<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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>
QUEST EDUCATION CORPORATION
- --------------------------------------------------------------------------------
(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):
[X] 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
QUEST EDUCATION CORPORATION
1400 HEMBREE ROAD, SUITE 100
ROSWELL, GEORGIA 30076
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
ON TUESDAY, SEPTEMBER 28, 1999
The annual meeting of shareholders of Quest Education Corporation will be
held on Tuesday, September 28, 1999, at the Holiday Inn, Great Oaks Ballroom,
1075 Holcomb Bridge Road, Roswell, Georgia 30076 at 1:00 p.m., local time. At
the meeting, shareholders will be asked to
- elect five directors;
- ratify the selection by the board of directors of Ernst & Young LLP
as Quest's independent auditors for the fiscal year ending March 31,
2000; and
- transact such other business properly brought before the shareholders
at the meeting.
This proxy statement, together with the accompanying notice and enclosed
proxy card, will be sent to the shareholders on or about September 2, 1999.
Shareholders of record at the close of business on August 27, 1999 will
be entitled to notice of and to vote at the annual meeting or any adjournment of
the meeting. Each share of common stock is entitled to one vote. The proxy card
provided with this proxy statement indicates the number of shares of Quest's
common stock that you own and are entitled to vote.
All shareholders are cordially invited to attend the annual meeting.
By Order of the Board of Directors,
Gary D. Kerber
President and Chief Executive Officer
Roswell, Georgia
August 31, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN
ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE
PROXY IS MAILED IN THE UNITED STATES.
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information About Voting............................ 1
Proposal No. 1: Election of Directors....................... 5
Proposal No. 2: Ratification of Appointment of Independent
Auditors.................................................. 20
</TABLE>
<PAGE> 3
QUEST EDUCATION CORPORATION
1400 HEMBREE ROAD, SUITE 100
ROSWELL, GEORGIA 30076
TELEPHONE: 770-510-2000
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
DATED: AUGUST 31, 1999
This proxy statement has been prepared and is furnished by the board of
directors of Quest Education Corporation for the annual meeting of shareholders
to be held on September 28, 1999, and at any adjournment of the meeting, for the
purposes indicated in the accompanying Notice of Meeting.
This proxy statement and the accompanying form of proxy will be mailed to
shareholders on or about September 2, 1999. Quest's annual report, including
audited consolidated financial statements for the fiscal year ended March 31,
1999, will be mailed or delivered with this proxy statement. The annual report
is not to be regarded as proxy soliciting material.
GENERAL INFORMATION ABOUT VOTING
WHO CAN VOTE?
You can vote your shares of common stock if our records show that you
owned the shares at the close of business on August 27, 1999. A total of
8,236,072 shares of common stock can vote at the annual meeting. You get one
vote for each share of common stock. The enclosed proxy card shows the number of
shares you can vote.
HOW DO I VOTE BY PROXY?
Follow the instructions on the enclosed proxy card to vote on each
proposal to be considered at the annual meeting. Sign and date the proxy card
and mail it back to us in the enclosed envelope. The proxyholders named on the
proxy card will vote your shares as you instruct. If you sign and return the
proxy card but do not vote on a proposal, the proxyholders will vote for you on
that proposal. Unless you instruct otherwise, the proxyholders will vote FOR
each of the five director nominees, FOR the ratification of the appointment of
Ernst & Young LLP as the independent auditors of the company for the fiscal year
ending March 31, 2000, and FOR any other proposals to be considered at the
meetings.
WHAT IF OTHER MATTERS COME UP AT THE ANNUAL MEETING?
The matters described in this proxy statement are the only matters we
know will be voted on at the annual meeting. If other matters are properly
present at the meeting, the proxyholders will vote your shares as they see fit.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. At any time before the vote on a proposal, you can change your vote
either by giving the company's secretary a written notice revoking your proxy
card or by signing, dating and returning to us a new proxy card. We will honor
the proxy card with the latest date.
CAN I VOTE IN PERSON AT THE ANNUAL MEETING RATHER THAN BY COMPLETING THE PROXY
CARD?
Although we encourage you to complete and return the proxy card to ensure
that your vote is counted, you can attend the annual meeting and vote your
shares in person.
<PAGE> 4
WHAT DO I DO IF MY SHARES ARE HELD IN "STREET NAME"?
If your shares are held in the name of your broker or other nominee, that
party should give you instructions for voting your shares.
HOW ARE VOTES COUNTED?
We will hold the annual meeting if holders of a majority of the shares of
common stock entitled to vote either sign and return their proxy cards or attend
the meeting. If you sign and return your proxy card, you shares will be counted
to determine whether we have a quorum even if you abstain or fail to vote on any
of the proposals listed on the proxy card.
WHO WILL COUNT THE VOTES?
First Union National Bank of North Carolina, N.A., Quest's transfer
agent, will tabulate the returned proxy votes by mail and the independent
inspector of the election will tabulate the votes at the meeting. The elections
inspector will treat shares represented by properly signed and returned proxies
that reflect abstentions from voting as shares that are present and entitled to
vote for purposes of determining the presence of a quorum on all matters. A
majority of the outstanding shares will constitute a quorum at the meeting.
The election inspector will treat shares referred to as "broker
non-votes" (i.e. shares held by brokers or nominees as to which voting
instructions have not been received from the beneficial owners) as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions and "broker non-votes" will not affect the outcome of the
director elections.
If your shares are held in the name of a nominee, and you do not tell the
nominee by September 18, 1999 how to vote your shares (so-called "broker
non-votes"), the nominee can vote them as it sees fit only on matters that are
deemed to be routine, and not on any other proposal. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular mater, those shares will not be considered as present and
entitled to vote with respect to that matter.
WHO PAYS FOR THIS PROXY SOLICITATION?
We do. In addition to sending you these materials, some of our employees
may contact you by telephone, by mail, or in person. None of these employees
will receive any extra compensation for doing this. We have retained Corporate
Investor Communications, Inc. to assist us in soliciting your proxy for a fee
plus reasonable out-of-pocket expenses.
None of the actions to be voted upon at the 1999 annual meeting shall
create dissenters' rights under the Delaware General Corporation Law.
You are requested, regardless of the number of shares you hold, to sign
the proxy and return it promptly in the enclosed envelope.
2
<PAGE> 5
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The table below shows, as of June 30, 1999, the number of shares of common
stock beneficially owned by:
- each person who we know beneficially owns more than 5% of the common
stock,
- each director,
- each executive officer included in the Summary Compensation Table, and
- all executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY SHARES
NAME AND ADDRESS OWNED(1) OUTSTANDING(2)
- ---------------- ------------ --------------
<S> <C> <C>
Sprout Capital V(3)......................................... 920,005 11.2%
Sprout Technology Fund(2)................................... 19,889 *
DLJ Venture Capital Fund II, L.P.(3)........................ 54,921 *
Wellington Management Co., Ltd.(4).......................... 808,000 9.8%
Matador Capital Management(5)............................... 434,150 5.3%
Gary D. Kerber(6)(7)........................................ 449,764 5.2%
Vince Pisano(6)(8).......................................... 256,507 3.0%
Gerald T. Kosentos(6)(9).................................... 33,733 *
Elaine Neely-Eacona(6)(10).................................. 17,375 *
Ellen L. Bernhardt(6)(11)................................... 30,167 *
Linwood W. Galeucia(6)...................................... 101,266 1.3%
Craig A. Wood(6)(12)........................................ 2,000 *
K. Terry Guthrie(6)(13)..................................... 8,000 *
A. William Benham(6)(14).................................... 12,526 *
Robert J. Cresci(15)........................................ 31,000 *
Carl S. Hutman(16).......................................... 31,340 *
Richard E. Kroon(18)........................................ 31,000 *
William D. Ford(19)......................................... 7,400 *
All executive officers and directors as a group (13
persons).................................................. 994,118 11.4%
</TABLE>
* Less than 1%.
(1) The number of shares of common stock beneficially owned by each person or
entity is determined under the rules of the Securities and Exchange
Commission, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under those rules, beneficial ownership
includes any shares for which the person or entity has sole or shared
voting power or investment power and also any shares of common stock which
the individual has the right to acquire within 60 days after June 30, 1999
through the exercise of any stock option or other right. The inclusion of
any shares of common stock deemed beneficially owned is not an admission of
beneficial ownership of those shares. Unless otherwise indicated, the
person or entity named in the table has sole voting and investment power
with respect to all shares of common stock shown as beneficially owned.
(2) The number of shares outstanding includes shares outstanding as of June 30,
1999 (8,224,037) plus any shares subject to options held by the person
named that are exercisable within 60 days after June 30, 1999.
(3) The address of this person or entity is 277 Park Avenue, 21st Floor, New
York, New York 10172.
(4) The address of this person or entity is 75 State Street, Boston,
Massachusetts 02109.
(5) The address of this person or entity is 200 1st Avenue North, Suite 203,
St. Petersburg, Florida 33701.
(6) The address of this person is c/o Quest Education Corporation, 1400 Hembree
Road, Suite 100, Roswell, Georgia 30076.
(7) Includes 158,672 shares of Common Stock which may be purchased upon the
exercise of options which are exercisable within 60 days of June 30, 1999.
3
<PAGE> 6
(8) Includes 111,676 shares of Common Stock which may be purchased upon the
exercise of options which are exercisable within 60 days of June 30, 1999.
Also includes 17,799 shares held by Mr. Pisano for the benefit of his minor
children and 160 shares held by a minor child residing with him. Mr. Pisano
disclaims beneficial ownership of the shares held by or on behalf of his
children.
(9) Includes 33,733 shares of Common Stock which may be purchased upon the
exercise of options which are exercisable within 60 days of June 30, 1999.
(10) Includes 14,250 shares of Common Stock which may be purchased upon the
exercise of options which are exercisable within 60 days of June 30, 1999.
(11) Includes 30,167 shares of Common Stock which may be purchased upon the
exercise of options which are exercisable within 60 days of June 30, 1999.
(12) Includes 2,000 shares of Common Stock which may be purchased upon the
exercise of options which are exercisable within 60 days of June 30, 1999.
(13) Includes 7,000 shares of Common Stock which may be purchased upon the
exercise of options which are exercisable within 60 days of June 30, 1999.
(14) Includes 11,484 shares of Common Stock which may be purchased upon the
exercise of options which are exercisable within 60 days of June 30, 1999.
(15) Mr. Cresci, a director, is a managing partner of Pecks Management Partners,
Ltd. Mr. Cresci's address is c/o Pecks Management Partners Ltd., 1
Rockefeller Plaza, New York, New York 10020. Includes 31,000 shares of
Common Stock which may be purchased upon the exercise of options which are
exercisable within 60 days of June 30, 1999.
(16) Mr. Hutman's address is c/o Fundamental Management Corp., 4000 Hollywood
Blvd., Suite 610-N, Hollywood, FL 33021. Includes 31,000 shares of Common
Stock which may be purchased upon the exercise of options which are
exercisable within 60 days of June 30, 1999.
(17) Mr. Kroon, a director, is the general partner of the general partner of
Sprout Capital V, Sprout Technology Fund, and DLJ Venture Capital Fund II,
L.P. Excludes 994,815 shares of Common Stock owned by these entities. Mr.
Kroon disclaims any beneficial ownership of those 994,815 shares. Includes
31,000 shares of Common Stock which may be purchased upon the exercise of
options which are exercisable within 60 days of June 30, 1999.
(18) Mr. Ford's address is 312 Eighth Street SE, Washington, D.C. 23003.
Includes 7,400 shares of Common Stock which may be purchased upon the
exercise of options which are exercisable within 60 days of June 30, 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our directors and executive officers must file reports with the Securities
and Exchange Commission indicating the number of shares of our common stock they
beneficially own and any changes in their beneficial ownership. Copies of these
reports must be provided to us. Based on our review of these reports and written
representations from the persons required to file them, we believe each of our
directors and executive officers filed all the required reports during fiscal
1999.
4
<PAGE> 7
PROPOSAL ONE
ELECTION OF DIRECTORS
An entire board of directors, consisting of five members, will be elected
at the annual meeting. The directors elected will hold office until their
successors are elected, which should occur at the next annual meeting.
Vote Required. The five nominees receiving the highest number of votes
will be elected. Votes withheld for a nominee will not be counted. You get one
vote for each of your shares of common stock.
Nominations. At the annual meeting, we will nominate the persons named in
this proxy statement as directors. Although we don't know of any reason why one
of these nominees might not be able to serve, the board of directors will
propose a substitute nominee if any nominee is not available for election. The
proxies will then be voted for the substitute nominee designated by the current
board of directors. All of nominees currently are directors of Quest.
GENERAL INFORMATION ABOUT THE NOMINEES.
Our Board of Directors is set at five persons. Five persons have been
nominated by the Board of Directors to fill such positions. All five are
currently Directors of the company. The ages listed for the nominees are as of
June 30, 1999.
<TABLE>
<S> <C> <C>
Gary D. Kerber.............................. 60 Mr. Kerber has been President, Chief
Executive Officer and a Director of the
company since March 1988. From 1971 to 1983,
he was employed by American Hospital Supply
Company in various sales and executive
positions. From 1983 to 1986, Mr. Kerber was
the chief executive officer for Kimberly
Services, Inc.
Robert J. Cresci............................ 55 Mr. Cresci has been a Director of the
company since 1991. Since September 1990,
Mr. Cresci has been a Managing Director of
Pecks Management Partners Ltd., an
investment management firm. Mr. Cresci
currently serves on the boards of Bridgeport
Machines, Inc., EIS International, Inc.,
Sepracor, Inc., Arcadia Financial, Ltd.,
Aviva Petroleum Ltd., Film Roman, Inc.,
Castle Dental Centers, Inc., Candlewood
Hotel Co., Inc., SeraCare, Inc. and several
private companies.
</TABLE>
5
<PAGE> 8
<TABLE>
<S> <C> <C>
Carl S. Hutman.............................. 65 Mr. Hutman has been a Director of the
company since 1988. Since 1996, he has also
been managing director of Fundamental
Management Corporation, an investment
management firm. Since 1981, he has been
president of Anlyn Advisers, Inc., an
investment advisory company. From 1981 to
1991, he was a general partner of Investech,
L.P., a venture capital partnership which
purchased convertible preferred stock and
common stock of the company in 1988 and 1989
and distributed all of its holdings to its
general and limited partners in 1991. Mr.
Hutman is a member of the Board of Directors
of Canadian General Investments, Limited,
Canadian World Fund Limited and Third
Canadian General Investment Trust Limited,
all of which are investment funds. Mr.
Hutman is also a member of the Board of
Directors of Harris Trust/Bank of Montreal,
Florida.
Richard E. Kroon............................ 57 Mr. Kroon has been a Director of the company
since 1994. Since 1981, Mr. Kroon has been
managing partner of the Sprout Group and
President and Chief Executive Officer of DLJ
Capital Corp. Mr. Kroon is a director of
several private companies and is
president-elect and director of National
Venture Capital Association.
William D. Ford............................. 71 Mr. Ford is an attorney admitted to practice
in the State of Michigan since 1951. From
1964 to 1994, he was a member of the U.S.
House of Representatives, representing the
13th District of Michigan. While a member of
the House of Representatives, Mr. Ford
served on the Education & Labor Committee
from 1964 to 1994, and served as Chairman of
that committee from 1991 until his
retirement in 1994. He actively participated
in the passage of the Head Start program,
the Elementary and Secondary Education Act,
and the Higher Education Act. He was a
sponsor of the Adult Education Act, the
Bilingual Education Act, and Education for
all Handicapped Children's Act, the National
and Community Service Trust Act, and the
Goals 2000: Educate America Act. Mr. Ford
also authored the Family and Medical Leave
Act and was instrumental in the passage of
numerous bills designed to ensure workers'
rights and safety, pension protection and
fair trade treatment for America's auto
industry and its workers.
</TABLE>
6
<PAGE> 9
Approval of a majority of the shares of common stock present or
represented by proxy and entitled to vote at the annual meeting is required for
election of nominees as directors. Broker non-votes with respect to this matter
will not be deemed to have been cast either "for" or "against" the matter,
although they will be counted in determining if a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" ALL NOMINEES FOR DIRECTOR.
EXECUTIVE OFFICERS
Information relating to each executive officer of the company who is not a
director (the "Named Executive Officers") is set forth below.
<TABLE>
<S> <C> <C>
Vince Pisano................................ 45 Mr. Pisano has been Vice President of
Finance and Chief Financial Officer of the
company since March 1990. From 1978 to 1990,
he was employed by National Education
Corporation, a provider of postsecondary
education, as corporate controller and
subsequently as the vice president of
finance of its educational centers division.
Gerald T. Kosentos.......................... 47 Mr. Kosentos has been Vice President of
Operations of the company since June 1997.
From April 1997 through June 1997 he was
Director of Operations -- Central Region of
the company. From January 1995 to June 1997
he was Director of ICM School of Business &
Medical Careers, a wholly owned subsidiary
of the company. Prior to January 1995, Mr.
Kosentos was employed for 21 years by
National Education Corporation, a provider
of postsecondary education, in various
positions including the directorship of
three school locations, Regional Director of
Operations and, for the last nine years of
his employment, as Vice President of
Operations.
Elaine Neely-Eacona......................... 46 Ms. Neely-Eacona was appointed Vice
President of Financial Aid of the company in
March 1998. From 1990 until March 1998, she
was Director of Financial Aid of the
company. From 1976 to 1990, she was employed
in various financial aid positions by
Education Management Corporation, a provider
of postsecondary education.
Ellen L. Bernhardt.......................... 48 Ms. Bernhardt has been Director of
Operations -- Eastern Region of the company
since August 1993. From 1985 to 1993, she
was employed by National Education
Corporation, a provider of postsecondary
education, most recently as Southeast
Regional Director of Operations.
</TABLE>
7
<PAGE> 10
<TABLE>
<S> <C> <C>
Linwood W. Galeucia......................... 54 Mr. Galeucia has been President of the New
England Region since March 13, 1998. From
1983 to March 1998, Mr. Galeucia was
President, Executive Vice President and
co-owner of Hesser, Inc., the parent company
of Hesser College. Since 1990, Mr. Galeucia
has been a member of the New Hampshire
Postsecondary Education Commission.
Craig A. Wood............................... 50 Mr. Wood was appointed Director of
Operations -- Western Region of the company
in March 1998. From December 1997 to March
1998, Mr. Wood served as a consultant to the
company. From July 1997 to December 1997,
Mr. Wood was Vice President, Operations of
Education America, Inc. From February 1995
to July 1997, Mr. Wood was Vice President,
Marketing of the Katherine Gibbs Schools,
Inc.
K. Terry Guthrie............................ 56 Mr. Guthrie has been Director of
Accreditation of the company since July
1993. From 1971 to July 1993, he was
employed as president of Ohio Institute of
Photography and Technology, which he
co-founded. Ohio Institute of Photography
and Technology was acquired by the company
in July 1993.
A. William Benham, Jr....................... 37 Mr. Benham has been Controller of the
company since May 1995. From 1990 to May
1995, Mr. Benham was Assistant Controller of
the company.
</TABLE>
Meetings of the Board of Directors. During the year ended March 31, 1999,
the board of directors held five meetings at which a majority of the directors
were physically present and two meetings at which a majority of the directors
participated by telephone. Each director attended at least 75% of the meetings
of the Board and any committee on which he served.
Committees of the Board. The board of directors has two principal
committees. The following chart describes the function and membership of each
committee and the number of times it met in 1999.
AUDIT COMMITTEE -- 1 MEETING
<TABLE>
<CAPTION>
FUNCTION MEMBERS
- -------- -------
<S> <C>
- - Review internal financial information Robert Cresci (Chairman)
- - Review audit program Carl Hutman
- - Review the results of audits with the independent
auditors
- - Oversee quarterly and yearly reporting
- - Responsible for policies, procedures and other matters
relating to business integrity, ethics and conflicts of
interests
</TABLE>
COMPENSATION COMMITTEE -- 1 MEETING
<TABLE>
<CAPTION>
FUNCTION MEMBERS
- -------- -------
<S> <C>
- - Review and approve compensation and benefit programs Richard E. Kroon (Chairman)
- - Approve compensation of senior executives Carl Hutman
- - Administer stock option plans William D. Ford
</TABLE>
8
<PAGE> 11
DIRECTORS' COMPENSATION
All directors hold office until the next annual meeting of shareholders
and the election and qualification of their successors. Directors who are not
employees and do not otherwise receive compensation from the company are
entitled to an annual directors' fee of $6,000 and directors' fees of $1,000 for
each board meeting attended and $500 for each committee meeting attended in
addition to the reimbursement of reasonable expenses incurred in connection with
their activities as directors. Directors who are also employees receive no
compensation for serving on the board of directors. Mr. Kerber is the only
director who is also an employee.
Non-Employee Director Stock Option Plan. In addition to the compensation
described above, directors are granted options to purchase 3,000 shares of
common stock under the Non-Employee Director Stock Option Plan each year at the
time of the annual meeting. On June 20, 1996, the date the Directors' Plan was
adopted, each of the three existing non-employee directors were each granted,
options to purchase 25,000 shares of Common Stock of the Company $10.00 per
share. When a new member is elected to the Board of Directors, that person is
granted an option to purchase 25,000 shares of Common Stock at the fair market
value at date of grant, vesting in five equal annual installments beginning on
the first anniversary of the date of grant. Each year immediately following the
date of the annual meeting, there is automatically granted to each non-employee
director who is then serving on the Board an option to purchase 3,000 shares of
the Common Stock. These options vest immediately. The options to be granted
under the Directors' Plan are nonqualified stock options (stock options which do
not constitute "incentive stock options" within the meaning of Section 422A of
the Internal Revenue Code).
9
<PAGE> 12
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the annual and long-term compensation paid
by Quest for services performed on the company's behalf for the last three
completed fiscal years (i.e., the fiscal years ended March 31, 1999, March 31,
1998 and March 31, 1997), with respect to those persons who were, as of March
31, 1999, the company's Chief Executive Officer and the next four highest paid
executive officers who earned compensation greater than $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------------
ANNUAL COMPENSATION(1) SECURITIES
------------------------------------------- UNDERLYING OPTIONS
FISCAL OTHER ANNUAL (NUMBER OF ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION SHARES) COMPENSATION
- --------------------------- ------ -------- -------- ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gary D. Kerber................... 1999 $215,634 $416,110 $ -- 50,414 $2,400(2)
Chairman, President and 1998 195,909 120,828 -- 20,000 2,400(2)
Chief Executive Officer 1997 188,660 148,000 -- 134,260 2,400(2)
Vince Pisano..................... 1999 162,025 312,655 -- 22,686 --
Vice President of Finance and 1998 147,197 90,784 -- 20,000 --
Chief Financial Officer 1997 140,247 111,200 10,000(3) 100,740 --
Gerald T. Kosentos............... 1999 149,885 270,750 -- -- --
Vice President of Operations 1998 128,269 38,388 -- 78,833 --
1997 86,166 24,430 -- 4,000 --
Ellen L. Bernhardt............... 1999 127,404 49,188 -- -- --
Director of Operations -- 1998 116,967 44,800 -- 15,000 --
Eastern Region 1997 110,914 22,500 -- 7,500 --
Linwood Galeucia................. 1999 119,999 87,613 -- -- --
President, New England 1998 5,770 -- -- -- --
Region 1997 -- -- -- -- --
</TABLE>
(1) Does not include the dollar value of perquisites and other personal
benefits.
(2) Consists solely of premiums paid by the company for a life insurance policy
for Mr. Kerber. Upon Mr. Kerber's death, the company will receive no
proceeds from such policy.
(3) Consists of a discount on the outstanding amount of a loan from the company
to Mr. Pisano in return for early repayment of the loan.
10
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all grants of options for our common stock
to the executive officers during the fiscal year ended March 31, 1999. In
addition, the table shows the hypothetical gains or "option spreads" that would
exist for the respective options. These gains are based on assumed rates of
annual compound stock price appreciation of 5% and 10% from the date the options
were granted over the full option terms.
OPTION GRANTS FOR FISCAL YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION
SECURITIES OPTIONS EXERCISE OR FOR OPTION TERM(2)
UNDERLYING GRANTED TO BASE PRICE EXPIRATION ---------------------
NAME OPTIONS EMPLOYEES ($/SHARE) DATE(1) 5% 10%
- ---- ---------- ---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gary D. Kerber............ 50,414 57.9% $5.81 10/14/99 $307,551 $322,196
Vince Pisano.............. 22,686 26.0% 5.81 10/14/99 138,396 144,986
------ -------- --------
TOTAL........... 73,100 $445,947 $467,182
====== ======== ========
</TABLE>
(1) Expiration dates reflect the expiration date of the last vested installment
of each grant. The company generally schedules an option grant to vest in
five equal installments, each installment expiring on the fifth anniversary
of the vesting date.
(2) The dollar amounts under these columns represent the potential tangible
value, before income taxes, of each option assuming that the market price of
the common stock appreciates in value from fair market value at the date of
grant to the end of the option term at 5% and 10% annual rates and therefore
are not intended to forecast possible future appreciation, if any, of the
price of the common stock. All grants of options have been made with
exercise prices equal to fair value at date of grant.
The following table sets forth, as of March 31, 1999, the number of stock
options and the value of unexercised stock options held by the executive
officers and the exercises of stock options during the year ended March 31, 1999
by the executive officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED MARCH 31, 1999
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NUMBER OF REALIZED OPTIONS AT MARCH 31, 1999 AT MARCH 31, 1999(1)
SHARES OF SHARES --------------------------- ---------------------------
NAME ACQUIRED ON EXERCISE ACQUIRED ON EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------------- -------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary D. Kerber....... 13,889 $ 76,917 118,117 103,224 $406,283 $ 44,837
Vince Pisano......... 6,250 34,613 81,233 81,776 248,396 35,863
Ellen L. Bernhardt... -- -- 12,000 37,167 105,357 138,986
Gerald T. Kosentos... -- -- 21,666 67,734 40,350 331,768
------ -------- ------- ------- -------- --------
TOTAL....... 20,139 $111,530 233,616 289,901 $800,386 $551,454
====== ======== ======= ======= ======== ========
</TABLE>
(1) The dollar value of the unexercised options has been calculated by
determining the difference between the fair market value of the securities
underlying the options and the exercise or base price of the option at
exercise or fiscal year-end, respectively.
11
<PAGE> 14
EMPLOYMENT AGREEMENTS
On December 31, 1992, the company entered into an Employment Agreement
with Gary D. Kerber as President and Chief Executive Officer. The Employment
Agreement provides for a base salary of $160,000 per year as of March 21, 1992,
which salary is reviewed on an annual basis by the Board of Directors of the
company prior to the end of each fiscal year. The Employment Agreement also
provides that Mr. Kerber will prepare, on an annual basis for each fiscal year,
an appropriate incentive compensation plan for himself and other executive
officers of the company, which plan may be implemented only with the consent of
the Board of Directors of the company. In reviewing such plans, the Compensation
Committee of the Board of Directors has considered the appropriateness of the
goals presented in light of the company's past performance and prospects and the
reasonableness of the projected compensation in light of the company's size and
potential income levels. The term of the Employment Agreement continues until
terminated by either Mr. Kerber or the company, with or without cause; provided,
however, that if the company terminates the Employment Agreement without cause,
the company will be obligated to pay Mr. Kerber termination pay equal to the
greater of $160,000 or an amount based upon a specified fraction of Mr. Kerber's
most recent annual fiscal year base compensation (net of incentive or bonus
compensation), as determined under the Employment Agreement. Mr. Kerber's base
salary for 1999 was $215,634.
12
<PAGE> 15
REPORT OF COMPENSATION COMMITTEE
GENERAL PHILOSOPHY ON EXECUTIVE COMPENSATION
Quest's executive compensation program is administered by the Compensation
Committee, which is composed of three non-employee directors. The committee is
responsible for establishing and administering the policies which govern both
annual compensation and equity ownership programs. All decisions by the
committee relating to the compensation of the company's executive officers are
reviewed by the full board of directors. This report is submitted by the
committee and addresses the company's policies for fiscal 1999 as they apply to
Gary D. Kerber, the President and Chief Executive Officer of the company, and
the other executive officers.
OVERVIEW AND PHILOSOPHY
The goals of company's executive compensation program are to:
- provide competitive compensation that will help attract, retain and
reward highly qualified executives who contribute to the long-term
success of the company.
- 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.
- align management's interests with stockholders by including long-term
equity incentives.
The committee believes that the company's executive compensation program
provides an overall level of compensation that is competitive within its
industry and among companies of comparable size and complexity. To ensure that
compensation is competitive, the company regularly compares its compensation
practices with those of other similar companies and sets its compensation
guidelines based on this review. The committee also seeks to achieve an
appropriate balance of the compensation paid to a particular individual and the
compensation paid to other executives both inside the company and at comparable
companies and attempts to maintain an appropriate mix of salary and incentive
compensation. While compensation data are useful guides for comparative
purposes, the company believes that a successful compensation program also
requires the application of judgment and subjective determinations of individual
performance.
EXECUTIVE COMPENSATION PROGRAM
The company's executive compensation program consists of base salary,
periodic incentive compensation and long-term equity incentives in the form of
stock options. Executive officers also are eligible to participate in certain
benefit programs which are generally available to all employees of the company,
such as medical insurance programs, life insurance programs and 401(k) plans.
BASE SALARY
At the beginning of each fiscal year, the Committee establishes an annual
salary plan for the company's senior executive officers based on recommendations
made by the company's Chief Executive Officer. The Committee attempts to set
base salary compensation within its perceived range of salaries of executive
officers with comparable qualifications, experience and responsibilities at
other companies in the same or similar businesses and of comparable size and
success. The Committee has reviewed compensation for comparable positions by
reviewing published compensation data as part of its efforts to set the annual
cash compensation for company executives. The Committee has attempted to base
salary determinations both upon the company's financial performance and upon the
individual's performance as measured by certain subjective non-financial
objectives. These non-financial objectives include the individual's contribution
to the company as a whole, including his or her ability to motivate others,
develop the skills necessary to grow as
13
<PAGE> 16
the company matures, recognize and pursue new business opportunities and
initiate programs to enhance the company's growth and success.
ANNUAL AND LONG-TERM INCENTIVE COMPENSATION
The company has no formal bonus program for its key employees, although
the Committee may consider adopting such a program in the future. Bonus payments
may be made to key employees based on the achievement of agreed upon performance
objectives or as a part of the recruitment process.
The company's stock option plan is designed to promote the identity of
long-term interests between the company's employees and its shareholders and to
assist in the retention of executives. The size of option grants is generally
intended by the Committee to reflect the executive's position with the company
and his or her contributions to the company. Stock options generally vest over a
period not to exceed five years from the date of the grant in order to encourage
key employees to continue in the employ of the company. Stock options are
granted at an option price equal to the fair market value of the company's
Common Stock on the date of grant; however, the company reserves the right to
grant stock options having exercise prices less than the fair market value of
the Common Stock on the date of grant, to modify the terms of existing options
and to reprice the options as an incentive for employees to remain with the
company.
BENEFITS
The company's executive officers are entitled to receive life and medical
insurance benefits on the same basis as other full-time employees of the
company. They are also eligible to participate in the company's 401(k) plan.
The amount of perquisites, as determined in accordance with the rules of
the Securities Exchange Commission relating to executive compensation, did not
exceed $50,000 or 10% of salary and bonus for fiscal 1999 for any of the
executive officers.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In fiscal 1999, Mr. Kerber, the company's President and Chief Executive
Officer, received a salary of $215,634, which represented his base salary for
1999 and a bonus of $416,110. In addition, he received an incentive grant of
options to purchase 50,414 shares of the company's common stock at an exercise
price of $5.81. The amount of Mr. Kerber's base salary is set annually by the
Board of Directors. See "Employment Agreement" for a description of the
employment agreement between Mr. Kerber and the company.
14
<PAGE> 17
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
public corporations for compensation over $1,000,000 paid for any fiscal year to
the corporation's chief executive officer or to any of the four other most
highly compensated executives officers. The deductibility of executive
compensation in excess of the limit set in Section 162(m) of the Internal
Revenue Code 1986, as amended, was not a factor in the Committee's determination
of 1999 compensation levels. The Committee will continue to review the company's
executive compensation plans to determine what changes, if any, may be advisable
in connection with Section 162(m).
COMPENSATION COMMITTEE
Richard E. Kroon
Robert J. Cresci
William D. Ford
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Richard E. Kroon, Robert J.
Cresci and William D. Ford. No member of the Compensation Committee was at any
time during fiscal 1999, or prior, an officer or employee of the company or any
subsidiary of the company.
In July 1991, the company entered into a Securities Purchase Agreement,
dated July 21, 1991, as amended, among the company and the Pecks Managed
Entities, pursuant to which the Delaware Plan, the ICI Trust and the Zeneca
Trust loaned $2,900,000, $603,000 and $497,000, respectively, to the company on
a senior subordinated basis in exchange for 13% Senior Subordinated Notes
originally due July 23, 1996 issued by the company in the aggregate principal
face amount of $4,000,000 and warrants to purchase an aggregate of 1,333,333
shares of Common Stock at a purchase price equal to the lesser of (i) $3.00 per
share or (ii) 70% of the cash purchase price per share of Common Stock in an
initial public offering without regard to deductions for underwriting discounts
and commissions. In May 1996, the terms of the Warrants were amended to provide
for a cashless exercise based on the initial public offering price in the event
of a public offering of the company's Common Stock. In return, the holders
agreed to exercise the Warrants simultaneously with the commencement of the
initial public offering and to terminate certain "put" provisions originally
contained in the Warrants. The modifications were approved by all of the members
of the company's Board of Directors, with Mr. Cresci abstaining. At completion
of the IPO, the Pecks Managed Entities beneficially owned more than five percent
of the issued and outstanding Common Stock of the company. In addition, Robert
J. Cresci, who is a director of the company, is a managing director of Pecks,
which serves as investment advisor for each of the Pecks Managed Entities. In
fiscal 1996, Mr. Cresci served as a member of the Compensation Committee of the
Board of Directors of the company. In connection with the IPO, the Pecks Managed
Entities exercised, on a cashless basis, the Warrants to purchase 1,333,333
shares of Common Stock at $3.00 per share, which resulted in the issuance of
933,333 shares of Common Stock in respect of such Warrants. In fiscal years
1997, 1996 and 1995, the company incurred interest expense on the Notes to the
Delaware Plan in the amounts of $149,834, $364,941 and $253,610, respectively,
to the ICI Trust in the amounts of $31,155, $75,883 and $52,733 respectively,
and to the Zeneca Trust in the amounts of $25,678, $62,543 and $43,464,
respectively. Upon consummation of the IPO, the company utilized $2,700,000 of
the proceeds of this Offering to repay the entire outstanding amount of
principal and accrued interest on the Notes.
In connection with the transactions contemplated by the Securities
Purchase Agreement, the company, the Pecks Managed Entities, the Sprout Group,
LTOS and Gary D. Kerber entered into a Coinvestors Agreement, dated July 23,
1991, pursuant to which the parties thereto agreed to vote their respective
shares of Common Stock of the company for the election to the Board of Directors
of the company of one person designated by the Pecks Managed Entities, so long
as the Pecks Managed Entities collectively held or
15
<PAGE> 18
beneficially owned (i) $750,000 aggregate principal amount of Notes or (ii)
250,000 shares of Common Stock issued or issuable upon exercise of the Warrants.
In addition, pursuant to a Registration Rights Agreement, dated as of July
23, 1991, as amended, the Pecks Managed Entities were granted certain demand
registration rights with respect to shares of Common Stock issued or issuable to
them upon exercise of the Warrants. Pursuant thereto, upon request of Pecks
Managed Entities holding at least 50% (by voting power) of the Warrants
(assuming conversion of the Warrants into shares of Common Stock), the company
shall use its best efforts to effect the registration under the Securities Act
of Common Stock at such holders' request. The company is only required to
undertake two such registrations. In the event of a registration initiated by
the company or by any other stockholder of the company holding registration
rights, the company has granted certain "piggy-back" registration rights to the
Pecks Managed Entities and must notify the Pecks Managed Entities of such
registration and permit the inclusion of any of the Pecks Managed Entities'
Common Stock in any such registration if so requested. The number of shares of
Common Stock held by the Pecks Managed Entities that must be included in a
registration will be determined by the managing underwriter selected by the
company, and Pecks Managed Entities' participation will be subject to a priority
cut-back as provided for in the Registration Rights Agreement. The company has
agreed to pay all expenses in connection with such registrations. See "Certain
Transactions."
16
<PAGE> 19
CERTAIN TRANSACTIONS
For information regarding transactions among the company, the Pecks
Managed Entities and Robert J. Cresci, who is a director of the company, see
"Compensation Committee Interlocks and Insider Participation."
In July 1993, the company acquired the Ohio Institute of Photography and
Technology, which was previously partially-owned by K. Terry Guthrie, who is an
executive officer of the company. The purchase price for the school was
$1,236,000, including amounts paid for covenants not to compete and real estate.
Mr. Guthrie received cash of $132,127. In addition, Mr. Guthrie and the company
entered into a three-year consulting agreement pursuant to which Mr. Guthrie
received a consulting fee of $23,807 per year through July 1996. Mr. Guthrie
also entered into a noncompetition agreement pursuant to which Mr. Guthrie
receives $35,000 per year for a five-year term through July 1998. Pursuant to
the consulting agreement and the noncompetition agreement, the company paid Mr.
Guthrie $35,000, $46,903 and $58,806 in fiscal years 1998, 1997 and 1996,
respectively.
In September 1991, the company made a loan to Vince Pisano and Mr.
Pisano's wife, Gail Pisano, in the amount of $75,000 pursuant to an Employee
Loan Agreement, as amended. The loan did not bear interest and was to be repaid
upon the earlier of December 31, 1996 or certain other events. The loan was
secured by certain real property owned by Mr. Pisano. If the loan was paid at or
prior to its stated maturity, $10,000 of the loan would be cancelled. Mr. Pisano
is a Vice President and Chief Financial Officer of the company. The company and
Mr. Pisano entered into an agreement which permitted Mr. Pisano to repay the
loan on its maturity date with Common Stock of the company owned by Mr. Pisano
which stock was valued at its fair market value on the date of repayment.
Pursuant to this agreement, during fiscal 1997, Mr. Pisano repaid his loan from
the company in full by transfer of 5,652 shares of Common Stock to the company.
In connection with the company's acquisition of its three schools in
Virginia, its school in North Hollywood, California, its three schools in El
Paso and San Antonio, Texas and its school in Hagerstown, Maryland, the company
pledged the stock of its acquiring subsidiaries to secure related indebtedness.
As of March 31, 1999, the principal amount outstanding of such indebtedness was
$750,000.
In connection with the acquisitions of two CHI Institute Schools and four
Hesser College Schools, the company also pledged the stock of the acquiring
subsidiaries to secure indebtedness. As of the date of March 31, 1999, the
principal amount of such indebtedness was $4,400,000 and $-0- for CHI Institute
and Hesser College, respectively.
On March 31, 1997, the company acquired the Nebraska Schools by merging a
privately held corporation, which previously operated the schools, into a
wholly-owned subsidiary of the company in exchange for 761,263 shares of the
company's common stock. The company has filed a registration statement (SEC File
No. 333-33025) pursuant to the Securities Act of 1933 (the "Securities Act")
with respect to the merger shares which was declared effective by the Commission
on February 27, 1998, and as of the date of this Form 10-K believes that
approximately 14,416 of the merger shares, including 4,762 shares held in
escrow, remain unsold. Provided this registration statement continues to be
effective, such registration statement will enable the holders of the merger
shares to sell their shares in the public market.
On February 14, 1998, the company acquired the CHI Institute Schools. As
part of the purchase price, 151,900 shares of the company's Common Stock were
issued to the two major shareholders. The company filed a registration statement
on Form S-3 (SEC File No. 333-47775) on March 11, 1998 with respect to such
shares. This registration statement was declared effective by the SEC on April
3, 1998, and provided it continues to be effective, it will enable the holders
of such shares to sell their shares in the public market.
On March 13, 1998, the company acquired the four Hesser Schools and the
real estate in Manchester, New Hampshire, which is the main campus. As part of
the purchase price, 202,532 shares of the company's Common Stock were issued to
the two shareholders of Hesser. The company filed a registration statement on
Form S-3 (SEC File No. 333-52451) on May 12, 1998 with respect to such shares.
This registration
17
<PAGE> 20
statement was declared effective by the Commission on May 19, 1998, and provided
it continues to be effective, it will enable the holders of the such shares to
sell their shares in the public market.
With respect to each transaction between the company and an affiliate of
the company, a majority of the disinterested members of the Board of Directors
determined that such transactions were on terms at least as fair as if they had
been consummated with unrelated third parties. The Board of Directors has
adopted a policy that prior to entering into any transaction with a related
party, a similar determination must be made with respect to such transaction by
a majority of the company's disinterested directors.
18
<PAGE> 21
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return of
the company's Common Stock from October 28, 1996 (the date that trading in the
Common Stock commenced on the Nasdaq National Market ("Nasdaq") to March 31,
1999 with (a) the Nasdaq Stock Market Index and (b) an index comprised of the
common stock of seven other education companies (the "Self Determined Peer
Group"). The comparison assumes that $100 was invested on October 28, 1996 in
the company's Common Stock and in each of the comparison indices, and assumes
reinvestment of dividends. The company has historically reinvested earnings in
the growth of its business and has not paid cash dividends on its Common Stock.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG QUEST EDUCATION CORPORATION,
THE NASDAQ STOCK MARKET INDEX AND A PEER GROUP OF COMPANIES.
OCTOBER 29, 1996 - MARCH 31, 1999
[CHART]
TABLE 1 -- CUMULATIVE VALUE OF $100 INVESTMENT
<TABLE>
<CAPTION>
10/29/96 3/31/97 3/31/98 3/31/99
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Nasdaq Stock Market $100.00 $101.96 $154.61 $208.02
Self-Determined Peer Group $100.00 $ 95.88 $146.35 $200.25
Quest Education Corporation $100.00 $112.20 $116.25 $ 91.25
</TABLE>
TABLE II -- NON-CUMULATIVE ANNUAL RETURN
<TABLE>
<CAPTION>
10/29/96 3/31/97 3/31/98 6/30/97
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Nasdaq Stock Market NA 1.96% 51.63% 34.55%
Self-Determined Peer Group NA (4.12)% 52.64% 36.83%
Quest Education Corporation NA 12.20% 3.61% (21.51)%
</TABLE>
Self Determined Peer Group consists of Computer Learning Centers, DeVry Inc.,
Education Management Corp., ITT Educational Services, Strayer Education Inc.,
Whitman Education Group Inc. and Edutrek International Inc.
19
<PAGE> 22
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The board of directors has appointed the firm of Ernst & Young LLP to
continue as independent auditors for the company for the fiscal year ending
March 31, 2000. Ernst & Young LLP has been acting as independent auditors of the
company for more than five fiscal years. Unless otherwise indicated, properly
executed proxies will be voted for the ratification of the appointment of Ernst
& Young LLP, independent auditors, to audit the consolidated financial
statements of the company for the fiscal year ending March 31, 2000.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting, will be given an opportunity to make a statement if they desire
to do so, and will also be available to respond to appropriate questions from
shareholders.
Approval of a majority of the shares of Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting is required for
approval of this proposal. Broker non-votes with respect to this matter will not
be deemed to have been cast either "for" or "against" the matter, although they
will be counted in determining if a quorum is present. Proxies marked "abstain"
or a vote to abstain by a stockholder present in person at the Annual Meeting
will have the same legal effect as a vote "against" the matter because it
represents a share present or represented at the meeting and entitled to vote,
thereby increasing the number of affirmative votes required to approve this
proposal.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
FOR THE COMPANY FOR THE FISCAL YEAR ENDING MARCH 31, 2000.
SHAREHOLDER PROPOSALS
Shareholders who intend to submit proposals to the company's shareholders
at the 2000 Annual Meeting of Shareholders must submit such proposals to the
company no later than June 1, 2000, in order to be considered for inclusion in
the Proxy Statement and Proxy to be distributed by the Board of Directors in
connection with that meeting. Shareholder proposals should be submitted to Vince
Pisano, Vice President, Quest Education Corporation, 1400 Hembree Road, Suite
100, Roswell, GA 30076.
ADDITIONAL INFORMATION
The Board of Directors is not aware of any matters to be presented at the
meeting other than the matters described herein and does not intend to bring any
other matters before the meeting. However, if any other matters should come
before the meeting, or any adjournment thereof, the persons soliciting the
proxies will have discretionary authority to vote all proxies in accordance with
their best judgment.
If you do not plan to attend the meeting, in order that your shares may be
represented and in order to assure the required quorum, please sign, date and
return your proxy promptly. In the event you are able to attend the meeting, at
your request, the company will cancel any proxy executed by you.
20
<PAGE> 23
FINANCIAL MATTERS
Detailed financial information of the company for the fiscal year ended
March 31, 1999 is included in the company's Annual Report to Shareholders, a
copy of which is enclosed herewith.
REPORT TO SHAREHOLDERS
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED MARCH 31, 1999, AND ANY AMENDMENTS THERETO, AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO,
WILL BE FURNISHED WITHOUT CHARGE TO ANY SHAREHOLDER UPON WRITTEN REQUEST TO THE
COMPANY AT 1400 HEMBREE ROAD, SUITE 100, ROSWELL, GA 30076, ATTENTION: INVESTOR
RELATIONS.
EXPENSES OF SOLICITATION
The company will bear the cost of soliciting proxies from its shareholders
and will enlist the help of banks and brokerage houses in soliciting proxies
from their customers. The company will reimburse these institutions for
out-of-pocket expenses incurred thereby. In addition to being solicited through
the mails, proxies may also be solicited personally or by telephone by the
directors, officers and employees of the company.
Kindly date, sign and return the enclosed proxy card.
By Order of the Board of Directors
GARY D. KERBER
President and Chief Executive Officer
21
<PAGE> 24
- FOLD AND DETACH HERE -
- --------------------------------------------------------------------------------
QUEST EDUCATION CORPORATION
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 28, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoint(s) Gary D. Kerber
and Vince Pisano, and each of them, with full power of substitution, as proxies
to represent and vote, as designated herein, all shares of stock of QUEST
EDUCATION CORPORATION (the "Company"), which the undersigned would be entitled
to vote if personally present at the Annual Meeting of Shareholders of the
Company to be held at the Holiday Inn, Great Oaks Ballroom, 1075 Holcomb Bridge
Road, Roswell, Georgia 30076 at 1:00 p.m., local time, of Tuesday, September 28,
1999, and at any adjournment thereof (the "Meeting").
In their discretion, the proxies are authorized to vote upon such other matters
as may properly come before the meeting or any adjournment thereof.
1. To elect the following five (5) directors (except as marked below) for the
ensuing year.
NOMINEES: GARY D. KERBER, WILLIAM D. FORD, ROBERT J. CRESCI,
CARL S. HUTMAN, RICHARD E. KROON
<TABLE>
<S> <C> <C> <C>
[ ] FOR all nominees [ ] WITHHOLD authority to vote for all nominees
(except as marked below)
</TABLE>
For all nominees except the following nominee(s):
- -------------------------------------------------
2. To ratify the selection by the Board of Directors of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending March 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED, ON REVERSE SIDE)
<PAGE> 25
- FOLD AND DETACH HERE -
- --------------------------------------------------------------------------------
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is given, this proxy will be
voted FOR all proposals. Attendance of the undersigned at the meeting, or at
any adjournment thereof, will not be deemed to revoke this proxy unless the
undersigned shall revoke this proxy in writing or shall deliver a subsequently
dated proxy to the Secretary of the Company or shall vote in person at the
Meeting.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID RETURN ENVELOPE.
Signature
------------------------------
Signature if held jointly
--------------
Please sign exactly as name appears
hereon. If the stock is registered in
the names of two or more persons, each
should sign. Executors, administrators,
trustees, guardians, attorneys and
corporate officers should add their
titles.
Dated: , 1999
------------------------
