Participant ceases to serve as a director for cause, all Options theretofore granted to such Participant under this Agreement shall, to the extent not theretofore exercised, terminate on the Termination Date, whether or not any portion or all of such Option is vested. 7. TERMINATION AND AMENDMENT OF AGREEMENT. This Agreement may be terminated or amended from time to time by vote of the Board of Directors; PROVIDED, HOWEVER, that no such termination or amendment shall materially adversely affect or impair any then outstanding Options without the consent of the Participants, and PROVIDED FURTHER, that the provisions of this Agreement specified in Rule 16b-3(c)(2)(ii)(A) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (as in effect on the effective date of the Plan) may not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. In addition to approval by the Board of Directors of any amendment to this Agreement, if the Board further determines on advice of counsel that it is necessary or desirable to obtain stockholder approval of any amendment to this Agreement in order to comply with Rule 16b-3 of the Exchange Act, or any successor rule, as it shall read as of the time of amendment, or for any other reason, then the effectiveness of any such amendment may be conditioned upon its approval by stockholders of the Company in accordance with the applicable laws of the state of incorporation of the Company, or such other stockholder approval as may be specified by the Board. 8. COMPLIANCE WITH RULE 16B-3. It is the intention of the Company that this Agreement comply in all respects with Rule 16b-3 promulgated under the Exchange Act and that Participants remain disinterested persons ("Disinterested Persons") for purposes of administering other employee benefit plans of the Company and having such other plans be exempt from Section 16(b) of the Exchange Act. Therefore, if any provision of this Agreement is later found not to be in compliance with 3 Rule 16b-3 or if any provision would disqualify Participants from remaining Disinterested Persons, that provision shall be deemed null and void, and in all events this Agreement shall be construed in favor of its meeting the requirements of Rule 16b-3. 9. ADMINISTRATION. (a) The Plan shall be administered by the Board of Directors. A majority of the members of the Board shall constitute a quorum. All determinations of the Board shall be made by a majority of such quorum or by a written consent signed by all members of the Board. (b) Options shall be automatically granted to Participants in accordance with Section 1 hereof and shall be issued upon the terms and conditions set forth in this Agreement. Accordingly, the persons to whom Options shall be granted, the number of shares subject thereto and the material terms and conditions governing the Options will not be subject to the discretion of the Board. However, if any questions of interpretation of this Agreement or of any Options issued hereunder shall arise, they shall be determined by the Board and such determination shall be final and binding upon all persons having an interest in this Agreement. 10. LEGEND ON CERTIFICATES. All certificates representing shares of Common Stock issued pursuant to the exercise of Options granted hereunder shall bear the following legend: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold, transferred, pledged, hypothecated or otherwise disposed of in the absence of (i) the effective registration statement for such securities under said act or (ii) an opinion of company counsel that such registration is not required." 11. ADJUSTMENT OF NUMBER OF SHARES. If a dividend or other distribution shall be declared upon the Common Stock payable in shares of Common Stock, the number of shares of Common Stock then subject to any Option granted hereunder, and the number of shares reserved for issuance pursuant to this Agreement but not yet covered by an Option, shall be adjusted by adding to each of such shares the number of shares which would be distributable thereon if such shares had been outstanding on the date fixed for determining the shareholders entitled to receive such stock dividend or the shareholders entitled to receive such stock dividend or distribution. If the outstanding shares of Common Stock shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether through reorganization, reclassification, recapitalization, stock split- 4 up, combination of shares, merger or consolidation, then there shall be substituted for each share of Common Stock then subject to any such Option and for each share of Common Stock reserved for issuance pursuant to this Agreement but not yet covered by an Option, the number and kind of shares of stock or other securities into which each outstanding share of Common Stock shall be so changed or for which each such share shall be exchangeable; PROVIDED, HOWEVER, that in the event that such change or exchange results from a merger or consolidation, and in the judgment of the Board such substitution cannot be effected or would be inappropriate, or if the Company shall sell all or substantially all of its assets, the Company shall use reasonable efforts to effect some other adjustment of each then outstanding Option which the Board, in its sole discretion, shall deem equitable. In the event that there shall be any change, other than as specified above in this Section 11, in the number or kind of outstanding shares of Common Stock or of any stock or other securities into which such shares of Common Stock shall have been changed or for which they shall have been exchanged, then, if the Board shall determine that such change equitably requires an adjustment in the number or kind of shares theretofore reserved for issuance pursuant to this Agreement but not yet covered by an Option and of the shares then subject to an Option or Options, such adjustment shall be made by the Board and shall be effective and binding for all purposes of this Agreement and of each stock option agreement applicable to Options granted hereunder. In the case of any substitution or adjustment as provided for in this Section 11, the aggregate option price in each stock option agreement for all shares covered thereby prior to such substitution or adjustment will be the aggregate option price for all shares of stock or other securities (including any fraction) which shall have been substituted therefore pursuant to this Section 11. No adjustment or substitution provided for in this Section 11 shall require the Company, in any stock option agreement, to sell a fractional share. Accordingly, any fraction of a share or other security which results from any such adjustment or substitution shall be eliminated and not carried forward to any subsequent adjustment or substitution. 12. METHOD OF EXERCISING OPTIONS. Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company in accordance with this paragraph. Such notice shall state that the Option is being exercised thereby and the number of shares of Common Stock in respect of which it is being exercised. It shall be signed by the person or persons so exercising the Option and shall be accompanied by payment (i) in full either in cash or by check, (ii) by delivery (I.E., surrender) of shares of Common Stock of the Company which have been owned by the Participant for at least six months prior to the exercise of the Option with a Fair Market Value (as defined above) at the time of the exercise of the Option equal to the exercise price, or (iii) by a combination of (i) and (ii). In addition, to the extent permitted by applicable law, the exercise price may be paid by one or more brokerage 5 firms pursuant to arrangements whereby such firm or firms, on behalf of a Participant, shall pay to the Company the exercise price of the Option being exercised, and the Company, pursuant to an irrevocable notice from the Participant, shall deliver shares being purchased to such firm. The Company shall issue, in the name of the person or persons exercising the Option and deliver, a certificate or certificates representing such shares as soon as practicable after the notice and payment shall be received. In the event the Option shall be exercised by any person or persons other than the Participant, pursuant to Section 6 hereof, such notice shall be accompanied by appropriate proof, reasonably satisfactory to the Company, of the right of such person or persons to exercise the Option. The Participant shall have no rights of a stockholder with respect to shares of Common Stock to be acquired by the exercise of the Option until the issuance to him of a certificate or certificates representing said shares. All shares of Common Stock purchased upon the exercise of the Option as provided herein shall be fully paid and non-assessable. 13. GENERAL. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement, shall pay all original issue taxes with respect to the issuance of shares of Common Stock pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith, and shall, from time to time, use its best efforts to comply with all federal and state securities laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto. 14. NOTICES. Each notice relating to this Agreement shall be in writing and delivered in person, by overnight courier or by first class mail, postage prepaid, to the proper address. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its then principal office, currently 851 Irwin Street, Suite 200 San Rafael, CA 94901 Each notice to the Participant or other person or persons then entitled to exercise the Option shall be addressed to the Participant or such other person or persons at the Participant's address set forth below: _______________________ _______________________ _______________________ 6 Anyone to whom a notice may be given under this Agreement may designate a new address by notice to that effect given in accordance with this Section 14. 15. INCORPORATION OF PLAN. Notwithstanding the terms and conditions herein, this Agreement shall be subject to and governed by all the terms and conditions of the Plan. A copy of the Plan, which is herein incorporated by reference has been delivered to Participant who hereby acknowledges receipt thereof. In the event of any discrepancy or inconsistency between the terms and conditions of the Agreement and of the Plan, the terms and conditions of the Plan shall control. 16. CONTINUANCE AS DIRECTOR. The granting of the Option is in consideration of the Participant's continuing relationship with the Company as a non-employee director; however, nothing in this Agreement shall confer upon the Participant the right to continue as a director of the Company or any of its subsidiaries. 17. ENFORCEABILITY. This Agreement shall be binding upon the Participant, his estate, his personal representatives and beneficiaries and shall be governed by the laws of the State of Delaware. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officers thereunto duly authorized, and the Participant has hereunto set his hand all as of the day and year first above written. CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. By:_________________________ PARTICIPANT: ____________________________ 7 EX-5 5 OPINION (FRANK A. DEVINE) EXHIBIT 5 September 12, 1997 Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 20549-001 Gentlemen: I have acted as counsel to Children's Discovery Centers of America, Inc. (the "Company") in connection with the preparation and filing with the Securities and Exchange Commission of its Registration Statement on Form S-8 under the Securities Act of 1933 (the "Registration Statement") relating to 800,000 shares of Common Stock of the Company, $.01 par value per share ("Common Stock"), issuable upon the exercise of options granted under the Company's Stock Option Plan ("Plan") and 83,626 shares of Common Stock issuable upon the exercise of options granted to employees and consultants outside the Plan ("Non-Plan Options"). In this connection, I have reviewed the Company's Certificate of Incorporation and By-Laws, each as amended to date, Resolutions of its Board of Directors, the Plan, agreements relating to the Non-Plan Options and such other documents and corporate records, and have considered such questions of law, as I have deemed appropriate in the circumstances. Based upon and subject to the foregoing, I am of the opinion that: (i) the issuance and sale of shares of Common Stock upon exercise of any Plan Options or Non-Plan Options, as the case may be, in accordance with the terms and subject to the conditions set forth in the agreements pursuant to which the Plan Options or Non-Plan Options, as the case may be, were granted (together the "Option Agreements") has been duly authorized and (ii) when the consideration for any such shares of Common Stock shall have been received by the Company and shares are issued pursuant to such Plan Options or Non-Plan Options, as the case may be, in accordance with the terms and subject to the conditions set forth in the Option Agreements, such shares of Common Stock will be validly issued, fully paid and nonassessable. Securities and Exchange Commission September 12 Page 2 I am admitted to practice in the State of California. Although I am not admitted to the Bar of the State of Delaware, in rendering this opinion I have considered the General Corporation Law of such State. Accordingly, the foregoing opinion is limited solely to the effect of the laws of the State of California and of the United States of America, and the General Corporation Law of the State of Delaware. I consent to the use of this opinion as an exhibit to the Registration Statement. This does not constitute a consent under Section 7 of the Securities Act of 1933 since I have not certified any part of such Registration Statement and do not otherwise come within the categories of persons whose consent is required under Section 7 or the rules and regulations of the Securities and Exchange Commission. Very truly yours, Frank A. Devine General Counsel EX-24.(A) 6 CONSENT (ARTHUR ANDERSEN) EXHIBIT 24(A) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated February 21, 1997, included (or incorporated by reference) in Children's Discovery Centers of America, Inc.'s Form 10-K for the year ended December 31, 1996 and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN LLP San Francisco, California September 12, 1997 -----END PRIVACY-ENHANCED MESSAGE-----