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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-26040
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COMPUTER LEARNING CENTERS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 36-3501869
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
11350 RANDOM HILLS ROAD, SUITE 240
FAIRFAX, VIRGINIA 22030
(Address of principal executive offices) (Zip Code)
</TABLE>
(703) 359-9333
(Registrant's telephone number, including area code)
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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 the issuer's classes of
common stock, as of the latest practicable date.
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<S> <C>
Class Outstanding at September 3, 1997
Common Stock, $.01 par value 7,992,894
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1
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COMPUTER LEARNING CENTERS, INC.
INDEX
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PAGE
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PART 1--FINANCIAL INFORMATION
ITEM 1. Financial Statements
Statements of Operations................................................................................. 3
Balance Sheets........................................................................................... 4
Statements of Cash Flows................................................................................. 5
Notes to Financial Statements............................................................................ 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 7
PART II--OTHER INFORMATION
ITEM 1. Legal Proceedings................................................................................. 13
ITEM 2. Changes in Securities............................................................................. 13
ITEM 3. Defaults Upon Senior Securities................................................................... 13
ITEM 4. Submission of Matters to a Vote of Security Holders............................................... 13
ITEM 5. Other Information................................................................................. 13
ITEM 6. Exhibits and Reports on Form 8-K.................................................................. 14
SIGNATURES................................................................................................. 14
</TABLE>
2
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COMPUTER LEARNING CENTERS, INC.
STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTH FOR THE SIX MONTH
PERIOD ENDING JULY 31, PERIOD ENDING JULY 31
-------------------------- --------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------------ ------------ ------------ ------------
Revenues................................................. $ 22,138 $ 14,977 $ 42,968 $ 28,983
Costs and expenses:
Cost of instruction and services....................... 12,307 8,247 23,527 15,786
Selling and promotional................................ 3,762 2,574 7,014 5,059
General and administrative............................. 1,618 1,490 3,511 2,675
Provision for doubtful accounts........................ 1,139 536 1,993 1,284
Amortization of intangible assets...................... 91 91 181 181
------------ ------------ ------------ ------------
18,917 12,938 36,226 24,985
Income before interest and income taxes.................. 3,221 2,039 6,742 3,998
Interest income, net..................................... 367 110 713 214
------------ ------------ ------------ ------------
Income before income taxes............................... 3,588 2,149 7,455 4,212
Provision for income taxes............................... 1,510 892 3,134 1,748
------------ ------------ ------------ ------------
Net income............................................. $ 2,078 $ 1,257 $ 4,321 $ 2,464
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per share (Note 3):
Net income per share................................... $ 0.25 $ 0.18 $ 0.52 $ 0.36
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of shares outstanding............ 8,455,037 7,031,844 8,383,802 6,871,803
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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COMPUTER LEARNING CENTERS, INC.
BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
JULY 31, JANUARY 31,
1997 1997
------------ ---------------
<S> <C> <C>
(UNAUDITED)
ASSETS:
Current assets:
Cash and cash equivalents....................................................... $ 25,094 $ 26,950
Accounts receivable, net of allowance for doubtful accounts of $2,402 and $1,734
respectively.................................................................. 33,754 28,274
Prepaid expenses and other current assets....................................... 5,566 3,581
------------ -------
Total current assets.......................................................... 64,414 58,805
------------ -------
Fixed assets, net................................................................. 16,955 9,571
Intangible assets, net of amortization............................................ 2,867 3,048
Non-current accounts receivable, net of allowance for doubtful accounts of $722
and $516, respectively.......................................................... 5,627 3,074
Other long-term assets............................................................ 1,289 1,229
------------ -------
Total assets.................................................................. $ 91,152 $ 75,727
------------ -------
------------ -------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Trade accounts payable.......................................................... $ 3,149 $ 1,779
Accrued employee expenses....................................................... 2,481 2,134
Accrued other expenses.......................................................... 2,244 2,412
Deferred revenues............................................................... 34,633 27,486
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Total current liabilities..................................................... 42,507 33,811
------------ -------
Other long-term liabilities....................................................... 3,022 2,124
------------ -------
Total liabilities............................................................. 45,529 35,935
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Stockholders' equity:
Preferred stock $.01 par value, 1,000,000 authorized shares, no shares issued or
outstanding................................................................... -- --
Common stock, .01 par value, 35,000,000 and 10,000,000 authorized shares,
respectively; 7,992,894 and 7,823,960 shares issued and outstanding,
respectively.................................................................. 80 78
Additional paid-in capital...................................................... 33,667 32,182
Net unrealized gain on securities available for sale............................ 135 112
Retained earnings............................................................... 11,741 7,420
------------ -------
Total stockholders' equity.................................................... 45,623 39,792
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Total liabilities and stockholders' equity.................................... $ 91,152 $ 75,727
------------ -------
------------ -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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COMPUTER LEARNING CENTERS, INC.
STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX-MONTH
PERIOD ENDED JULY
31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Cash flows from operating activities:
Net income................................................................................ $ 4,321 $ 2,464
Adjustments to reconcile net income to cash provided by operating activities:
Provision for doubtful accounts......................................................... 1,993 1,284
Depreciation............................................................................ 1,699 892
Amortization of intangible assets....................................................... 181 181
Changes in net assets and liabilities:
Accounts receivable..................................................................... (7,473) (2,943)
Prepaid expenses and other current assets............................................... (1,859) (359)
Non-current accounts receivable......................................................... (2,553) (820)
Other long-term assets.................................................................. (60) (83)
Trade accounts payable.................................................................. 1,370 999
Accrued employee expenses............................................................... 347 583
Accrued other expenses.................................................................. 627 (28)
Deferred revenues....................................................................... 7,147 3,409
Other long-term liabilities............................................................. 898 139
--------- ---------
Cash provided by operating activities................................................. 6,638 5,718
--------- ---------
Cash flows from investing activities:
Capital expenditures...................................................................... (9,083) (2,957)
Product development....................................................................... (104) (37)
--------- ---------
Cash used for investing activities.................................................... (9,187) (2,994)
--------- ---------
Cash flows from financing activities:
Exercise of stock options................................................................. 693 310
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Cash provided by financing activities................................................. 693 310
--------- ---------
Net (decrease) increase in cash and cash equivalents........................................ (1,856) 3,034
--------- ---------
Cash and cash equivalents, beginning of period.............................................. 26,950 8,260
--------- ---------
Cash and cash equivalents, end of period.................................................... $ 25,094 $ 11,294
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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COMPUTER LEARNING CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. The interim financial statements as of and for the quarter and six
months ended July 31, 1997 and 1996 have not been audited. However, the
financial information reflects all adjustments, consisting only of normal
recurring adjustments that are, in the opinion of management, necessary for a
fair statement of results for the interim periods presented.
2. These financial statements should be read together with the fiscal year
1997 audited financial statements set forth in the Computer Learning Centers,
Inc. Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
3. On March 24, 1997 the Board of Directors declared a three for two stock
split in the form of a 50% stock dividend on the Company's common stock, payable
April 14, 1997 to stockholders of record at the close of business on April 8,
1997. Share and per share amounts for all prior periods have been restated to
reflect the stock split.
4. Certain reclassifications have been made to prior year amounts to
conform with the current period presentation.
5. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, "Earnings Per Share" ("SFAS
128"). This statement establishes new standards for computing and presenting
earnings per share ("EPS"). The standard replaces Accounting Principles Board
Opinion No. 15 ("APB 15") presentation of "primary EPS" with "basic EPS,"
computed as income available to common stockholders divided by the weighted
average number of common shares outstanding during the period. SFAS 128 also
requires dual presentation of basic and diluted EPS on the face of the statement
of operations for entities with complex capital structures. Diluted EPS is
computed similarly to "fully diluted EPS," as defined in APB 15. In addition,
the statement requires a reconciliation of the numerator and denominator of the
basic to diluted EPS. SFAS 128 is effective for financial statements issued for
periods ending after December 15, 1997, with early adoption not permitted.
Restatement of all prior period EPS data is required.
The Company anticipates that adoption of this new accounting standard will
have a significant effect on financial reporting due to the dilutive effect of
stock options outstanding. The following represents pro forma disclosure of
basic and diluted EPS for the quarter and six months ended July 31, 1997.
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<CAPTION>
FOR THE THREE MONTH PERIOD FOR THE SIX MONTH PERIOD
ENDED JULY 31, 1997 ENDED JULY 31, 1997
-------------------------- --------------------------
BASIC DILUTED BASIC DILUTED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income............................................... $ 2,078 $ 2,078 $ 4,321 $ 4,321
------------ ------------ ------------ ------------
Weighted average number of common shares outstanding..... 7,901,565 7,901,565 7,863,794 7,863,794
Effect of dilutive securities:
Options.................................................. -- 612,979 -- 636,924
------------ ------------ ------------ ------------
7,901,565 8,514,544 7,863,794 8,500,718
------------ ------------ ------------ ------------
Earnings per share....................................... $ 0.26 $ 0.24 $ 0.55 $ 0.51
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
These amounts compare to reported primary EPS of $0.25 and $0.52 per common
share for the quarter and six months ended July 31, 1997. All options of the
Company's stock had a dilutive effect for the quarter and six months ended July
31, 1997.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
This report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects," and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking statements. These
factors include, without limitation, those set forth below under the caption
"Certain Factors That May Affect Future Results."
RESULTS OF OPERATIONS
The following table sets forth statement of operations data of the Company
expressed as a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JULY 31, ENDED JULY 31,
---------------------- ----------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------- ---------- ---------- ----------
Revenues...................................... 100.00% 100.00% 100.00% 100.00%
Costs and expenses:
Cost of instruction and services............ 55.6 55.1 54.8 54.5
Selling and promotional..................... 17.0 17.2 16.3 17.5
General and administrative.................. 7.4 9.9 8.2 9.2
Provision for doubtful accounts............. 5.1 3.6 4.6 4.4
Amortization of intangible assets........... 0.4 0.6 0.4 0.6
---------- ---------- ---------- ----------
Total costs and expenses...................... 85.5 86.4 84.3 86.2
---------- ---------- ---------- ----------
Income before interest and income taxes....... 14.5 13.6 15.7 13.8
Interest income, net.......................... 1.7 0.7 1.7 0.7
---------- ---------- ---------- ----------
Income before income taxes.................... 16.2 14.3 17.4 14.5
Provision for income taxes.................... 6.8 5.9 7.3 6.0
---------- ---------- ---------- ----------
Net income.................................... 9.4% 8.4% 10.1% 8.5%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
THREE MONTHS ENDED JULY 31, 1997 ("SECOND QUARTER OF 1997") COMPARED WITH THE
THREE MONTHS ENDED JULY 31, 1996 ("SECOND QUARTER OF 1996").
Revenues increased 47.3% to $22.1 million in the second quarter of 1997 from
$15.0 million in the second quarter of 1996 due primarily to an increase in
enrollments and the growing popularity of the Company's longer programs,
including Associate Degree programs. Revenues from Advantec Institute ("AI"),
increased 68.9% to $1.0 million in the second quarter of 1997 from $592,000 in
the second quarter of 1996 due primarily to an increase in the number of
students trained and students being trained in longer and higher tuition value
programs.
Student enrollment for the second quarter of 1997 was 3,037, a 43.0%
increase from the second quarter of 1996. Student enrollment at the eleven
Learning Centers which have been open for more than one year increased 20.0%,
yielding an increase in same Center student population of 23.1%. Ending student
population at July 31, 1997 increased 39.4% to 7,446 from 5,342 at July 31,
1996.
Costs of instruction and services increased by 50.0% to $12.3 million in the
second quarter of 1997 from $8.2 million in the second quarter of 1996 primarily
due to the direct costs necessary to support the increase in student population
coupled with adding additional infrastructure to support the growth of the
7
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business. These direct costs consist primarily of faculty and staff compensation
and related benefits, and facility costs (including rent and depreciation). The
Company had sixteen Learning Centers operating in the second quarter of 1997
compared to eleven Learning Centers operating in the second quarter of 1996.
Costs of instruction and services as a percentage of revenues increased to 55.6%
in the second quarter of 1997 from 55.1% in the second quarter of 1996.
Selling and promotional expenses increased by 46.2% to $3.8 million in the
second quarter of 1997 from $2.6 million in the second quarter of 1996 due
primarily to increased marketing and advertising to support the growth in
enrollments. The increase relates primarily to the five Learning Centers which
have been operating for less than one year. Selling and promotional expenses as
a percentage of revenues decreased to 17.0% in the second quarter of 1997 from
17.2% in the second quarter of 1996.
General and administrative expenses increased 6.7% to $1.6 million in the
second quarter of 1997 from $1.5 million in the second quarter of 1996, due
primarily to increases in number of personnel and increases in salaries and
related benefits associated with supporting the growth of the business. General
and administrative expense as a percentage of revenues decreased to 7.4% in the
second quarter of 1997 compared to 9.9% in the second quarter of 1996.
Provision for doubtful accounts increased by 105.2% to $1.1 million in the
second quarter of 1997 from $536,000 in the second quarter of 1996. Provision
for doubtful accounts as a percentage of revenues increased to 5.1% in the
second quarter of 1997 compared to 3.6% in the second quarter of 1996. This is
primarily due to the increase in the allowance for doubtful accounts resulting
from the increased collection risk in self funding at the Chicago Learning
Center coupled with the incremental expense associated with the five Learning
Centers which have been operating for less than one year.
Amortization of intangibles was $91,000 in the second quarter of 1997 and
1996 as there has been no change in the gross amount of the Company's only
remaining intangible asset. The asset consists of the Department of Education
certifications, which has a remaining life of approximately eight years.
The Company realized net interest income of $367,000 in the second quarter
of 1997, compared to $110,000 in the second quarter of 1996 primarily as a
result of the interest generated by larger invested cash balances.
SIX MONTHS ENDED JULY 31, 1997 COMPARED WITH THE SIX MONTHS ENDED JULY 31, 1996
Revenues increased 48.3% to $43.0 million for the six months ended July 31,
1997 from $29.0 million for the comparable period of the prior year due
primarily to an increase in enrollments and the growing popularity of the
Company's longer programs, including Associate Degree programs. Revenues from Al
increased 149.7% to $2.4 million for the six months ended July 31, 1997 from
$961,000 for the comparable period of the prior year due primarily to an
increase in the number of students trained and students attending higher tuition
programs.
Student enrollment for the six months ended July 31, 1997 was 5,617, a 37.2%
increase from the comparable period for the prior year. Student enrollment at
the eleven Learning Centers which have been open for more than one year
increased 18.0%, yielding an increase in same Center student population of
23.1%. Ending student population at July 31, 1997 increased 39.4% to 7,446 from
5,342 at July 31, 1996.
Costs of instruction and services increased 48.7% to $23.5 million for the
six months ended July 31, 1997 from $15.8 million for the comparable period of
the prior year due primarily to the direct costs necessary to support the
increase in the student population and the operation of the five new Learning
Centers. These direct costs consist primarily of faculty and staff compensation
and related benefits and facilities costs, including rent and depreciation. The
Company had sixteen Learning Centers operating during the six months ended July
31, 1997 compared to eleven Learning Centers operating during the six months
ended July 31, 1996. Costs of instruction and services as a percentage of
revenues increased to 54.8% for the six months ended July 31, 1997 from 54.5%
for the comparable period of the prior year.
8
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Selling and promotional expenses increased by 37.3% to $7.0 million for the
six months ended July 31, 1997 from $5.1 million for the comparable period of
the prior year due primarily to increased marketing and advertising to support
the growth in enrollments and as a result of having five new Learning Centers
operating during the period ended July 31, 1997. These five new Centers
accounted for $1.1 million or 57.9% of the increase in selling and promotional
expenses. Selling and promotional expenses as a percentage of revenues decreased
to 16.3% for the six months ended July 31, 1997 from 17.5% for the comparable
period of the prior year.
General and administrative expenses increased 29.6% to $3.5 million for the
six months ended July 31, 1997 from $2.7 million for the comparable period of
the prior year, due primarily to increased number of personnel and increases in
salaries and related benefits associated with supporting the growth of the
business, as well as performance-based incentive compensation expense. General
and administrative expense as a percentage of revenues was 8.2% for the six
months ended July 31, 1997 compared to 9.2% for the comparable period of the
prior year.
Provision for doubtful accounts increased by 53.9% to $2.0 million from $1.3
million for the comparable period of the prior year. Provision for doubtful
accounts as a percentage of revenues was 4.6% for the six months ended July 31,
1997 compared to 4.4% for the comparable period of the prior year. This is
primarily due to the increase in the allowance for doubtful accounts resulting
from the increased collection risk in self funding at the Chicago Learning
Center coupled with the incremental expense associated with the five Learning
Centers which have been operating for less than one year.
Amortization of intangibles was $181,000 for the six months ended July 31,
1997 and for the comparable period of the prior year as there has been no change
in the gross amount of the Company's only remaining intangible asset. The asset
consists of the Department of Education certifications, which has a remaining
life of approximately eight years.
The Company realized net interest income of $713,000 for the six months
ended July 31, 1997, compared to net interest income of $214,000 for the
comparable period of the prior year primarily as a result of the interest
generated by larger invested cash balances.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased by $1.9 million for the
six-month period ended July 31, 1997. Cash generated from operations in the
first six months of the year as compared to the prior year period increased by
approximately $900,000 primarily due to the difference in net income for the
comparable periods. Capital expenditures increased to $9.1 million in 1997 from
$3.0 million in 1996 primarily as a result of funding leasehold improvements and
purchasing necessary capital equipment for Learning Centers that commenced
operations during the period as well as anticipated new Learning Centers.
The Company believes its available cash on hand, cash provided by operating
activities and existing lines of credit under the credit facility will be
sufficient to meet the Company's cash requirements for at least the next 12
months. Thereafter, the Company will continue to evaluate all sources of capital
available to it, including bank financing and additional equity or debt
offerings, to satisfy ongoing working capital and capital expenditure
requirements.
STUDENT LOAN DEFAULTS
By letter dated September 26, 1996, the Department of Education notified the
Company that, effective upon receipt of the letter, the Chicago Learning Center
was no longer eligible to participate in the Federal Family Education Loan
("FFEL") program and further notified the Company that the Chicago Learning
Center may reapply to participate in the FFEL program on October 1, 1997 if its
FY 1994 cohort default rate, which has since been published at 21.1%, was below
25%. In accordance with a previously
9
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enacted statute, the Department of Education also stated that the Chicago
Learning Center could not participate in the Pell Grant program until July 1,
1997, however the Chicago Learning Center maintained eligibility to participate
in other Title IV Programs, including the Federal Supplemental Education
Opportunity Grant program and the Federal Perkins program. Effective July 1,
1997, the Chicago Learning Center regained eligibility to participate in the
Pell Grant program.
The Philadelphia Learning Center's FY 1994 cohort default rate as published
is 26.9% which results in three consecutive years of default rates that exceed
the 25% threshold. The Company plans on appealing the FY 1994 cohort default
rate with the Department of Education to challenge the accuracy of such rate. If
the ultimate resolution for the FY 1994 cohort default rate appeal is
unfavorable, the Philadelphia Leaning Center would be subject to the loss of
eligibility to participate in the FFEL and Federal Direct Loan programs. The
Company cannot predict either the outcome or timing of when the Department of
Education's decision with respect to the Philadelphia Learning Center's FY 1994
cohort default rate appeal. If the Philadelphia Learning Center suffers an
interruption of, or loses, its eligibility to participate in some or all of the
Title IV Programs, such interruption or loss would have a material adverse
effect on the Company.
The US Department of Education recently notified post secondary educational
institutions of their 1995 Draft Cohort Default Rate ("CDR") for the FFEL
program. The Draft CDR was previously called the "Prepublication" CDR. The Draft
CDR's for all Learning Centers averaged 16.8%, as compared to an average
official CDR for fiscal 1994 of 21.1%. Draft CDR's are subject to revision prior
to publication as official CDR's, however the Company does not anticipate that
the rates will increase significantly. The Company's Chicago and Philadelphia
Learning Centers had fiscal 1995 Draft CDR's of 15.9% and 18.4% respectively,
versus official CDR's for fiscal 1994 of 21.1% and 26.9%.
Effective July 1, 1997, the Company regained utilization of the Federal Cash
Contribution ("FCC") associated with the Federal Perkins loan program. The FCC
represents additional Title IV funds provided to the Company on behalf of the
Federal government. The Federal Perkins program accounted for 1.0% of the
Company's revenues in fiscal year 1997.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The following factors, among others, could cause actual results to differ
materially from those contained in forward looking statements made in this
Report on Form 10-Q and presented elsewhere by management from time to time.
POTENTIAL ADVERSE EFFECTS OF REGULATION
As educational institutions that participate in various federal and state
financial aid programs, the Company and the Learning Centers are subject to
extensive governmental regulation. In particular, the Higher Education Act of
1965, as amended (the "HEA"), and the regulations promulgated thereunder,
subject the Company, the Learning Centers and all other higher education
institutions eligible to participate in the various Title IV Programs to
significant regulatory scrutiny. The termination or material limitation of the
ability of the Company or any of the Learning Centers to participate in the
Title IV Programs would have a material adverse effect on the Company.
Because certain statutory and regulatory provisions impose significant
requirements on the Company and the Learning Centers and because the agency
administering these regulations (the United States Department of Education) has
not fully developed administrative interpretations of certain of the statutory
and regulatory provisions, it is not clear how the requirements imposed by
statute and regulations will be applied and interpreted. In addition, changes in
or new interpretations of the HEA, its implementing regulations or other
applicable laws, rules or regulations could have a material adverse effect on
the accreditation, authorization to operate in various states, permissible
activities or costs of doing business of the Company or one or more of the
Learning Centers. The failure to maintain or renew any required
10
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regulatory approvals, accreditations or authorizations by the Company or any of
the Learning Centers would have a material adverse effect on the Company.
The violation of federal requirements governing participation in the Title
IV Programs or of state or accrediting agency requirements governing the
provision of educational services by the Company or any Learning Center could
result in the restriction or loss by the Company or a Learning Center of its
ability to participate in government funding programs or to offer education and
training programs. Any such loss or restriction would have a material adverse
effect on the Company. Furthermore, current statutes and regulations or
statutory and regulatory standards that become effective in the future may be
applied or interpreted by the government in ways that will delay or change the
Company's expansion plans or otherwise adversely affect the operation of the
Learning Centers and their participation in the Title IV Programs. In addition,
all government-provided student financial aid programs, including the Title IV
Programs, are subject to the effects of federal and state budgetary processes
and the possible elimination or consolidation of the Department of Education,
and there can be no assurance that government funding for the financial aid
programs in which the Company's students participate will continue to be
available or be maintained at current levels. The loss of funding or a reduction
in funding levels for the Title IV Programs would have an adverse material
effect on the Company.
CONTROL BY GENERAL ATLANTIC ENTITIES; POTENTIAL ADVERSE REGULATORY EFFECTS OF
CHANGE OF CONTROL
General Atlantic Corporation and certain of its affiliates (the "General
Atlantic Entities") currently own approximately 18.4% of the Company's Common
Stock. Consequently, the General Atlantic Entities have significant influence
over the policies and affairs of the Company and are in a position to determine
the outcome of corporate actions requiring stockholder approval, including the
election of directors, the adoption of amendments to the Company's Amended and
Restated Certificate of Incorporation and the approval of mergers and sales of
the Company's assets. Although the General Atlantic Entities have advised the
Company that they have no immediate plans to dispose of additional shares of
Common Stock held by them, the General Atlantic Entities disposed of Common
Stock in June of 1997 and there can be no assurance that the General Atlantic
Entities will maintain their current ownership interest in the Company or as to
the manner or timing of any disposition of Common Stock by the General Atlantic
Entities. Because of the control position of the General Atlantic Entities, any
disposition of Common Stock by the General Atlantic Entities or issuance of
stock by the Company that results in a loss of control by the General Atlantic
Entities may have material adverse consequences for the Company under applicable
federal and state regulations and accrediting agency requirements, including
potential loss of eligibility to participate in the Title IV Programs. Upon a
change in ownership resulting in a change of control of the Company, as defined
in the HEA's and the Department's regulations, each Learning Center would lose
its eligibility to participate in the Title IV Programs for an indeterminate
period of time while it applies to regain eligibility with the likely loss of a
portion of its Title IV funding during the re-approval period. A change of
control would also have significant regulatory consequences for the Company at
the state level and could affect the accreditation of the Learning Centers.
COMPETITION
The post-secondary adult education and training market is highly fragmented,
with no single institution or company holding a dominant market share. The
Company competes for students with vocational and technical training schools,
degree-granting colleges and universities, continuing education programs and
commercial training programs. Certain public and private colleges may offer
programs similar to those of the Learning Centers at a lower tuition cost due in
part to government subsidies, foundation grants, tax-deductible contributions or
other financial resources not available to proprietary institutions.
11
<PAGE>
DEPENDENCE ON NEW PROGRAMS; RISKS ASSOCIATED WITH CHANGES IN TECHNOLOGY AND
GROWTH
The market for the Company's programs and services is characterized by
rapidly-changing requirements and characteristics, and the Company's ability to
develop and offer new programs and services and to open new locations is subject
to extensive state and federal regulation and accrediting agency requirements.
If the Company is unable, for financial, regulatory or other reasons, to develop
and offer new programs and services in a timely manner in response to changes in
the industry, or if programs and services offered by the Company fail to gain or
maintain widespread commercial acceptance, the Company's business may be
materially and adversely affected.
The Company offers training programs and services for rapidly-changing
information technology. The introduction of information products embodying new
technologies and the emergence of new information system standards or services
may adversely affect the Company's ability to market its programs and services.
This may require the Company to make substantial expenditures in order to
develop new programs and services and to acquire new faculty, equipment and
facilities. If the Company is unable, for financial, regulatory or other
reasons, to make those expenditures or acquisitions, the Company's business may
be materially and adversely affected.
The Company's ability to meet its future operating and financial goals will
depend upon the Company's ability to successfully implement its growth strategy
which will include the introduction of new locations, as well as the potential
acquisition of assets and programs complementary to the Company's operations.
The Company's success in this area will depend on its ability to successfully
integrate such new locations, assets and businesses. There can be no assurance
that the Company will be able to implement or manage expansion effectively.
DEPENDENCE UPON KEY EMPLOYEES
The Company's success depends to a significant extent upon the continued
service of its executive officers and other key personnel. None of the Company's
executive officers or key employees, other than the President and Chief
Executive Officer, are subject to an employment or non-competition agreement.
The loss of the services of any of its executive officers or other key employees
could have a material adverse effect on the Company. The Company's future
success will depend in part upon its continuing ability to attract and retain
highly qualified personnel. There can be no assurance that the Company will be
successful in attracting and retaining such personnel.
GENERAL
Because of these and other factors, past financial performance should not be
considered an indicator of future performance. Investors should not use
historical trends to anticipate future results and should be aware that the
trading price of the Company's Common Stock may be subject to wide fluctuations
in response to quarter-to-quarter variations in operating results, general
conditions in the education and training industry, changes in earnings estimates
and recommendations by analysts or other events.
12
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's 1997 Annual Meeting of Stockholders was held on July 10, 1997.
Represented, in person or by proxy were 7,230,918 shares, or, approximately 92%
of total shares outstanding. The following actions were taken:
1. Election of two Class II Directors to serve until the 2000 Annual Meeting
of Stockholders. The two nominees, Ira D. Cohen and Stephen P. Reynolds, were
elected by the following vote:
<TABLE>
<CAPTION>
NOMINEES FOR AGAINST NON-VOTE
- ------------------------------------------------------------- ---------- ----------- ---------------
<S> <C> <C> <C>
Mr. Cohen.................................................... 7,223,548 7,370 0
Mr. Reynolds................................................. 7,223,548 7,370 0
</TABLE>
2. To approve an amendment to the Company's Second Amended and Restated
Certificate of Incorporation to increase the authorized number of shares of
Common Stock of the Company from 10,000,000 shares to 35,000,000 shares.
<TABLE>
<CAPTION>
FOR AGAINST NON-VOTE
- ---------- ---------- -------------
<S> <C> <C>
5,894,971 1,335,597 350
</TABLE>
3. To approve the Company's Non-Employee Directors Stock Option Plan.
<TABLE>
<CAPTION>
FOR AGAINST NON-VOTE
- ---------- --------- -----------
<S> <C> <C>
7,186,713 11,900 2,565
</TABLE>
4. To approve amendments to the Company's Non-Employee Directors Stock
Option Plan.
<TABLE>
<CAPTION>
FOR AGAINST NON-VOTE
- ---------- --------- -----------
<S> <C> <C>
7,145,981 19,930 35,267
</TABLE>
5. Ratification of the selection by the Board of Directors of Price
Waterhouse LLP as independent accountants for the current fiscal year.
<TABLE>
<CAPTION>
FOR AGAINST NON-VOTE
- ---------- ----------- -------------
<S> <C> <C>
7,230,468 150 300
</TABLE>
ITEM 5. OTHER INFORMATION.
Not applicable.
13
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
A list of exhibits required to be filed as part of this report is set
forth in the Index to Exhibits, which immediately precedes such exhibits
and is incorporated herein by reference.
(b) Reports on Form 8-K
None.
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.
COMPUTER LEARNING CENTERS, INC.
By: /s/ CHARLES L. COSGROVE
-----------------------------------------
Charles L. Cosgrove
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
Date: September 9, 1997
14
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. FILING DESCRIPTION PAGE NO. IN THIS FILING
- ------------------- ----------------------------------------------- -----------------------------------------------
<S> <C> <C>
3.1 Second Amended and Restated Certificate of Page 16
Incorporation of the Registrant, as amended
3.2 Amended and Restated Bylaws of the Registrant Incorporated by reference to Exhibit 3.4 of the
Registrant's Form S-1 Registration Statement,
as amended, filed March 29, 1995 (No.33-90716)
4.1 Form of Certificate for Shares of the Incorporated by reference to Exhibit 4.1 of the
Registrant's Common Stock Registrant's Form S-1 Registration Statement,
as amended, filed March 29, 1995 (No. 33-90716)
10.1 Employee Stock Purchase Plan Page 27
11.1 Statement re: Computation of Per Share Earnings Page 31
27 Financial Data Schedule Page 33
</TABLE>
15
<PAGE>
Exhibit 3.1
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COMPUTER LEARNING CENTERS, INC.
Pursuant to Sections 242 and 245 of the General
Corporation Law of the State of Delaware
The undersigned, Reid R. Bechtle and Charles L. Cosgrove, are President and
Secretary, respectively, of Computer Learning Centers, Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation"). The Corporation's Certificate of Incorporation
was initially filed in the Office of the Secretary of State of Delaware on March
6, 1987 under the name Comprehensive Learning Concepts, Inc., Restated
Certificates of Incorporation of the Corporation were subsequently filed with
the Office of the Secretary of State of Delaware under such name on May 31, 1989
and January 29, 1991 and an Amended and Restated Certificate of Incorporation of
the Corporation was filed under the name "Computer Learning Centers, Inc." on
May 5, 1995.
The undersigned, as President and Secretary of the Corporation, do hereby
certify that:
(a) the Board of Directors of the Corporation, at a meeting thereof duly
called and held on May 4, 1995, at which a quorum was present and acting
throughout, duly adopted a resolution pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware proposing that this Second
Amended and Restated Certificate of Incorporation be approved and declaring the
adoption of such Second Amended and Restated Certificate to be advisable;
(b) this Second Amended and Restated Certificate of Incorporation was duly
approved by the stockholders of the Corporation by written consent in accordance
with the provisions of Sections 228 and 242 of the General Corporation Law of
the State of Delaware, and written notice of such consent has been given to all
stockholders of the Corporation who have not consented in writing to said
amendment and restatement; and
(c) this Second Amended and Restated Certificate of Incorporation amends
and restates and further amends the Amended and Restated Certificate of
Incorporation of the Corporation and the following sets forth the terms of the
Second Amended and Restated Certificate of Incorporation of the Corporation:
FIRST. The name of the Corporation is Computer Learning Centers, Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
is as follows:
To provide information technology and computer-related skills training to
students and professionals and to conduct or engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: I. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 11,000,000 shares, consisting of
(i) 10,000,000 shares of Common Stock, $.01 par value (the "Common Stock") and
(ii) 1,000,000 shares of Series Preferred Stock, $.01 par value ("Preferred
Stock").
16
<PAGE>
II. The designations, powers, preferences and relative,
participating, optional or other special rights of, and the qualifications,
limitations or restrictions upon, each class or series of stock shall be as
follows:
1. COMMON STOCK.
2. General. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
3. Voting. The holders of the Common Stock are entitled to one vote for
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
4. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
5. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
6. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Except as
provided herein or to the extent class or series voting is otherwise required by
law or agreement, without limiting the generality of the foregoing, the
resolutions providing for issuance of any series of Preferred Stock may provide
that such series shall be superior or rank equally or be junior to the Preferred
Stock of any other series to the extent permitted by law. Except as provided
herein or to the extent class or series voting is otherwise required by law or
agreement, no vote of the holders of the Preferred Stock or Common Stock shall
be a prerequisite to the issuance of any shares of any series of the Preferred
Stock authorized by and complying with the conditions of the Certificate of
Incorporation, the right to have such vote being expressly waived by all present
and future holders of the capital stock of the Corporation.
FIFTH. In furtherance and not in limitation of powers conferred by
statute, it is further provided:
(a) Election of directors need not be by written ballot.
(b) The Board of Directors is expressly authorized to adopt,
amend or repeal the Bylaws of the Corporation.
(c) The books of the Corporation may be kept at such place
within or without the State of Delaware as the Bylaws of the Corporation may
provide or as may be designated from time to time by the Board of Directors of
the Corporation.
17
<PAGE>
SIXTH. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver of receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
SEVENTH. I. Actions, Suits and Proceedings Other than by or in the Right
of the Corporation. The Corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section VII
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
II. Actions or Suits by or in the Right of the Corporation. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware or such other court shall deem proper.
III. Indemnification for Expenses of Successful Party. Notwithstanding the
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections I and II of this Article, or in defense of
any claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he
18
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
Corporation, and (v) with respect to any criminal proceeding, an adjudication
that the Indemnitee had reasonable cause to believe his conduct was unlawful,
the Indemnitee shall be considered for the purposes hereof to have been wholly
successful with respect thereto.
IV. Notification and Defense of Claim. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section IV. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in
clause (ii) above.
V. Advance of Expenses. Subject to the provisions of Section VI below,
in the event that the Corporation does not assume the defense pursuant to
Section IV of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter,
provided, however, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Corporation as authorized in
this Article. Such undertaking may be accepted without reference to the
financial ability of such person to make such repayment.
VI. Procedure for Indemnification. In order to obtain indemnification or
advancement of expenses pursuant to Section I, II, III or V of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section I, II or V the
Corporation determines, by clear and convincing evidence, within such 60-day
period that the Indemnitee did not meet the applicable standard of conduct set
forth in Section I or II, as the case may be. Such determination shall be made
in each instance by (a) a majority vote of a quorum of the directors of the
Corporation consisting of persons who are not at that time parties to the
action, suit or proceeding in question ("disinterested directors"), (b) if no
such quorum is obtainable, a majority vote of a committee of two or more
disinterested directors, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (d) independent
legal counsel (who may be regular legal counsel to the Corporation), or (e) a
court of competent jurisdiction.
VII. Remedies. The right to indemnification or advances as granted by this
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section VI. Unless otherwise provided by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the
Corporation to have made a determination prior to the commencement of such
action that indemnification is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to Section VI that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct. The Indemnitee's expenses (including attorneys' fees) incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
19
<PAGE>
VIII. Subsequent Amendment. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
IX. Other Rights. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time
to time by its Board of Directors, grant indemnification rights to other
employees or agents of the Corporation or other persons serving the Corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this Article.
X. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
XI. Insurance. The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of Delaware.
XII. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
XIII. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
XIV. Definitions. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
XV. Subsequent Legislation. If the General Corporation Law of Delaware
is amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
XVI. Amendments to Article. Notwithstanding any other provisions of law,
this Second Amended and Restated Certificate of Incorporation or the Bylaws of
the Corporation, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least sixty-three
and two-thirds percent (66 2/3%) of the votes which all the stockholders would
be entitled to cast at any annual election of directors or class of directors
shall be required to amend or repeal, or to adopt any provision inconsistent
with, this Article.
20
<PAGE>
EIGHTH. The Corporation is to have perpetual existence.
NINTH. Except to the extent that the General Corporation Law of
Delaware, as amended from time to time, prohibits the elimination or limitation
of liability of directors for breaches of fiduciary duty, no director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for any breach of fiduciary duty as a director,
notwithstanding any provision of law imposing such liability. No amendment to
or repeal of this provision shall apply to or have any effect on the liability
or alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment.
Notwithstanding any other provisions of law, this Second Amended and Restated
Certificate of Incorporation or the Bylaws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least sixty-six and two-thirds percent (66
2/3%) of the votes which all the stockholders would be entitled to cast at any
annual election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article.
TENTH. This Article is inserted for the management of the business and
for the conduct of the affairs of the Corporation, and it is expressly provided
that it is intended to be in furtherance and not in limitation or exclusion of
the powers conferred by the statutes of Delaware.
I. Number of Directors. The number of directors which shall constitute
the whole Board of Directors shall be determined by resolution of a majority of
the Board of Directors, but in no event shall be less than three. The number of
directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of stockholders
by such stockholders as have the right to vote on such election. Directors need
not be stockholders of the Corporation.
II. Classes of Directors. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class. If a fraction is contained in
the quotient arrived at by dividing the authorized number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class III and, if such fraction is two-thirds, one of the extra directors shall
be a member of Class II and the other extra director shall be a member of Class
III, unless otherwise provided for from time to time by resolution adopted by a
majority of the Board of Directors.
III. Terms of Office. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, however, that each initial director in Class I
shall serve for a term ending on the date of the annual meeting next following
the end of the Corporation's fiscal year ending January 31, 1996; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting next following the end of the Corporations fiscal year ending January
31, 1997; and each initial director in Class III shall serve for a term ending
on the date of the annual meeting next following the end of the Corporation's
fiscal year ending January 31, 1998.
IV. Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as director of the class of which he is a member
until the expiration of his current term or his prior death, retirement, or
resignation and (ii) the newly created or eliminated directorships resulting
from such increase or decrease shall be apportioned by the Board of Directors
among the three classes of directors so as to ensure that no one class has more
than one director more than any other class. To the extent possible, consistent
with the foregoing rule, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of office are to expire at the earliest dates
following such allocation, unless otherwise provided for from time to time by
resolution adopted by a majority of the directors then in office, although less
than a quorum.
V. Tenure. Notwithstanding any provisions to the contrary contained
herein, each director shall hold office until his successor is elected and
qualified, or until his earlier death, resignation or removal.
21
<PAGE>
VI. Vacancies. Any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, may be filled
only by vote of a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office, if
applicable, and a director chosen to fill a position resulting from an increase
in the number of directors shall hold office until the next election of the
class for which such director shall have been chosen and until this successor is
elected and qualified, or until his earlier death, resignation or removal.
VII. Quorum. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
VIII. Action at Meeting. At any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law or
the Corporation's Certificate of Incorporation or By-Laws.
IX. Removal. Any one or more of the directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors; provided that, if and for so long as the Board of
Directors is classified pursuant to Section 141(d) of the General Corporation
Law of Delaware, stockholders may effect such removal only for cause.
X. Stockholder Nominations and Introduction of Business, Etc. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided in the By-Laws of the Corporation.
XI. Amendments to Article. Notwithstanding any other provisions of law,
this Second Amended and Restated Certificate of Incorporation or the
Corporation's By-Laws, as amended, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the votes which all the
stockholders would be entitled to cast at any annual election of directors or
class of directors shall be required to amend or repeal, or to adopt any
provision inconsistent with, this Article TENTH.
ELEVENTH. Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting. Notwithstanding any other provision of
law, this Second Amended and Restated Certificate of Incorporation or the
Corporation's By-Laws, as amended, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the votes which all the
stockholders would be entitled to cast at any annual election of directors or
class of directors shall be required to amend or repeal, or to adopt any
provision inconsistent with this Article ELEVENTH.
TWELFTH. Special meetings of stockholders may be called at any time by the
President or by the Chairman of the Board of Directors. Business transacted at
any special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting. Notwithstanding any other
provision of law, this Second Amended and Restated Certificate of Incorporation
or the Corporation's By-Laws, as amended, and notwithstanding the fact that a
lesser percentage may be specified by law, the affirmative vote of the holders
of at least sixty-six and two-thirds percent (66 2/3%) of the votes which all
the stockholders would be entitled to cast at any annual election of directors
or class of directors shall be required to amend or repeal, or to adopt any
provision inconsistent with this Article TWELFTH.
THIRTEENTH: Except as otherwise provided herein, the Corporation reserves
the right to amend, alter, change or repeal any provision contained in this
Second Amended and Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute and this Second Amended and Restated Certificate
of Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
22
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Second Amended and
Restated Certificate of Incorporation to be signed by its President and its
corporate seal to be hereunto affixed and attested by its Secretary, as of the
31st day of May, 1995.
COMPUTER LEARNING CENTERS, INC.
By: \s\ Reid R. Bechtle
-------------------------
Reid R. Bechtle
President
\s\ Charles L. Cosgrove
Attest:----------------------------
Secretary
23
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "COMPUTER LEARNING CENTERS, INC." FILED IN THIS OFFICE ON THE THIRTIETH DAY
OF JULY, AD 1997 AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
SIGNED: EDWARD J. FREEL, SECRETARY OF STATE
DATE: 07-30-97
AUTHENTICATION: 8583293
24
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COMPUTER LEARNING CENTERS, INC.
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
The undersigned, Reid R. Bechtle and Charles L. Cosgrove, are President and
Secretary, respectively, of Computer Learning Centers, Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation"). The undersigned, as President and Secretary of
the Corporation, do hereby certify that:
(a) the Board of Directors of the Corporation, at a meeting thereof duly
called and held on March 13, 1997, at which a quorum was present and acting
throughout, duly adopted a resolution pursuant to Section 242 of the General
Corporation Law of the State of Delaware setting forth an amendment to the
Corporation's Second Amended and Restated Certificate of Incorporation (the
"Charter"), and declaring said amendment to be advisable; and
(b) said amendment was duly approved by the stockholders of the
Corporation at a meeting thereof duly called and held on July 10, 1997, at which
a quorum was present and acting throughout, in accordance with the provisions of
Section 242 of the General Corporation Law. The resolution setting forth the
amendment is as follows:
RESOLVED: That Section I of Article FOURTH of the Charter is hereby deleted
in its entirety and the following is inserted in lieu thereof:
I. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 36,000,000 shares, consisting of
(i) 35,000,000 shares of Common Stock, $.0l par value (the "Common Stock") and
(ii) 1,000,000 shares of Series Preferred Stock, $.0l par value ("Preferred
Stock").
25
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President and its corporate seal to be hereunto
affixed and attested by its Secretary, as of the 10th day of July, 1997.
COMPUTER LEARNING CENTERS, INC.
By: \s\ Reid R. Bechtle
----------------------------
Reid R. Bechtle
President
Attest: \s\ Charles L. Cosgrove
-------------------------------
Secretary
26
<PAGE>
Exhibit 10.1
COMPUTER LEARNING CENTERS, INC.
EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Plan is to provide eligible employees of Computer
Learning Centers, Inc. (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.01 par value
(the "Common Stock"), commencing on August 1, 1997. Two hundred thousand
(200,000) shares of Common Stock in the aggregate have been approved for this
purpose.
1. ADMINISTRATION. The Plan will be administered by the Company's Board of
Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. ELIGIBILITY. Participation in the Plan will neither be permitted nor
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder. All
employees of the Company, including Directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options (as defined in Section 9) to purchase Common Stock under the Plan
provided that:
(a) they are regularly employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and
(b) they have been employed by the Company or a Designated Subsidiary
for at least 12 months prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or the subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424 (d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the employee has a contractual right to purchase shall be treated as
stock owned by the employee.
3. OFFERINGS. The Company will make one or more offerings ("Offerings") to
employees to purchase stock under this Plan. Offerings will begin each February
1, or the first business day thereafter (the "Offering Commencement Dates").
Each Offering Commencement Date will begin a 12 month period (a "Plan Period")
during which payroll deductions will be made and held for the purchase of Common
Stock at the end of the Plan Period. The Board or the Committee may, at its
discretion, choose a different Plan Period of twelve (12) months or less for
subsequent offerings.
The Board has approved the initial offering period, subject to the Plan
being approved by stockholders, of August 1, 1997 through January 31, 1998.
Thereafter, the offering period unless changed by the Board or Committee will be
a twelve month period beginning February 1, and ending January 31.
4. PARTICIPATION. An employee eligible on the Offering Commencement Date of
any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the Corporate Human Resources Department
at least 30 days prior to the applicable Offering Commencement Date. The form
will authorize a regular payroll deduction from the Compensation received by the
employee during the Plan Period. Unless an employee files a new form or
withdraws from the Plan, his deductions and purchases will continue at the same
rate for future Offerings under the Plan as long as the Plan remains in effect.
The term "Compensation" means the amount of money reportable on the employee's
Federal Income Tax Withholding Statement, excluding (overtime, shift premium,
incentive or bonus awards, allowances for travel expenses, income or gains on
the exercise of Company stock options or stock appreciation rights, and similar
items, whether or not shown on the employee's Federal Income Tax Withholding
Statement, but including, in the case of salespersons, sales commissions to the
extent determined by the Board of the Committee).
5. DEDUCTIONS. The Company will maintain payroll deduction accounts for all
participating employees. With respect to any Offering made under this Plan, an
employee may authorize a payroll deduction in any whole percentage from 1% to
10% of the Compensation he or she receives during the Plan Period or such
shorter period during which deductions from payroll are made. The deduction
percentages will be converted to fixed dollar amounts and rounded down to the
nearest whole dollar.
27
<PAGE>
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other
purchase plan of the Company and its subsidiaries, to accrue at a rate which
exceeds $25,000 of the fair market value of such Common Stock (determined at the
Offering Commencement Date of the Plan Period) for each calendar year in which
the Option is outstanding at any time.
6. DEDUCTION CHANGES. An employee may discontinue his payroll deduction
during any Plan Period, by filing a new payroll deduction authorization form.
An employee may not increase his payroll deduction during a Plan Period. If an
employee elects to discontinue his payroll deductions during a Plan Period, but
does not elect to withdraw his funds pursuant to Section 8 hereof, funds
deducted prior to his election to discontinue will be applied to the purchase of
Common Stock on the Exercise Date (as defined below).
7. INTEREST. Interest will not be paid on any employee accounts, except to
the extent that the Board or the Committee, in its sole discretion, may elect in
the future to credit employee accounts with interest at such per annum rate as
it may from time to time determine.
8. WITHDRAWAL OF FUNDS. An employee may at any time prior to the close of
business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee,
except that employees who are also directors or officers of the Company within
the meaning of Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules promulgated there under may not participate again for a
period of at least six months as provided in Rule 16b--3 (d) (2) (i) or any
successor provision.
9. PURCHASE OF SHARES. On the Offering Commencement Date of each Plan
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan. In no event may an employee purchase in any one Offering
Period, a number of shares which is more than 15% of the employee's annualized
base pay divided by 85% of the market value of a share of Common Stock on the
Commencement date of the offering period.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (a) the closing price on any national securities exchange on
which the Common Stock is listed, (b) the closing price of the Common Stock on
the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter-market, whichever is applicable, as published in
THE WALL STREET JOURNAL. If no sales of Common Stock were made on such a day,
the price of the Common Stock for purposes of clauses (a) and (b) above shall be
the reported price for the next preceding day on which sales were made.
Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on such date will pay for pursuant to the formula set forth
above (but not in excess of the maximum number determined in the manner set
forth above).
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period which is less than the purchase price of one share of Common
Stock will be carried forward into the employee's payroll deduction account for
the following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. ISSUANCE OF CERTIFICATES. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the street
name of a brokerage firm, bank or other nominee holder designated by the
employee.
11. RIGHTS ON RETIREMENT, DEATH OR TERMINATION OF EMPLOYMENT. In the event
of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purpose of this Plan.
28
<PAGE>
12. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. RIGHTS NOT TRANSFERABLE. Rights under this Plan are not transferable by
a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. APPLICATION OF FUNDS. All funds received or held by the Company under
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. ADJUSTMENT IN CASE OF CHANGES AFFECTING COMMON STOCK. In the event of a
subdivision of outstanding shares of Common Stock, or the payment of dividend in
Common Stock, the number of shares approved for this Plan, and the share
limitation set forth in Section 9, shall be increased proportionately, and such
other adjustment shall be made as may be deemed equitable by the Board or the
Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. MERGER. If the Company shall at any time merge or consolidate with
another corporation and the holders of the capital stock of the company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger, and the Committee shall take such steps in
connection with such merger as the Committee shall deem necessary to assure that
the provisions of Paragraph 15 shall thereafter be applicable, as nearly as
reasonably may be, in relation to the said securities or property as to which
such holder of such Option might thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such Stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transactions; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (c) all outstanding Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each holder
of an Option shall have the right to exercise such Option in full based on
payroll deductions then credited to his account as of a date determined by the
Board or the Committee, which date shall not be less than ten (10) days
preceding the effective date of such transaction.
17. AMENDMENT OF THE PLAN. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the shareholders of the Company is required by Section 423 of
the Code or by Rule 16b-3 under the Exchange Act, such amendment shall not be
effected without such approval, and (b) in no event may any amendment be made
which would cause the Plan to fail to comply with Section 16 of the Exchange Act
and the rules promulgated thereunder, as in effect from time to time, or Section
423 of the Code.
18. INSUFFICIENT SHARES. In the event that the total number of shares of
Common Stock specified in elections to be purchased under any Offerings plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. TERMINATION OF THE PLAN. This plan may be terminated at any time by the
Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
29
<PAGE>
20. GOVERNMENTAL REGULATIONS. The Company's obligation to sell and deliver
Common Stock under this Plan is subject to listing on a national stock exchange
or quotation on the Nasdaq National Market and the approval of all governmental
authorities required in connection with the authorization, issuance or sale of
such stock.
The Plan shall be governed by Delaware law except to the extent that such
law is preempted by federal law.
The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934. Any provision
inconsistent with such Rule shall to that extent be inoperative and shall not
affect the validity of the Plan.
21. ISSUANCE OF SHARES. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
22. NOTIFICATION UPON SALE OF SHARES. Each employee agrees, by entering the
Plan, to promptly give the Company notice of any disposition of shares purchased
under the Plan where such disposition occurs within two years after the date of
grant of the Option pursuant to which such shares were purchased.
23. EFFECTIVE DATE AND APPROVAL OF SHAREHOLDERS. The Plan shall take effect
on August 1, 1997 subject to approval by the shareholders of the Company as
required by Rule 16b-3 under the Exchange Act and by Section 423 of the Code,
which approval must occur within twelve months of the adoption of the Plan by
the Board.
Adopted by the Board of Directors on March 13, 1997
Approved by the stockholders on July 10, 1997
30
<PAGE>
Exhibit 11.1
COMPUTER LEARNING CENTERS, INC.
Computation of Earnings Per Share
(dollar amounts in thousands, except per share amounts)
(unaudited)
For the three-month period ended July 31,
-----------------------------------------
1997 1996
---------- ---------
Net income $ 2,078 $ 1,257
--------- ---------
Weighted average number of common
shares outstanding:
Common Stock 7,901,565 6,441,509
Common Stock Equivalents:
Employee stock options 517,154 431,333
Non employee stock options 36,318 159,002
--------- ---------
Weighted average common shares outstanding 8,455,037 7,031,844
--------- ---------
Earnings per share:
Net income per share $0.25 $0.18
--------- ---------
Share amounts and earnings per share restated to reflect the April 1997
three for two stock split.
31
<PAGE>
Exhibit 11.1
COMPUTER LEARNING CENTERS, INC.
Computation of Earnings Per Share
(dollar amounts in thousands, except per share amounts)
(unaudited)
For the six-month period ended July 31,
---------------------------------------
1997 1996
--------- ---------
Net income $4,321 $2,464
--------- ---------
Weighted average number of common
shares outstanding:
Common Stock 7,863,794 6,415,196
Common Stock Equivalents:
Employee stock options 486,729 345,493
Non employee stock options 33,279 111,114
--------- ---------
Weighted average common shares outstanding 8,383,802 6,871,803
--------- ---------
Earnings per share:
Net income per share $0.52 $0.36
--------- ---------
Share amounts and earnings per share restated to reflect the April 1997 three
for two stock split.
32
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF OPERATIONS AND THE BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 25,094
<SECURITIES> 192
<RECEIVABLES> 42,505
<ALLOWANCES> (3,124)
<INVENTORY> 633
<CURRENT-ASSETS> 64,414
<PP&E> 25,638
<DEPRECIATION> (8,683)
<TOTAL-ASSETS> 91,152
<CURRENT-LIABILITIES> 42,507
<BONDS> 0
0
0
<COMMON> 80
<OTHER-SE> 45,543
<TOTAL-LIABILITY-AND-EQUITY> 91,152
<SALES> 0
<TOTAL-REVENUES> 42,968
<CGS> 0
<TOTAL-COSTS> 36,226
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,993
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,455
<INCOME-TAX> 3,134
<INCOME-CONTINUING> 4,321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,321
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.51
</TABLE>
