<PAGE>
AS FILED WITH SECURITIES AND EXCHANGE COMMISSION ON JUNE 1, 1998. FILE NO.
0-26040
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /)
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
COMPUTER LEARNING CENTERS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
COMPUTER LEARNING CENTERS, INC.
11350 RANDOM HILLS ROAD, SUITE 240
FAIRFAX, VIRGINIA 22030
------------------------
July 24, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held at 11:00 a.m. on August 25, 1998 at the Westfields Conference Center, 14750
Conference Center Drive, Chantilly, Virginia 20151.
We urge you to participate in the business of the Annual Meeting by
completing and returning the enclosed proxy as promptly as possible. Your vote
is important.
The accompanying Notice of Annual Meeting and Proxy Statement provide
information about the matters to be acted upon by the stockholders. The Proxy
Statement also contains information about the role and responsibility of the
Board of Directors and the committees of the Board and provides important
information about each nominee for election as Director.
Sincerely,
Reid R. Bechtle
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
COMPUTER LEARNING CENTERS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 25, 1998
------------------------
The 1998 Annual Meeting of Stockholders of Computer Learning Centers, Inc.
(the "Company") will be held Tuesday, August 25, 1998 at 11:00 a.m. at the
Westfields Conference Center, 14750 Conference Center Drive, Chantilly, Virginia
20151 for the following purposes:
1. To elect two Class III Directors to serve until the 2001 Annual
Meeting of Stockholders.
2. To approve the Company's 1998 Stock Incentive Plan.
3. To ratify the selection by the Board of Directors of Price Waterhouse
LLP as independent accountants for the current fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
All stockholders of record at the close of business on June 26, 1998 will be
entitled to vote at the meeting. The stock transfer books of the Company will
remain open following the record date.
It is important that your shares be represented at this meeting. Whether or
not you expect to be present, please fill in, date, sign and return the enclosed
proxy form in the accompanying addressed, postage-prepaid envelope. If you
attend the meeting, you may revoke your proxy and vote in person.
By Order of the Board of Directors,
Charles L. Cosgrove,
SECRETARY
July 24, 1998
<PAGE>
COMPUTER LEARNING CENTERS, INC.
11350 RANDOM HILLS ROAD, SUITE 240
FAIRFAX, VIRGINIA 22030
------------------------
PROXY STATEMENT
------------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 25, 1998
This Proxy Statement and accompanying proxy are being furnished to
stockholders on or about July 24, 1998, in connection with the solicitation by
the Board of Directors of Computer Learning Centers, Inc. (the "Company") of
proxies to be voted at the Annual Meeting of Stockholders to be held at 11:00
am, on Tuesday, August 25, 1998, at the Westfields Conference Center, 14750
Conference Center Drive, Chantilly, Virginia, and at any adjournments of that
meeting. All proxies will be voted in accordance with the stockholders'
instructions, and if no choice is specified, the proxies will be voted in favor
of the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation or a subsequently dated proxy to the Secretary of the Company
or by voting in person at the Annual Meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
JANUARY 31, 1998 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT
EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST TO THE SECRETARY, COMPUTER LEARNING CENTERS, INC., 11350 RANDOM HILLS
ROAD, SUITE 240, FAIRFAX, VIRGINIA 22030. EXHIBITS WILL BE PROVIDED UPON WRITTEN
REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
At the close of business on June 26, 1998, the record date for determining
the stockholders entitled to vote at the Annual Meeting, there were outstanding
and entitled to vote an aggregate of 17,327,668 shares, $.01 par value per
share, of the Company (the "Common Stock"). Stockholders are entitled to one
vote per share. The presence in person or by proxy of stockholders holding a
majority of such shares will constitute a quorum for the transaction of business
at the Annual Meeting. Shares of Common Stock present in person or represented
by proxy (including shares which abstain or do not vote with respect to one or
more of the proposals presented for stockholder approval) will be counted for
purposes of determining whether a quorum is present.
Election of Directors will be determined by the vote of the holders of a
plurality of the shares voting on such election. Approval of the other matters
to be voted on will require the affirmative vote of a majority of the shares
present or represented at the meeting. Shares that abstain from voting with
respect to a specific proposal and shares held in "street name" by brokers or
nominees who indicate on their proxies that they do not have discretionary
authority to vote such shares as to a particular proposal will not be counted as
votes in favor of such proposal. Accordingly, broker non-votes and abstentions
will have the effect of a vote against any matter that requires the affirmative
vote of a certain percentage of the votes cast or shares voting on the proposal.
The Board of Directors knows of no matters, other than those reported below,
which are to be brought before the Annual Meeting. If other matters properly
come before the Annual Meeting, however, it is the intention of the persons
named in the enclosed form of proxy to vote such proxy in accordance with their
judgment on such matters.
All expenses of solicitation of proxies will be borne by the Company.
Present and former officers, Directors and other employees of the Company may
solicit proxies by telephone, telegram or mail, or by meetings with stockholders
or their representatives. The Company will reimburse brokers, banks or other
custodians, nominees and fiduciaries for their charges and expenses in
forwarding proxy material to beneficial owners.
Unless otherwise indicated, all Company common share amounts set forth in
this Proxy Statement reflect the two-for-one and three-for-two stock splits
effected by the Company in the form of a stock dividend paid January 8, 1998 and
April 14, 1997, respectively.
<PAGE>
PROPOSAL ONE: ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of six Directors
divided into three classes. The Board is comprised of two Class I Directors, two
Class II Directors and two Class III Directors, with members of each class
holding office for staggered three-year terms. Each Director serves (subject to
his earlier death, resignation or removal) until the Annual Meeting of
Stockholders held in the year that is three years after such Director's election
and thereafter until such Director's successor is elected and has qualified.
At the Annual Meeting, two Directors are to be elected to hold office for a
three-year term to expire at the 2001 Annual Meeting of Stockholders. Unless
there is a contrary indication, the persons named in the accompanying form of
proxy intend to vote such proxy for the election to the Board of Directors of
John L. Corse and Ralph W. Clark, the current Directors whose terms expire this
year.
Each of the nominees has consented to serve as a Director. If for any reason
a nominee should become unable or unwilling to accept nomination or election,
the persons named in the accompanying form of proxy intend to vote such proxy
for the election of such other person as the Board may recommend. Alternatively,
the Board may reduce the number of Directors to eliminate the vacancy.
A brief summary of each Director's principal occupation, business
affiliations and other information follows. Unless otherwise indicated, the
principal occupation of each Director has been the same for the past five years.
There is no family relationship between any of the Directors or executive
officers of the Company.
NOMINEES FOR DIRECTOR
NOMINEES FOR TERM EXPIRING AT 2001 ANNUAL MEETING
John L. Corse, age 56, has served as a Director of the Company since October
1994. Since September 1997, Mr. Corse is a self-employed business consultant.
From February 1995 to August 1997, he has served as President of Hughes Advanced
Systems, a subsidiary of Hughes Aircraft Corporation and a provider of
information systems and services to businesses. From 1993 to 1995, Mr. Corse was
a self-employed business consultant. From 1992 to 1993, he served as President
and Chief Executive Officer of Security Software America, Inc., a software
publisher serving government contractors and government agencies. From 1990 to
1992, Mr. Corse was a self-employed business consultant.
Ralph W. Clark, age 57, has served as a Director of the Company since
October 1994. He is currently Chairman of Frontec AMT Inc., a software company.
From 1988 to 1994, Mr. Clark was a Vice President of International Business
Machines Corporation ("IBM"), where he served as Assistant General Manager of
the Application Software Group, President of the General and Public Sector
Division (a software division), and, most recently, President of Skill Dynamics,
IBM's education division.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED
ABOVE.
DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT 1999 ANNUAL MEETING
Reid R. Bechtle, age 45, joined the Company in 1991 as President of the
Company's Computer Learning Center division and has been a Director and the
President and Chief Executive Officer of the Company since October 1994. From
1982 to 1991, he served as President of Multi-List, Inc., a software services
subsidiary of PRC/Litton, Inc.
Harry H. Gaines, age 60, has been Chairman of the Board of Directors since
October 1994 and has served as a Director since 1987. From 1987 to October 1994
and from 1988 to October 1994, he served as President and Chief Executive
Officer of the Company and of Mohr Development Company, respectively. From 1989
through September 1995, Mr. Gaines served as President of Blessing/White Inc.
2
<PAGE>
TERM EXPIRING AT 2000 ANNUAL MEETING
Ira D. Cohen, age 46, has served as a Director of the Company since 1987.
Since 1988, he has been a Managing Director of The Updata Group, Inc., an
investment banking firm that specializes in mergers and acquisitions for the
information technology industry. From 1984 to 1986, he served as Chief Financial
Officer for CGA Computer, Inc., and from 1986 to 1988 he served as Chief
Financial Officer of Updata Software, Inc. Mr. Cohen is a certified public
accountant. Mr. Cohen is also a director of Datastream, Inc.
Stephen P. Reynolds, age 46, has served as a Director of the Company since
August 1996. Mr. Reynolds is a managing member of General Atlantic Partners, LLC
("GAP LLC") and has been with GAP LLC or its predecessor entities since April
1980. Mr. Reynolds is also a general partner and limited partner of GAP-CLC.
Partners, L.P. Mr. Reynolds, a certified public accountant, is on the board of
Solo Serve Corporation, a publicly traded off-price soft goods retail company.
MEETING AND COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors are the Audit and
Compensation Committees. The Company does not have a nominating committee.
The Audit Committee supports the independence of the Company's independent
auditors and the objectivity of the Company's financial statements. The Audit
Committee (a) reviews the Company's principal policies for accounting, internal
control and financial reporting, (b) recommends to the Board of Directors the
engagement or discharge of the independent auditors, (c) reviews with the
independent auditors the plan, scope and timing of their audit, and (d) reviews
the independent auditors' fees and, after completion of the audit, reviews with
management the independent auditors' report. The Audit Committee also reviews
the annual financial statements of the Company, the independence of the
independent auditors, the adequacy of the Company's internal accounting control
system, and the Company's policies on business integrity and ethics and
conflicts of interest. The Audit Committee held one meeting during fiscal 1998.
The members of the Audit Committee are Ralph W. Clark and Stephen P. Reynolds.
The Compensation Committee (a) reviews and makes recommendations to the
Board of Directors with respect to the direct and indirect compensation and
employee benefits of the President and other elected officers of the Company,
(b) reviews, administers and makes recommendations to the Board of Directors
with respect to any incentive plans and bonus plans that include elected
officers, and (c) reviews the Company's policies relating to the compensation of
senior management and other employees. In addition, the Committee reviews
management's long-range planning for executive development and succession,
establishes and periodically reviews policies on perquisites, and performs
certain other review functions relating to management compensation and employee
relations policies. The Compensation Committee held four meetings during fiscal
1998. The members of the Compensation Committee are Ira D. Cohen, John L. Corse
and Harry H. Gaines.
During fiscal 1998, there were seven regular meetings of the Board of
Directors. Each of the Directors attended all of the meetings of the Board of
Directors and the standing Board committees on which he or she served.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and Directors and persons who own greater than ten
percent of a registered class of the Company's equity securities to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission and the Nasdaq Stock Market.
Based solely on a review of the forms it has received and on written
representations from certain reporting persons that no such forms were required
for them, the Company believes that during the fiscal year ended January 31,
1998 all Section 16(a) filing requirements applicable to its officers, Directors
and ten percent beneficial owners were complied with by such persons.
3
<PAGE>
PROPOSAL TWO: APPROVAL OF THE 1998 STOCK INCENTIVE PLAN
On May 29, 1998, the Board of Directors of the Company adopted, subject to
stockholder approval, the 1998 Stock Incentive Plan (the "1998 Plan"). Up to
1,000,000 shares of Common Stock (subject to adjustment in the event of stock
splits and other similar events) may be issued pursuant to awards granted under
the 1998 Plan.
SUMMARY OF THE 1998 PLAN
DESCRIPTION OF AWARDS
The 1998 Plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), nonstatutory stock options, restricted stock awards and other
stock-based awards, including the grant of shares based upon certain conditions,
the grant of securities convertible into Common Stock and the grant of stock
appreciation rights (collectively "Awards").
INCENTIVE STOCK OPTIONS AND NONSTATUTORY STOCK OPTIONS
Optionees receive the right to purchase a specified number of shares of
Common Stock at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. Options may be
granted at an exercise price which may not be less than the fair market value of
the Common Stock on the date of grant. Under present law, however, incentive
stock options and options intended to qualify as performance-based compensation
under Section 162(m) of the Code may not be granted at an exercise price less
than the fair market value of the Common Stock on the date of grant (or less
than 110% of the fair market value in the case of incentive stock options
granted to optionees holding more than 10% of the voting power of the Company).
Options may not be granted for a term in excess of ten years, unless the options
were granted equal to 110% of the fair market value at date of grant, and
incentive options granted to optionees holding more than 10% of the voting power
of the Company shall not have a term greater than five years from the date of
grant. The 1998 Plan permits the Board to determine the manner of payment of the
exercise price of options, including through payment by cash, check or in
connection with a "cashless exercise" through a broker, by surrender to the
Company of shares of Common Stock, by delivery to the Company of a promissory
note, or by any other lawful means.
RESTRICTED STOCK AWARDS
Restricted Stock Awards entitle recipients to acquire shares of Common
Stock, subject to the right of the Company to repurchase all or part of such
shares from the recipient in the event that the conditions specified in the
applicable Award are not satisfied prior to the end of the applicable
restriction period established for such Award.
OTHER STOCK-BASED AWARDS
Under the 1998 Plan, the Board has the right to grant other Awards based
upon the Common Stock having such terms and conditions as the Board may
determine, including the grant of shares based upon certain conditions, the
grant of securities convertible into Common Stock and the grant of stock
appreciation rights.
ELIGIBILITY TO RECEIVE AWARDS
Officers, employees, directors, consultants and advisors of the Company and
its subsidiaries are eligible to be granted Awards under the 1998 Plan. Under
present law, however, incentive stock options may only be granted to employees.
The maximum number of shares with respect to which an Award may be granted to
any participant under the 1998 Plan may not exceed 100,000 shares per calendar
year (or, in case of an initial Award made in connection with the employment of
a new employee, 100,000 shares in the initial calendar year of employment.
4
<PAGE>
ADMINISTRATION
The 1998 Plan is administered by the Board of Directors. The Board has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the 1998 Plan and to interpret the provisions of the 1998
Plan. Pursuant to the terms of the 1998 Plan, the Board of Directors may
delegate authority under the 1998 Plan to one or more committees of the Board,
and subject to certain limitations, to one or more executive officers of the
Company. The Board has authorized the Compensation Committee to administer
certain aspects of the 1998 Plan, including the granting of options to executive
officers. Subject to any applicable limitations contained in the 1998 Plan, the
Board of Directors, the Compensation Committee, or any other committee or
executive officer to whom the Board delegates authority, as the case may be,
selects the recipients of Awards and determines (i) the number of shares of
Common Stock covered by options and the dates upon which such options become
exercisable, (ii) the exercise price of options, (iii) the duration of options,
and (iv) the number of shares of Common Stock subject to any restricted stock or
other stock-based Awards and the terms and conditions of such Awards, including
conditions for repurchase, issue price and repurchase price. As grants of awards
under the 1998 Plan are discretionary, the Company cannot now determine the
number of options on other Awards to be received by the Company's Named
Executive Officers, by all current executive officers as a group or by all
current non-executive officers as a group.
The Board of Directors is required to make appropriate adjustments in
connection with the 1998 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. In the event of a merger,
liquidation or other Acquisition Event (as defined in the 1998 Plan), the Board
of Directors is authorized to provide for outstanding Options or other
stock-based Awards to be assumed or substituted for, to accelerate the Awards to
make them fully exercisable prior to consummation of the Acquisition Event or to
provide for a cash-out of the value of any outstanding options. If any Award
expires or is terminated, surrendered, canceled or forfeited, the unused shares
of Common Stock covered by such Award will again be available for grant under
the 1998 Plan.
AMENDMENT OR TERMINATION
The Board of Directors may at any time amend, suspend or terminate the 1998
Plan, except that no Award designated as subject to Section 162(m) of the Code
by the Board of Directors after the date of such amendment shall become
exercisable, realizable or vested (to the extent such amendment was required to
grant such Award) unless and until such amendment shall have been approved by
the Company's stockholders.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1998 Plan and with respect to the sale of Common Stock acquired under the 1998
Plan.
INCENTIVE STOCK OPTIONS
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option, however, may subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted ("the Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
5
<PAGE>
If the participant sells ISO Stock for more than the exercise price prior to
having owned it for at least two years from the Grant Date and one year from the
Exercise Date (a "Disqualifying Disposition"), then all or a portion of the gain
recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held ISO Stock for more than one
year prior to the date of sale.
NONSTATUTORY STOCK OPTIONS
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the Exercise Date
over the Exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO stock. This capital gain or loss will be
a long-term gain or loss if the participant has held the NSO Stock for more than
one year prior to the date of the sale.
RESTRICTED STOCK AWARDS
A participant will not recognize taxable income upon the grant of a
restricted stock Award, unless the participant makes an election under Section
83(b) of the Code (a "Section 83(b) Election"). If the participant makes a
Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary income, for the year in which the Award is
granted, in an amount equal to the difference between the fair market value of
the Common Stock at the time the Award is granted and the purchase price paid
for the Common Stock. If a Section 83(b) Election is not made, the participant
will recognize ordinary income, at the time that the forfeiture provisions or
restrictions on transfer lapse, in an amount equal to the difference between the
fair market value of the Common Stock at the time of such lapse and the original
purchase price paid for the Common Stock. The participant will have a basis in
the Common Stock acquired equal to the sum of the price paid and the amount of
ordinary compensation income recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock Award, the participant will recognize a capital gain or loss equal to the
difference between the sale price of the Common Stock and the participant's
basis in the Common Stock. The gain or loss will be a long-term gain or loss if
the shares are held for more than one year. For this purpose, the holding period
shall begin just after the date on which the forfeiture provisions or
restrictions lapse if a Section 83(b) Election is made.
OTHER STOCK-BASED AWARDS
The tax consequences associated with any other stock-based Award granted
under the 1997 Plan will vary depending on the specific terms of such Award.
Among the relevant factors are whether or not the Award has readily
ascertainable fair market value, whether or not the Award is subject to
forfeiture provisions or restrictions on transfer, the nature of the property to
be received by the participant under the Award and the participant's holding
period and tax basis for the Award or underlying Common Stock.
6
<PAGE>
MAXIMUM INCOME TAX RATES ON CAPITAL GAIN AND ORDINARY INCOME
Long-term capital gain will be taxable at a maximum rate of 20% if
attributable to Common Stock held for more than eighteen months and at a maximum
rate of 28% if attributable to Common Stock held for more than one year but not
more than eighteen months. Short-term capital gain and ordinary income will be
taxable at a maximum rate of 39.6%. Phaseouts of personal exemptions and
reductions of allowable itemized deductions at higher levels of income may
result in slightly higher marginal tax rates. Ordinary compensation income will
also be subject to a medicare tax and, under certain circumstances, a social
security tax.
TAX CONSEQUENCES TO THE COMPANY
The grant of an Award under the 1998 Plan will have no tax consequences to
the Company. Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Common Stock acquired under the 1998 Plan will have
any tax consequences to the Company. The Company generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the 1997 Plan, including in connection
with a restricted stock Award or as a result of the exercise of a nonstatutory
stock option or a Disqualifying Disposition. Any such deduction will be subject
to the limitations of Section 162(m) of the Code. The Company will have a
withholding obligation with respect to any ordinary compensation income
recognized by participants under the 1998 Plan who are employees or otherwise
subject to withholding in connection with a restricted stock Award or the
exercise of a nonstatutory stock option.
THE BOARD OF DIRECTORS BELIEVES THAT THE FUTURE SUCCESS OF THE COMPANY
DEPENDS, IN LARGE PART, UPON THE ABILITY OF THE COMPANY TO MAINTAIN A
COMPETITIVE POSITION IN ATTRACTING, RETAINING AND MOTIVATING KEY PERSONNEL.
ACCORDINGLY, THE BOARD OF DIRECTORS BELIEVES ADOPTION OF THE 1998 PLAN IS IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR
THIS PROPOSAL.
PROPOSAL THREE: RATIFY THE SELECTION BY THE BOARD OF DIRECTORS OF PRICE
WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS FOR THE
CURRENT FISCAL YEAR
In accordance with the recommendation of the Audit Committee, the Board of
Directors has reappointed Price Waterhouse LLP as independent accountants of the
Company for fiscal 1999. Although ratification of the reappointment of Price
Waterhouse LLP is not legally required, the Board believes it is appropriate for
the stockholders to ratify such action. In the event the stockholders do not
ratify the selection of Price Waterhouse LLP as the Company's independent
accountants, the Company will reconsider such appointment. A representative of
Price Waterhouse LLP, which has served as the Company's independent accountants
since 1987, will attend the meeting, will have the opportunity to make a
statement if he or she desires to do so, and will be available to respond to
appropriate questions. The Board of Directors reserves the right to replace the
independent accountants at any time upon the recommendation of the Audit
Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid or accrued during each of the last three fiscal years for the Company's
Chief Executive Officer and each of the Company's other executive officers,
based on salary and bonus earned during the fiscal year (the "Named Executive
Officers").
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUSES(1) COMPENSATION(2) COMPENSATION(3)
- --------------------------------------------- --------- ---------- ----------- ---------------- -----------------
Reid R. Bechtle.............................. 1998 $ 250,000 $ 312,000 $ 14,496 $ 2,399
President/Chief 1997 225,000 320,000 14,496 3,000
Executive Officer 1996 200,000 215,000 10,598 3,000
Charles L. Cosgrove.......................... 1998 161,500 165,000 6,000 2,064
Vice President/Chief 1997 145,833 150,000 5,676 2,068
Financial Officer 1996 123,333 90,000 0 1,838
Susan L. Luster.............................. 1998 157,500 157,500 0 2,363
Vice President/Chief 1997 151,250 150,000 0 1,988
Operating Officer 1996 27,308 0 0 0
</TABLE>
- ------------------------
(1) All bonus amounts shown above were accrued during the stated fiscal year and
paid in the subsequent fiscal year.
(2) Represents contributions toward automobile allowances made by the Company on
behalf of the Named Executive Officers indicated.
(3) Represents contributions to the Company's 401(k) Plan made by the Company on
behalf of the Named Executive Officers indicated.
COMPENSATION OF DIRECTORS
No Director who is an employee of the Company is compensated for service as
a member of the Board of Directors or any committee of the Board of Directors.
As compensation for serving on the Board of Directors, each Director who is not
also an employee of the Company is entitled to receive an annual fee of $8,000
for attendance of the full Board and an annual fee of $2,000 for all committee
meetings. Directors also are entitled to reasonable expenses incurred by them in
connection with their attendance at Board or committee meetings. Insurance
policies in the name of the Company provide for the indemnification of the
Company's Directors and officers, as well as for the reimbursement to the
Company for amounts paid by the Company above certain limits in indemnifying its
Directors and officers. For a description of the Company's 1995 Non-Employee
Directors Stock Option Plan, see "Stock Plan" below.
CERTAIN TRANSACTIONS
EMPLOYMENT AGREEMENTS
In February 1997, Reid R. Bechtle, the Company's President and Chief
Executive Officer, entered into an employment agreement that has a term of one
year but shall be automatically renewed for successive one-year periods unless
the Company notifies Mr. Bechtle of non-renewal at least 90 days prior to the
end of the initial term or any renewal term. The agreement provides for an
annual salary of $265,000, which may be increased from time to time by the
Compensation Committee, a guaranteed annual bonus equal to 25% of Mr. Bechtle's
salary and an additional annual bonus payable based on achievement by the
Company of certain revenue and income targets. In the event Mr. Bechtle's
employment is terminated other than for cause, as defined in the agreement, or
due to his voluntary resignation, he is entitled to receive an amount equal to
two times his then effective base salary and guaranteed bonus. In addition, if
Mr. Bechtle's employment is terminated as the result of a change of control as
defined in the agreement, he is entitled to receive an amount equal to three
times the greater of (i) the average annual total compensation paid to him over
the Company's last three fiscal years or (ii) total compensation paid during the
Company's fiscal year ended January 31, 1998.
8
<PAGE>
In January 1998, the Company entered into a severance agreement with the
Chief Financial Officer of the Company, Charles Cosgrove. The agreement will
expire upon the termination of Mr. Cosgrove's employment with the Company for
any reason whatsoever. The agreement provides for an annual salary of not less
than $165,000, which may be increased from time to time by the Compensation
Committee of the Company's Board of Directors. In addition, the agreement
specifies that Mr. Cosgrove shall be eligible to receive an annual bonus payable
under the Company's bonus plan in accordance with the bonus criteria established
by the Company's Board of Directors. In the event Mr. Cosgrove's employment is
terminated without cause or he resigns for good reason as defined the agreement,
he is entitled to receive a lump sum payment in an amount equal to one times his
base salary in effect as of the date of termination. In addition, if Mr.
Cosgrove's employment is terminated as a result of a change in control as
defined in the agreement, he will receive a lump sum amount equal to one and one
half times his base salary plus one and one half times his prior fiscal year
bonus or current year target bonus, whichever is larger.
STOCK PLANS
The Company has a Long-Term Incentive Plan that provides for award of
incentive and non-statutory stock options and stock appreciation rights to
certain directors, officers and key employees. The plan is administered by the
Compensation Committee of the Board of Directors. The Company has provided that
no further grants may be made under the Long-Term Incentive Plan. On February 1,
1994, options to purchase 839,422 shares of Common Stock were granted to Mr.
Bechtle, at an exercise price of $1.84 per share. During fiscal 1998, Mr.
Bechtle exercised options to purchase 329,630 of these shares, realizing a value
of $5,817,006 (see table below on page 11). During fiscal 1998, Mr. Cosgrove
exercised options previously granted under this plan to purchase 15,816 shares
of Common Stock at an exercise price of $3.15 per share, realizing a value of
$258,282. As of April 30, 1998, options to purchase 139,456 shares of Common
Stock were outstanding under this Long-Term Incentive Plan.
The Company's 1995 Stock Incentive Plan provides a variety of awards,
including stock options, stock appreciation rights and restricted and
unrestricted stock grants to the Company's employees, officers, consultants and
advisors. Stock options may be granted either in the form of incentive stock
options or non-statutory stock options. The option exercise price of incentive
stock options may not be less than the fair market value of common stock on the
date of grant. The Company has reserved 1,460,460 shares of Common Stock for
grant under this plan. During fiscal 1998, Mr. Cosgrove exercised 19,500 of
these shares, realizing a value of $316,095 (see table below on page 11). As of
April 30, 1998 options to purchase 1,160,050 shares of common stock were
outstanding under this plan, and 220,210 options were available for grant.
On March 14, 1995 the Board of Directors adopted the 1995 Non-Employee
Directors Stock Option Plan (the "Directors Plan"). The Director's Plan was
amended on March 13, 1997. As amended, the Director's Plan provides that each
Director elected to a three-year term by the stockholders will receive an option
to purchase 11,000 shares of Common Stock on the date following his or her
election and each Director elected to fill a vacancy on the Board will receive
an option to purchase 11,000 shares of Common Stock, multiplied by a fraction
the numerator of which is the number of years (counting any portion of a year as
one year) remaining in such Director's term and the denominator of which is
three. Options to purchase Common Stock under the Director's Plan will vest in
three equal increments on the first, second and third anniversary of grant,
except that options exercisable for less than 11,000 shares will vest over such
period and in such amounts, if any, as may be determined by the Directors.
Incentive and non-statutory options are exercisable at a price not less than
100% and 50%, respectively, of the fair market value of the common stock at the
date of grant, as determined by the Compensation Committee. Stock appreciation
rights provide for payments equal to the base amount of the right, as determined
by the administration committee. No such appreciation rights are outstanding.
Options may be granted in tandem with appreciation rights; however, holders of
such tandem awards are subject to restrictions on the matter of exercise as
defined in the plan. Generally, stock options and rights vest ratably over five
years. All options and rights must be exercised within ten years from date of
grant. None of the Company's officers were granted options during the fiscal
year ended January 31, 1998.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT FISCAL-YEAR END AT FISCAL YEAR-END(1)
ON VALUE -------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- --------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Reid R. Bechtle........... 329,630 $ 5,817,006 318,078 360,000 $ 8,689,268 $ 9,260,100
Charles L. Cosgrove....... 35,316 574,377 25,504 146,996 675,360 4,113,531
Susan L. Luster........... 0 0 48,000 72,000 1,491,000 2,236,500
</TABLE>
- ------------------------
(1) The closing price for the Company's Common Stock on the Nasdaq Stock Market
on January 31, 1998 was $34.0625 (reflects two-for-one and three-for-two
stock splits effective January 8, 1998 and April 14, 1997, respectively).
Value is calculated on the basis of the difference between the option
exercise price and $34.0625, multiplied by the number of "in-the-money"
shares of Common Stock underlying the option.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report sets forth the executive compensation policies of the Committee
with respect to the Company's executive officers in general and the rationale
for the specific decisions affecting the compensation for Mr. Reid Bechtle, the
Company's Chief Executive Officer in fiscal 1998. This report also discusses the
relationship between the compensation of the Named Executive Officers and the
performance of the Company.
The Company's executive compensation program is designed to promote the
following objectives:
- To provide competitive compensation that will help attract, retain and
reward highly qualified executives who contribute to the long-term success
of the Company.
- To align management's interests with the success of the Company by placing
a portion of the executive's compensation at risk in relation to the
Company's performance.
- To align management's interests with stockholders by including long-term
equity incentives.
The Committee reviewed the compensation policies adopted with respect to all
of the Company's executive officers and confirmed that executive officer
compensation must be related to the Company's performance and must emphasize
increasing stockholder value. The Committee determined that the current
compensation policies sufficiently tied the executive officers' compensation to
the Company's performance.
The Committee determined that the Company's continued success is due in part
to its skilled executives. In setting and administering the Company's
compensation policies and programs, the Committee considers compensation
provided to executives of corporations similar to the Company in terms of
assets, sales, revenues and earnings. The Company's executive compensation
programs are designed to attract, reward and retain skilled executives and to
provide incentives which vary upon the attainment of short-term operating
performance objectives and long-term performance goals. The main objective is to
provide the Company executives with incentives directly linked to the creation
of stockholder value.
THE COMMITTEE'S ROLE. The Committee is responsible for the administration
of the executive compensation program and reviews all proposed new or amended
employee benefit plans. During fiscal 1998, the Committee was composed of the
three Directors named below, neither of whom was eligible to participate in any
of the plans which make up the Company's executive compensation program.
The Committee may select consultants from nationally recognized independent
compensation and benefits consulting firms to provide expert advice on any
aspect of the Company executive compensation program. The Committee may request
written reports or hold private meetings with such consultants in order to
obtain independent opinions on compensation proposals. The Committee has met,
and will continue to meet, in executive sessions which are not attended by any
of the Company's executives or managers.
PERFORMANCE EVALUATION. The Committee met in executive session in March
1998 to review the overall performance of the Chief Executive Officer,
particularly with respect to the Company's long range strategies and the
achievement of both financial and non-financial objectives. Paramount
consideration
10
<PAGE>
was given to the Chief Executive Officer's role in building stockholder value
and improving the return on the stockholders' investment.
THE COMPENSATION PROGRAM. The compensation program for the Company
executives presently consists of base salary, annual incentive bonus, long-term
incentives and employee benefits. It is the intent of the Committee that
incentives based on long-term performance should be the major component in the
pay package for senior executives. Discussed below is each element of the
compensation program.
BASE SALARY. Salaries are set and administered to reflect the value of the
job in the marketplace and individual contribution and performance. Salaries
provide a necessary element of stability in the total pay program and, as such,
are not subject to significant variability. Salary increases are based primarily
on merit. In March 1997, the Company's executive salaries were evaluated in
relation to a competitive annualized merit increase guideline of 4.5% for
expected levels of individual performance. Actual increases can vary from the
guideline depending primarily on individual performance. The normal interval
between salary reviews for the Chief Executive Officer and other executives is
12 months.
Mr. Bechtle's salary was increased effective April 1, 1997 to $250,000, an
increase of 8.7% after 12 months. Among the other named officers and executives,
Mr. Cosgrove's salary was increased effective April 1, 1997 to $165,000, an
increase of 10.0% after 12 months.
ANNUAL INCENTIVE BONUS. The amounts of annual bonus awards are based on
corporate financial performance for the year compared to annual performance
goals established at the beginning of the year. The Board of Directors, based
upon the recommendation of the Compensation Committee, establishes a plan based
upon revenue, net income, earnings per share, and individual performance goals.
The incentive bonus is structured to allow an incentive bonus target equal to
50% of base salary. The incentive plan is structured to award no bonuses except
as required by Mr. Bechtle's employment agreement, to the participants if the
base minimum performance goals are not achieved and incentives may equal up to
125% of base salary for performance that exceeds the minimum performance goals.
The Committee believes that allowing the executive team to earn amounts in
excess of the base bonus (50% of base salary) will encourage outstanding
performance and closely aligns management with stockholder interests. For fiscal
1998, such performance goals were: (1) fiscal 1998 net income and earnings per
share compared to plan; (2) fiscal 1998 revenue compared to plan; and (3)
individual performance goals related to long-term growth of the Company.
For fiscal 1998, Mr. Bechtle's targeted bonus was 125% of salary or
$312,500. As a result of achieving the net income, earnings per share and
revenue plans for fiscal 1998, the Compensation Committee recommended and the
Board of Directors concurred, that Mr. Bechtle receive a bonus of $312,500 for
fiscal 1998, which was 100% of his targeted bonus.
STOCK OPTION AWARDS. The Compensation Committee also believes that equity
ownership by key executives provides a valuable incentive for such executives
and helps align executive's and stockholders' interests. Stock option awards
provide long-term incentives which are directly related to the performance of
the Company's Common Stock. Options generally vest at the rate of 20% per year
and have 10-year terms. No options were granted to any officer of the Company
during the fiscal year ended January 31, 1998.
EMPLOYEE BENEFITS. Executives also participate in the Company's broad-based
employee benefits program which includes a 401(k) plan, group medical and dental
coverage, group life insurance and other benefit plans.
Discussion of the Committee's Policy Regarding Qualifying Compensation for
Deductibility Under Section 162(m) of the Internal Revenue Code.
Tax legislation known as the Omnibus Budget Reconciliation Act of 1993
("OBRA") created a new Code Section 162(m), under which the allowable deduction
for compensation paid or accrued with respect to the chief executive officer and
each of the four most highly compensated executive officers of a publicly held
corporation is limited to no more than $1 million per year for taxable years on
or after January 1, 1994. Certain types of compensation are exempted from this
deduction limitation, including payments subject to: (a) the attainment of an
objective performance goal or goals; (b) an outside director requirement; and
(c) a stockholder approval requirement.
11
<PAGE>
It is the policy of the Committee to establish a competitive executive
compensation program and to design and administer incentive plans which relate
directly to the Company's overall performance and the individual executive's
specific contribution.
In light of OBRA, it is the policy of the Committee to modify where
necessary the executive compensation plans so as to maximize the tax
deductibility of compensation paid to its executive officers, and the Committee
does not anticipate paying any compensation in 1998 that is not fully tax
deductible. Accordingly, the 1995 Stock Incentive Plan and proposed 1998 Stock
Incentive Plan include a fixed limit on the number of options that may be
granted to any individual in any given year.
This report is furnished by the members of the Committee:
Ira D. Cohen
John L. Corse
Harry H. Gaines
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the Board of Directors
are Mr. Cohen, Mr. Corse and Mr. Gaines. No member of the Compensation Committee
is an executive officer or employee of the Company.
PERFORMANCE GRAPH
The performance graph set forth below compares the cumulative total
shareholder return on the Company's Stock with the S&P 500 Index and an Industry
Group Index for the period from June 1, 1995 through January 31, 1998. The graph
assumes the investment of $100 at the close of trading on May 31, 1995 in the
Company's Common Stock, the S&P 500 Index and the Industry Group Index and
assumes re-investment of all dividends, if any. The industry group consists of
the following companies selected on the basis of the similar nature of their
business: DeVry, Inc., Whitman Education Group, Inc., ITT Educational Services,
Inc., Education Management Corporation and Education Medical, Inc. The Company
believes that, including itself, these companies represent the majority of the
market value of publicly traded companies whose primary business is vocational
education and training. The Company's Common Stock commenced trading on the
Nasdaq Stock Market on May 31, 1995.
12
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE COMPANY S&P 500 INDUSTRY GROUP
<S> <C> <C> <C>
June 1, 1995 $100.00 $100.00 $100.00
January 31, 1998 $1,339.44 $194.15 $329.91
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31,
JUNE 1, 1995 1998
--------------- ---------------
<S> <C> <C>
The Company.................................................... $ 100 $ 1,339.44
S&P 500 Index.................................................. $ 100 $ 194.15
Industry Group Index........................................... $ 100 $ 329.91
</TABLE>
13
<PAGE>
SECURITY OWNERSHIP
The following table sets forth, as of April 30, 1998, the number of shares
of the Company's Common Stock owned by (i) any person (including any group)
known by management to beneficially own more than 5% of the Company's Common
Stock, (ii) each Director of the Company and nominee for Director, (iii) each of
the executive officers of the Company named in the Summary Compensation Table
and (iv) all Directors and executive officers as a group. Unless otherwise
indicated in a footnote, each individual or group possesses sole voting and
investment power with respect to the shares indicated as beneficially owned.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OWNED(1)
- --------------------------------------------------------------------------- ----------------- ------------------
<S> <C> <C>
General Atlantic Entities (2).............................................. 2,944,717 17.0%
125 East 56th Street
New York, NY 10022
Fidelity Investments (3)................................................... 2,511,000 14.5%
82 Devonshire Street
Boston, MA 02109-3614
Massachusetts Financial Services Company (4)............................... 2,177,596 12.6%
500 Boylston Street
Boston, MA 02116
Putnam Investments, Inc. (5)............................................... 1,117,637 6.5%
One Post Office Square
Boston, MA 02109
Harry H. Gaines............................................................ 249,914 1.4%
35 Maher Lane
Newtown, PA 18940
Ira D. Cohen (6)........................................................... 22,330 *
Stephen P. Reynolds (7).................................................... 2,958,757 17.1%
John L. Corse (8).......................................................... 23,214 *
Ralph W. Clark (9)......................................................... 30,380 *
Reid R. Bechtle (10)....................................................... 482,078 2.8%
Charles L. Cosgrove (11)................................................... 40,584 *
Susan L. Luster (12)....................................................... 48,000 *
3,855,257 22.2%
All Directors and executive officers as a group (8 persons) (13)...........
</TABLE>
- ------------------------
* Less than 1%
(1) Each stockholder possesses sole voting and investment power with respect to
the shares listed, except as otherwise noted. Amounts shown include shares
issuable within the 60-day period following April 30, 1998 pursuant to the
exercise of options.
(2) This information based on Schedule 13G, Amendment No. 2, received by the
Company on or about April 24, 1998. Includes 1,716,378 shares held by
General Atlantic Corporation ("GAC"), which retains sole voting power with
respect to such shares, 1,228,339 shares held by General Atlantic Partners
II, L.P. ("GAP") and GAP-CLC Partners, L.P. ("GAP-CLC") (collectively, the
"General Atlantic Entities"). The General Atlantic Entities retain shared
voting power with respect to the shares held by GAP and GAP-CLC. Stephen P.
Reynolds, a Director of the Company, is a general partner in GAP-CLC and a
managing member of GAP and disclaims beneficial ownership of shares owned by
the General Atlantic Entities.
(3) This information based on Schedule 13D received by the Company on or about
April 1, 1998.
13
<PAGE>
(4) This information based on Schedule 13G filed with the Securities and
Exchange Commission on May 15, 1998.
(5) This information based on Schedule 13G filed with the Securities and
Exchange Commission on January 28, 1998.
(6) Includes 4,650 shares issuable pursuant to the exercise of Director options
within 60 days after April 30, 1998.
(7) Includes all of the shares referenced in note (2) above, Mr. Reynolds, a
Director of the Company, is a managing member of GAP and a general partner
of GAP-CLC. Mr. Reynolds disclaims beneficial ownership of all of such
shares. Also includes 14,040 shares issuable pursuant to the exercise of
Director options within 60 days after April 30, 1998.
(8) Includes 11,214 shares issuable pursuant to the exercise of Director options
within 60 days after April 30, 1998.
(9) Includes 18,690 shares issuable pursuant to the exercise of Director options
within 60 days after April 30, 1998.
(10) Includes 318,078 shares issuable pursuant to the exercise of options within
60 days after April 30, 1998.
(11) Includes 40,504 shares issuable pursuant to the exercise of options within
60 days after April 30, 1998.
(12) Includes 48,000 shares issuable pursuant to the exercise of options within
60 days after April 30, 1998.
(13) Includes 455,176 shares issuable pursuant to the exercise of options within
60 days after April 30, 1998. See note (2) and notes (5) through (12) above.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
The date by which stockholder proposals must be received by the Company for
inclusion in proxy material relating to the 1999 Annual Meeting of Stockholders
is April 27, 1999.
By Order of the Board of Directors
Charles L. Cosgrove, Secretary
July 24, 1998
14
<PAGE>
COMPUTER LEARNING CENTERS, INC.
1998 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this 1998 Stock Incentive Plan (the "Plan") of Computer
Learning Centers, Inc., a Delaware corporation (the "Company"), is to advance
the interests of the Company's stockholders by enhancing the Company's ability
to attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any present or future subsidiary corporations of Computer Learning Centers, Inc.
as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder (the "Code").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock, or other
stock-based awards (each, an "Award") under the Plan. Any person who has been
granted an Award under the Plan shall be deemed a "Participant".
3. ADMINISTRATION, DELEGATION
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered by
the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
(b) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by applicable
law, the Board may delegate to one or more executive officers of the Company the
power to make Awards and exercise such other powers under the Plan as the Board
may determine, provided that the Board shall fix the maximum number of shares
subject to Awards and the maximum number of shares for any one Participant to be
made by such executive officers.
(c) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). The Board shall
appoint one such Committee of not less than two members, each member of which
shall be an "outside director" within the meaning of Section 162(m) of the Code
and a "non-employee director" as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"). All references in the Plan
to the "Board" shall mean the Board or a Committee of the Board or the executive
officer referred to in Section 3(b) to the extent that the Board's powers or
authority under the Plan have been delegated to such Committee or executive
officer.
4. STOCK AVAILABLE FOR AWARDS
(a) NUMBER OF SHARES. Subject to adjustment under Section 4(c), Awards may
be made under the Plan for up to 1,000,000 shares of Common Stock. If any Award
expires or is terminated, surrendered or canceled without having been fully
exercised or is forfeited in whole or in part or results in any Common Stock not
being issued, the unused Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan, subject, however, in the case
of Incentive Stock Options (as hereinafter
15
<PAGE>
defined), to any limitation required under the Code. Shares issued under the
Plan may consist in whole or in part of authorized but unissued shares or
treasury shares.
(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 4(c), for
Awards granted after the Common Stock is registered under the Exchange Act, the
maximum number of shares with respect to which an Award may be granted to any
Participant under the Plan shall be 100,00 per calendar year. The
per-participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
(c) ADJUSTMENT TO COMMON STOCK. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding Option, (iii) the repurchase price per
security subject to each outstanding Restricted Stock Award, and (iv) the terms
of each other outstanding stock-based Award shall be appropriately adjusted by
the Company (or substituted Awards may be made, if applicable) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate. If this Section 4(c) applies and Section 8(e)(1)
also applies to any event, Section 8(e)(1) shall be applicable to such event,
and this Section 4(c) shall not be applicable.
5. STOCK OPTIONS
(a) GENERAL. The Board may grant options to purchase Common Stock (each, an
"Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) EXERCISE PRICE. The Board shall establish the exercise price at the time
each Option is granted and specify it in the applicable option agreement. The
purchase price of shares that are subject to an option shall not be less than
the fair market value of such shares at the time the option is granted (or less
than 110% of the fair market value on the date of the grant in the case of
incentive stock options granted to optionees holding more than 10% of the voting
power of the Company).
(d) DURATION OF OPTIONS. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
option agreement. No Option will be granted for a term in excess of 10 years and
Options granted to optionees holding more than 10% of the voting power of the
Company shall not be granted for a term in excess of 5 years.
(e) EXERCISE OF OPTION. Options may be exercised only by delivery to the
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.
(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may otherwise provide in an Option Agreement,
(i) by delivery of an irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient funds to
pay the exercise price, (ii) by delivery of shares of Common Stock owned
16
<PAGE>
by the Participant valued at their fair market value as determined by the
Board in good faith ("Fair Market Value"), which Common Stock was owned by
the Participant at least six months prior to such delivery or (iii) by
delivery by the Participant to the Company of a copy of irrevocable and
unconditional instructions to a creditworthy broker to deliver promptly to
the Company cash or a check sufficient to pay the exercise price;
(3) to the extent permitted by the Board and explicitly provided in an
Option Agreement, (i) by delivery of a promissory note of the Participant to
the Company on terms determined by the Board or (ii) by payment of such
other lawful consideration as the Board may determine; or
(4) any combination of the above permitted forms of payment.
6. RESTRICTED STOCK
(a) GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").
(b) TERMS AND CONDITIONS. The Board shall determine the terms and conditions
of any such Restricted Stock Award, including the conditions for repurchase (or
forfeiture) and the issue price, if any. Any st6ck certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) TRANSFERABILITV OF AWARDS. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) DOCUMENTATION. Each Award under the Plan shall be evidenced by a written
instrument in such form as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each type of
Award may be made alone or in addition or in relation to any other type of
Award. The terms of each type of Award need not be identical, and the Board need
not treat Participants uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an Award
of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant
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and the extent to which, and the period during which, the Participant, the
Participant's legal representative, conservator, guardian or Designated
Beneficiary may exercise rights under the Award.
(e) Acquisition Events
(1) CONSEQUENCES OF ACQUISITION EVENTS. Upon the occurrence of an
Acquisition Event (as defined below), or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall take any one or
more of the following actions with respect to then outstanding Awards: (i)
provide that outstanding Options shall be assumed, or equivalent Options shall
be substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such Options substituted for Incentive Stock Options
shall satisfy, in the determination of the Board, the requirements of Section
424(a) of the Code; (ii) upon written notice to the Participants, provide that
all then unexercised Options will become exercisable in full as of a specified
time (the "Acceleration Time") prior to the Acquisition Event and will terminate
immediately prior to the consummation of such Acquisition Event, except to the
extent exercised by the Participants between the Acceleration Time and the
consummation of such Acquisition Event; (iii) in the event of an Acquisition
Event under the terms of which holders of Common Stock will receive upon
consummation thereof a cash payment for each share of Common Stock surrendered
pursuant to such Acquisition Event (the "Acquisition Price"), provide that all
outstanding Options shall terminate upon consummation of such Acquisition Event
and each Participant shall receive, in exchange therefor, a cash payment equal
to the amount (if any) by which (A) the Acquisition Price multiplied by the
number of shares of Common Stock subject to such outstanding Options (whether or
not then exercisable), exceeds (B) the aggregate exercise price of such Options;
(iv) provide that all Restricted Stock Awards then outstanding shall become free
of all restrictions prior to the consummation of the Acquisition Event; and (v)
provide that any other stock-based Awards outstanding (A) shall become
exercisable, realizable or vested in full, or shall be free of all conditions or
restrictions, as applicable to each such Award, prior to the consummation of the
Acquisition Event, or (B), if applicable, shall be assumed, or equivalent Awards
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof).
An "Acquisition Event" shall mean: (a) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto representing immediately thereafter (either by remaining outstanding or
by being converted into voting securities of the surviving or acquiring entity)
less than 50% of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after such
merger or consolidation; (b) any sale of all or substantially all of the assets
of the Company; or (c) the complete liquidation of the Company.
(2) ASSUMPTION OF OPTIONS UPON CERTAIN EVENTS. The Board may grant Awards
under the Plan in substitution for stock and stock-based awards held by
employees of another corporation who become employees of the Company as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.
(f) WITHHOLDING. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(g) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board
18
<PAGE>
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(h) CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(i) ACCELERATION. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of all restrictions or that any other stock-based Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
9. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on the
date on which it is adopted by the Board, but no Award granted to a Participant
designated as subject to Section 162(m) by the Board shall become exercisable,
vested or realizable, as applicable to such Award, unless and until the Plan has
been approved by the Company's stockholders. No Awards shall be granted under
the Plan after the completion of ten years from the earlier of (i) the date on
which the Plan was adopted by the Board or (ii) the date the Plan was approved
by the Company's stockholders, but Awards previously granted may extend beyond
that date.
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan or
any portion thereof at any time, provided that no Award granted to a Participant
designated as subject to Section 162(m) by the Board after the date of such
amendment shall become exercisable, realizable or vested, as applicable to such
Award (to the extent that such amendment to the Plan was required to grant such
Award to a particular Participant), unless and until such amendment shall have
been approved by the Company's stockholders.
(e) STOCKHOLDER APPROVAL. For purposes of this Plan, stockholder approval
shall mean approval by a vote of the stockholders in accordance with the
requirements of Section 162(m) of the Code.
(f) GOVERNING LAW. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware, without regard to any applicable conflicts of law.
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<PAGE>
COMPUTER LEARNING CENTERS, INC.
Proxy for Annual Meeting of Stockholders to be held August 25, 1998
The undersigned, having received notice of the meeting and management
proxy statement therefor, and revoking all prior proxies, hereby appoints
Reid R. Bechtle and Charles L. Cosgrove, and each of them, as Proxies, each
with the power to appoint his substitute, and hereby authorizes them, to
represent and vote, as designated below, all shares of Common Stock of
Computer Learning Centers, Inc. (the Company ) which the undersigned would
be entitled to vote if personally present at the Annual Meeting of
Stockholders to be held on August 25, 1998 or any adjournment thereof.
In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
Attendance of the undersigned at the meeting or any adjournment thereof will
not be deemed to revoke this proxy unless the undersigned shall revoke this
proxy in writing.
(To be Signed on Reverse Side.)
<PAGE>
Please mark your
/X/ votes as in this
example.
The Board of Directors recommends that you vote
"FOR" the nominees and each ofthe proposals listed below.
WITHHOLD AUTHORITY
to vote for all nominees
FOR listed below
/ / / /
Proposal 1:
To elect two
Class III Directors to
serve until the 2001 Annual Meeting of Stockholders
Nominees: John L. Corse
Ralph W. Clark
FOR all nominees listed (except as marked to the contrary listed below).
Proposal 2:
Proposal to approve the Company s 1998 Stock FOR AGAINST ABSTAIN
Incentive Plan. / / / / / /
Proposal 3:
Proposal to ratify the selection of Price FOR AGAINST ABSTAIN
Waterhouse LLP to serve as the Company's / / / / / /
independent accountants for fiscal 1999.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS. THIS
PROXY WILL BE VOTED AS DIRECTED.
IN THE ABSENCE OF DIRECTIONS, THIS
PROXY WILL BE VOTED FOR THE
DIRECTORS NAMED ABOVE, AND FOR
PROPOSALS 2 and 3.
STOCKHOLDERS ARE URGED TO DATE,
MARK, SIGN AND RETURN THIS PROXY
PROMPTLY IN THE ENVELOPE PROVIDED,
WHICH REQUIRES NO POSTAGE IF
MAILED WITHIN THE UNITED STATES.
Signature(s)_______________________________ DATE_____________________________
Note: Please sign exactly as name or names appear on Stock Certificates
(as indicated hereon).
