<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Nobel Education Dynamics, Inc.
(Name of Registrant As Specified in Charter)
(Name of Person(s) Filing the 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)(4) and 0-11
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
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):
N/A
4) Proposed maximum aggregate value of transaction:
N/A
5) Total fee paid:
N/A
[ ] 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:
N/A
------------------------------------------------------------------------
(2) Form, Schedule, or Registration Statement.:
N/A
------------------------------------------------------------------------
(3) Filing party:
N/A
------------------------------------------------------------------------
(4) Date filed:
N/A
------------------------------------------------------------------------
<PAGE>
NOBEL EDUCATION DYNAMICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 19, 1997
To the Stockholders:
The 1997 Annual Meeting of Stockholders of Nobel Education Dynamics, Inc.
will be held at 10:00 a.m. on September 19, 1997 at the Sacramento Hilton Inn,
2200 Harvard Street, Sacramento, California (telephone: (916) 922-4700) for the
following purposes:
1. To elect three directors to serve for a three-year term.
2. To ratify the selection of Coopers & Lybrand, L.L.P. as the Company's
independent auditors for fiscal year 1997.
3. To consider and vote on a proposal to amend the 1995 Stock Incentive Plan
(a) to increase the aggregate number of shares of the Company's common stock
which may be subject to awards under such Plan, (b) to increase of the
number of shares subject to an option which a participant may receive in any
year and (c) to increase of the number of shares subject to options which is
granted to each nonemployee director each year (subject to fulfillment of
certain conditions).
4. To consider and vote on a proposal to amend the Company's Amended and
Restated Certificate of Incorporation to reduce the number of authorized
shares of Common Stock.
5. To transact such other business as may properly come before the Meeting or
any adjournment thereof.
Only stockholders of record at the close of business on July 22, 1997 will
be entitled to notice of, and to vote at, the Meeting and any adjournment or
adjournments thereof.
Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Proxy Statement.
All stockholders are cordially invited to attend the Meeting in person.
HOWEVER, TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK,
SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE-
PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. Any stockholder attending the
Meeting may vote in person even if he or she returned a proxy.
Sincerely,
Yvonne DeAngelo
Vice President - Finance and
Administration and Secretary
Media, PA
July 24, 1997
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Solicitation of Proxy, Revocability and Voting............................................................... 1
Security Ownership........................................................................................... 3
Proposal 1: Election of Directors........................................................................... 6
Proposal 2: Ratification of Appointment of Independent Accountants.......................................... 10
Proposal 3: Amendments to 1995 Stock Incentive Plan......................................................... 11
Proposal 4: Amendment to Certificate of Incorporation
To Reduce the Number of Authorized Shares of Common Stock................................................. 17
Executive Compensation....................................................................................... 18
Stock Performance............................................................................................ 24
Compliance with Section 16(a) of the Securities Exchange Act of 1934......................................... 25
Certain Relationships and Related Transactions............................................................... 25
General Information.......................................................................................... 26
Deadline for Receipt of Stockholder Proposals................................................................ 26
</TABLE>
<PAGE>
NOBEL EDUCATION DYNAMICS, INC.
PROXY STATEMENT
SOLICITATION OF PROXY, REVOCABILITY AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Nobel Education Dynamics, Inc., a Delaware corporation (the "Company"), for use
at the 1997 Annual Meeting of Stockholders (the "Meeting") to be held on
September 19, 1997. Only stockholders of record on July 22, 1997 will be
entitled to notice of, and to vote at, the Meeting. Each share of common stock
("Common Stock") outstanding on the record date is entitled to one vote on each
matter to be considered; and each share of preferred stock ("Preferred Stock")
is entitled to the number of votes on each matter to be considered equal to the
number of full shares of Common Stock into which such share of Preferred Stock
is convertible (calculated by rounding any fractional share down to the nearest
whole number). As of the record date of the meeting, each share of Series A
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock was
convertible into .2940, 0.25 and 0.25 shares of Common Stock, respectively. On
July 22, 1997, the Company had 6,051,565 shares of Common Stock, 1,128,694
shares of Series A Preferred Stock, 2,500,000 shares of Series C Preferred Stock
and 1,063,830 shares of Series D Preferred Stock issued and outstanding.
The Company's principal executive offices are located at Rose Tree
Corporate Center II, 1400 North Providence Road, Suite 3055, Media, Pennsylvania
19063. The approximate date on which this Proxy Statement and the accompanying
proxy are first being sent to stockholders is July 24, 1997.
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy, of the holders of
shares representing a majority of the votes represented by the Common Stock and
Preferred Stock is necessary to constitute a quorum for the transaction of
business. The holders of the Common Stock and the Preferred Stock vote together,
and not as a separate class, on all matters to be submitted to stockholders at
the Meeting. The election of directors will be determined by a plurality vote
and the three nominees receiving the most "FOR" votes will be elected. Approval
of the proposals to ratify the selection of auditors and to approve amendments
to the Company's 1995 Stock Incentive Plan will require the affirmative vote of
the holders of a majority of the votes represented by the shares of the
Company's Common Stock and Preferred Stock present at the Meeting in person or
by proxy and entitled to vote. The affirmative vote of at least a majority of
the votes represented by the outstanding shares of the Company's Common Stock
and Preferred Stock will be required to approve the proposed amendment to the
certificate of incorporation to reduce the number of authorized shares of Common
Stock. Because directors are elected by a plurality of the votes cast,
withholding authority to vote with respect to one or more nominees will have no
effect on the outcome of the election, although such shares would be counted as
present for purposes of determining the existence of a quorum. Similarly, any
"broker nonvotes" (i.e., shares held by a broker or nominee which are
represented at the Meeting, but with respect to which such broker or nominee is
not empowered to
<PAGE>
vote on a particular proposal) are not considered to be votes cast and therefore
would have no effect on the outcome of the election of directors, although they
would be counted as present for purposes of determining the existence of a
quorum. Other than with respect to the election of directors, all other matters
that come before the Meeting require either an approval of a majority of the
votes represented by the shares of stock present and entitled to vote thereon or
a majority of the votes represented by the shares of stock outstanding.
Therefore, abstentions as to particular proposals will have the same effect as
votes against such proposals. Broker non-votes will be treated as shares not
entitled to vote and will not be included in the calculation of the number of
votes represented by shares present and entitled to vote. Accordingly, broker
non-votes will have no effect on the outcome of the proposals to ratify the
selection of auditors and to approve the amendments to the 1995 Stock Incentive
Plan, but will have the effect of a vote against the proposed amendment to the
certificate of incorporation to reduce the number of authorized shares of Common
Stock
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. It may be revoked by
filing with the Secretary of the Company or by the presentation at the Meeting
of an instrument of revocation or a duly executed proxy bearing a later date. It
also may be revoked by attendance at the Meeting and the casting of a written
ballot in person. Unless so revoked, the shares represented by proxies will be
voted at the Meeting in accordance with instructions or, as to any matter as to
which no instructions are given, for the election of the proposed nominees and
in favor of Proposals 2 through 4.
SOLICITATION
The Company will bear the entire cost of preparing, assembling, printing
and mailing this proxy statement, the accompanying proxy, and any additional
material which may be furnished to stockholders. Copies of solicitation material
will be furnished to brokerage houses, fiduciaries and custodians to forward to
beneficial owners of stock held in their names. The solicitation of proxies will
be made by the use of the mails and through direct communication with certain
stockholders or their representatives by officers, directors and employees of
the Company, who will receive no additional compensation therefor. The Company
has engaged Stocktrans, Inc., the transfer agent for the Company's Common Stock
and Preferred Stock, to solicit proxies and distribute materials to brokerage
houses, banks, custodians and other nominee holders. The Company will pay
Stocktrans approximately $4,000 for these services.
2
<PAGE>
SECURITY OWNERSHIP
Common Stock
The following table shows information concerning the beneficial ownership
of the Company's Common Stock as of June 12, 1997 by each director and nominee,
by each executive officer named in the Summary Compensation Table appearing
elsewhere in this Proxy Statement, by all directors, nominees and executive
officers as a group, and by each person who is known to the Company to be the
beneficial owner of more than 5% of the Company's Common Stock. The number of
shares beneficially owned by each person 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 such rules,
beneficial ownership includes any shares as to which the person has sole or
shared voting power or investment power and also any shares which the person has
the right to acquire within 60 days of June 12, 1997 through the exercise of any
stock option or right or conversion of any convertible security or otherwise. As
of June 12, 1997, the Edison Venture Fund II, L.P., Allied Capital Corporation
and affiliated funds, and A. J. Clegg were the only persons or group of persons
known to the Company as beneficially owning more than 5% of the outstanding
Common Stock of the Company. The Edison Venture Fund II, L.P. has its principal
executive office at 997 Lenox Drive #3, Lawrenceville, New Jersey 08648. Allied
Capital Corporation and affiliated funds have their principal executive offices
at 1666 K St., N.W., Suite 901, Washington, DC 20006. A. J. Clegg's address is
c/o Nobel Education Dynamics, Inc., Rose Tree Corporate Center II, 1400 North
Providence Road, Suite 3055, Media, Pennsylvania 19063.
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Percent of
Name of Beneficial Owner Beneficially Owned Class (1)
-------------------------------------- ------------------ ----------
<S> <C> <C>
A. J. Clegg 537,542 (2) 8.50%
Edward H. Chambers 17,730 (3) *
John R. Frock 40,534 (4) *
Peter H. Havens 12,609 (5) *
Morgan R. Jones 10,600 (6) *
Janet Katz 29,900 (7) *
John Martinson 654,532 (8) 9.77%
Eugene Monaco 1,000 *
D. Scott Clegg 17,917 (9) *
B. Robin Eglin 1,000 (10) *
Edison Venture Fund II, L.P. 654,032 (11) 9.76%
Allied Capital Corporation 575,000 (12) 8.69%
All directors and executive officers 1,327,073 (13) 18.75%
as a group (13 persons)
* Less than 1%. [See notes on following page]
</TABLE>
3
<PAGE>
(1) The percentages of class set forth in the table reflect the percentage of
outstanding Common Stock currently owned by each holder listed and the
percentage of outstanding Common Stock which would be owned by each such
holder giving effect to the conversion of all shares of Preferred Stock and
exercise of all options and warrants held by such holder, but not to such
conversion or exercise by any other person.
(2) Of these shares, 140,967 shares are beneficially owned directly by Mr.
Clegg as follows: 5,000 shares of Common Stock owned of record by Mr.
Clegg, 100,806 shares issuable upon conversion of Series C Preferred Stock
of the Company, 20,161 shares issuable upon the exercise of warrants and
15,000 issuable upon exercise of currently exercisable stock options. Mr.
Clegg is also the beneficial owner of 394,075 shares owned of record by, or
issuable upon the conversion of Series C Preferred stock of the Company
owned of record by, JBS Investment Banking, Ltd., a privately held
corporation of which Mr. Clegg is a director, officer and controlling
stockholder, as follows: 253,690 shares of Common Stock owned of record by
JBS and 140,385 shares of Common Stock issuable upon the conversion of the
Company's Series A Preferred Stock owned of record by JBS. (JBS may also be
deemed to be the beneficial owner of these 394,075 shares.) Mr. Clegg is
also the beneficial owner of 2,500 shares of Common Stock owned by his
spouse. This does not include shares beneficially owned by Mr. Clegg's
adult children (including Scott Clegg, an officer of the Company), as to
which he disclaims beneficial ownership.
(3) Consists of 9,750 shares of Common Stock which Mr. Chambers has the right
to purchase upon the exercise of currently exercisable options, 1,470
shares of Common Stock issuable upon the conversion of the Company's Series
A Preferred Stock, and 6,510 shares of Common Stock held by Mr. Chambers.
(4) Consists of 8,334 shares of Common Stock which Mr. Frock has the right to
purchase upon the exercise of currently exercisable options, 14,700 shares
of Common Stock issuable upon the conversion of the Company's Series A
Preferred Stock and 17,500 shares of Common Stock held by Mr. Frock.
(5) Consists of 7,250 shares of Common Stock which Mr. Havens has the right to
purchase upon the exercise of currently exercisable options, 3,234 shares
of Common Stock issuable upon the conversion of the Company's Series A
Preferred Stock held by Mr. Havens, and 2,125 shares of Common Stock held
by Mr. Havens.
(6) Consists of 10,100 shares of Common Stock held by Mr. Jones and 500 shares
of Common Stock which Mr. Jones has the right to purchase upon the exercise
of currently exercisable options. Does not include shares owned by Mr.
Jones's spouse and adult children as to which he disclaims beneficial
ownership.
(7) Consists of 29,400 shares of Common Stock issuable upon the conversion of
the Company's Series A Preferred Stock held by Ms. Katz and 500 shares of
Common Stock which Ms. Katz has the right to purchase upon the exercise of
currently exercisable options.
(8) Mr. Martinson is a managing partner of Edison Partners II, the general
partner of Edison Venture Fund II, L.P.. By virtue of his position as
managing partner, Mr. Martinson may under the SEC's rules also be deemed a
beneficial owner of the shares owned by Edison Venture Fund II, L.P. (See
footnote 11.) Mr. Martinson disclaims beneficial ownership of such shares.
Mr. Martinson also holds currently exercisable options to purchase 500
shares of Common Stock.
(9) Consists of 17,917 shares of Common Stock which Mr. Clegg has the right to
purchase upon the exercise of currently exercisable options.
(10) Consists of 1,000 shares of Common Stock which Mr. Eglin has the right to
purchase upon the exercise of currently exercisable options.
(11) Consists of 25,000 shares of Common Stock held by the Edison Venture Fund
II, L.P., 524,193 shares of Common Stock issuable upon the conversion of
the Company's Series C Preferred Stock held by the Edison Venture Fund II,
L.P. and 104,839 shares issuable upon the exercise of warrants held by the
Edison Venture Fund II, L.P. By virtue of his position as managing partner
of Edison Venture Fund II, L.P., Mr. Martinson may under the SEC's rules
also be deemed a beneficial owner of these shares.
(12) Consists of an aggregate of 265,958 shares of Common Stock upon the
conversion of the Company's Series D Preferred Stock and 309,043 issuable
upon the exercise of warrants held by Allied Capital Corporation, Allied
Capital Corporation II, Allied Investment Corporation and Allied Investment
Corporation II.
(13) Consists of shares shown as beneficially held by all natural persons in
this table, and an additional 3,459 shares of Common Stock which executive
officers not named in the table have the right to purchase upon the
exercise of currently exercisable options and 250 shares owned by such
executive officers.
4
<PAGE>
Preferred Stock
The following table shows information concerning the beneficial ownership
of the Company's Series A Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock as of June 12, 1997 by each director and nominee, by each
executive officer named in the Summary Compensation Table appearing elsewhere in
this Proxy Statement, by all directors, nominees and executive officers as a
group, and by each person who is known to the Company to be the owner of more
than 5% of the any series of Preferred Stock (based on the Company's transfer
agent's records). Directors, nominees and executive officers omitted from a
section of the following table do not beneficially own shares of the series of
Preferred Stock to which such section relates.
<TABLE>
<CAPTION>
Number of Shares
Name of of Common Stock Percent
Security Name of Beneficial Owner (1) Beneficially Owned of Class
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series A Edward H. Chambers 5,000 0.44%
Preferred A. J. Clegg 477,500 (2) 42.31%
Stock John R. Frock 50,000 4.43%
Peter H. Havens 11,000 0.97%
Janet Katz 100,000 8.86%
Emanuel Shemin 101,487 8.99%
Foothill Capital Corporation and 100,000 8.86%
Foothill Partners L. P.
All directors and executive officers 844,987 74.86%
as a group (13 persons)
-----------------------------------------------------------------------------------------
Series C A. J. Clegg 403,226 16.13%
Preferred Edison Venture Fund II, L.P. 2,096,774 83.87%
Stock John Martinson 2,096,774 (3) 83.87%
All directors and executive officers 2,500,000 (3) 100.00%
as a group (13 persons)
-----------------------------------------------------------------------------------------
Series D Allied Capital Corporation 1,063,830 (4) 100.00%
Preferred
Stock All directors and executive officers 0
as a group (13 persons)
-----------------------------------------------------------------------------------------
</TABLE>
(1) As reflected on the records of the Company's transfer agent, Mr. Shemin's
address is 800 South Ocean Blvd. LPH4, Boca Raton, FL 33432 and Foothill
Capital's address is 11111 Santa Monica Blvd., Suite 1500, Los Angeles, CA
90025. Ms. Katz's address is ____________________________, NJ _____. See
page 3 for the addresses of A. J. Clegg, Edison Partners II and Allied
Capital.
(2) Mr. Clegg is the beneficial owner of these 477,500 shares of Series A
Preferred Stock owned of record by JBS Investment Banking, Ltd., as he is a
director, officer and controlling stockholder of JBS Investment Banking,
Ltd.
(3) John Martinson is a managing partner of Edison Partners II, the general
partner of Edison Venture Fund II, L.P. By virtue of his position as
managing partner, Mr. Martinson may also under the SEC's rules be deemed a
beneficial owner of the 2,096,774 shares of Series C Preferred Stock owned
by Edison Venture Fund II, L.P. Mr. Martinson disclaims beneficial
ownership of such shares.
(4) Shares are owned by Allied Capital Corporation, Allied Capital Corporation
II, Allied Investment Corporation and Allied Investment Corporation II.
5
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
NOMINEES
At the Meeting, three directors are to be elected to serve for a three year
term and until his or her successor has been duly elected and qualified. The
entire Board of Directors consists of eight persons. Each nominee is currently
a director. Directors will be elected by a plurality of the shares present and
voting at the meeting. If so authorized, the persons named in the accompanying
proxy card intend to vote for the election of each nominee. Stockholders who do
not wish their shares to be voted for a particular nominee may so indicate in
the space provided on the proxy card. If any of the nominees are not available
to serve at the time of the Meeting, the persons named in the proxies may vote
the proxies for such other persons as they may choose unless the Board of
Directors reduces the number of directors to be elected.
The names of the nominees and the continuing directors, and certain
information about them, are set forth below:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
- ----------------------------------------------------------------------------------------------
<S> <C>
Nominees for a term expiring in 2000:
John R. Frock 54 Executive Vice President - Corporate 1992
Development and Assistant Secretary of the
Company
Janet L. Katz 49 Curriculum Coordinator of Upper Saddle 1994
River Schools and Building Administrator of
Bogart School
Eugene G. Monaco 68 Judge, Delaware County Court (retired) 1995
Continuing Directors with a term expiring in 1998:
Morgan R. Jones 56 Partner and Chairman of Drinker 1991
Biddle & Reath
John H. Martinson 46 Managing Partner of Edison Venture Fund 1994
Continuing Directors with a term expiring in 1999:
Edward Chambers 59 Executive Vice President-Finance and 1988
Administration of Wawa, Inc.
A. J. Clegg 58 Chairman of Board of Directors, President 1992
and Chief Executive Officer of the Company
Peter H. Havens 41 Executive Vice President of Bryn Mawr 1991
Bank Corporation
</TABLE>
6
<PAGE>
The following description contains certain information concerning the
nominees, including current positions and principal occupations during the past
five years.
Edward H. Chambers. Mr. Chambers has served as Executive Vice President -
Finance and Administration of Wawa, Inc. since March 1988. During the period
April 1984 through March 1988, he served as President and Chief Executive
Officer, and as a director, of Northern Lites, Ltd., an owner and operator of
quick-service restaurants operating pursuant to a franchise from D'Lites of
America, Inc. From 1982 to July 1984, Mr. Chambers was President - Retail
Operations of Kentucky Fried Chicken Corp., a franchiser of quick-service
restaurants. He is also a director of Davco, Inc., a franchisee of Wendy's
International, Inc. and a director of Riddle Memorial Hospital.
A.J. Clegg. Mr. Clegg was named Chairman of the Board and Chief Executive
Officer of the Company on May 29, 1992. Since 1989, Mr. Clegg has also served
on the Advisory Board of Drexel University and, in 1996, was named as a member
of the Board of Trustees of Drexel University. Since June 1990, Mr. Clegg has
also served as the Chairman and CEO of JBS Investment Banking, Ltd., which
provides investment management and consulting services to businesses and
formerly provided services to the Company through an Administrative Services
Agreement. Mr. Clegg's responsibilities for JBS Investment Banking, Ltd. do not
require material amounts of his time. In 1979, he formed Empery Corporation, an
operator of businesses in the cable television and printing industries, and held
the offices of Chairman, President and CEO during his tenure (1979-1993). In
addition, Mr. Clegg served as Chairman and CEO of TVC, Inc. (1983-1993), a
distributor of cable television components; and Design Mark Industries (1988-
1993), a manufacturer of electronic senswitches. Mr. Clegg has also served on
the board of directors of Ferguson International Holdings, PLC, a United Kingdom
company, from March 1990 to April 1991; and was Chairman and CEO of Globe Ticket
and Label Company from December 1984 to February 1991.
John R. Frock. Mr. Frock was named Executive Vice President - Corporate
Development on August 1, 1994. Mr. Frock was elected to the Board of Directors
of the Company on May 29, 1992. From 1992 to 1995, Mr. Frock was the President
and Chief Operating Officer of JBS Investment Banking, Ltd., which provided
investment management and consulting services to businesses (which included
Nobel). During the past five years, Mr. Frock also served as the Chairman and
Chief Executive Officer of Avant Guarde Enterprises, Ltd.; President and Chief
Operating Officer of SBF Communications Graphics, a business forms printer
located in Philadelphia, PA; President of Globe Ticket and Label Company; and
President of the Graphics Group of Empery Corporation.
Peter H. Havens. Mr. Havens has been Executive Vice President of Bryn Mawr Bank
Corporation since May 1995 overseeing the Investment Management and Trust
Division. From 1982 through May 1995, Mr. Havens served as manager of Kewanee
Enterprises, a private investment firm located in Bryn Mawr, Pennsylvania. He
is also Chairman of the Board of Directors of Petroferm, Inc. and a director of
Bryn Mawr Bank Corporation, Ursinus College and Independence Seaport Museum.
Morgan R. Jones. Mr. Jones has been a partner in the law firm Drinker Biddle &
Reath, Philadelphia, Pennsylvania since 1970, and is presently Chairman of the
firm.
Janet Lea Katz. Ms. Katz has both a Masters and a Doctorate in Education from
Columbia University and is currently serving as the building administrator at
Bogert School in Upper Saddle
7
<PAGE>
River, New Jersey. Ms. Katz has held various positions throughout her career in
education, including speech arts teacher, coordinator and therapist for speech
and language programs for elementary school and research assistant for the study
of learning disabilities at Columbia University, and is presently the curriculum
coordinator for Upper Saddle River Schools, Upper Saddle River, New Jersey, as
well as the building administrator at Bogert School.
John Martinson. Mr. Martinson is Managing Partner of Edison Venture Fund which
he founded in 1986. He also serves on the Board of Directors of the National
Venture Capital Association, Dendrite International, Inc. and eleven private
companies.
Eugene G. Monaco. Mr. Monaco has both a J.D. from Temple Law School and M.S. in
Mechanical Engineering from the University of Delaware and, from January 1, 1990
until his retirement in late 1995, served as a Judge for the Delaware County
District Court. He also served as an Instructor in Kinematics and Dynamics at
Drexel University, a Lecturer in child abuse at Penn State University, and was
the Chief Negotiator for the Rose Tree Media School Board. He also served as
Assistant District Attorney in Media, Pennsylvania and Engineering Negotiator
for Westinghouse Electric for 32 years.
John Martinson serves on the Board as the designee of Edison Venture Fund
II, L.P., the majority holder of the Series C Convertible Preferred Stock, which
was issued in August 1994.
A. J. Clegg's son, D. Scott Clegg, is the Executive Vice President -
Operations of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED ABOVE.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held a total of ____ meetings during
the fiscal year ended December 31, 1996. In addition, the Board of Directors
adopted resolutions by unanimous consent _____ times during the 1996 fiscal
year. Each member of the Board of Directors attended at least 75% of the
meetings of the Board and Board Committees of which he or she was a member
during 1996.
The Board of Directors has an Audit Committee, a Compensation Committee and
a Nominating Committee.
The Audit Committee of the Board of Directors presently consists of Mr.
Chambers (Chairman) and Mr. Havens. It held three meetings during 1996. The
Audit Committee recommends the engagement of the Company's independent
accountants and is primarily responsible for approving the services performed by
the Company's independent accountants and for reviewing and evaluating the
Company's accounting principles and its system of internal accounting controls.
The Compensation Committee of the Board of Directors presently consists of
Mr. Chambers (Chairman), Mr. Havens and Mr. Monaco. The Committee reviews and
recommends compensation and compensation changes for executives of the Company
and the Board of Directors and administers the Company's stock option and stock
grant plans. The Committee met one time during 1996.
The Nominating Committee of the Board of Directors presently consists of
Mr. Jones (Chairman), Mr. Clegg and Mr. Martinson. The Committee recommends to
the Board a slate of director
8
<PAGE>
candidates for possible election by the stockholders. The Nominating Committee
met four times in 1996. Stockholders who wish to suggest qualified candidates to
the Nominating Committee should write to the Secretary of the Company, Nobel
Education Dynamics, Inc., Rose Tree Corporate Center II, 1400 North Providence
Road, Suite 3055, Media, Pennsylvania 19063, stating in detail the candidate's
qualifications for consideration by the Committee.
COMPENSATION OF DIRECTORS
The Company pays directors (other than A. J. Clegg) an annual retainer of
$6,000 which is paid quarterly and pays members of committees of the Board
(other than A. J. Clegg) $750 per meeting for each committee meeting attended.
(John Frock's compensation reported in the Summary Compensation Table does not
include such fees.)
The Company's 1995 Stock Incentive Plan provides that as of March 31, 1996
and each subsequent March 31 that the Plan is in effect each individual serving
as a director of the Company who is not an officer or employee thereof will be
granted a nonqualified stock option to purchase 500 shares of Common Stock if
the individual served as a director for the entire previous fiscal year and the
Company's pre-tax income for such fiscal year increased at least 20% from the
prior fiscal year. Pursuant to the Plan, each of Messrs. Chambers, Havens, Jones
and Martinson and Ms. Katz received an option to purchase 500 shares of Common
Stock on March 31, 1996, and each of Messrs. Chambers, Havens, Jones, Martinson
and Monaco and Ms. Katz received an option to purchase 500 shares of Common
Stock on March 31, 1997. (If the Proposal 3 is adopted, the number of shares
subject to the nonqualified stock option to be granted annually would increase
to 2,000.)
9
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Item 2 on Proxy Card)
The Board of Directors has selected Coopers & Lybrand, L.L.P., independent
accountants, to audit the consolidated financial statements of the Company for
its 1997 fiscal year and recommends that the stockholders vote for ratification
of such appointment. If the stockholders do not ratify this appointment, the
Board of Directors will reconsider its selection. A representative of Coopers &
Lybrand, L.L.P. is expected to be present at the Annual Meeting and will have
the opportunity to make a statement if desired and is expected to be available
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
10
<PAGE>
PROPOSAL 3
AMENDMENTS TO 1995 STOCK INCENTIVE PLAN
(Item 3 on Proxy Card)
On June 12, 1997, the Company's Board of Directors (the "Board") adopted,
subject to stockholder approval, certain amendments (the "Plan Amendments") to
the Nobel Education Dynamics, Inc. 1995 Stock Incentive Plan (the "1995 Plan").
The purpose of the 1995 Plan is to assist the Company and any subsidiary of the
Company ("Subsidiary") in (i) attracting and retaining officers and other key
management level employees of outstanding ability ("Key Employees" as defined in
the Plan), (ii) attracting and retaining directors of the Company or a
Subsidiary who are not officers or employees thereof ("Outside Directors"), and
(iii) motivating Key Employees and Outside Directors to exercise their best
efforts on behalf of the Company and its Subsidiaries.
The Plan Amendments include the following:
1) increase of the aggregate number of shares of the Common Stock
which may be subject to Awards under such Plan from 375,000 to
750,000;
2) increase of the number of shares of Common Stock subject to an
Option which a participant may receive in any year from 25,000 to
40,000, and clarification that the annual maximum is applied on a
calendar year basis and
3) increase of the number of shares subject to an Option which is
granted to each nonemployee director each year from 500 to 2,000
(subject to the stated performance criteria).
The following is a description of the 1995 Plan. Such description is
intended merely as a summary of its principal features and is qualified in its
entirety by reference to the 1995 Plan.
Under the 1995 Plan, currently 375,000 shares of Common Stock are reserved
(subject to adjustment to reflect stock dividends, stock splits, share
combinations, and similar changes in the capitalization of the Company) for the
granting of incentive stock options ("ISOs"), non-qualified stock options
("NQSOs"), stock appreciation rights ("SARs"), restricted stock ("Restricted
Stock") and unrestricted stock ("Unrestricted Stock") (collectively, the
"Awards"). If the Plan Amendments are adopted, the number of shares of Common
Stock reserved for Awards under the Plan will increase to 750,000. As of July
15, 1997, there were outstanding NQSOs under the 1995 Plan to purchase an
aggregate of 261,400 shares, which NQSOs are held by 78 Key Employees and six
Outside Directors.
There are approximately 175 Key Employees and six Outside Directors
eligible to participate in the Plan. Key Employees are eligible to receive any
type of Award, while Outside Directors are only eligible to receive NQSOs .
Currently, no Key Employee may receive ISOs and NQSOs (collectively,
"Options") for more than 25,000 shares of Common Stock over any one-year period.
If the Plan Amendments are adopted, such restriction will be changed to prohibit
any Key Employee from receiving Options for
11
<PAGE>
more than 40,000 shares of Common Stock during any calendar year (i.e., any
period from January 1 through December 31 of the same year).
Currently, as of each March 31 that the Plan is in effect, each individual
serving as an Outside Director is granted an NQSO to purchase 500 shares of
Common Stock if the individual served as a director for the entire previous
fiscal year-end, and the Company's pre-tax income for such fiscal year increased
at least 20% from the prior fiscal year. If the Plan Amendments are adopted, the
number of shares which each Outside Director will be granted each March 31 upon
satisfaction of the stated conditions will increase to 2,000.
The Plan is administered by the Compensation Committee, which is currently
comprised of Mr. Chambers (Chairman), Mr. Havens and Mr. Monaco. The Committee
has full authority to interpret the Plan, to establish appropriate rules and
regulations, to select Key Employees who will receive Awards under the Plan, to
grant Awards on behalf of the Company, to set the dates and authorized terms of
such Awards, and generally to administer the Plan. With respect to the
eligibility of Outside Directors, the Plan is intended to be a "formula award"
plan as defined by Rule 16b-3 promulgated under the Securities Exchange Act of
1934 (the "Exchange Act") and, as such, the Committee does not have any
discretionary authority with respect to the grant of NQSOs to Outside Directors.
Options granted under the Plan to Key Employees shall have an exercise
price of not less than fair market value of the Common Stock on the date of the
grant and may not extend for more than ten years, subject to more stringent
limitations in the case of ISOs granted to an optionee who is a 10% or greater
stockholder. NQSOs granted under the Plan to Outside Directors have an exercise
price equal to the fair market value of the shares of Common Stock on the date
the Option is granted. NQSOs granted to Outside Directors have a term of ten
years from the date of the grant. Options granted to Key Employees are
exercisable in such installments as the Committee may determine, but not earlier
than six months from the later of the date of the grant, except under specified
circumstances. NQSOs granted to Outside Directors are exercisable commencing six
months after the date of the grant. On July 3, 1997, the last reported sales
price of the Company's Common Stock on The Nasdaq National Market System was
$8.625.
Any Option held by a Key Employee or Outside Director who dies while still
performing services for the Company or a Subsidiary, or whose employment with
the Company or a Subsidiary is terminated prior to the expiration date of such
Option, will remain exercisable by the Key Employee or Outside Director, or his
or her personal representative, for a period of time following the Key
Employee's or Outside Director's termination of service or death as provided in
the Plan and the applicable option agreement. Upon exercise of an Option, a Key
Employee must pay the exercise price in cash, or, if the Committee shall so
determine in its discretion, either in whole or in part by the delivery of
Common Stock held by the Key Employee, subject to the limitations set forth in
the Plan. The exercise price of an NQSO granted to an Outside Director must be
paid in cash or its equivalent.
ISOs are also subject to certain additional terms and conditions required
by the Internal Revenue Code of 1986, as amended (the "Code"). To the extent
that the fair market value (determined as of the date of the option grant) of
the Common Stock with respect to which ISOs are exercisable for
12
<PAGE>
the first time in any one year as to any optionee exceeds $100,000, such option
shall be treated as a NQSO for tax purposes.
In the Committee's discretion, a Key Employee granted an Option may also be
granted the right in lieu of exercising all or a portion of an Option, to elect
instead to receive an amount equal to the difference between the fair market
value of all, or a specified number, of the shares of Common Stock subject to
such Option on the date such right is exercised and the exercise price under
such Option. Such right is referred to as a Stock Appreciation Right ("SAR").
This amount may be paid in cash or in Common Stock, or in a combination of cash
and Common Stock as the Committee shall determine. Any SAR is exercisable only
at a time when the Option to which it is related is exercisable. (More
stringent rules apply if the Key Employee is a director or officer of the
Company within the meaning of Section 16 of the Exchange Act and cash is being
paid upon exercise of the SAR.) An SAR shall be granted in tandem with an
Option and the Option-SAR shall be considered exercised when either the
underlying Option or SAR is exercised. An SAR expires no later than the
termination of the Option to which it relates and is transferable only if and
when the underlying Option is transferable, and may be exercised only when the
fair market value of the Common Stock subject to the Option exceeds the exercise
price of the Option.
The Committee, in its discretion, may make such Restricted Stock Awards
under the Plan to Key Employees as it determines are warranted. Restricted Stock
Awards may be subject to one or more vesting periods and any additional terms,
conditions or restrictions as the Committee may deem advisable. If the Company
issues certificates representing the Common Stock subject to the Restricted
Stock Award in the name of the Key Employee, such Common Stock will bear a
legend indicating their restrictions and the Key Employee shall execute a stock
power to be held with the certificates by the Company. However, the Key Employee
shall be entitled to receive dividends paid on such Common Stock, shall have the
right to vote such Common Stock, and shall have all other stockholders' rights
with respect to such Common Stock. The Committee shall specify in the Restricted
Stock Award agreement the manner of determining the number of unvested shares of
Common Stock which shall become vested in the Key Employee if his or her
employment is terminated prior to the later of the expiration of the vesting
period or the satisfaction of any conditions. Different vesting provisions may
apply to a Key Employee's termination due to death or disability. Any remaining
unvested shares of Common Stock shall be forfeited upon termination of
employment unless the Committee determines otherwise.
The Committee may grant Restricted Stock Awards under which the Key
Employee shall not be required to make any payment or under which the Key
Employee shall pay all (or any lesser amount than all) of the fair market
value of the Common Stock determined as of the date of the grant.
The Committee may make Unrestricted Stock Awards to Key Employees and each
certificate for shares of unrestricted Common Stock shall be registered in the
name of the Key Employee and be delivered to him or to her.
Upon a change in control of the Company (as defined in the Plan), the
Committee (as it is constituted on the day preceding the date of the change in
control) may, in its discretion, accelerate the vesting and exercisability of
outstanding Options and SARs granted to Key Employees and accelerate the vesting
of Restricted Stock Awards granted to Key Employees. In the event of certain
13
<PAGE>
corporate reorganizations, each outstanding Award will be assumed by the
surviving or successor corporation. However, the Committee may terminate all or
a portion of the outstanding Options granted to Key Employees if it determines
that such termination is in the best interests of the Company in which case the
Key Employee will be given not less than seven days' notice prior to termination
and the Options may be exercised up to and including the date immediately
preceding such termination.
The Plan became effective on December 13, 1995, and terminates on December
13, 2005. The Plan Amendments became effective on June 12, 1997, subject to
stockholder approval. The Board of Directors of the Company may amend, suspend
or discontinue the Plan, except that without the approval of the stockholders:
(1) the class of persons eligible to receive Awards shall not be changed nor
shall any other requirement as to eligibility for participation in the Plan be
materially modified; (2) the maximum number of shares of Common Stock with
respect to which Awards may be granted under the Plan shall not be increased
(otherwise than in connection with certain changes in the capitalization of the
Company); (3) the benefits accruing to individuals participating in the Plan
shall not be materially increased; (4) the duration of the Plan shall not be
extended; and (5) no amendment which would require stockholder approval pursuant
to Treas Reg. (S)1.162-27(e)(4)(vi) may be made. However, no amendment to the
Plan that would affect (1) the amount and price of the Common Stock subject to
NQSOs to be granted to Outside Directors, (2) the timing of such grants to
Outside Directors, or (3) the formula, if any, that determines the amount, price
and timing of NQSO grants to Outside Directors, shall be made more than once
every six months, other than to comport with changes in the Code or the Employee
Retirement Income Security Act of 1974 ("ERISA").
In 1996, the Company adopted a separate Stock Incentive Plan for California
employees, since certain provisions of the 1995 Plan prevented the Company from
qualifying the 1995 Plan under securities laws of the State of California.
Grants under the California plan would have reduced on a one for one basis the
shares available under the 1995 Plan. On the date that the stockholders of the
Company approved the California plan, the Common Stock of the Company was
approved to be traded under the NASDAQ National Market System. This NASDAQ
approval resulted in the Company's Common Stock being exempt from the
qualification requirements of California securities laws. Accordingly, the
Board of Directors of the Company subsequently terminated the 1995 Plan and
rescinded certain conforming amendments to the 1995 Plan.
TAX TREATMENT
If an option is treated as an ISO, the optionee will recognize no U.S.
Federal taxable income upon grant of the ISO. Upon the exercise of an ISO, the
optionee recognizes no taxable income provided the optionee was an employee of
the Company during the entire period from the date of the grant of the ISO until
three months before the date of exercise or in the case of an optionee whose
employment terminates due to disability, until twelve months before the date of
exercise. (Of course, in both of these situations, the ISA itself may provide a
shorter exercise period after employment ceases.) Notwithstanding the preceding,
the excess of the fair market value of the Common Stock over the exercise price,
both determined at the time of exercise, generally will be included in the
optionee's alternative minimum taxable income in the year of exercise.
14
<PAGE>
Upon an optionee's sale of the Common Stock (assuming that the sale occurs
no sooner than two years after grant of the ISO and one year after exercise of
the ISO), any gain will be taxed to the optionee as long-term capital gain. If
the optionee disposes of the shares of Common Stock prior to the expiration of
the above holding period, the optionee will recognize ordinary income in an
amount generally measured as the difference between the exercise price and the
lower of the fair market value of the Common Stock at the exercise date or the
sale price of the Common Stock. Any gain or loss recognized on such a
disposition of the Common Stock in excess of the amount treated as ordinary
income will be characterized as capital gain or loss. The Company will be
allowed a business expense deduction to the extent the optionee recognizes
ordinary income.
An optionee will not recognize any U.S. Federal taxable income at the time
the optionee is granted an NQSO. However, upon exercise of the NQSO, the
optionee will recognize ordinary income for Federal income tax purposes in an
amount generally measured as the excess of the then fair market value of the
Common Stock over the exercise price. If the Company complies with the
applicable income tax withholding or information reporting requirements, it will
be entitled to a business expense deduction in the same amount and at the same
time as the optionee recognizes ordinary income. Upon an optionee's sale of such
shares, any difference between the sale price and fair market value of such
shares on the date of exercise will be treated as capital gain or loss and will
qualify for long-term capital gain or loss treatment if the shares of Common
Stock have been held for more than one year.
Upon the grant of a SAR, the optionee recognizes no taxable income. Upon
exercise of a SAR, the optionee recognizes ordinary income as of the date of
exercise in an amount equal to the excess of the fair market value of the Common
Stock on the date of exercise over the exercise price. An optionee exercising a
SAR is subject to Federal income tax withholding on the income recognized as a
result of the exercise of the SAR. The Company is entitled to a deduction (in
the same year in which the grantee recognizes income) to the extent of the
amount includible in the gross income of the optionee.
Upon the making of a Restricted Stock Award, the grantee will recognize no
taxable income unless the grantee files a "section 83(b) election" with the
Internal Revenue Service within thirty days after the award. Upon payment of
dividends with respect to unvested stock, the grantee will recognize ordinary
income and the Company generally will be entitled to a deduction (in the same
year in which the grantee recognizes income) equal to the amount includible in
the gross income of the grantee.
Upon vesting of Common Stock in a grantee, the grantee will recognize
ordinary income in an amount equal to the fair market value of such Common Stock
on the date of vesting minus any purchase price paid for the restricted shares.
The Company will generally be entitled to a deduction (in the same year in which
the grantee recognizes income) equal to the amount of ordinary income includible
in the gross income of the grantee.
Upon the making of an Unrestricted Stock Award or the making of a Restricted
Stock Award with respect to which the grantee makes a section 83(b) election,
the grantee will recognize ordinary income in an amount equal to the fair market
value of such Common Stock on the date of the grant (determined without regard
to any restrictions that will lapse) and the grantee is subject to Federal
15
<PAGE>
income tax withholding. The grantee's holding period for Common Stock begins on
the day of the grant. When the grantee disposes of such Common Stock, he/she
will recognize a long-term or short term capital gain (or loss) under Code rules
which govern stock dispositions, assuming that the Common Stock is held by the
grantee as capital assets. The Company will generally be entitled to a
deduction (in the same year in which the grantee recognizes income) equal to the
amount of ordinary income includible in the gross income of the grantee.
Different rules for measuring ordinary income may apply if the optionee is
subject to Section 16 of the Securities Exchange Act of 1934, as amended.
The foregoing does not purport to be a complete summary of the effect of
Federal income taxation upon holders of Options, SARs, Restricted Stock or
Unrestricted Stock or upon the Company. It also does not reflect provisions of
the income tax laws of any municipality, state or foreign country.
THE BOARD OF DIRECTORS BELIEVES THAT THE PLAN HAS BEEN AN IMPORTANT TOOL
FOR THE COMPANY IN ITS EFFORTS TO ATTRACT AND RETAIN TALENTED EMPLOYEES AND OUT
SIDE DIRECTORS AND THAT THE PLAN AMENDMENTS ARE IMPORTANT TO ALLOW THE COMPANY
TO REMAIN COMPETITIVE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.
16
<PAGE>
PROPOSAL 4
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO REDUCE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(Item 4 on Proxy Card)
The Company's Board of Directors has unanimously approved and recommended
that the stockholders of the Company approve an amendment to Article Fourth to
the Certificate of Incorporation to reduce the number of authorized shares of
capital stock from 50,000,000 shares to 30,000,000 shares.
The proposed reduction in authorized shares will significantly decrease the
franchise tax payable by the Company to the State of Delaware, the Company's
state of incorporation. The franchise tax payable for 1996 equaled $________;
if the number of authorized shares had equaled only 30,000,000 shares, such
franchise tax payable would have been $_______. The Board of Directors believes
that, giving effect to the reduction in the number of authorized shares, the
Company will still have authorized and unissued shares that are adequate for its
capital requirements for the foreseeable future.
The proposed amendment to the Certificate of Incorporation which would be
adopted if Proposal 4 is approved is as follows:
Resolved, that the Certificate of Incorporation of the Company,
as amended, be further amended by deleting the first paragraph of
Article Fourth and substituting in its place the following:
The amount of total authorized capital stock of the
Corporation is Thirty Million (30,000,000) shares,
divided into Twenty Million (20,000,000) shares of
Common Stock, par value $.001 per share, and Ten Million
(10,000,000) shares of undesignated Preferred Stock, par
value $.001 per share.
In order to be adopted, this proposal must receive the affirmative vote of
holders of shares entitled to a majority of the votes represented by the shares
of all classes of stock of the Company eligible to vote at the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 4.
17
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Company's Compensation Committee is comprised of three outside
directors of the Company, currently Messrs. Chambers (Chairman), Havens and
Monaco. At least annually, the Compensation Committee reviews the compensation
levels of the Company's executive officers and certain other key employees and
makes recommendations to the Board of Directors regarding compensation of such
persons. In general, the Compensation Committee endeavors to base the
compensation of the executive officers on individual performance, performance
against established financial goals based on the Company's strategic plan, and
comparative compensation paid to executives of direct competitors and of non-
financial service companies.
The Compensation Committee's review of compensation, other than that of the
Chairman and Chief Executive Officer, is based on the recommendations of the
Company's internal compensation committee, which consists of A.J. Clegg
(Chairman) and John R. Frock (Executive Vice President. In 1996, the
Compensation Committee was involved in setting the compensation of the Chairman
and Chief Executive Officer, Executive Vice President, Executive Vice
President/Chief Financial Officer (who joined the Company in December 1996),
Executive Vice President - Operations, Vice President - Real Estate Development,
Vice President - Finance and Administration, Vice President - Education and
General Counsel.
Executive officers' compensation generally consists of base salary, which
comprises a significant portion of total compensation, bonuses, which are based
on the Company's performance and/or specific goals, fringe benefits and stock
options. All executive officers are reviewed annually for performance, and
salary changes are effective in March. Bonuses are distributed after the
results of the audit of the financial statements have been verified by the
Board.
In 1995, a salary structure for executive positions was established, based
on a survey performed in May 1994 by Towers and Perrin. Towers Perrin met with
the Compensation Committee members and the Company's executive management to
learn about the Company's executives' responsibilities and developed competitive
compensation levels using published and private data sources covering companies
in the service and education industries, some of which are included in the peer
group in the five-year performance graph. In 1996, the Compensation Committee
established the other executive officers' salaries based on the survey performed
by Towers and Perrin in 1995 and by reviewing current salary levels for similar
positions of direct competitors. The Compensation Committee believes that the
salaries of the executive officers are in line with salary ranges in the
companies that they reviewed. Increases in executive officers' compensation for
1996 were based on performance of the executive, as well as the performance of
the Company both in the current year and over time.
The Chairman and Chief Executive Officer's compensation commencing March
1996 included an annual base salary of $220,000, a bonus plan tied to the
Company's net income as compared to the annual plan submitted to and approved by
the Board of Directors in December 1995 and customary fringe benefits. Mr.
Clegg's salary reflected $40,000 increase over the prior year, $20,000 of which
was related to the increase proposed by the Compensation Committee the prior
year, which
18
<PAGE>
he voluntarily postponed. The remainder of the increase was based on the
performance of the Company.
Bonuses for all executives are based on performance. In 1996, the
Company's revenues increased 34% to $58 million. Each 1996 bonus plan for
executives was specific to the individual's area of responsibility. The
Chairman/CEO, Executive Vice President - Corporate Development, General Counsel
and Vice President-Finance and Administration's bonuses were based on growth in
pretax income over prior year. The Vice President-Real Estate Development's
bonus plan was based on opening a certain number of sites and selling the real
estate acquired in connection with the acquisition of the Carefree Learning
Center preschools. The Executive Vice President - Operations had a bonus plan
based on growth of operating profit over the prior year. The Company completed
four acquisitions, adding ten schools, and opened seven new schools. Pretax
income increased 58% from $2,550,296 to $4,024,685 for the twelve months ended
December 31, 1996. During 1996, the management team continued to implement the
growth strategy. The financial foundation of the Company strengthened and the
Company obtained the approval of NASDAQ to be included in its national market
listings. Although the Company attained double digit growth in revenues and
pretax income, the financial market had higher expectations, so there was a
decrease in the Company's stock price. Because of this, all executives agreed to
forego amounts payable under their bonus plans.
COMPENSATION COMMITTEE
Mr. Edward Chambers
Mr. Peter Havens
Mr. Eugene Monaco
19
<PAGE>
COMPENSATION TABLES
The following tables contain compensation data for the Chief Executive
Officer and each other executive officer of the Company whose salary and bonus
in 1996 aggregated to at least $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------------------------------------
OTHER SECURITIES ALL OTHER
ANNUAL RESTRICTED UNDERLYING COMPENS-
NAME AND COMPENS STOCK OPTIONS/ ATION/4/
PRINCIPAL POSITION YEAR SALARY BONUS/1/ ATION/2/ AWARDS SARS/3/
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A.J. CLEGG 1996 $201,465 $ 0 - 0 0 $3,332
Chairman, President and 1995 160,014 $96,000 - 0 45,000 2,052
Chief Executive Officer /5/,/6/ 1994 57,851 39,978 - 0
JOHN R. FROCK 1996 $112,119 $ 0 $13,840 0 0 $1,587
Executive Vice President /7/ 1995 98,082 $33,750 13,549 /8/ /8/ 746
1994 32,539 14,055 14,950 0 0
D. SCOTT CLEGG 1996 $102,816 $ 0 - 0 30,000 $1,245
Executive Vice President 1995 82,087 $29,400 - 0 5,000 127
- - Operations 1994 73,238 13,320 - 0 127
B. ROBIN EGLIN 1996 $101,018 $ 0 $13,841 0 0 $1,086
Vice President - Real 1995 72,322 $19,500 $10,380 3,000 $ 756
Estate Development /9/
</TABLE>
(1) Bonuses are reported with respect to the fiscal year earned, although paid
in the following year. No bonuses were paid to the named executives for
1996; however, in January 1997, these executives received additional stock
option grants.
(2) The amounts reported for John R. Frock consisted of (i) $7,800, $7,800 and
$3,082 for automobile expenses in 1996, 1995 and 1994, respectively, and
(ii) $5,760, $5,511 and $895 for health insurance in 1996, 1995 and 1994,
respectively. The amounts reported for B. Robin Eglin consisted of (i)
$7,800 and $5,850, for automobile expenses in 1996 and 1995, respectively,
and (ii) $6,041 and $4,530 for health insurance in 1996 and 1995,
respectively. While other named executives enjoy certain similar
perquisites, for fiscal year 1996, perquisites and other personal benefits
for such executive officers did not exceed the lesser of $50,000 or 10% of
any such executive officer's salary and bonus and accordingly have been
omitted from the table as permitted by the rules of the Securities and
Exchange Commission.
(3) Options granted to A.J. Clegg were granted on December 18, 1995; options
granted to D. Scott Clegg were granted on November 18, 1995 and June 21,
1996, respectively; options granted to B. Robin Eglin were granted on
December 18, 1995. All such options vest in increments of one-third of the
total number of options granted on the first, second and third anniversary
dates of the date of grant.
(4) Other compensation in 1996: for A.J. Clegg consisted of $2,290 for life
insurance and $1,042 for employer matching 401(k) plan contributions; for
John R. Frock consisted of $984 for life insurance and $603 for employer
matching 401(k) plan contributions; for D. Scott Clegg consisted $365 for
life insurance and $880 for employer
20
<PAGE>
matching 401(k) plan contributions; and for B. Robin Eglin consisted of
$540 for life insurance and $546 for employer matching 401(k) plan
contributions.
(5) In August 1994, A.J. Clegg was hired as an employee of the Company in the
position of Chairman and Chief Executive Officer. Prior to this time, Mr.
Clegg was the Chairman and Chief Executive Officer of JBS Investment
Banking, Ltd. ("JBS"). On May 29, 1992, pursuant to a private placement
offering, the Company entered into a three year Administrative Services
Agreement with JBS, pursuant to which JBS provided management and advisory
services to the Company and received certain management fees. The fixed fee
portion of this agreement was terminated in August 1994 when Mr. Clegg
joined the Company as a full time employee. During 1995 and 1994,
respectively, the Company paid fees to JBS approved by the Board totaling
$8,289 and $200,374 for the services of JBS personnel, which included A.J.
Clegg, John R. Frock and four other persons. Mr. Clegg joined the Company
as a full time employee on August 1, 1994.
(6) On March 1, 1995, the Board of Directors approved an increase in Mr.
Clegg's base salary of $20,000, from $160,014 to $180,014. Mr. Clegg
voluntarily declined taking such increase in 1995.
(7) John R. Frock joined the Company as a full time employee on August 1, 1994.
(8) The Company made a Restricted Stock Award to Mr. Frock under the 1995 Stock
Incentive Plan of 25,000 shares of Common Stock on March 19, 1996. However,
these shares were never issued, and the Company and Mr. Frock subsequently
agreed to the cancellation of such award. Further, on December 18, 1995,
the Company granted Mr. Frock an option to purchase 25,000 shares of common
stock, which option was canceled in March 1996.
(9) B. Robin Eglin joined the Company in April 1995.
21
<PAGE>
OPTIONS/STOCK APPRECIATION RIGHTS GRANTED IN 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION TERM
INDIVIDUAL GRANTS (10YRS.)/1/
-------------------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED EXERCISE AT 0% AT 5% AT 10%
OPTION/ TO ALL OR BASE ANNUAL ANNUAL ANNUAL
NAME OF SARS EMPLOYEES PRICE PER EXPIRATION GROWTH GROWTH GROWTH
EXECUTIVE GRANTED/2/ IN 1996 /3/ SHARE DATE RATE RATE RATE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A. J. Clegg 0 0.00% n/a n/a $0 $ 0 $ 0
John R. Frock 0 0.00% n/a n/a $0 $ 0 $ 0
D. Scott Clegg 30,000 51.72% $14.25 6/21/06 $0 $268,853 $681,325
B. Robin Eglin 0 0.00% n/a n/a $0 $ 0 $ 0
</TABLE>
____________________
(1) The potential realizable values are based on an assumption that the stock
price of the shares of Common Stock of the Company appreciate at the annual
rate shown (compounded annually) from the date of grant until the end of
the option term. These values do not take into account amounts required to
be paid as income taxes under the Internal Revenue Code of 1986, as
amended, and any applicable state laws, or option provisions providing for
termination of an option following termination of employment,
nontransferability, or vesting over periods of up to three years. These
amounts are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth of the shares of the Company's Common
Stock.
(2) Options granted D. Scott Clegg were granted on June 21, 1996 upon his
promotion to Executive Vice President - Operations and vest in increments
of one-third of the total number of options granted on the first, second
and third anniversary dates of the date of grant.
(3) During 1996, the Company granted to employees options to purchase an
aggregate of 58,000 shares of Common Stock.
AGGREGATED OPTION/STOCK APPRECIATION RIGHTS EXERCISED IN 1996
AND VALUE OF OPTIONS AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
EXERCISED IN 1996 1996 DECEMBER 31, 1996
-----------------------------------------------------------------------------------------
SHARES
NAME OF ACQUIRED VALUE
EXECUTIVE ON EXERCISE REALIZED EXERCISABLE UNEXERCISEABLE EXERCISABLE UNEXERCISEABLE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A. J. Clegg 0 0 15,000 30,000 $ 0 $0
John R. Frock 0 0 0 0 $ 0 $0
D. Scott Clegg 0 0 7,917 33,333 $39,075 $0
B. Robin Eglin 0 0 1,000 2,000 $ 0 $0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
None of the above named executive officers held any stock appreciation rights at
December 31, 1996.
22
<PAGE>
EXECUTIVE SEVERANCE PLAN
In March 1997, the Company adopted an Executive Severance Pay Plan (the
"Plan"). The Plan covers each of the four executive officers named in the table
on page 20, as well as four other officers and key executives of the Company,
and persons who succeed to the positions held by such executives and such other
additional employees or positions as determined by written resolution of the
Board from time to time (collectively, the "Eligible Executives"). Under the
Plan, if the employment of an Eligible Executive with the Company terminates
following a Change of Control (as defined in the Plan) of the Company, under
specified circumstances, the Eligible Executive will be entitled to receive the
severance benefit specified in the Plan. The amount payable to an Eligible
Executive would equal (a) the Eligible Executive's salary for a period of months
equal to six plus the number of years of service of the Eligible Executive as of
the date of termination (or two times the number of years of service, if he or
she has completed at least three years of service as of the termination date),
subject to a maximum of 18 months' pay, plus (b) the bonus which would have been
payable to the Eligible Executive for the year in which employment was
terminated pro rated based on the number of months of employment in the year of
termination.
AGREEMENTS WITH EXECUTIVE OFFICER
The Company and John R. Frock are parties to a Noncompete Agreement which
provides that the Company will make a payment to Mr. Frock following his
termination for any reason if, within 30 days of his termination date, Mr. Frock
delivers a letter to the Company agreeing not to engage in specified activities
in competition with the Company for four years. The amount of such payment will
equal $85,000 if the termination date is prior to December 1, 1997, $170,000 if
the termination date is on or after December 1, 1997 and on or before November
30, 1998, and $255,000 if the termination date is after November 30, 1998. The
Company and Mr. Frock are also parties to a Contingent Severance Agreement which
provides that if Mr. Frock's employment is terminated because (i) the Company
terminates Mr. Frock's employment without Cause (as defined in the agreement) or
(ii) Mr. Frock resigns following a Change of Control (as defined in the
agreement), within 20 days following the date of termination, the Company must
make a severance payment to Mr. Frock. The amount of such payment would be
calculated in the same manner as a payment under the Noncompete Agreement. The
Company will not under any circumstance be required to make a payment to Mr.
Frock under both the Noncompete Agreement and the Contingent Severance
Agreement.
23
<PAGE>
STOCK PERFORMANCE
The following line graph compares the cumulative total stockholder return
on the Company's Common Stock with the total return of the CRSP (Center for
Research in Security Prices) index for NASDAQ Stock Market (U.S. Companies) and
an index of peer group companies for the period December 31, 1991 through
December 31, 1996. The graph assumes that the value of the investment in the
Company's Common Stock and each index was $100 at December 31, 1991 and that all
dividends paid by the Companies included in the indexes were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
PERFORMANCE GRAPH FOR
NOBEL EDUCATION DYNAMICS, INC.
<TABLE>
<CAPTION>
12/91 12/92 12/93 12/94 12/95 12/96
<S> <C> <C> <C> <C> <C> <C>
Nobel Education Dynamics, Inc. 100.0 200.0 175.0 225.0 850.0 500.0
NASDAQ Stock Market
(U.S. Companies) 100.0 116.4 133.6 130.6 184.7 227.1
Self-Determined Peer Group 100.0 154.5 232.1 243.1 371.2 617.0
</TABLE>
Assumes $100 was invested on December 31, 1991 in the applicable stock or index,
and that all dividends were reinvested.
The self determined peer group includes Children's Discovery Centers, ITT
Educational Services, La Petite Academy, Youth Services International, Inc.,
DeVry Inc., Kinder Care Learning Centers, Inc., and Sylvan Learning Systems,
Inc.
24
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
its Common Stock, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of the Company's Common
Stock. Executive officers, directors and ten percent stockholders are required
by SEC regulations to furnish the Company with a copy of all Section 16(a) forms
("Forms 3, 4, and 5") that they file. To the Company's knowledge, based solely
on a review of copies of the Forms 3, 4 and 5 furnished to the Company and
written representations as to all transactions in the Company's securities
effected during the period from January 1, 1996 through December 31, 1996, all
applicable Section 16(a) filing requirements were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996, legal services were rendered to the Company by Drinker Biddle
& Reath, of which Morgan R. Jones, a director of the Company, is a partner and
Chairman. Fees paid to this firm in 1996 were $128,015. The Company expects this
firm to continue to provide such services in 1997.
25
<PAGE>
GENERAL INFORMATION
Stockholders who wish to obtain, free of charge, a copy of the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, as filed with
the Securities and Exchange Commission, may do so by writing or calling Yvonne
DeAngelo, Vice President - Finance and Administration and Secretary, Nobel
Education Dynamics, Inc., Rose Tree Corporate Center II, 1400 North Providence
Road, Suite 3055, Media, Pennsylvania 19063, telephone (610) 891-8200 or by
sending an electronic mail message to [email protected].
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 1998 Annual of Meeting of Stockholders
must be received by the Company no later than January 1, 1998 and be otherwise
in compliance with applicable laws and regulations in order for such proposals
to be included in the Proxy Statement. In addition, the Company's Certificate of
Incorporation requires that any stockholder who wishes to make a nomination for
the office of director or to initiate a proposal or other business at the 1998
Annual Meeting must give the Company advance notice by July 6, 1998 (or, if the
date of the 1998 Annual Meeting is before August 30, 1998 or after October 9,
1998, by the date ten days following the date that the Company first mails to
stockholders the Company's notice of the meeting), and that notice must meet
certain other requirements set forth in the Company's Certificate of
Incorporation.
By Order of the Board of Directors
Yvonne DeAngelo
Vice President - Finance and Administration and Secretary
July 24, 1997
26
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
NOBEL EDUCATION DYNAMICS, INC.
The undersigned hereby appoints A.J. Clegg, Brian C. Zwaan and Yvonne DeAngelo
proxies for the undersigned, each with power to appoint his substitute, and
authorizes each of them acting alone, or together if more than one is present,
to represent and to vote, as specified below, all of the shares of the
undersigned held of record by the undersigned on July 22, 1997, at the 1997
Annual Meeting of Stockholders of Nobel Education Dynamics, Inc. (the "Company")
on September 19, 1997, and at all adjournments thereof, on the matters set forth
herein and in the discretion of the proxies for the transaction of such other
business as may come before the meeting.
______________________________________________
______________________________________________
Your name should appear exactly as your name
appears in the space at the left. For joint
accounts, any co-owner may sign. When signing
in a fiduciary or representative capacity,
please give your full title as such. If a
corporation or partnership, sign in full
corporate or partnership name by authorized
officer or partner.
Date:__________________________________, 1997
(OVER)
<PAGE>
1. ELECTION OF THREE DIRECTORS TO SERVE FOR A THREE YEAR TERM (UNTIL THE ANNUAL
MEETING OF STOCKHOLDERS IN THE YEAR 2000)
[] FOR all nominees listed below [] WITHHOLD AUTHORITY to vote for
(except as marked to the all nominees listed below
contrary below):
John R. Frock Janet L. Katz Eugene G. Monaco
INSTRUCTION: To withhold authority to vote for any individual
nominee, print that nominee's name in the following space:
_________________________________________________________________
2. RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND, L.L.P. AS THE COMPANY'S
INDEPENDENT AUDITORS FOR FISCAL YEAR 1997:
[] FOR [] AGAINST [] ABSTAIN
3. APPROVAL OF AMENDMENTS TO THE COMPANY'S 1995 STOCK INCENTIVE PLAN (A) TO
INCREASE THE NUMBER OF AWARDS WHICH CAN BE MADE THEREUNDER, (B) TO INCREASE
THE NUMBER OF SHARES SUBJECT TO AN OPTION WHICH A PARTICIPANT MAY RECEIVE IN
ANY YEAR AND (C) TO INCREASE THE NUMBER OF SHARES SUBJECT TO AN OPTION WHICH
IS GRANTED TO EACH NONEMPLOYEE DIRECTOR EACH YEAR (SUBJECT TO FULFILLMENT OF
SPECIFIED CONDITIONS).
[] FOR [] AGAINST [] ABSTAIN
4. APPROVAL OF AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO PROVIDE FOR THE REDUCTION IN THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK:
[] FOR [] AGAINST [] ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF EACH
NOMINEE, "FOR" RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND AS AUDITORS
FOR THE COMPANY'S 1997 FISCAL YEAR, "FOR" THE PROPOSAL TO AMEND THE COMPANY'S
1995 STOCK INCENTIVE PLAN AND "FOR" THE PROPOSAL TO AMEND THE COMPANY'S AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION.
---------------------------------------
PLEASE SIGN, DATE AND RETURN THIS PROXY
IN THE ENCLOSED POSTAGE PAID ENVELOPE.
---------------------------------------
