NEW YORK (AP) _ The former president of Kinder-Care Learning Centers and its ex-chairman agreed Thursday to pay $650,000 to settle a Securities and Exchange Commission case over transactions with Drexel Burnham Lambert Inc.

The settlement also permanently bars the defendants, Richard Grassgreen and Perry Mendel, from serving as officers or directors of publicly traded companies.

Grassgreen, who was Kinder-Care's president, had testified against Michael Milken, once the head of Drexel's junk bond division, at his presentencing hearing in 1990. Milken pleading guilty to six felonies related to securities trading and is serving a 10-year prison sentence.

Grassgreen pleaded guilty in May to two felonies that dealt with similar allegations in the SEC civil complaint. He faces a maximum sentence of five years in prison and a $250,000 fine when sentenced later this year.

The SEC accused Grassgreen and Mendel of violating securities laws for allegedly keeping for their personal accounts commitment fees from Drexel that should have gone to Kinder-Care. Commitment fees are paid to investors who agree to buy junk bonds for a planned takeover.

The SEC also had charged that they failed to disclose to Kinder-Care their personal investments in MacPherson Partners, which Milken and his brother, Lowell, formed in 1985 to finance the acquisition of Storer Communications by Kohlberg, Kravis, Roberts & Co.

Grassgreen and Mendel did not deny or admit the SEC allegations in settling the case. Grassgreen will pay $355,000 and Mendel will pay $295,000, representing their alleged profits from the transactions.