FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission File Number 1-13722
WHITMAN EDUCATION GROUP, INC.
FLORIDA 22-2246554
- -------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 Biscayne Boulevard, Miami, Florida 33137
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(305) 575-6534
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of issuer's classes
of common stock, as of the latest practicable date.
As of November 10, 1998, there were 13,261,355 shares of common stock
outstanding.
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<PAGE>
WHITMAN EDUCATION GROUP, INC.
FORM 10-Q
SEPTEMBER 30, 1998
TABLE OF CONTENTS
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.................................. 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..................................... 16
Item 4. Submission of Matters to a Vote of Security Holders... 16
Item 6. Exhibits and Reports on Form 8-K...................... 17
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
---------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 30,958 $ 3,384,336
Accounts receivable, net ................................................... 25,793,316 21,354,104
Inventories................................................................. 1,640,026 1,614,455
Deferred income taxes....................................................... 1,834,043 1,471,043
Other current assets........................................................ 1,938,165 1,158,841
--------------- ---------------
Total current assets........................................................ 31,236,508 28,982,779
Property and equipment, net................................................. 13,984,559 12,925,177
Marketable securities....................................................... 262,500 262,500
Deposits and other assets, net.............................................. 1,374,377 1,431,188
Goodwill, net............................................................... 10,068,769 10,219,525
--------------- --------------
$ 56,926,713 $ 53,821,169
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable........................................................... $ 2,898,452 $ 1,268,306
Accrued expenses........................................................... 3,509,825 2,115,220
Income taxes payable....................................................... -- 107,133
Short-term notes payable................................................... 1,056,018 156,018
Current portion of capitalized lease obligations........................... 1,296,968 1,061,767
Current portion of long-term debt.......................................... 451,057 354,401
Deferred tuition revenue................................................... 18,694,807 15,966,150
--------------- --------------
Total current liabilities.................................................. 27,907,127 21,028,995
Other liabilities.......................................................... 500,962 609,708
Capitalized lease obligations.............................................. 3,532,919 2,535,673
Long-term debt............................................................. 7,598,245 11,813,639
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, authorized 100,000,000 shares issued and
outstanding 13,207,605 shares at September 30, 1998
and 13,193,582 shares at March 31, 1998............................... 21,189,304 21,183,554
Additional paid-in capital.............................................. 671,536 671,536
Accumulated deficit .................................................... (4,447,422) (3,995,978)
Accumulated other comprehensive loss.................................... (25,958) (25,958)
--------------- ---------------
Total stockholders' equity................................................. 17,387,460 17,833,154
--------------- ---------------
$ 56,926,713 $ 53,821,169
=============== ==============
</TABLE>
See accompanying notes to financial statements.
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WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Net revenues....................................................... $ 18,299,125 $ 14,502,007
Costs and expenses:
Instructional and educational support........................... 11,502,865 9,992,729
Selling and promotional......................................... 2,564,395 2,228,724
General and administrative...................................... 3,739,427 2,592,573
--------------- --------------
Total costs and expenses........................................... 17,806,687 14,814,026
--------------- --------------
Income (loss) from operations...................................... 492,438 (312,019)
Other (income) expense:
Interest expense................................................ 358,390 324,879
Interest income................................................. (54,805) (48,312)
-------------- --------------
Income (loss) before income tax benefit6........................... 188,853 (588,586)
Income tax benefit................................................. -- --
-------------- --------------
Net income (loss).................................................. $ 188,853 $ (588,586)
============== ==============
Net income (loss) per share:
Basic........................................................... $ 0.01 $ (0.05)
============== ==============
Diluted......................................................... $ 0.01 $ (0.05)
============== ==============
Weighted average common shares outstanding:
Basic........................................................... 13,205,650 12,678,256
============== ==============
Diluted......................................................... 13,927,576 12,678,256
============== ==============
</TABLE>
See accompanying notes to financial statements.
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WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Net revenues........................................................ $ 34,067,033 $ 27,942,795
Costs and expenses:
Instructional and educational support............................ 22,437,798 19,483,374
Selling and promotional.......................................... 5,091,753 4,184,868
General and administrative....................................... 6,778,924 5,727,001
------------- -------------
Total costs and expenses............................................ 34,308,475 29,395,243
------------- -------------
Loss from operations................................................ (241,442) (1,452,448)
Other (income) expense:
Interest expense................................................. 676,650 595,933
Interest income.................................................. (123,648) (88,972)
-------------- -------------
Loss before income tax benefit...................................... (794,444) (1,959,409)
Income tax benefit.................................................. 343,000 --
-------------- -------------
Net loss............................................................ $ (451,444) $ (1,959,409)
============== =============
Net loss per share:
Basic ........................................................... $ (0.03) $ (0.15)
============== =============
Diluted.......................................................... $ (0.03) $ (0.15)
============== =============
Weighted average common shares outstanding:
Basic ........................................................... 13,202,209 12,677,921
============== ===============
Diluted.......................................................... 13,202,209 12,677,921
============== ================
</TABLE>
See accompanying notes to financial statements.
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WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss......................................................... $ (451,444) $ (1,959,409)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization................................. 2,004,112 1,636,888
Bad debt expense.............................................. 1,761,342 1,465,558
Deferred tax provision........................................ (343,000) --
Changes in operating assets and liabilities:
Restricted cash.......................................... -- 511,927
Accounts receivable...................................... (6,200,554) (4,938,853)
Inventories.............................................. (25,571) (153,777)
Other current assets..................................... (779,324) (306,443)
Deposits and other assets................................ (70,992) (53,637)
Accounts payable......................................... 1,630,146 234,739
Accrued expenses......................................... 1,394,605 (349,554)
Income taxes payable..................................... (127,133) 392
Deferred tuition revenue................................. 2,728,657 3,031,898
Other.................................................... (108,746) (99,126)
--------------- --------------
Net cash provided by (used in) operating activities...... 1,412,098 (979,397)
--------------- --------------
Cash flows from investing activities:
Purchase of property and equipment............................... (1,247,152) (2,391,304)
--------------- --------------
Net cash used in investing activities............................ (1,247,152) (2,391,304)
--------------- --------------
Cash flows from financing activities:
Proceeds from revolving line of credit, long-term
borrowings and capital lease obligations...................... 18,206,175 17,657,142
Principal payments on revolving line of credit,
long-term borrowings and capital lease obligations............ (21,730,249) (18,092,586)
Proceeds from short-term notes payable........................... -- 1,086,017
Proceeds from exercise of options and warrants................... 5,750 3,188
--------------- --------------
Net cash (used in) provided by financing activities.............. (3,518,324) 653,761
--------------- --------------
Decrease in cash and cash equivalents............................ (3,353,378) (2,716,940)
Cash and cash equivalents at beginning of period................. 3,384,336 3,853,932
--------------- --------------
Cash and cash equivalents at end of period....................... $ 30,958 $ 1,136,992
=============== ==============
Continued on the following page.
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WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -- (CONTINUED)
FOR THE SIX MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1998 1997
--------------- ---------------
Supplemental disclosures of noncash financing
and investment activities:
Equipment acquired under capital leases........................ $ 1,537,782 $ 788,639
=============== ================
Supplemental disclosures of cash flow information:
Interest paid.................................................. $ 602,915 $ 536,075
=============== ================
Income taxes paid.............................................. $ 155,200 $ 1,343
=============== ================
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
1. GENERAL
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and, in the
opinion of the management of Whitman, include all adjustments, which are of a
normal recurring nature, necessary for a fair presentation of financial position
and the results of operations and cash flows for the periods presented. However,
the financial statements do not include all information and footnotes required
for a presentation in accordance with generally accepted accounting principles.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included or
incorporated by reference in Whitman's Form 10-K for the fiscal year ended March
31, 1998. The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the full year.
The accompanying financial statements include the accounts of Whitman
Education Group, Inc., and its wholly-owned subsidiaries, Ultrasound Technical
Services, Inc. ("Ultrasound Diagnostic Schools"), Sanford Brown College, Inc.
("Sanford-Brown College") and MDJB, Inc. ("Colorado Technical University"). All
intercompany accounts and transactions have been eliminated.
Whitman experiences seasonality in its quarterly results of operations
as a result of changes in the level of student enrollment. New enrollment in
Whitman's schools tends to be lower in the first and second fiscal quarters
covering the summer months which are traditionally associated with recess from
school. Costs are generally not significantly affected by the seasonable factors
on a quarterly basis. Accordingly, quarterly variations in net revenues will
result in fluctuations in income from operations on a quarterly basis.
2. EARNINGS PER SHARE
In fiscal 1998, Whitman adopted Statement of Financial Accounting Standards
No. 128, Earnings per Share. All earnings per share amounts for all periods have
been presented, and where necessary, restated to conform to the Statement 128
requirements.
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2. EARNINGS PER SHARE - (CONTINUED)
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER SEPTEMBER
---------------------------------- --------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss).................... $ 188,853 $ (588,586) $ (451,444) $ (1,959,409)
============= ============= ============== =============
Denominator:
Denominator for basic
earnings per share -
weighted-average shares............ 13,205,650 12,678,256 13,202,209 12,677,921
Effect of dilutive securities:
Employee stock options............... 579,613 -- -- --
Warrants............................. 142,313 -- -- --
-------------- ------------- ------------- -------------
Dilutive potential common
shares............................. 721,926 -- -- --
-------------- ------------- ------------- -------------
Denominator for diluted
earnings per share -
adjusted weighted -
average shares and
assumed conversions............... 13,927,576 12,678,256 13,202,209 12,677,921
============== ============= ============= =============
Basic earnings (loss) per share........... $ 0.01 $ (0.05) $ (0.03) (0.15)
============== ============= ============= =============
Diluted earnings (loss) per share......... $ 0.01 $ (0.05) $ (0.03) (0.15)
============== ============= ============= =============
</TABLE>
3. COMPREHENSIVE LOSS
In fiscal 1999, Whitman adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income." Statement 130 establishes new rules
for the reporting and display of comprehensive income and its components.
Statement 130 requires unrealized gains or losses on Whitman's
available-for-sale securities, which prior to its adoption were recorded
separately in stockholders' equity, to be included in "other comprehensive
loss."
For the three months ended September 30, 1998 and 1997, total comprehensive
income was $173,853 and comprehensive loss was $526,711, respectively. For the
six months ended September 30, 1998 and 1997, total comprehensive losses were
$451,444 and $1,897,534, respectively.
4. CONTINGENCIES
In August 1998, three individuals purporting to be former students of the
diagnostic medical ultrasound program of the Philadelphia Ultrasound Diagnostic
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<PAGE>
4. CONTINGENCIES - (CONTINUED)
School filed a lawsuit against Whitman, Ultrasound Technical Services,
Inc., a subsidiary of Whitman that owns and operates the Ultrasound Diagnostic
Schools, certain current and former officers, directors and employees of Whitman
and a former consultant, styled Cullen, et al. v. Whitman Education Group, Inc.,
in the United States District Court for the Eastern District of Pennsylvania
(Civil Action No. 98-CV-4076). The complaint alleges, among other things,
certain state and federal statutory violations, breach of contract and fraud and
seeks to have the action certified as a class action encompassing students from
both the Philadelphia and Pittsburgh Ultrasound Diagnostic Schools. The
plaintiffs seek injunctive relief, compensatory, treble and punitive damages and
attorneys' fees and costs. A motion to dismiss has been filed by Whitman and is
presently pending before the court. Whitman believes the lawsuit is without
merit and intends to vigorously defend it. While the outcome cannot be predicted
with certainty, if determined adversely to Whitman, it could have a material
adverse effect on Whitman's financial position and results of operations.
5. SUBSEQUENT EVENT
On November 9, 1998, Colorado Technical University, Inc., entered into a
Letter of Intent to sell its Huron University ("HU") campus in Huron, South
Dakota to a newly-formed entity to be capitalized by HU's existing management
and certain investors. In connection with the proposed transaction, Colorado
Technical University would contribute the operating assets of HU and $500,000 to
the purchaser, and the purchaser would issue Colorado Technical University, Inc.
convertible preferred stock and assume the third party liabilities of HU. Under
the terms of the proposed transaction, the preferred stock would be convertible
into common stock equal to 19.9% of the common equity of HU. The preferred stock
would have a liquidation preference equal to the net value of the assets and
cash contributed by Colorado Technical University. Subject to the conversion
right, the preferred stock would be redeemable by HU for up to 10 years
following the transaction for an amount equal to the liquidation preference.
Completion of the transaction is subject to various conditions, including
the execution of a definitive agreement, the obtaining of adequate financing by
the new ownership group, the obtaining of all necessary state and other
governmental agency approvals, the attaining of independent accreditation of HU
by the North Central Association of Colleges and Schools and HU independently
qualifying for participation in federal Title IV student financial assistance
programs administered by the United States Department of Education. Subject to
the occurrence of these conditions, the parties will seek to close the
transaction on or about June 1999. There can be no assurance, however, that the
parties will execute a definitive agreement on the terms set forth above, or at
all, or that any of the foregoing conditions will be satisfied. Accordingly,
there can be no assurance that the proposed transaction will, in fact, be
consummated.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements of Whitman, the related notes to
consolidated financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included in Whitman's Form 10-K
for the year ended March 31, 1998 and the condensed consolidated financial
statements and the related notes to the condensed consolidated financial
statements included in Item 1 of this Quarterly Report on Form 10-Q. Except for
the historical matters contained herein, statements made in this report are
forward looking and are made pursuant to the safe harbor provisions of the
Securities Litigation Reform Act of 1995. Such statements may include, but are
not limited to, projections of revenues, income and cash flows, and Whitman's
financing needs and plans for future operations. Investors are cautioned that
forward looking statements involve risks and uncertainties, including, but not
limited to, regulatory, licensing and accreditation risks inherent in operating
proprietary post-secondary educational institutions and risks relating to
Whitman's ability to refinance or extend its revolving credit facility, which
may cause Whitman's actual results, performance or achievements to differ
materially from the forward looking statements made in the report or otherwise
made by or on behalf of Whitman. Factors that may affect future results include
the unanticipated operational impact of Year 2000 issues and certain economic,
competitive, governmental and other factors discussed in this report and in
Whitman's filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain
statement of operations data to net revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- --------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues.............................. 100% 100% 100% 100%
------- ------- ------- -------
Costs and expenses:
Instructional and educational support 62.9 68.9 65.9 69.7
Selling and promotional............... 14.0 15.4 14.9 15.0
General and administrative............ 20.4 17.9 19.9 20.5
------- ------- ------- -------
Total costs and expenses................. 97.3 102.2 100.7 105.2
------- ------- ------- -------
Income (loss) from operations............ 2.7 (2.2) (0.7) (5.2)
Other (income) expense:
Interest expense...................... 2.0 2.2 2.0 2.1
Interest income....................... (0.3) (0.3) (0.4) (0.3)
------- ------- ------- -------
Income (loss) before income taxes........ 1.0 (4.1) (2.3) (7.0)
Income tax benefit....................... -- -- 1.0 --
------- ------- ------- -------
Net income (loss)........................ 1.0% (4.1)% (1.3)% (7.0)%
======= ======= ======= =======
</TABLE>
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<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1997
Net revenues increased by $3.8 million or 26.2% to $18.3 million for the
three months ended September 30, 1998 from $14.5 million for the three months
ended September 30, 1997. The increase was primarily due to an increase in
average student enrollment. Average student enrollment increased 21.9% overall
with the University Degree Division experiencing a 42.8% increase and the
Associate Degree Division experiencing a 13.5% increase.
The increase in student enrollment in the University Degree Division was
primarily due to increased enrollments at the Denver campus which was opened in
October 1996 and the Sioux Falls campus which was relocated to a larger facility
in August 1998, and the addition of new degree programs at each of the three
Colorado Technical University campuses. The increase in student enrollment in
the Associate Degree Division was primarily due to increased enrollments in the
medical assisting program offered by the Ultrasound Diagnostic Schools.
Instructional and educational support increased by $1.5 million or 15.1% to
$11.5 million for the three months ended September 30, 1998 from $10.0 million
for the three months ended September 30, 1997. The increase in instructional and
educational support expenses was primarily due to the increase in direct costs
necessary to support the increase in student population. The increase in these
direct costs consisted primarily of increases in payroll and related benefits
for faculty and staff, and an increase in occupancy costs primarily related to
expanded facilities and upgraded equipment. As a percentage of net revenues,
instructional and educational support expenses decreased to 62.9% for the three
months ended September 30, 1998 as compared to 68.9% for the three months ended
September 30, 1997 due to a greater rate of increase in net revenues than the
rate of increase in such expenses necessary to support the increase in
enrollment.
Selling and promotional expenses increased by $0.4 million or 15.1% to $2.6
million for the three months ended September 30, 1998 from $2.2 million for the
three months ended September 30, 1997. The increase in selling and promotional
expenses was primarily due to increased marketing and advertising expenses
necessary to support the growth in student enrollments. As a percentage of net
revenues, selling and promotional expenses decreased to 14.0% for the three
months ended September 30, 1998, as compared to 15.4% for the three months ended
September 30, 1997. This decrease was primarily due to a greater rate of
increase in net revenues than the rate of increase in such expenses at the
University Degree Division.
General and administrative expenses increased by $1.1 million or 44.2% to
$3.7 million for the three months ended September 30, 1998 from $2.6 million for
the three months ended September 30, 1997. As a percentage of net revenues,
general and administrative expenses were 20.4% and 17.9%, respectively, for the
three months ended September 30, 1998 and September 30, 1997. The increases in
general and administrative expenses were primarily due to an increase in
administrative costs necessary to support the growth in student population, an
increase in bad debt expense due to an increase in student receivables resulting
from an increase in student enrollment, and an increase in professional fees.
Whitman reported net income of $189,000 for the three months ended
September 30, 1998 as compared to a net loss of $589,000 for the three months
ended September 30, 1997. The increase in profitability was primarily due to an
increase in operating income of $.8 million from the Associate Degree Division.
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<PAGE>
SIX MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE SIX MONTHS ENDED
SEPTEMBER 30, 1997
Net revenues increased by $6.1 million or 21.9% to $34.0 million for the
six months ended September 30, 1998 from $27.9 million for the six months ended
September 30, 1997. The increase was primarily due to an increase in average
student enrollment. Average student enrollment increased 19.7% overall with the
University Degree Division experiencing a 30.0% increase and the Associate
Degree Division experiencing a 14.7% increase.
The increase in student enrollment in the University Degree Division was
primarily due to increased enrollments at the Denver and Sioux Falls campuses,
and the addition of new degree programs at each of the three Colorado Technical
University campuses. The increase in student enrollment in the Associate Degree
Division was primarily due to increased enrollments in the medical assisting
programs offered by the Ultrasound Diagnostic Schools.
Instructional and educational support increased by $2.9 million or 15.2% to
$22.4 million for the six months ended September 30, 1998 from $19.5 million for
the six months ended September 30, 1997. The increase in instructional and
educational support expenses was primarily due to an increase in payroll and
related benefits for faculty and staff resulting from the growth in student
enrollments and an increase in occupancy costs resulting from the upgrade of
equipment and expansion of facilities at the Associate Degree Division. As a
percentage of net revenues, instructional and educational support expenses
decreased to 65.9% for the six months ended September 30, 1998 as compared to
69.7% for the six months ended September 30, 1997 due to a greater rate of
increase in net revenues than the rate of increase in such expenses necessary to
support the increase in enrollment.
Selling and promotional expenses increased by $0.9 million or 21.7% to $5.1
million for the six months ended September 30, 1998 from $4.2 million for the
six months ended September 30, 1997. The increase in selling and promotional
expenses was primarily due to increased marketing and advertising expenses
necessary to support the growth in student enrollments. As a percentage of net
revenues, selling and promotional expenses were 14.9% and 15.0%, respectively,
for the six months ended September 30, 1998 and September 30, 1997.
General and administrative expenses increased by $1.1 million or 18.4% to
$6.8 million for the six months ended September 30, 1998 from $5.7 million for
the six months ended September 30, 1997. The increase in general and
administrative expenses was primarily due to an increase in administrative costs
necessary to support the growth in student enrollments and an increase in bad
debt expense due to an increase in student receivables resulting from an
increase in student enrollment. As a percentage of net revenues, general and
administrative expenses were 19.9% and 20.5%, respectively, for the six months
ended September 30, 1998 and September 30, 1997.
Whitman reported a net loss of $.5 million and $2.0 million for the six
months ended September 30, 1998 and 1997, respectively. The decrease in the net
loss was primarily due to an increase in operating income of $1.7 million
from the Associate Degree Division.
SEASONALITY
Whitman experiences seasonality in its quarterly results of operations as a
result of changes in the level of student enrollment. New enrollment in
Whitman's schools tends to be lower in the first and second fiscal quarters
covering the summer months which are traditionally associated with recess from
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<PAGE>
SEASONALITY - (CONTINUED)
school, with the greatest seasonal effect in the second quarter. Costs are
generally not significantly affected by the seasonal factors on a quarterly
basis. Accordingly, quarterly variations in net revenues will result in
fluctuations in income from operations on a quarterly basis.
The operating results of Huron University are significantly affected by
seasonality. As a more traditional university, Huron University experiences a
significant decline in revenues during the late spring and summer. This seasonal
impact was compounded in the first and second quarters of the current fiscal
year as a result of increased operating expenses at Huron University as compared
to the same quarters one year ago. Operating expenses at Huron University
increased during the third quarter of fiscal 1998 due to an increase in payroll
expenses for faculty and staff to improve the academic programs and to support
increased enrollment. The decline in net revenues at Huron University combined
with the increased level of operating expenses, which remained relatively
constant in the first and second quarters as compared to the third quarter of
the last fiscal year, resulted in operating losses of $.7 million and $1.6
million, respectively, for the three and six months ended September 30, 1998 as
compared to operating losses of $.6 million and $.7 million, respectively, for
the three and six months ended September 30, 1997.
YEAR 2000 ISSUE
Whitman has implemented a process for identifying, prioritizing and
modifying or replacing certain computer and other systems and programs that may
be affected by the Year 2000 issue. Whitman is also monitoring the adequacy of
the manner in which certain third parties and third party vendors of systems are
attempting to address the Year 2000 issue. Whitman has substantially completed
an assessment of its computer systems and has determined that with the
modifications made to existing software and the conversions made to new
software, the Year 2000 issue will not pose significant operational problems to
its information systems. Whitman expects to substantially complete and test the
Year 2000 issues by the early part of 1999, which is prior to any anticipated
impact on Whitman's operating systems.
Based on preliminary information, costs of addressing potential problems
are not currently expected to have a material adverse impact on Whitman's
financial position, results of operations or cash flows in future periods. While
Whitman believes its process is designed to be successful, because of the
complexity of the Year 2000 issue, and the interdependence of organizations
using computer systems, it is possible that Whitman's efforts or those of third
parties with whom Whitman interacts, will not be successful or satisfactorily
completed in a timely fashion.
Based on the modifications and conversions of software made to date and the
assessment of embedded devices that have been identified at its facilities to
date, Whitman does not believe that contingency planning is warranted at this
time. The assessment of third parties external to Whitman is underway, and the
results of this assessment, when completed, may reveal the need for contingency
planning at a later date. Whitman will regularly evaluate the need for
contingency planning based on the progress and findings of the Year 2000
project.
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LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at September 30, 1998 and March 31, 1998 were
$31,000 and $3.4 million, respectively. The decrease in cash and cash
equivalents was primarily due to the net repayment of debt of $3.5 million for
the six months ended September 30, 1998. Whitman's working capital totalled $3.3
million at September 30, 1998 and $8.0 million at March 31, 1998.
Whitman experiences a decline in cash flow in the first and second quarters
due to the seasonal effect of lower enrollment during the summer months. Whitman
believes that cash flow will strengthen in the third and fourth quarters since
these periods have historically represented the periods of highest revenues and
net income within a fiscal year.
Net cash of $1.4 million was provided by operating activities for the six
months ended September 30, 1998 compared to net cash used in operating
activities of $1.0 million for the six months ended September 30, 1997. The
increase of $2.4 million was primarily due to an increase in accounts payable
and accrued expenses due to the timing of payments and a decline in the net loss
as compared to the prior year.
Net cash of $1.2 million and $2.4 million was used for investing activities
for the six months ended September 30, 1998 and 1997, respectively. The decrease
of $1.2 million was primarily due to a reduction in net cash used for capital
expenditures.
Net cash of $3.5 million was used in financing activities for the six
months ended September 30, 1998, compared to net cash of $0.7 million provided
by financing activities for the six months ended September 30, 1997. The
increase in cash used was due to an increase of $3.1 million in net payments on
long-term borrowings.
Whitman has a revolving credit facility that matures in April 1999 in the
amount of $7.5 million. At September 30, 1998, Whitman had $6.2 million
outstanding and $1.1 million available under this facility. Borrowings under
this facility decreased by $1.1 million from the amounts outstanding at March
31, 1998. The amounts borrowed under the working capital facility for the six
months ended September 30, 1998 were primarily used for operations, repayment of
debt and capital expenditures. Whitman intends to refinance or extend its
revolving credit facility on a long-term basis in fiscal 1999 under similar
terms and conditions.
Under a separate standard of financial responsibility, if based upon the
institution's annual compliance audit an institution has made late refunds to 5%
or more of the sample of student records audited in either of the two most
recent fiscal years, the institution is required to post a letter of credit in
favor of the DOE in an amount equal to 25% of the total Title IV Program refunds
paid by the institution in its prior fiscal year. Based on this standard, in
October 1998, Whitman posted letters of credit amounting to $450,000 as a result
of late refund findings with respect to fiscal 1998.
Whitman's primary source of operating liquidity is the cash received from
payments of tuition and fees. Most students attending Whitman's schools receive
some form of financial aid under Title IV Programs. UDS, Sanford-Brown and
Colorado Tech receive approximately 81%, 83% and 39% of their funding,
respectively, from the Title IV Programs. Disbursements under each program are
subject to disallowance and repayment by the schools.
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LIQUIDITY ANDCAPITAL RESOURCES - (CONTINUED)
Whitman believes that with its working capital, its cash flow from
operations, its revolving credit facility and its expected increased financings
under capital lease obligations to fund capital expenditures, it will have
adequate resources to meet its anticipated operating requirements for the
foreseeable future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August 1998, three individuals purporting to be former students of the
diagnostic medical ultrasound program of the Philadelphia Ultrasound Diagnostic
School filed a lawsuit against Whitman, Ultrasound Technical Services, Inc., a
subsidiary of Whitman that owns and operates the Ultrasound Diagnostic Schools,
certain current and former officers, directors and employees of Whitman and a
former consultant, styled Cullen, et al. v. Whitman Education Group, Inc., in
the United States District Court for the Eastern District of Pennsylvania (Civil
Action No. 98-CV-4076). The complaint alleges, among other things, certain state
and federal statutory violations, breach of contract and fraud and seeks to have
the action certified as a class action encompassing students from both the
Philadelphia and Pittsburgh Ultrasound Diagnostic Schools. The plaintiffs seek
injunctive relief, compensatory, treble and punitive damages and attorneys' fees
and costs. A motion to dismiss has been filed by Whitman and is presently
pending before the court. Whitman believes the lawsuit is without merit and
intends to vigorously defend it. While the outcome cannot be predicted with
certainty, if determined adversely to Whitman, it could have a material adverse
effect on Whitman's financial position and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ANNUAL SHAREHOLDERS' MEETING
On August 27, 1998, the Company held its annual meeting of shareholders. At
that meeting, all of the nominees for directors were elected by the vote set
forth opposite their names in the table below:
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS FOR WITHHELD
--------------------- ---------- --------
<S> <C> <C>
Phillip Frost, M.D. 10,489,314 529,025
Richard C. Pfenniger 10,489,038 529,301
Jack R. Borsting 10,489,314 529,025
Peter S. Knight 10,489,314 529,025
Lois F. Lipsett 10,489,314 529,025
Richard M. Krasno 10,489,314 529,025
Percy A. Pierre 10,489,314 529,025
Neil Flanzraich 10,489,314 529,025
A. Marvin Strait 10,489,314 529,025
</TABLE>
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ANNUAL SHAREHOLDERS' MEETING - (CONTINUED)
In addition, the shareholders of the Company approved the amendment of the
Company's 1996 stock option plan. A total of 7,261,289 shares were voted in
favor of the amendment, 913,986 shares were voted against the amendment, 15,164
shares abstained from the vote and 2,827,900 shares were not voted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
2.1 Bylaws, as amended
10.1 1996 Stock Option Plan, as amended
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Company during the quarter ended
September 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITMAN EDUCATION GROUP, INC.
(Registrant)
By: S/S FERNANDO L. FERNANDEZ
--------------------------------------
FERNANDO L. FERNANDEZ
VICE PRESIDENT - FINANCE, CHIEF
FINANCIAL OFFICER AND TREASURER
Date: November 13, 1998
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EXHIBIT 2.1
AMENDED AND RESTATED
BYLAWS
OF
WHITMAN EDUCATION GROUP, INC.
A FLORIDA CORPORATION
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of the shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held at the date and time designated
by the board of directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders shall be
called upon the written request of the chairman, the chief executive officer or
the board of directors by action at a meeting, a majority of directors acting
without a meeting, or (as provided by the Articles of Incorporation)
shareholders holding at least 50% of the Corporation's stock entitled to vote at
the meeting. The written request for the special meeting shall specify the
purpose or purposes of the meeting. Only business within the purposes described
in the notice required by Section 4 of this Article may be conducted at the
special meeting.
SECTION 3. PLACE OF MEETINGS. Meetings of the shareholders will be held at
the principal place of business of the Corporation or at such other place,
within or outside of Florida, as is designated by the board of directors.
SECTION 4. NOTICE OF MEETINGS. A written notice of each meeting of
shareholders, signed by the secretary or the persons authorized to call the
meeting, shall be mailed to each shareholder entitled to vote at the meeting at
the address as it appears on the records of the Corporation, not less than 10
nor more than 60 days before the date set for the meeting. The notice shall
state the time and place the meeting is to be held, and, if the notice relates
to a special meeting, shall also state the purposes for which the meeting is
called. The record date for determining shareholders entitled to notice of and
to vote at the meeting will be the date fixed by board of directors. A notice of
meeting shall be sufficient for the meeting and any adjournment of the meeting.
Any shareholder may waive notice of a meeting before, at or after the meeting.
SECTION 5. QUORUM. A majority of the shares entitled to vote, represented
in person or by proxy, shall constitute a quorum for the transaction of business
at a meeting of shareholders. A majority of shareholders represented in person
or by proxy at a meeting of shareholders, even if less than a quorum, may
adjourn the meeting form time to time and place to place without further notice
until a quorum is present.
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SECTION 6. SHAREHOLDER VOTING. If a quorum is present at a meeting of
shareholders, the action on a matter is approved if the votes cast in favor of
the action exceed the votes cast opposing the action, except as otherwise
provided in Section 2 of Article II, the articles of incorporation or applicable
law. Each outstanding share shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders.
SECTION 7. RECORD DATE. The board of directors may fix a record date for
any lawful purpose, including, without limiting the generality of the foregoing,
the determination of shareholders entitled to (1) receive notice of or to vote
at any meeting of shareholders or any adjournment thereof or to express consent
to corporate action in writing without a meeting, (2) receive payment of any
dividend or other distribution or allotment of any rights, or (3) take any other
action. The record date shall not be more than 70 days preceding the date of
such meeting, the date fixed for the payment of any dividend or distribution, or
the action requiring a determination of shareholders.
SECTION 8. PROXIES. A shareholder entitled to vote at any meeting of
shareholders or any adjournment thereof (or another entitled to vote on behalf
of the shareholder as a matter of law) may vote in person or by proxy executed
in writing and signed by the shareholder or his attorney-in-fact. The
appointment of proxy will be effective when received by the Corporation's
secretary or other officer or agent authorized to tabulate votes. No proxy shall
be valid more than 11 months after the date of its execution unless a longer
term is expressly stated in the proxy.
SECTION 9. CONDUCT OF BUSINESS WITHOUT MEETING BY SHAREHOLDERS. Any action
of the shareholders may be taken without a meeting if written consents, setting
forth the action taken, are signed by at least a majority of shares entitled to
vote and are delivered to the Corporation's secretary, or other officer or agent
of the Corporation having custody of the Corporation's books within 60 days
after the date that the earliest written consent was delivered. Within 10 days
after obtaining an authorization of an action by written consent, notice shall
be given to those shareholders who have not consented in writing or who are not
entitled to vote on the action. The notice shall fairly summarize the material
features of the authorized action. If the action creates dissenters' rights, the
notice shall contain a clear statement of the right of dissenting shareholders
to be paid the fair value of their shares upon compliance with and as provided
for by the Florida Business Corporation Act. The written consents shall be filed
with the records of the meetings of shareholders.
SECTION 10. NOTICE OF NOMINATION OF DIRECTORS. Nominations for election to
the Board of Directors of the corporation at a meeting of shareholders may be
made by the Board of Directors or by any shareholder of the corporation entitled
to vote for the election of directors at such meeting who complies with the
notice procedures set forth in this Section 10. Such nominations, other than
those made by or on behalf of the Board of Directors, may be made only if notice
in writing is personally delivered to, or mailed by first class United States
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mail, postage prepaid, and received by, the secretary not less than 60 days
nor more than 90 days prior to such meeting; provided, however, that if less
than 70 days' notice or prior public disclosure of the date of the meeting is
given to shareholders, such nomination shall have been mailed by first class
United States mail, postage prepaid, and received by, or personally delivered
to, the secretary not later than the close of business on the tenth (10th) day
following the day on which notice of the date of the meeting was mailed or such
public disclosure was made, whichever occurs first. Such notice shall set forth
(a) as to each proposed nominee (i) the name, age, business address and, if
known, residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares, if any, of stock of
the corporation that are beneficially owned by each such nominee and (iv) any
other information concerning the nominee that must be disclosed in proxy
solicitations pursuant to the proxy rules of the Securities and Exchange
Commission if such person had been nominated, or was intended to be nominated,
by the Board of Directors (including such person's written consent to be named
as a nominee and to serve as a director if elected); and (b) as to the
shareholder giving the notice (i) the name and address, as it appears on the
corporation's books, of such shareholder, (ii) a representation that such
shareholder is a holder of record of shares of stock of the corporation entitled
to vote at the meeting and the class and number of shares of the corporation
which are beneficially owned by such shareholder, (iii) a representation that
such shareholder intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice and (iv) a description of
all arrangements or understandings between such shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by such shareholder. The
corporation also may require any proposed nominee to furnish such other
information as may reasonably be required by the corporation to determine the
eligibility of such proposed nominee to serve as a director of the corporation.
The chairman of the meeting may, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting,
and that the defective nomination shall be disregarded.
SECTION 11. NOTICE OF BUSINESS AT ANNUAL MEETINGS. At an annual meeting of
the shareholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors or (b
) otherwise properly brought before the meeting by or at the direction of the
Board of Directors or (c) otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before an annual meeting by a
shareholder, if such business relates to the election of directors of the
corporation, the procedures in Section 10 of this Article I must be complied
with. If such business relates to any other matter, the shareholder must have
given timely notice thereof in writing to the secretary. To be timely, a
shareholder's notice must be personally delivered to, or mailed by first class
United States mail, postage prepaid, and received by, the secretary not less
than 60 days nor more than 90 days prior to such meeting; provided, however,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given to shareholders, such notice, to be timely, must have been
mailed by first class United States mail, postage prepaid, and received by, or
personally delivered to, the secretary not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the
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meeting was mailed or such public disclosure was made, whichever occurs
first. A shareholder's notice to the secretary shall set forth as to each matter
the shareholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the shareholder
proposing such business, (iii) a representation that the shareholder is a holder
of record of shares of stock of the corporation entitled to vote at the meting
and the class and number of shares of the corporation which are beneficially
owned by the shareholder and (iv) any material interest of the shareholder in
such business. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this Section 11 and except that any shareholder proposal
which complies with Rule 14a-8 of the proxy rules (or any successor provision)
promulgated under the Securities Exchange Act of 1934, as amended, as is to be
included in the corporation's proxy statement for an annual meeting of
shareholders shall be deemed to comply with the requirements of this Section 11.
The chairman of the meeting may, if the facts warrant, determine and declare to
the meeting that business was not properly brought before the meeting in
accordance with the provisions of this Section 11, and if he should so
determine, he shall so declare to the meeting and the business not properly
brought before the meeting shall be disregarded.
ARTICLE II
DIRECTORS
SECTION 1. NUMBER OF DIRECTORS. The board of directors of the Corporation
shall consist of not less than one person, the exact number to be determined
from time to time by resolution adopted by the affirmative vote of a majority of
all directors of the Corporation then holding office at any special or regular
meeting. Any such resolution increasing or decreasing the number of directors
shall have the effect of creating or eliminating a vacancy or vacancies, as the
case may be, provided that no such resolution shall reduce the number of
directors below the number then holding office.
SECTION 2. ELECTION OF DIRECTORS AND CHAIRMAN AND VICE CHAIRMAN OF THE
BOARD. Directors shall be elected at the annual meeting of shareholders, but
when the annual meeting is not held or directors are not elected thereat, they
may be elected at a special meeting called and held for that purpose. Directors
shall be elected by a plurality of the votes cast by the share entitled to vote
in the election at a meeting at which a quorum is present. At the time of
election, a director must be at least 18 years of age, but need not be a
shareholder of the Corporation. The board of directors may elect from their
members a chairman and a vice chairman of the board. The chairman of the board,
if one be elected, shall preside at all meetings of the board of directors and
meetings of the shareholders and shall have such other powers and duties as may
be prescribed by the board of directors. The vice chairman, if any be elected,
shall have such powers and duties as may from time to time be assigned to him by
the board of directors or the chairman, and in the absence of the chairman,
shall preside at all meetings of the board of directors.
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SECTION 3. TERM OF OFFICE. Each director shall hold office until the annual
meeting next succeeding his election and until his successor is elected and
qualified, or until his earlier resignation, removal from office or death.
SECTION 4. REMOVAL. Any director or the entire board of directors may be
removed, with or without cause, at a meeting of shareholders, provided the
notice of the meeting states that one of the purposes of the meeting is the
removal of the director. A director may be removed only if the number of votes
cast to remove him exceeds the number of votes cast against removal.
SECTION 5. VACANCIES. Any vacancy occurring in the board of directors,
including a vacancy created by an increase in the number of directors, may be
filled by the shareholders or by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the board of directors. A
director elected to fill a vacancy shall hold office only until the next
election of directors by the shareholders. If there are no remaining directors,
the vacancy shall be filled by the shareholders.
SECTION 6. QUORUM AND TRANSACTION OF BUSINESS. A majority of the number of
directors fixed pursuant to these bylaws shall constitute a quorum for the
transaction for business, except that a majority of the directors in office
shall constitute a quorum for filling a vacancy on the board. Whenever less than
a quorum is present at the time and place appointed for any meeting of the
board, a majority of those present may adjourn the meeting form time to time and
place to place, until a quorum shall be present. The act of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors.
SECTION 7. REGULAR MEETINGS. Regular meetings of the board of directors
shall be held at such times and places, within or without the State of Florida,
as the board of directors may, by resolution, from time to time determine. The
secretary shall give notice of each such resolution to any director who was not
present at the time the resolution was adopted, but no further notice of such
regular meeting need be given.
SECTION 8. SPECIAL MEETINGS. Special meetings of the board of directors may
be called by the chairman, the vice-chairman, the chief executive officer, the
president or any two members of the board of directors, and shall be held at
such times and places, within or without the State of Florida, as may be
specified in such call.
SECTION 9. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Notice of the time and
place of each annual or special meeting shall be given to each director by the
secretary or by the person or persons calling such meeting. Such notice need not
specify the purpose or purposes of the meeting and may be given in any manner or
method and at such time so that the director receiving it may have reasonable
opportunity to attend the meeting. Such notice shall, in all events, be deemed
to have been properly and duly given if mailed at least 48 hours prior to the
meeting and directed to the residence of each director as shown in the
secretary's records. The giving of notice shall be deemed to have been waived by
any director who shall attend and participate in such meeting and may be waived,
in writing, by any director either before or after such meeting.
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SECTION 10. COMPENSATION. The directors, as such, shall be entitled to
receive such reasonable compensation for their services as may be fixed from
time to time by resolution of the board of directors. In addition, the directors
may be reimbursed for expenses of attending meetings of the board of directors
and committees thereof. Nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the executive committee or of any standing or
special committee of the board of directors may by resolution of the board be
allowed such compensation for their services as the board of directors may deem
reasonable and additional compensation may be allowed to directors for special
services rendered.
SECTION 11. ACTION WITHOUT A MEETING. Any action required to be taken at a
meeting of the board of directors (or a committee of the board of directors),
and any action which may be taken at a meeting of the board of directors (or a
committee of the board of directors) may be taken without a meeting if a consent
in writing, setting forth the action to be taken and signed by all of the
directors (or members of the committee), is filed in the minutes of the
proceedings of the board of directors. The action taken shall be deemed
effective when the last director signs the consent, unless the consent specifies
otherwise.
ARTICLE III
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. The board of directors may from time to
time, by resolution passed by a majority of the whole board, create an executive
committee of three or more directors, the members of which shall be elected by
the board of directors to serve at the pleasure of the board. If the board of
directors does not designate a chairman of the executive committee, the
executive committee shall elect a chairman from its own number. Except as
otherwise provided herein and in the resolution creating an executive committee,
such committee shall, during the intervals between the meetings of the board of
directors, possess and may exercise all of the powers of the board of directors
in the management of the business and affairs of the Corporation, other than
that of filling vacancies among the directors or in any committee of the
directors and except as provided by law. The executive committee shall keep full
records and accounts of its proceedings and transactions. All action by the
executive committee shall be reported to the board of directors at its meeting
next succeeding such action and shall be subject to control, revision and
alteration by the board of directors, provided that no rights of third persons
shall be prejudicially affected thereby. Vacancies in the executive committee
shall be filled by the directors, and the directors may appoint one or more
directors as alternate members of the committee who may take the place of any
absent member or members at any meeting.
SECTION 2. MEETINGS OF EXECUTIVE COMMITTEE. Subject to the provisions of
these bylaws, the executive committee shall fix its own rules of procedure and
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shall meet as provided by such rules or by resolutions of the board of
directors, and it shall also meet at the call of the chief executive officer,
the chairman of the executive committee or any two members of the committee.
Unless otherwise provided by such rules or by such resolutions, the provisions
of Section 10 of the Article II relating to the notice required to be given for
meetings of the board of directors shall also apply to meetings of the executive
committee. A majority of the executive committee shall be necessary to
constitute a quorum.
SECTION 3. OTHER COMMITTEES. The board of directors may by resolution
provide for such other standing or special committees as it deems desirable, and
discontinue the same at its pleasure. Each such committee shall have such powers
and perform such duties, not inconsistent with law, as may be delegated to it by
the board of directors. The provisions of Section 1 and Section 2 of this
Article shall govern the appointment and action of such committee so far as
consistent, unless otherwise provided by the board of directors. Vacancies in
such committees shall be filled by the board of directors or as the board of
directors may provide.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL PROVISIONS. The board of directors shall elect a senior
executive officer who shall hold the office of chief executive officer or
president or both, a senior financial officer who shall serve as a vice
president and who may also serve as treasurer, a secretary and such number of
vice presidents, if any, as the board may from time to time determine. The board
of directors may from time to time create such other offices and appoint such
other officers, subordinate officers and assistant officers as it may determine.
Any two of such offices, other than those of president and vice president, may
be held by the same person, but no officer shall execute, acknowledge or verify
an instrument in more than one capacity.
SECTION 2. TERM OF OFFICE. The officers of the Corporation shall hold
office at the pleasure of the board of directors, and, unless sooner removed by
the board of directors, until successors are chosen and qualified. The board of
directors may remove any officer at any time, with or without cause. A vacancy
in any office, however created, shall be filled by the board of directors.
ARTICLE V
DUTIES OF OFFICERS
SECTION 1. CHIEF EXECUTIVE OFFICER, PRESIDENT AND CHIEF OPERATING OFFICER.
(A) The chief executive officer shall be the senior officer of the
corporation and, subject to the control of the board of directors, shall
exercise supervision over the management of the business of the Corporation. In
the absence of the chairman of the board, he shall preside at meetings of the
shareholders. He shall have authority to sign all certificates for shares and
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all deeds, mortgages, bonds, agreement, notices, and other instruments requiring
his signature; and shall have all the powers and duties prescribed by the
Florida Business Corporation Act and such others as the board of directors may
from time to time assign to him. In the event a president is not appointed, the
chief executive officer shall also have the duties set forth in Section 1(B)
below.
(B) The president shall exercise supervision over the business of the
Corporation and over its several officers, subject, however, to the oversight of
the chief executive officer, if one be elected. In the absence of the chairman
of the board and the chief executive officer, he shall preside at meetings of
the shareholders. He shall have authority to sign all certificates for shares
and all deeds, mortgages, bonds, agreements, notices, and other instruments
requiring his signature; and shall have all the powers and duties prescribed by
the Florida Business Corporation Act and such others as the board of directors
may from time to time assign to him.
(C) The chief operating officer, if one be elected, shall exercise
supervision over the business of the Corporation and over its several officers,
subject, however, to the oversight of the chief executive officer and the
president. In the absence of the chairman of the board, chief executive officer
and president, he shall preside at meetings of the shareholders. He shall have
authority to sign all deeds, mortgages, bonds, agreements, notices, and other
instruments requiring his signature; and shall have all the powers and duties
prescribed by the Florida Business Corporation Act and such others as the board
of directors may from time to time assign to him.
SECTION 3. VICE PRESIDENT. The vice presidents shall have such powers and
duties as may from time to time be assigned to them by the board of directors,
the chief executive officer or the president. At the request of the chief
executive officer or the president, or in the case of their absence or
disability, the vice president designated by the president (or in the absence of
such designation, the vice president designated by the board) shall perform all
the duties of the president and, when so acting, shall have all the power of the
president. The authority of vice president to sign in the name of the
Corporation certificates for shares and deeds, mortgages, bonds, agreements,
notices and other instruments shall be coordinate with like authority of the
chief executive officer and the president.
SECTION 4. SECRETARY. The secretary shall, keep minutes of all the
proceedings of the shareholders and the board of directors and shall make proper
record of the same, which shall be attested by him; shall have authority to
execute and deliver certificates as to any of such proceedings and any other
records of the Corporation; shall have authority to sign all certificates for
shares and all deeds, mortgages, bonds, agreements, notes and other instruments
to be executed by the Corporation which require his signature; shall give notice
of meetings of shareholders and directors; shall produce on request at each
meeting of shareholders a certified list of shareholders arranged in
alphabetical order; shall keep such books and records as may be required by law
or by the board of directors; and, in general, shall perform all duties incident
to the office of secretary and such other duties as may from time to time be
assigned to him by the board of directors, the chief executive officer or the
president.
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SECTION 5. TREASURER. The treasurer shall have general supervision of all
finances of the Corporation; he shall be in charge of all money, bills, notes,
deeds, leases, mortgages and similar property belonging to the Corporation, and
shall do with the same as may from time to time be required by the board of
directors. He shall cause to be kept adequate and correct accounts of the
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, stated capital and shares,
together with such other accounts as may be required; and he shall have such
other powers and duties as may from time to time be assigned to him by the board
of directors, the chief executive officer or the president.
SECTION 6. ASSISTANT AND SUBORDINATE OFFICERS. The board of directors may
elect such assistant and subordinate officers as it may deem desirable. Each
such officer shall hold office at the pleasure of the board of directors and
perform such duties as the board of directors or the chief executive officer or
the president may prescribe. The board of directors may, from time to time,
authorize any officer to appoint and remove subordinate officers, to prescribe
their authority and duties, and to fix their compensation.
SECTION 7. DUTIES OF OFFICERS MAY BE DELEGATED. In the absence of any
officer of the Corporation, or for any other reason the board of directors may
deem sufficient, the board of directors may delegate, for the time being, the
powers or duties, or any of them, of such officers to any other officer or to
any director.
SECTION 8. RESIGNATIONS AND REMOVALS. Any officer may resign at any time by
delivering his resignation in writing to the chairman of the board, if any, the
chief executive officer, or the secretary or to a meeting of the board of
directors. Such resignation shall be effective upon receipt unless specified to
be effective at some other time, and without in either case the necessity of its
being accepted unless the resignation shall so state. The board of directors may
at any time remove any officer either with or without cause. The board of
directors may at any time terminate or modify the authority of any agent. No
officer resigning and (except where a right to receive compensation shall be
expressly provided in a duly authorized written agreement with the Corporation)
no officer removed shall have any right to any compensation as such officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise; unless, in the case of a resignation, the directors, or, in the
case of removal, the body acting on the removal, shall in their or its
discretion provide for compensation.
ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify its officers and directors, and any former
officer or director, to the full extent permitted by law.
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ARTICLE VII
CERTIFICATES FOR SHARES
SECTION 1. FORM AND EXECUTION. Certificates for shares, certifying the
number of fully-paid shares owned, shall be issued to each shareholder in such
form as shall be approved by the board of directors. Such certificates shall be
signed by the chairman or vice-chairman of the board of directors or the chief
executive officer, the president or a vice president and by the secretary or an
assistant secretary or the treasurer or an assistant treasurer; provided,
however, that if such certificates are countersigned by a transfer agent and/or
registrar, the signatures of any of said officers and the seal of the
Corporation upon such certificates may be facsimiles, engraved, stamped or
printed. If any officer or officers who shall have signed, or whose facsimile
signature shall have been used, printed or stamped on any certificate or
certificates for shares, shall cease to be such officer or officers, because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates, if
authenticated by the endorsement thereon of the signature of a transfer agent or
registrar, shall nevertheless be conclusively deemed to have been adopted by the
Corporation by the use and delivery thereof and shall be as effective in all
respects as though signed by a duly elected, qualified and authorized officer or
officers, and as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be an officer or officers of the Corporation.
SECTION 2. REGISTRATION OF TRANSFER. Any certificate for Shares of the
Corporation shall be transferable in person or by attorney upon the surrender
thereof to the Corporation or any transfer agent therefor (for the class of
shares represented by the certificate surrendered) properly endorsed for
transfer and accompanied by such assurances as the Corporation or such transfer
agent may require as to the genuineness and effectiveness of each necessary
endorsement.
SECTION 3. LOST, DESTROYED OR STOLEN CERTIFICATES. A new share certificate
or certificates may be issued in place of any certificate theretofore issued by
the Corporation which is alleged to have been lost, destroyed or wrongfully
taken upon (1) the execution and delivery to the Corporation by the person
claiming the certificate to have been lost, destroyed or wrongfully taken of an
affidavit of the fact, specifying whether or not, at the time of such alleged
loss, destruction or taking, the certificate was endorsed, and (2) the
furnishing to the Corporation an indemnity and other assurances satisfactory to
the Corporation and to all transfer agents and registrars of the class of shares
represented by the certificate against any and all losses, damages, costs,
expenses or liabilities to which they or any of them may be subjected by reason
of the issue and delivery of such new certificate or certificates or in respect
of the original certificate.
SECTION 4. REGISTERED SHAREHOLDERS. A person in whose name shares are of
record on the books of the Corporation shall conclusively be deemed the
unqualified owner and holder thereof for all purposes and to have capacity to
exercise all rights of ownership. Neither the Corporation nor any transfer agent
of the Corporation shall be bound to recognize any equitable interest in or
claim to such shares on the part of any other person, whether disclosed upon
such certificate or otherwise, nor shall they be obliged to see to the execution
of any trust or obligation.
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ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall commence on such date in each year
as shall be fixed from time to time by the board of directors.
ARTICLE IX
SEAL
The board of directors may provide a suitable seal containing the name of
the Corporation. If deemed advisable by the board of directors, duplicate seals
may be provided and kept for the purposes of the Corporation.
ARTICLE X
CORPORATE RECORDS; SHAREHOLDERS'
INSPECTION RIGHTS; FINANCIAL INFORMATION
SECTION 1. CORPORATE RECORDS.
(A) The Corporation shall keep as permanent records minutes of all meetings
of its shareholders and board of directors, a record of all actions taken by the
shareholders or board of directors without a meeting, and a record of all
actions taken by a committee of the board of directors on behalf of the
Corporation.
(B) The Corporation shall maintain accurate accounting records and a record
of its shareholders in a form that permits preparation of a list of the names
and addresses of all shareholders in alphabetical order by class of shares
showing the number and series of shares held by each.
(C) The Corporation shall keep a copy of: its articles or restated articles
of incorporation and all amendments to them currently in effect; these bylaws or
restated bylaws and all amendments currently in effect; resolutions adopted by
the board of directors creating one or more classes or series of shares and
fixing their relative rights, preferences and limitations, if shares issued
pursuant to those resolutions are outstanding; the minutes of all shareholders'
meetings and records of all actions taken by shareholders without a meeting for
the past three years; written communications to all shareholders generally or
all shareholders of a class or series within the past three years, including the
financial statements furnished for the last three years; a list of names and
business street address of its current directors and officers; and its most
recent annual report delivered to the Department of State.
(D) The Corporation shall maintain its records in written form or in
another form capable of conversion into written form within a reasonable time.
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SECTION 2. SHAREHOLDERS' INSPECTION RIGHTS. A shareholder is entitled to
inspect and copy, during regular business hours at the Corporation's principal
officer, any of the corporate records described in Section 1(C) of this Article
if the shareholder gives the Corporation written notice of the demand at least
five business days before the date on which he wishes to inspect and copy the
records.
A shareholder is entitled to inspect and copy, during regular business
hours at a reasonable location specified by the Corporation, any of the
following records of the Corporation if the shareholder gives the Corporation
written notice of his demand at least five business days before the date on
which he wishes to inspect and copy provided: (1) the demand is made in good
faith and for a purpose reasonably related to such person's interest as a
shareholder; (2) the shareholder describes with reasonable particularity the
purpose and the records he desires to inspect; and (3) the records are directly
connected with the purpose: (a) excerpts from minutes of any meeting of the
board of directors, records of any action of a committee of the board of
directors while acting in place of the board of behalf of the Corporation,
minutes of any meeting of the shareholders, and records of action taken by the
shareholders or board without a meeting (to the extent not subject to inspection
under the preceding paragraph); (b) accounting records; (c) the record of
shareholders; and (d) any other books and records of the Corporation.
The Corporation may deny any demand for inspection if the demand was made
for an improper purpose, or if the demanding shareholder has within the two
years preceding his demand, sold or offered for sale any list of shareholders of
the Corporation or of any other corporation, has aided or abetted any person in
procuring any list of shareholders for that purpose, or has improperly used any
information secured through any prior examination of the records of the
Corporation or any other corporation.
SECTION 3. FINANCIAL STATEMENTS OF SHAREHOLDERS. Unless modified by
resolution of the shareholders, within 120 days after the close of each fiscal
year, the Corporation shall furnish its shareholders with annual financial
statements which may be consolidated or combined statements of the Corporation
and one or more of its subsidiaries, as appropriate, that include a balance
sheet as of the end of the fiscal year, an income statement for that year, and a
statement of cash flows for that year. If financial statements are prepared for
the Corporation on the basis of generally accepted accounting principles, the
annual financial statements must also be prepared on that basis.
If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
Corporation's accounting records stating his reasonable belief whether the
statements were prepared on the basis of generally accepted accounting
principles and, if not, describing the basis of preparation and describing any
respects in which the statements were not prepared on a basis of accounting
consistent with the statements prepared for the preceding year.
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The Corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year or within such
additional time thereafter as is reasonably necessary to enable the Corporation
to prepare its financial statements if, for reasons beyond the Corporation's
control, it is unable to prepare its financial statements within the prescribed
period. Thereafter, on written request from a shareholder who was not mailed the
statements, the Corporation shall mail him the latest annual financial
statements.
SECTION 4. OTHER REPORTS TO SHAREHOLDERS. If the Corporation indemnifies or
advances expenses to any director, officer, employee or agent otherwise than by
court order or action by the shareholders or by an insurance carrier pursuant to
insurance maintained by the Corporation, the Corporation shall report the
indemnification or advance in writing to the shareholders with or before the
notice of the next annual shareholders' meeting, or prior to the meeting if the
indemnification or advance occurs after the giving of the notice but prior to
the time the annual meeting is held. This report shall include a statement
specifying the persons paid, the amounts paid, and the nature and status at the
time of such payment of the litigation or threatened litigation.
If the Corporation issues or authorities the issuance of shares for
promises to render services in the future, the Corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the Corporation, with or before the notice of the next
shareholders' meeting.
ARTICLE XI
AMENDMENTS
These bylaws may be altered, amended or repealed, and new bylaws adopted,
by the board of directors or shareholders.
I certify that the foregoing bylaws are the bylaws of Whitman Education
Group, Inc. a Florida corporation, as of November 6, 1998.
/S/ RICHARD B. SALZMAN
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RICHARD B. SALZMAN, SECRETARY
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EXHIBIT 10.1
AMENDED AND RESTATED
WHITMAN EDUCATION GROUP, INC.
1996 STOCK OPTION PLAN
1. PURPOSES.
The purposes of this 1996 Stock Option Plan (the "Plan") are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to the Employees of the Company or its
Subsidiaries as well as other individuals who perform services for the Company
or its Subsidiaries, and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or Non-Qualified
Stock Options, at the discretion of the Committee and as reflected in the terms
of the written option agreement.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
"Board of Directors" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the common stock, no par value per share, of the
Company.
"Company" shall mean Whitman Education Group, Inc., a Florida corporation.
"Committee" shall mean the committee appointed by the Board of Directors in
accordance with Section 4(a) of the Plan.
"Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Service as an Employee
shall not be considered interrupted for purposes of the Plan, in the case of
sick leave, military leave, or any other bona fide leave of absence approved by
the Committee.
"Disabled" or "Disability" shall mean a physical or mental disability as
defined in Section 22(e)(3) of the Code.
"Employee" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary. The payment of a director's
fee by the Company shall not be sufficient to constitute the recipient an
"employee" of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Incentive Stock Option" shall mean a stock option intended to qualify as
an "incentive stock option" within the meaning of Section 422 of the Code.
"Non-Qualified Stock Option" shall mean a stock option not intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Code.
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"Option" shall mean a stock option granted pursuant to the Plan.
"Optioned Stock" shall mean the Common Stock subject to an Option.
"Optionee" shall mean the recipient of an Option.
"Parent" shall mean a "parent corporation" of the Company, whether now or
hereafter existing, as defined in Section 424(e) of the Code.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act or any successor rule.
"Share" shall mean a share of Common Stock, as adjusted in accordance with
Section 13 ----- of the Plan.
"Subsidiary" shall mean a "subsidiary corporation" of the Company, whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK.
Subject to the provisions of Section 13 of the Plan, the maximum aggregate
number of Shares which may be issued under the Plan is 2,500,000. If an Option
should expire or become unexercisable for any reason without having been
exercised in full, the unpurchased Shares which were subject thereto shall,
unless the Plan shall have been terminated, become available for further grant
under the Plan.
4. ADMINISTRATION.
(a) COMMITTEE. The Plan at all times shall be administered by a Committee
appointed by the Company's Board of Directors consisting of not less than two
members of the Board of Directors.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have the authority, in its discretion: (i) to grant Incentive
Stock Options or Non-Qualified Stock Options; (ii) to determine the fair market
value of the Common Stock; (iii) to determine the exercise price per Share of
Options to be granted; (iv) to determine the persons to whom, and the time or
times at which, Options shall be granted and the number of Shares to be
represented by each Option; (v) to determine the vesting schedule of Options to
be granted; (vi) to prescribe, amend and rescind rules and regulations relating
to the Plan; (vii) to determine the terms and provisions of each Option granted
under the Plan (which need not be identical); (viii) to accelerate the exercise
date of any Option; (ix) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted by the Committee; (x) subject to the provisions of the Plan and subject
to such additional limitations and restrictions as the Committee may impose, to
delegate to specific members of management or to a committee of management
personnel the authority to determine: (a) the persons to whom, and the time and
times at which, Options shall be granted and the number of Shares to be
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represented by each Option; (b) the vesting schedule of Options; (c) the term of
Options, and (d) other terms and conditions of any Options; provided that the
Committee shall not have the authority to delegate such matters with respect to
awards to be granted to any person subject to Section 16 of the Exchange Act or
any "covered employee" under Section 162(m) of the Code; and (xi) to interpret
the Plan and make all other determinations deemed necessary or advisable for the
administration of the Plan. The Committee may require the voluntary surrender of
all or any portion of any Option granted under the Plan as a condition precedent
to a grant of a new Option to such Optionee. Subject to the provisions of the
Plan, such new Option shall be exercisable at the price, during the period and
on such other terms and conditions as are specified by the Committee at the time
the new Option is granted. Upon surrender, the Options surrendered shall be
unexercisable and the Shares previously subject to such Options shall be
available for the grant of other Options.
(c) EFFECT OF THE COMMITTEE'S DECISION. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Optionees.
5. ELIGIBILITY.
INCENTIVE STOCK OPTIONS MAY BE GRANTED ONLY TO EMPLOYEES. Non-Qualified
Stock Options may be granted to Employees, non-Employee directors (in accordance
with the provisions of Section 8 of the Plan or otherwise in the discretion of
the Committee), independent contractors and agents. Any person who has been
granted an Option may, if he is otherwise eligible, be granted an additional
Option or Options. Subject to the provisions of Section 15 of the Plan, the
maximum number of Shares with respect to which Options may be granted under the
Plan to any Employee in any calendar year is 1% of the authorized and
outstanding Shares of Common Stock on the date of adoption of the Plan.
6. DOLLAR LIMITATION.
Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of stock for which Incentive Stock Options (under
all stock option plans of the Company and of any Parent or Subsidiary) are
exercisable for the first time by an Employee during any calendar year exceeds
$100,000, such Options shall be treated as Non-Qualified Stock Options. For
purposes of this limitation, (a) the fair market value of stock is determined as
of the time the Option is granted; and (b) the limitation is applied by taking
into account Options in the order in which they were granted.
7. RIGHTS OF OPTIONEES.
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment by the Company, nor shall it interfere in any way
with his or her right or the Company's right to terminate his or her employment
at any time.
8. AUTOMATIC GRANT OF OPTION TO NON-EMPLOYEE DIRECTORS.
Subject to Section 3 of the Plan, each person who is a non-Employee
director of the Company on the first business day following any annual meeting
of shareholders of the Company and who is not a common law employee of
the Company or of any Subsidiary shall automatically receive on
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such date an Option to acquire 7,500 Shares and the person who is serving as the
Chairman of the Board of Directors on such day following any annual meeting and
who is not a common law employee of the Company or any Subsidiary shall
automatically be granted options to acquire 37,500 Shares, as adjusted in
accordance with Section 15 of the Plan. The exercise price for the Shares to be
issued pursuant to Options granted under this Section 8 shall be as set forth in
Section 11(a)(ii) of the Plan. The Options granted pursuant to this Section 8
shall have a term of ten years from the date of grant. Non-Employee directors
shall have the right, if they so wish, to decline receipt of any Options to be
granted under this Section 8.
9. TERM OF PLAN.
The Plan shall become effective upon its adoption by the Board of Directors
of the Company; provided that, if the Plan is not approved by the shareholders
of the Company in accordance with Section 20 of the Plan within 12 months after
the date of adoption by the Board of Directors, the Plan and any Options granted
thereunder shall terminate and become null and void. The Plan shall continue in
effect until July 25, 2006 unless sooner terminated in accordance with Section
17 of the Plan. Notwithstanding the foregoing, all awards made under the Plan
prior to such date will remain in effect until such awards have been satisfied
or terminated in accordance with the terms and provisions of the Plan.
10. TERM OF OPTION.
The term of each Option shall be ten years from the date of grant thereof
or, except for Options granted pursuant to Section 8 of the Plan, such shorter
term as may be determined by the Committee. However, in the case of an Incentive
Stock Option granted to an Employee who, immediately before the Incentive Stock
Option is granted, owns stock representing more than 10% of the voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five years from the date of grant thereof or
such shorter time as may be determined by the Committee.
11. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price of the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Committee, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option: (A) granted to an Employee
who, immediately before the grant of such Incentive Stock Option, owns
stock representing more than 10% of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise
price shall be no less than 110% of the fair market value per Share on the
date of grant; and (B) granted to any other Employee, the per share
exercise price shall be no less than the fair market value per Share on the
date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share exercise
price shall be no less than the fair market value per Share on the date of
grant and, with respect to Options granted to non-Employee directors as
provided in Section 8 of the Plan, shall be equal to the fair market value
per Share on the date of the grant.
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(b) Notwithstanding Section 11(a) of the Plan, in the event the Company
substitutes an Option for a stock option issued by another corporation in
connection with a corporate transaction, such as a merger, consolidation,
acquisition of property or stock, separation (including a spin-off or other
distribution of stock or property), reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the
Code) or partial or complete liquidation involving the Company and such other
corporation, the exercise price of such substituted Option shall be as
determined by the Committee in its discretion (subject to the provisions of
Section 424(a) of the Code in the case of a stock option that was intended to
qualify as an "incentive stock option") to preserve, on a per share basis
immediately after such corporate transaction, the same ratio of fair market
value per option share to exercise price per share which existed immediately
prior to such corporate transaction under the option issued by such other
corporation.
(c) The fair market value per Share shall be determined by the Committee in
its discretion; provided, however, that if the Common Stock is listed on a stock
exchange, the fair market value per Share shall be the closing price on such
exchange on the date of grant of the Option, as reported in the Wall Street
Journal.
(d) The consideration to be paid for the Shares to be issued upon exercise
of an Option shall consist of cash or check in an amount equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised or such
other consideration as the Committee shall determine. Payment may also be made,
in the discretion of the Committee, by delivery (including by facsimile) to the
Company or its designated agent of an executed irrevocable option exercise form
together with irrevocable instructions to a broker-dealer designated by the
Company to sell (or margin) a sufficient portion of the Shares and deliver the
sale (or margin loan) proceeds directly to the Company to pay for the exercise
price; provided that Optionees subject to Section 16 of the Exchange Act shall
not be entitled to make payment by such method until either the holders of a
majority of the outstanding shares of the Company entitled to vote have approved
an amendment to the Plan permitting payment by such method or counsel to the
Company has advised the Committee that such approval is not required by Rule
16b-3. For purposes of this Section 11(d), the exercise date of such Option
shall be the date on which such documents have been delivered to the Company or
its designated agent.
12. EXERCISE OF OPTION.
(a) Procedure for Exercise. Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the
Committee, including performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of the Plan. An Option may
not be exercised for a fraction of a Share. An Option shall be deemed to be
exercised when written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may, as authorized by
the Committee, consist of any consideration and method of payment allowable
under Section 11(d) of the Plan.
(b) Rights as a Shareholder. Until the issuance, which in no event (except
as provided in Section 18 of the Plan) will be delayed more than 30 days from
the date of the exercise of the Option, of the stock certificate evidencing such
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Shares (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of
Shares which thereafter may be available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
13. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF STATUS AS AN EMPLOYEE. If an Employee ceases to be in
Continuous Status as an Employee, other than (i) by reason of retirement or (ii)
as a result of a termination by the Company for deliberate, willful or gross
misconduct, any Option held by such Employee shall be exercisable within twelve
(12) months after the date he ceases to be in Continuous Status as an Employee
(or such shorter or longer time as may be determined by the Committee) to the
extent the Employee was entitled to exercise such Option as of the date of such
Employee's termination of employment.
(b) RETIREMENT OF OPTIONEE. If any Employee ceases to be in Continuous
Status as an Employee by reason of such Employee's retirement, any Option held
by such Employee shall be exercisable within 36 months after the date such
Employee ceases to be in Continuous Status as an Employee to the extent that the
Employee was entitled to exercise such Option as of the date of such Employee's
retirement. For purposes of the Plan, "retirement" means termination of services
as an Employee at or after age 65 other than as a result of deliberate, willful
or gross misconduct.
(c) DEATH OR DISABILITY OF OPTIONEE. Subject to the provisions of the Plan,
any Option held by an Optionee at the time of the Optionee's death may be
exercised subsequently by either the legal representative of the Optionee's
estate or by the person or persons who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent the Optionee was entitled to
exercise such Option as of the date of the Optionee's death. In the event of the
death or disability of an Optionee during the time period specified in Section
13(a) or 13(b), as applicable, the Option may be exercised, at any time within
three months following the date of his death or disability, by the Optionee, or,
in the case of death, by either the legal representative of the Optionee's
estate or by a person or persons who acquired the right to exercise the option
by bequest or inheritance, but only to the extent the Optionee was entitled to
exercise such Option as of the date of the Optionee's death or disability.
(d) TERMINATION FOR MISCONDUCT. If any Employee ceases to be in Continuous
Status as an Employee as a result of a termination by the Company for
deliberate, willful or gross misconduct, any Option held by such Employee shall
terminate immediately and automatically on the date of such Employee's
termination as an Employee unless otherwise determined by the Committee.
(e) EXPIRATION OF OPTIONS. None of the events described above in this
Section 13 shall extend the period of exercisability of the Option beyond the
expiration date thereof. To the extent that an Optionee was not entitled to
exercise an Option on the date said Optionee ceased to be in Continuous Status
as an Employee or the date of the Optionee's death or disability, or if the
Optionee does not exercise such Option (which they were entitled to exercise)
within the time period specified in this Section 13, the Option shall terminate
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and become null and void. Notwithstanding the provisions of Section 13(a),
13(b) or 13(d) of the Plan, no Options shall be exercisable after an Optionee
ceases to be in Continuous Status as an Employee in the event the Optionee shall
have during the time period in which his Options are exercisable, engaged in
deliberate action which, as determined by the Committee, causes substantial harm
to the interests of the Company or constitutes a breach of any obligation of the
Optionee to the Company. In such event, the Optionee shall forfeit all rights to
any unexercised Option as of the date of such deliberate action.
14. NON-TRANSFERABILITY OF OPTIONS.
During an Optionee's lifetime, an Option may be exercisable only by the
Optionee and an Option granted under the Plan and the rights and privileges
conferred thereby shall not be subject to execution, attachment or similar
process and may not be sold, pledged, assigned, hypothecated, transferred; or
otherwise disposed of in any manner (whether by operation of law or otherwise)
other than by will or by the laws of descent and distribution or, pursuant to a
qualified domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION;
CHANGE IN CONTROL; DISSOLUTION.
(a) Subject to any required action by the shareholders of the Company, each
of (i) the number of shares of Common Stock covered by each outstanding Option,
(ii) the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, (iii) the price per share of Common Stock covered by each such
outstanding Option, (iv) the number of shares of Common Stock to be granted to
non-Employee directors pursuant to Section 8 of the Plan, and (v) the maximum
number of Shares with respect to which Options may be granted to any Employee,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split or the payment of a
stock dividend with respect to the Common Stock or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that (a) each such
adjustment with respect to an Incentive Stock Option shall comply with the rules
of Section 424(a) of the Code (or any successor provision) and (b) in no event
shall any adjustment be made which would render any Incentive Stock Option
granted hereunder other than an "incentive stock option" as defined in Section
422 of the Code; and provided further, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) If: (1) any person (as defined for purposes of Section 13(d) and 14(d)
of the Exchange Act, but excluding the Company and any of its wholly-owned
subsidiaries) acquires direct or indirect ownership of 50% or more of the
combined voting power of the then outstanding securities of the Company as a
result of a tender or exchange offer, open market purchases, privately
-7-
<PAGE>
negotiated purchases or otherwise; or (2) the shareholders of the Company
approve (i) any consolidation or merger of the Company in which the Company is
not the surviving corporation (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of the surviving corporation immediately after the
merger), or (ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company to an entity which is not a wholly-owned subsidiary of the
Company, then the exercisability of each Option outstanding under the Plan shall
be automatically accelerated so that each such Option shall, immediately prior
to the specified effective date of any of the foregoing transactions, become
fully exercisable with respect to the total number of Shares subject to such
Option and may be exercisable for all or any portion of such Shares. Upon the
consummation of any of such transaction, all outstanding Options under the Plan
shall, to the extent not previously exercised, either be assumed by the
successor corporation or parent thereof or be replaced with a comparable option
to purchase shares of the capital stock of the successor corporation or parent
thereof.
(c) In the event of the proposed dissolution or liquidation of the Company,
all outstanding Options will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Committee.
16. TIME FOR GRANTING OPTIONS.
The date of grant of an Option shall be the date on which the Committee
makes the determination granting such Option or such later date as the Committee
may specify. Notice of the determination shall be given to each Employee to whom
an Option is so granted within a reasonable time after the date of such grant.
17. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Committee Action; Stockholders' Approval. Subject to applicable laws
and regulations, the Committee or the Board of Directors may amend or terminate
the Plan from time to time in such respects as the Committee or the Board of
Directors may deem advisable, without the approval of the Company's
shareholders.
(b) Effect of Amendment or Termination. No amendment or termination or
modification of the Plan shall in any manner affect any Option theretofore
granted without the consent of the Optionee, except that the Committee may amend
or modify the Plan in a manner that does affect Options theretofore granted upon
a finding by the Committee that such amendment or modification is in the best
interest of shareholders or Optionees.
18. CONDITIONS UPON ISSUANCE OF SHARES.
Shares shall not be issued pursuant to the exercise of an Option unless the
exercise of such Option and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the advice of counsel for the Company with respect to such compliance. As a
-8-
<PAGE>
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by law.
19. OPTION AGREEMENTS.
Options shall be evidenced by written option agreements in such form as the
Committee shall approve. Such agreements shall contain such provisions,
including, without limitation, restrictions upon the exercise of the option, as
the Committee shall determine.
20. SHAREHOLDER APPROVAL.
Continuance of the Plan shall be subject to approval by the shareholders of
the Company entitled to vote thereon within twelve months after the date the
Plan is adopted. The approval of such shareholders of the Company shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder, and shall be obtained, at a
duly held shareholders' meeting, by the affirmative vote of the holders of a
majority of the outstanding shares of the Company present or represented and
entitled to vote thereon.
21. INDEMNIFICATION OF COMMITTEE MEMBERS.
In addition to such other rights of indemnification as they may have as
Directors, the members of the Committee shall be indemnified by the Company
against the reasonable expenses, including attorneys' fees actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
to the extent required by and in the manner provided by the Articles of
Incorporation or Bylaws of the Company), or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member did not act in good faith and in a manner he reasonably
believed to be in and not opposed to the best interests of the Company; provided
that within 60 days after institution of any such action, suit or proceeding a
Committee member shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
22. OTHER COMPENSATION PLANS.
The adoption of the Plan shall not affect any other stock option or
incentive or other compensation plans in effect for the Company or any
Subsidiary, nor shall the Plan preclude the Company from establishing any other
forms of incentive or other compensation for employees and directors of the
Company or any Subsidiary.
23. HEADINGS.
Headings of Articles and Sections hereof are inserted for convenience and
reference; they constitute no part of the Plan.
-9-
<PAGE>
24. WITHHOLDING.
The Company and any Subsidiary may, to the extent permitted by law, deduct
from any payments or transfers of any kind due to an Optionee the amount of any
federal, state, local or foreign taxes required by any governmental regulatory
authority to be withheld or otherwise deducted with respect to the Options or
the Optioned Stock.
25. GOVERNING LAW.
The Plan, the Options granted hereunder and all related matters shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Florida.
26. RESERVATION OF SHARES
The Company shall, during the term of the Plan and any Option granted
hereunder, reserve and keep available a number of Shares as shall be sufficient
to satisfy the requirements of the Plan.
APPROVED 8/27/98 SHAREHOLDERS MEETING
-10-
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