<PAGE> 1
AS FILED WITH SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 2000. FILE NO.
0-26040
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
COMPUTER LEARNING CENTERS, INC.
--------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(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:
--------------------------------------------------------------------------------
[ ] 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:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing party:
--------------------------------------------------------------------------------
(4) Date filed:
--------------------------------------------------------------------------------
<PAGE> 2
2000
NOTICE OF
ANNUAL MEETING
AND PROXY STATEMENT
COMPUTER LEARNING CENTERS, INC.
<PAGE> 3
COMPUTER LEARNING CENTERS, INC.
10021 BALLS FORD ROAD, SUITE 200
MANASSAS, VIRGINIA 20109
------------------------
June 14, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to
be held at 1:00 p.m. on August 1, 2000 at the Computer Learning Center of
Alexandria, 6295 Edsall Road, Suite 210, Alexandria, Virginia, 22312.
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 the nominee for election as Director.
Sincerely,
/s/ JOHN L. CORSE
John L. Corse
President and Chief Executive Officer
<PAGE> 4
COMPUTER LEARNING CENTERS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 1, 2000
------------------------
The 2000 Annual Meeting of Stockholders of Computer Learning Centers, Inc.
(the "Company") will be held Tuesday, August 1, 2000 at 1:00 p.m. at the
Computer Learning Center of Alexandria, 6295 Edsall Road, Suite 210, Alexandria,
Virginia, 22312 for the following purposes:
1. To elect a Class II Director to serve until the 2003 Annual Meeting of
Stockholders.
2. To approve the Company's 2000 Stock Incentive Plan
3. To ratify the selection by the Board of Directors of
PricewaterhouseCoopers 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 2, 2000 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,
/s/ MARK M. NASSER
Mark M. Nasser
Secretary
June 14, 2000
<PAGE> 5
COMPUTER LEARNING CENTERS, INC.
10021 BALLS FORD ROAD, SUITE 200
MANASSAS, VIRGINIA 20109
------------------------
PROXY STATEMENT
------------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 1, 2000
This Proxy Statement and accompanying proxy are being furnished to
stockholders on or about June 14, 2000, 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 1:00
p.m., on Tuesday, August 1, 2000, at the Computer Learning Center of Alexandria,
6295 Edsall Road, Suite 210, Alexandria, 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, 2000 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., 10021 BALLS
FORD RD, SUITE 200, MANASSAS, VIRGINIA 20109. EXHIBITS WILL BE PROVIDED UPON
WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
At the close of business on June 2, 2000, the record date for determining
the stockholders entitled to vote at the Annual Meeting, there were outstanding
and entitled to vote an aggregate of 18,610,818 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 a Director 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.
<PAGE> 6
PROPOSAL ONE: ELECTION OF DIRECTOR
The Board of Directors of the Company currently consists of five Directors
divided into three classes. The Board is comprised of two Class I Directors, one
Class II Director 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, a Director is to be elected to hold office for a
three-year term to expire at the 2003 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
Stephen P. Reynolds, the current Director whose term expires this year.
The nominee 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.
Ira D. Cohen resigned as a Director in January 2000. The Company is
grateful for his service and wishes him well in his future endeavors.
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.
NOMINEE FOR DIRECTOR
Stephen P. Reynolds, age 48, has served as a Director of the Company since
August 1996. Mr. Reynolds has served in various capacities with General Atlantic
Partners II, L.P. or its predecessors since April 1980 and currently serves as
special advisor. He also serves as a member of the Boards of Directors of SS&C
Technologies, Inc. and Brigham Exploration Company, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
DIRECTORS CONTINUING IN OFFICE
Term Expiring at 2001 Annual Meeting
John L. Corse, age 58, has served as a Director of the Company since
October 1994, and as President and Chief Operating Officer since November 1998.
Mr. Course served in these capacities until January 2000, when he was appointed
the position of President and Chief Executive Officer. From September 1997 to
October 1998, Mr. Corse was 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 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.
Ralph W. Clark, age 59, has served as a Director of the Company since
October 1994. 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. Mr. Clark also serves as a member of the
Board of Directors of Leggett and Platt, Inc.
Term Expiring at 2002 Annual Meeting
Reid R. Bechtle, age 47, joined the Company in 1991 as President of the
Company's Computer Learning Center division and has been a Director of the
Company since October 1994. Mr. Bechtle served as President of the Company from
October 1994 to October 1998 and from November 1998 to January 2000 he served as
2
<PAGE> 7
the Company's Chief Executive Officer. From 1982 to 1991, he served as President
of Multi-List, Inc., a software services subsidiary of PRC/Litton, Inc. Mr.
Bechtle resigned as Chief Executive Officer in January 2000 but remains with the
Company as a member of the Board of Directors.
Harry H. Gaines, age 62, 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., a
professional management company.
MEETINGS 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 six meetings in fiscal 2000. The
members of the Audit Committee are Ralph W. Clark and Stephen P. Reynolds.
Please refer to the Audit Committee Charter attached as an appendix to the Proxy
Statement.
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 Chief Executive Officer 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 two meetings in
fiscal 2000. During fiscal 2000, the members of the Compensation Committee were
Ira D. Cohen and Harry H. Gaines. With Mr. Cohen resigning from the Board of
Directors in January 2000, Harry H. Gaines is currently the only member of the
Compensation Committee.
During fiscal 2000, there were six regular meetings of the Board of
Directors. Mr. Cohen did not participate in any of the Board meetings while the
remaining Directors attended 100% of the aggregate number of meetings of the
Board of Directors and the standing Board committees on which they serve,
respectively.
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,
2000 all Section 16(a) filing requirements applicable to its officers, Directors
and ten percent beneficial owners were complied with by such persons.
3
<PAGE> 8
PROPOSAL TWO: APPROVAL OF THE 2000 STOCK INCENTIVE PLAN
On May 26, 2000, the Board of Directors of the Company adopted, subject to
stockholder approval, the 2000 Stock Incentive Plan (the "2000 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 2000 Plan.
SUMMARY OF THE 2000 PLAN
The following description of the 2000 Plan is qualified in its entirety by
the full text of this plan attached as Exhibit A to this Proxy Statement.
Description of Awards
The 2000 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 2000 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 2000 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 2000 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 2000 Plan may not exceed 200,000 shares per calendar
year.
4
<PAGE> 9
Administration
The 2000 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 2000 Plan and to interpret the provisions of the 2000
Plan. Pursuant to the terms of the 2000 Plan, the Board of Directors may
delegate authority under the 2000 Plan to one or more committees of the Board.
The Board has authorized the Compensation Committee to administer certain
aspects of the 2000 Plan, including the granting of options to executive
officers. Subject to any applicable limitations contained in the 2000 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 2000 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 2000 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. In the event of a merger or
other Acquisition Event (as defined in the 2000 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 2000
Plan.
Amendment or Termination
The Board of Directors may at any time amend, suspend or terminate the 2000
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
2000 Plan and with respect to the sale of Common Stock acquired under the 2000
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.
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
5
<PAGE> 10
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 2000 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.
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 one year. Short-term capital
gain and ordinary income will be taxable at a maximum rate of 39.6%. Phase-outs
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.
6
<PAGE> 11
Tax Consequences to the Company
The grant of an Award under the 2000 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 2000 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 2000 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 2000 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 2000 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
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS FOR THE
CURRENT FISCAL YEAR
In accordance with the recommendation of the Audit Committee, the Board of
Directors has reappointed PricewaterhouseCoopers LLP as independent accountants
of the Company for fiscal 2001. Although ratification of the reappointment of
PricewaterhouseCoopers 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 PricewaterhouseCoopers LLP as the
Company's independent accountants, the Company will reconsider such appointment.
A representative of PricewaterhouseCoopers 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.
7
<PAGE> 12
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").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------------------
FISCAL OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUSES(1) COMPENSATION(2) COMPENSATION(3)
--------------------------- ------ -------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Reid R. Bechtle..................... 2000 $265,000 $ 0 $14,496 $2,500
Former Chief Executive Officer 1999 265,000 0 14,496 2,513
1998 250,000 312,000 14,496 2,399
John L. Corse....................... 2000 215,000 0 10,800 --
President/Chief Executive Officer 1999 57,885 26,875 2,700 --
1998 -- -- -- --
Charles L. Cosgrove................. 2000 187,500 0 6,000 2,109
Former Vice President/Chief
Financial 1999 183,750 0 6,000 2,319
Officer 1998 161,500 165,000 6,000 2,064
Mark M. Nasser...................... 2000 115,000 0 0 1,725
Vice President/Chief Financial
Officer 1999 90,000 0 0 1,350
1998 74,000 35,000 0 1,110
Susan L. Luster..................... 2000 159,470 0 0 2,422
Vice President of Operations 1999 157,500 0 0 2,500
1998 157,500 157,500 0 2,363
Christine M. Strachota.............. 2000 162,000 50,000 0 1,140
Former Vice President of
International 1999 150,000 50,000 0 1,313
Operations 1998 -- -- -- --
Marie A. Bennett.................... 2000 111,000 0 0 1,444
Vice President of Regulatory 1999 13,933 10,000 0 --
Compliance 1998 -- -- -- --
</TABLE>
---------------
(1) All bonus amounts shown above were accrued during the stated fiscal year and
paid in the subsequent fiscal year except for the amount shown for Marie A.
Bennett, whose bonus was paid in December 1998.
(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
8
<PAGE> 13
limits in indemnifying its Directors and officers. Directors are also eligible
to receive options to purchase Common Stock under the Company's 1995
Non-Employee Director Stock Option Plan and other stock plans, see "Stock Plans"
below.
CERTAIN TRANSACTIONS
In February 1997, Reid R. Bechtle, the Company's former Chief Executive
Officer, entered into an employment agreement that had a term of one year,
renewable for successive one-year periods unless the Company notified Mr.
Bechtle of non-renewal at least 90 days prior to the end of the initial term or
any renewal term. The agreement provided for an annual salary of $265,000,
subject to increases approved 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 January 2000, Mr. Bechtle resigned from his position as Chief
Executive Officer and in April 2000 Mr. Bechtle entered into a severance
agreement with the Company. The agreement provides that, in lieu of the
severance provisions of his employment agreement, the Company shall pay Mr.
Bechtle his annual salary and guaranteed bonus, an amount equal to $331,250, in
twenty-four equal payments over a twelve-month period ending February 2001.
In January 1998, the Company entered into a severance agreement with the
former Chief Financial Officer of the Company, Charles L. Cosgrove. The
agreement provided for an annual salary of not less than $165,000, subject to
increases approved from time to time by the Compensation Committee of the
Company's Board of Directors. In addition, the agreement specified that Mr.
Cosgrove was 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 January 2000, Mr. Cosgrove resigned from his position as
Chief Financial Officer and entered into a severance agreement with the Company.
The agreement provides that, in lieu of the provisions of the 1998 severance
agreement, the Company shall pay Mr. Cosgrove his annual salary, an amount equal
to $187,500, in twenty-four equal payments over a twelve-month period ending
March 2001.
In June 1998, the Company entered into a severance agreement with the Vice
President of Operations of the Company, Susan L. Luster. The agreement provides
for an annual salary of not less than $157,500, which may be increased from time
to time by the Compensation Committee. In the event Ms. Luster's employment is
terminated without cause or resignation for reasons defined in the agreement,
she is entitled to a lump sum payment equal to 12 months of salary. In addition,
if Ms. Luster's employment is terminated as a result of a change in control as
defined in the agreement, she will receive a lump sum amount equal to one and
one half times her base salary.
In November 1998, the Company entered into a severance agreement with the
President and Chief Executive Officer of the Company, John L. Corse. The
agreement provides for an annual salary of not less than $215,000, which may be
increased from time to time by the Compensation Committee. In the event Mr.
Corse's employment is terminated without cause or resignation for reasons
defined in the agreement, he is entitled to a lump sum payment equal to one and
one half times (1.5) his annual salary. In addition, if Mr. Corse's employment
is terminated as a result of a change in control as defined in the agreement, he
will receive a lump sum payment equal to two times his current base salary and
two times his annual bonus of the prior fiscal year.
In July 1999, the Company entered into a severance agreement with the Vice
President of International Operations of the Company, Christine M. Strachota.
The agreement provided for an annual salary of not less than $162,000, subject
to increases approved by the Compensation Committee. In the event Ms.
Strachota's employment was terminated without cause or resignation for reasons
defined in the agreement, she was entitled to a lump sum payment equal to 12
months of salary. In addition, if Ms. Strachota's employment were terminated as
a result of a change in control as defined in the agreement, she was entitled to
receive a lump sum amount equal to one and one half (1.5) times her base salary.
In April 2000, Ms. Strachota's employment was terminated and she received a lump
sum payment equal to $170,400.
In October 1999, the Company entered into a severance agreement with the
Vice President of Regulatory Compliance of the Company, Marie A. Bennett. The
agreement provides for an annual salary of not less than
9
<PAGE> 14
$105,000, subject to increases approved by the Compensation Committee. In the
event Ms. Bennett's employment is terminated without cause or resignation for
reasons defined in the agreement, she is entitled to a lump sum payment equal to
12 months of salary. In addition, if Ms. Bennett's employment is terminated as a
result of a change in control as defined in the agreement, she will receive a
lump sum amount equal to one and one half (1.5) times her base salary.
In January 2000, the Company entered into a severance agreement with the
Chief Financial Officer of the Company, Mark M. Nasser. The agreement provides
for an annual salary of not less than $165,000, subject to increases approved by
the Compensation Committee of the Company's Board of Directors. In addition, the
agreement specifies that Mr. Nasser 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. Nasser's
employment is terminated without cause or he resigns for good reason as defined
in 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. Nasser's employment is terminated as a result of a change in
control as defined in the agreement, he is entitled to 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 reserved
2,326,374 shares of Common Stock for grant under the plan. As of April 30, 2000,
options to purchase 95,465 shares of Common Stock were outstanding under this
Long-Term Incentive Plan. The Company has provided that no further grants may be
made under the Long-Term Incentive Plan.
The Company's 1998 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, Directors,
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 1,000,000 shares of
Common Stock for grant under this plan. As of April 30, 2000, options to
purchase 945,650 shares of common stock were outstanding under this plan, and
options to purchase 54,350 shares of Common Stock were available for grant.
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, Directors,
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. As of April 30, 2000 options to purchase
1,283,358 shares of common stock were outstanding under this plan, and options
to purchase 3,960 shares of Common Stock were available for grant.
The Company's 1995 Non-Employee Director Stock Option Plan (the "Director's
Plan") provides that each non-employee 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.
10
<PAGE> 15
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.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN GRANT DATE
GRANTED FISCAL EXERCISE PRICE EXPIRATION PRESENT
NAME (1) YEAR PER SHARE(2) DATE VALUE($)(3)
---- ---------- ------------ -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
John L. Corse............................ 250,000 26.90% $1.88 1/26/10 $287,500
Susan L. Luster.......................... 30,000 3.23% 1.88 1/26/10 34,500
Mark M. Nasser........................... 7,500 .81% 4.47 6/24/09 20,700
70,000 7.53% 1.88 1/26/10 80,500
Marie A. Bennett......................... 30,000 3.23% 1.88 1/26/10 34,500
Christine M. Strachota (4)............... 30,000 3.23% 1.88 1/26/10 34,500
</TABLE>
---------------
(1) Numbers shown represent options to purchase Common Stock.
(2) Stock options granted at 100% of fair market value of Common Stock on the
date of grant. With the exception of Mr. Nasser's grant of 70,000 options as
to whom 20% of the options vested upon grant, with the remaining options
vesting in 20% increments over the next four years, all other options become
exercisable in 20% increments over five years.
(3) Grant date present value is determined using the Black-Scholes model. The
model makes assumptions about future variables, so the actual value of
options may be greater or less than the values stated in the table. For new
options granted during fiscal year 2000, the calculations assume no dividend
yield, volatility of approximately 67.1% and a risk-free rate of return of
5.9% based on Zero Coupon Treasury Bonds for five-year maturities on the
respective grant dates.
(4) Upon Ms. Strachota's termination, her options were cancelled.
11
<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL-YEAR END AT FISCAL YEAR-END(1)
VALUE --------------------------- ---------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Reid R. Bechtle.................... 0 $0 558,076 0 $3,123 $0
John L. Corse...................... 0 0 42,201 337,333 0 0
Charles L. Cosgrove................ 0 0 96,504 0 0 0
Susan L. Luster.................... 0 0 96,000 54,000 0 0
Christine M. Strachota............. 0 0 10,000 0 0 0
Mark M. Nasser..................... 0 0 36,981 79,350 0 0
Marie A. Bennett................... 0 0 4,000 46,000 0 0
</TABLE>
---------------
(1) The closing price for the Company's Common Stock on the Nasdaq Stock Market
on January 31, 2000 was $1.88. Value is calculated on the basis of the
difference between the option exercise price and $1.88, 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. John L. Corse, the
Company's Chief Executive Officer as of January 2000. 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 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. From February 1998 through October 1998, the Committee
was composed of John L. Corse, Harry H. Gaines and Ira D. Cohen. In November
1998, John L. Corse was appointed President and Chief Operating Officer of the
Company, which necessitated his departure from the Compensation Committee. Mr.
Cohen resigned from the Board of Directors in January 2000. Harry H. Gaines, the
remaining member of the Compensation Committee is not eligible to participate in
any of the plans which make up the Company's executive compensation program.
12
<PAGE> 17
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 April
2000 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 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. The Company's executive salaries are 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. Corse's salary was increased effective January 26, 2000 to $275,800, an
increase of 28.3% after 12 months. Among the other Named Executive Officers, Ms.
Luster's salary was increased effective March 1, 2000 to $189,525, an increase
of 20.3% after 39 months, Ms. Bennett's salary was increased effective December
14, 1999 to $153,000, an increase of 45.7% after twelve months, Ms. Strachota's
salary was increased effective March 1, 2000 to $170,400, an increase of 5.2%
after twelve months and Mr. Nasser's salary was increased effective January 18,
2000 to $173,400, an increase of 50.7% after nineteen 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 recommendations of the Compensation Committee, establishes a base,
middle, and high performance plan based upon revenue, net income, earnings per
share, and individual performance goals. The incentive is structured to allow
for incentive payment targets of 50% to 100% of base salary on a graduated
basis. The incentive plan is structured to award no bonuses to the plan
participants if minimum performance goals are not achieved. The Committee
believes that allowing the executive team to earn amounts in excess of the base
bonus plan (50% of base salary) will encourage outstanding performance and
closely aligns management toward increasing shareholder value. For fiscal 2000,
such performance goals were: (1) fiscal 2000 net income and earnings per share
compared to plan; (2) fiscal 2000 revenue compared to plan; and (3) individual
performance goals related to long-term growth of the Company.
As a result of not achieving the net income, earnings per share and revenue
plans for fiscal 2000, the Compensation Committee recommended and the Board of
Directors concurred that none of the named Executives other than Ms. Strachota
receive a bonus. Ms. Strachota received a bonus of $50,000 as a condition of her
employment with the Company. Mr. Bechtle's guaranteed portion of his annual
bonus which equals 25% of Mr. Bechtle's salary or $66,250 was included as part
of his severance package.
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.
13
<PAGE> 18
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 subsection 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.
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 2001 that is not fully tax
deductible. Accordingly, the 2000, 1998 and 1995 Stock Option Plans 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 Committee:
HARRY H. GAINES
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Gaines is currently the only member of the Compensation Committee of
the Board of Directors. Mr. Gaines is not 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, 2000. 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 Quest Education Corporation. 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.
14
<PAGE> 19
[Performance Graph]
<TABLE>
<CAPTION>
COMPUTER LEARNING CENTERS
INC. S&P 500 INDEX INDUSTRY GROUP INDEX
------------------------- ------------- --------------------
<S> <C> <C> <C>
5/95 100.00 100.00 100.00
1996 109.37 121.09 154.52
1997 362.47 152.99 293.36
1998 1277.17 194.15 329.91
1999 193.32 257.23 587.72
2000 70.30 283.85 297.10
</TABLE>
SECURITY OWNERSHIP
The following table sets forth, as of April 30, 2000, to the best knowledge
of the Company, 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 Named Executive Officers employed by the
Company as of April 30, 2000 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)................................ 2,944,716 15.8%
125 East 56th Street
New York, NY 10022
Fidelity Investments(3)..................................... 1,821,680 9.8%
82 Devonshire Street
Boston, MA 02109-3614
Harry H. Gaines(4).......................................... 264,574 1.4%
Stephen P. Reynolds(5)...................................... 2,982,423 16.0%
John L. Corse(6)............................................ 100,201 *
Ralph W. Clark(7)........................................... 52,367 *
Reid R. Bechtle(8).......................................... 743,076 3.9%
Mark M. Nasser(9)........................................... 37,913 *
Susan L. Luster(10)......................................... 106,350 *
Marie A. Bennett(11)........................................ 4,450 *
All Directors and executive officers as a group (8
persons)(12).............................................. 4,291,354 21.5%
</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, 2000 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, 1,228,338 shares held by General Atlantic Partners
15
<PAGE> 20
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 special advisor to GAP-CLC and disclaims
beneficial ownership of shares owned by the General Atlantic Entities.
(3) This information based on Schedule 13G received by the Company on or about
February 14, 2000.
(4) Includes 14,660 shares issuable pursuant to the exercise within 60 days
after April 30, 2000 of options granted under the Director's Plan.
(5) Mr. Reynolds, a Director of the Company, is a special advisor to GAP-CLC.
Mr. Reynolds disclaims beneficial ownership of all of such shares
referenced in note (2), except to the extent of his proportionate pecuniary
interests therein. Includes 28,707 shares issuable pursuant to the exercise
of options within 60 days after April 30, 2000.
(6) Includes 42,201 shares issuable pursuant to the exercise of options within
60 days after April 30, 2000, including 22,201 Director options.
(7) Includes 29,677 shares issuable pursuant to the exercise within 60 days
after April 30, 2000 of options granted under the Director's Plan.
(8) Includes 185,000 shares owned by members of Mr. Bechtle's immediate family
and 558,076 shares issuable pursuant to the exercise of options as of April
30, 2000.
(9) Includes 36,981 shares issuable pursuant to the exercise of options within
60 days after April 30, 2000.
(10) Includes 96,000 shares issuable pursuant to the exercise of options within
60 days after April 30, 2000.
(11) Includes 4,000 shares issuable pursuant to the exercise of options within
60 days after April 30, 2000.
(12) Includes 810,302 shares issuable pursuant to the exercise of options within
60 days after April 30, 2000. See note (2) and notes (5) through (11)
above.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
The date by which stockholder proposals must be received by the Company for
inclusion in proxy material relating to the 2001 Annual Meeting of Stockholders
is April 3, 2001. In addition, the Company's Bylaws provide that the Company be
given advance written notice of any proposal which a stockholder wishes to
present for action at an Annual Meeting of Stockholders (other than matters
included in the Company's proxy statement in accordance with Rule 14a-8 under
the Securities Exchange Act of 1934). The required notice must be in the form
prescribed in the Bylaws and be delivered by the stockholder and received by the
Secretary at the principal executive office of the Company not less than 30 days
prior to the first anniversary of the Notice of Annual Meeting for the prior
year. The persons named in the proxy solicited by the Board of Directors in
connection with such meeting may vote in their discretion as to any such
proposal submitted after that date or as otherwise permitted by Securities and
Exchange Commission rules.
By Order of the Board of Directors
/s/ MARK M. NASSER
Mark M. Nasser,
Secretary
June 14, 2000
16
<PAGE> 21
EXHIBIT A TO PROXY STATEMENT
2000 STOCK INCENTIVE PLAN
COMPUTER LEARNING CENTERS, INC.
2000 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this 2000 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) 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"). Any such Committee
shall consist 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.
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 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 8(a), 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 200,000 shares per calendar year. The
A-1
<PAGE> 22
per-participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
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 "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 total combined 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 total
combined voting power of the Company or its parent or any subsidiary 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:
(i) in cash or by check, payable to the order of the Company;
(ii) 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 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;
(iii) 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
(iv) 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
A-2
<PAGE> 23
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, a "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 stock 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. ADJUSTMENTS FOR CHANGES IN STOCK AND CERTAIN OTHER EVENTS
(a) Changes In Capitalization. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, 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 per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding 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 8(a)
applies and Section 8(c) also applies to any event, Section 8(c) shall be
applicable to such event, and this Section 8(a) shall not be applicable.
(b) Liquidation Or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted Stock Award or other Award granted under the Plan
at the time of the grant of such Award.
(c) 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
A-3
<PAGE> 24
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 of the Company with or into another entity as a result of which
the Common Stock is converted into or exchanged for the right to receive cash,
securities or other property, (b) any exchange of shares of the Company for
cash, securities or other property pursuant to a share exchange transaction or
(c) any sale of all or substantially all of the assets of the Company.
(d) Assumption Of Options Upon Certain Events. The Board may grant Awards
under the Plan in substitution for stock and stock-based awards held by 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.
9. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) Transferability 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 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) 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.
(f) 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 determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) 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
A-4
<PAGE> 25
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 only 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.
(h) 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.
10. 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.
A-5
<PAGE> 26
APPENDIX B TO PROXY STATEMENT OF COMPUTER LEARNING CENTERS, INC. (6-14-00)
COMPUTER LEARNING CENTERS, INC.
AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
CHARTER
CHARTER; PURPOSE AND FUNCTION OF COMMITTEE
This document shall be the official Charter of the Audit Committee (the
"Committee") of the Board of Directors (the "Board") of Computer Learning
Centers, Inc., a Delaware corporation (the "Company"). The primary function of
the Committee is to assist the Board in fulfilling its oversight
responsibilities for accurate and complete reporting by reviewing: (a) the
annual financial reports provided by the Company to the public, (b) the
Company's systems of internal controls regarding finance, accounting, legal
compliance and ethics that management and the Board have established, and (c)
the Company's auditing, accounting and financial reporting processes. Consistent
with this function, the Committee should encourage continuous improvement of,
and should foster adherence to, the Company's policies, procedures and practices
at all levels. The Committee shall be accountable and responsible to the full
Board. The Committee's primary duties and responsibilities are to:
- Serve as independent and objective party to monitor the Company's
financial reporting process and internal control systems;
- Review and appraise the audit efforts of the Company's independent
accountants; and
- Provide open channels of communication among the Company's independent
accountants, senior management and the Board.
The Committee will primarily fulfill these responsibilities by carrying out
the activities enumerated in Section IV of this Charter.
COMPOSITION; QUALIFICATIONS OF COMMITTEE MEMBERS
A. Composition. The Committee currently has two members. The committee
shall be comprised of three (3) or more members of the Board by the end of
calendar year 2000. The Board shall determine any changes to the number of
members from time to time in its discretion.
B. Qualifications. Each member of the Committee shall be an Independent
Director and have Financial Knowledge (each as defined herein), and shall be
free from any relationship that, in the judgment of the Board, would interfere
with the exercise of his or her independent judgment as a member of the
Committee. At least one (1) member of the Committee shall have Financial
Experience (as defined herein).
ELECTION AND MEETINGS
A. Election. The members of the Committee were appointed by the Board.
Thereafter, the Board shall appoint the members of the Committee annually, which
shall otherwise serve until their successors shall be duly elected and
qualified. Unless a Chairman of the Committee is appointed by the Board, the
members of the Committee may designate a Chairman by majority vote of the full
Committee.
B. Meetings. The Committee shall meet at least two times annually, or more
frequently as circumstances require in the discretion of the Committee and the
Board. As an element of its duties to encourage and facilitate open
communication, the Committee should meet at least annually with representatives
from the Company's executive management and its independent accountants in
separate sessions to discuss any matters that the Committee or any of these
groups believe should be discussed.
B-1
<PAGE> 27
RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Committee shall:
Documents/Reports Review
Review, and if it deems necessary or appropriate, update this Charter
periodically, at least annually.
1. Review the Company's annual financial statements submitted to the
public, including any opinion rendered by the Company's independent accountants.
2. Review the regular internal reports to management prepared by the
Company's internal accounting department and management's response to such
reports.
3. Review with the Company's financial management and its independent
accountants the annual financial statements prior to filing with the Securities
and Exchange Commission the 10-K Annual Report.
Independent Accountants
4. Recommend to the Board the Committee's selection of an independent
accounting firm, considering independence and effectiveness and other factors it
deems appropriate and in the best interests of the Company, and approve the fees
and other compensation to be paid to such independent accounting firm. On at
least an annual basis, the Committee should receive from the independent
accounting firm a formal written statement delineating and describing all
relationships between the Company and such firm, consistent with the
Independence Standards Board's Standard 1. The Committee should review and
discuss with the independent accounting firm all such identified relationships
or services to examine and determine the independence and objectivity of the
accounting firm. The Committee shall take all appropriate action, or recommend
to the Board such appropriate actions, to oversee the independence of such
independent accountants.
5. Review and evaluate the performance of the independent accounting firm,
and when appropriate, recommend to the Board or implement a discharge and
replacement of the accounting firm when circumstances warrant.
6. Periodically consult with the independent accounting firm, out of the
presence of the Company's management, regarding internal controls and the
completeness and accuracy of the Company's financial statements.
Financial Reporting Process
7. In consultation with the independent accounting firm and the Company's
internal accounting personnel, review the integrity of the Company's financial
reporting process, both internal and external.
8. Consider the independent accounting firm's judgments about the quality
and appropriateness of the Company's accounting principles as applied to its
financial reporting.
9. Consider and approve, if appropriate, major changes to the Company's
accounting principles and practices as suggested by the independent accounting
firm, management of the Company and/or its internal accounting department.
Process and Organizational Improvements
10. Review any significant judgments made by management, the independent
accounting firm, and the Company's internal accounting department regarding
management's preparation of the annual financial statements and, where
necessary, discuss the view as to the appropriateness of such judgments.
11. Following completion of the annual audit, review separately with
management, the independent accounting firm and the Company's internal
accounting department any significant difficulties encountered during the course
of the audit, including any restrictions on the scope of work or access to
required information.
B-2
<PAGE> 28
12. Review any significant disagreement among management and the
independent accounting firm or the Company's internal accounting department in
connection with the preparation of the financial statements.
13. Review with the independent accounting firm, the Company's internal
accounting department and management the extent to which changes or improvements
in financial or accounting practices, as approved by the Committee, have been
implemented. This review should be conducted at an appropriate time subsequent
to implementation of changes or improvements, as determined by the Committee.
Legal Compliance; General
14. Review, with the Company's senior management or outside legal counsel,
legal compliance matters, including corporate securities trading policies.
15. Review, with the Company's senior management or outside legal counsel
and the full board, any legal matter that could have a significant impact on the
Company's financial statements.
16. Perform any other activities consistent with this Charter, the
Company's Bylaws and governing law, as the Committee or the Board deems
necessary or appropriate.
DEFINITIONS
INDEPENDENT DIRECTOR--A person other than an officer or employee of the
Company or any of its subsidiaries or any other individual having a relationship
which, in the opinion of the Company's Board of Directors, would interfere with
the exercise of independent judgment in carrying out the responsibilities of a
director. The following persons shall not be considered independent for these
purposes:
(a) a director who is employed by the Company or any of its affiliates for
the current year or the past year;
(b) a director who accepts any compensation from the Company or any of its
affiliates in excess of $60,000 during the previous fiscal year, other than
compensation for Board service, benefits under a tax-qualified retirement plan
or other non-discretionary compensation;
(c) a director who is a member of the immediate family of an individual who
is, or has been in any of the past year, employed by the Company or any of its
affiliates as an executive officer. Immediate family members include a person's
spouse, parents, children, siblings, mother-in-law, father-in-law,
brother-in-law, sister-in-law, son-in-law, daughter-in-law and anyone who
resides in such person's home;
(d) A director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the Company
made, or from which the Company received, payments (other than those arising
solely from investments in the Company's securities) that exceed 5% of the
Company's or business organization's consolidated gross revenues for that year,
or $200,000, whichever is more, in any of the past three (3) years; or
(e) A director who is employed as an executive of another entity where any
of the Company's executives serve on that entity's compensation committee.
Pursuant to Rule 4310 of the Nasdaq National Market Listing Requirements,
one director who is not an Independent Director as defined above and who is not
a current employee or an immediate family member of such employee, may be
appointed to the Audit Committee if the full Board of Directors, under
exceptional and limited circumstances, determines that membership on the
Committee by the individual is required in the best interests of the Company and
its stockholders, and the Board of Directors discloses, in the next annual proxy
statement subsequent to such determination, the nature of the relationship and
the reasons for that determination.
FINANCIAL KNOWLEDGE--A working familiarity with basic finance and
accounting practices, including the ability to read and understand fundamental
financial statements, including balance sheets, income statements, stockholders
equity and cash flow statements. Persons who will become so qualified within a
reasonable period
B-3
<PAGE> 29
of time after his or her appointment to the Audit Committee also comply with
this provision. Committee members may enhance their familiarity with finance and
accounting by participating in educational programs conducted by the Company or
an outside consultant.
FINANCIAL EXPERIENCE--Past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.
B-4
<PAGE> 30
COMPUTER LEARNING CENTERS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 1, 2000
The undersigned, having received notice of the meeting and management proxy
statement therefor, and revoking all prior proxies, hereby appoints Mark M.
Nasser and John L. Corse, 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 1, 2000 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.)
[SEE REVERSE SIDE]
<PAGE> 31
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEE AND EACH OF
THE PROPOSALS LISTED BELOW.
WITHHOLD AUTHORITY
TO VOTE FOR ALL NOMINEES
FOR LISTED BELOW
Proposal 1: [ ] [ ]
To elect the following
nominee as a
Class II Director
to serve until the
2003 Annual Meeting of Stockholders.
NOMINEE: Stephen P. Reynolds
FOR all nominees listed (except as marked to the contrary listed below).
___________________________________________________________
FOR AGAINST ABSTAIN
Proposal 2: [ ] [ ] [ ]
Proposal to approve the Company's 2000
Stock Incentive Plan.
Proposal 3:
Proposal to ratify the selection of [ ] [ ] [ ]
PricewaterhouseCoopers LLP to serve as
the Company's Independent accountants for fiscal 2001.
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 DIRECTOR 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).
