<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 No.:
N/A
3) Filing party:
N/A
4) Date filed:
N/A
<PAGE>
NOBEL EDUCATION DYNAMICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 19, 1998
To the Stockholders:
The 1998 Annual Meeting of Stockholders of Nobel Education Dynamics, Inc.
will be held at 10:00 a.m. on November 19, 1998 at Chesterbrook Academy, 1190
McDermott Drive, West Chester, Pennsylvania (telephone: (610) 719-0243)) for the
following purposes:
1. To elect two directors to serve for a three-year term.
2. To ratify the selection of PricewaterhouseCoopers L.L.P. as the Company's
independent auditors for fiscal year ended June 30, 1999.
3. To consider and vote on a proposal to amend the Company's Certificate of
Incorporation to change the name of the Company to "Nobel Learning
Communities, Inc."
4. 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 September 25, 1998
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
October 1, 1998
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Solicitation of Proxy, Revocability and Voting.............................. 1
Security Ownership.......................................................... 3
Proposal 1: Election of Directors........................................... 7
Proposal 2: Ratification of Appointment of Independent Accountants.......... 12
Proposal 3: Amendment to Certificate of Incorporation
To Change the Name of the Company......................................... 13
Executive Compensation...................................................... 14
Stock Performance........................................................... 21
Compliance with Section 16(a) of the Securities Exchange Act of 1934........ 22
Certain Relationships and Related Transactions.............................. 22
General Information......................................................... 23
Deadline for Receipt of Stockholder Proposals............................... 23
</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
1998 Annual Meeting of Stockholders (the "Meeting") to be held on November 19,
1998. Only stockholders of record on September 25, 1998 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
________, 1998, the Company had _________ shares of Common Stock, _________
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 October 1, 1998.
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 two nominees receiving the most "FOR" votes will be elected. Approval of
the proposal to ratify the selection of auditors 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 change the name of the Company. 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 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
<PAGE>
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 proposal to ratify the selection of auditors, but will have the
effect of a vote against the proposed amendment to the Certificate of
Incorporation to change the name of the Company.
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 and 3.
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 August 3, 1998 by each director, by each
executive officer named in the Summary Compensation Table appearing elsewhere in
this proxy statement, by all directors 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 August 3, 1998 through the exercise of any stock option or right or
conversion of any convertible security or otherwise. As of August 3, 1998, 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 were the following:
A. J. Clegg; Allied Capital Corporation and affiliated funds; Edison Venture
Fund II, L.P.; Gintel Asset Management, Inc.; and KU Learning, L.L.C. The
addresses of such holders of more than 5% of the outstanding Common Stock is set
forth in the footnote relating to their holders.
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Percent of
Name of Beneficial Owner Beneficially Owned Class (1)
------------------------ ------------------ ---------
<S> <C> <C>
A. J. Clegg 572,876 (2) 8.92%
Edward H. Chambers 18,230 (3) *
John R. Frock 45,533 (4) *
Peter H. Havens 13,109 (5) *
Morgan R. Jones 13,750 (6) *
Janet Katz 30,400 (7) *
John Martinson 670,032 (8) 9.92%
Eugene Monaco 2,250 (9) *
William L. Walton 1,106,255 (10) 15.31%
B. Robin Eglin 9,667 (11) *
Barbara Presseisen 4,100 (12) *
Barry S. Swirsky 8,333 (13) *
Allied Capital Corporation 1,106,255 (14) 15.31%
Edison Venture Fund II, L.P. 654,032 (15) 9.69%
Gintel Asset Management, Inc. 492,500 (16) 8.05%
KU Learning, L.L.C. 1,283,500 (17) 20.97%
All directors and executive 1,406,146 (18) 19.65%
officers as a group
(15 persons)
</TABLE>
* Less than 1%. [See notes on following page]
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 of Common Stock, 572,876 shares are beneficially owned by
Mr. Clegg as follows: 265,690 shares of Common Stock owned of record by Mr.
Clegg, 140,385 shares issuable upon conversion of the Company's Series A
Preferred Stock, 100,806 shares issuable upon conversion of the Company's
Series C Preferred Stock, 20,161 shares issuable upon the exercise of
warrants and 43,334 issuable upon exercise of currently exercisable stock
options. Mr. Clegg is the beneficial owner of ________ of such shares by
virtue of his right to vote shares held of record by his children. Mr.
Clegg may also be deemed to be the beneficial owner of 2,500 shares of
Common Stock owned by his spouse. These shares do not include certain
shares beneficially owned by Mr. Clegg's adult children with respect to
which he has no voting rights, as to which he disclaims beneficial
ownership. 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.
(3) Consists of 10,250 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 13,333 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 7,750 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 1,000 shares of Common Stock which Mr. Jones has the right to
purchase upon the exercise of currently exercisable options and 12,750
shares of Common Stock held by Mr. Jones. 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 1,000 shares of
Common Stock which Ms. Katz has the right to purchase upon the exercise of
currently exercisable options.
(8) Includes 15,000 shares held in account for Mr. Martinson's three minor
children, for which Mr. Martinson is custodian and 1,000 shares which Mr.
Martinson has the right to purchase upon the exercise of currently
exercisable options. 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 14.) (These shares are also included in shares reflected
as owned by Mr. Martinson in the table.) Mr. Martinson disclaims beneficial
ownership of such shares, except to the extent of his pecuniary interest
therein.
(9) Consists of 500 shares of Common Stock which Mr. Monaco has the right to
purchase upon the exercise of currently exercisable options and 1,750
shares of Common Stock held by Mr. Monaco.
(10) Mr. Walton is Chief Executive Officer of Allied Capital Corporation. By
virtue of his position as Chief Executive Officer, Mr. Walton may under the
SEC's rules also be deemed a beneficial owner of the shares owned by Allied
Capital Corporation and its affiliates. (See footnote 14.) (These shares
are also included in shares reflected as owned by Mr. Walton in the table.)
Mr. Walton disclaims beneficial ownership of such shares.
(11) Consists of 1,000 shares of Common Stock held by Mr. Eglin and 8,667 shares
of Common Stock which Mr. Eglin has the right to purchase upon the exercise
of currently exercisable options.
(12) Consists of 100 shares of Common Stock held by Ms. Presseisen and 4,000
shares of Common Stock which Ms. Presseisen has the right to purchase upon
the exercise of currently exercisable options.
(13) Consists of 8,333 shares of Common Stock which Mr. Swirsky has the right to
purchase upon the exercise of currently exercisable options.
4
<PAGE>
(14) Consists of an aggregate of 265,958 shares of Common Stock issuable upon
the conversion of the Company's Series D Preferred Stock and 840,298
issuable upon the exercise of warrants held by Allied Capital Corporation,
Allied Capital Corporation II, Allied Investment Corporation and Allied
Investment Corporation II. Allied Capital Corporation and affiliated funds
have their principal executive offices at 1666 K St., N.W., Suite 901,
Washington, DC 20006.
(15) 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. Mr. Martinson is a general partner of Edison
Partners II, L.P. which is the sole general partner of Edison Venture Fund
II, L.P. By virtue of such position, Mr. Martinson and other affiliates of
Edison Venture Fund II, L.P., may under the SEC's rules also be deemed a
beneficial owner of these shares. Such individuals disclaim beneficial
ownership of the shares beneficially owned by Edison Venture Fund II, L.P.,
except to the extent of their pecuniary interest therein. Edison Venture
Fund II, L.P. has its principal executive office at 997 Lenox Drive #3,
Lawrenceville, New Jersey 08648.
(16) Based on a Schedule 13G filed with the SEC on February 3, 1998. Gintel
Asset Management is the investment advisor to various investors and,
pursuant to contractual relationships with such investors, has the right to
vote and dispose of these shares. Robert M. Gintel, is Chief Executive
Officer and 100% shareholder of Gintel Asset Management, Inc., whose
business address is 6 Greenwich Office Park, Greenwich, CT 06831.
(17) Based on a Schedule 13D filed with the SEC on January 16, 1998 and amended
June 2, 1998. Shares are beneficially owned by KU Learning, L.L.C. and its
affiliates. The business address of such persons is 844 Moraga Drive, Los
Angeles, CA 90049.
(18) Consists of shares shown as beneficially held by all natural persons in
this table, and an additional 5,075 shares owned by executive officers
(four) not named in the table and 12,791 shares of Common Stock which such
executive officers have the right to purchase upon the exercise of
currently exercisable options.
5
<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 30, 1998 by each director, by each executive officer
named in the Summary Compensation Table appearing elsewhere in this proxy
statement, by all directors 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 any
series of Preferred Stock. Directors and executive officers omitted from a
section of the following table do not beneficially own any 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 0.49%
Preferred A. J. Clegg 477,500 46.42%
Stock John R. Frock 50,000 4.86%
Peter H. Havens 11,000 1.07%
Janet Katz 100,000 9.72%
Emanuel Shemin 101,487 9.87%
All directors and executive officers 543,500 52.83%
as a group (15 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 (2) 83.87%
All directors and executive officers 2,500,000 (2) 100.00%
as a group (15 persons)
-------------------------------------------------------------------------------------
Series D Allied Capital Corporation 1,063,830 (3) 100.00%
Preferred William L. Walton 1,063,830 (3) 100.00%
Stock All directors and executive officers 0
as a group (15 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. Mr. Clegg's
address is c/o Nobel Education Dynamics, Inc., Rose Tree Corporate Center
II, 1400 North Providence Road, Suite 3055, Media, Pennsylvania 19063. Ms.
Katz's address is Edith J. Bogert School, 391 W. Saddle River Road, Upper
Saddle River, NJ 07458. 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.
(2) John Martinson is a general partner of Edison Partners II, L.P. which is
the sole general partner of Edison Venture Fund II, L.P. By virtue of such
position, Mr. Martinson may under the SEC's rules also be deemed a
beneficial owner of these shares. Mr. Martinson disclaims beneficial
ownership of the shares beneficially owned by Edison Venture Fund II, L.P.,
except to the extent of his pecuniary interest therein.
(3) Shares are owned by Allied Capital Corporation, Allied Capital Corporation
II, Allied Investment Corporation and Allied Investment Corporation II. Mr.
Walton is Chief Executive Officer of Allied Capital Corporation. By virtue
of his position as Chief Executive Officer, Mr. Walton may under the SEC's
rules also be deemed a beneficial owner of the shares owned by Allied
Capital Corporation and its affiliates. (These shares are also included in
shares reflected as owned by Mr. Walton in the table.) Mr. Walton disclaims
beneficial ownership of such shares.
6
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
NOMINEES
At the Meeting, two directors are to be elected to serve for a three year term
and until their successors have been duly elected and qualified. The entire
Board of Directors consists of eight persons. 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.
Of the two nominees for election, Morgan R. Jones is currently a director and
William L. Walton is a new nominee. John Martinson, who has been a director
since 1994, is retiring as of the date of the annual meeting.
The names of the nominees and the current directors, and certain information
about them, are set forth below:
<TABLE>
<CAPTION>
Name of Nominee Director
or Director Age Principal Occupation Since
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nominees for a term expiring in 2001 (Class II Directors):
Morgan R. Jones 58 Partner and Chairman of Drinker 1991
Biddle & Reath
William L. Walton 49 Chairman, President and Chief Executive
Officer of Allied Capital Corporation
Continuing Directors with a term expiring in 1999 (Class III Directors):
Edward Chambers 61 Executive Vice President-Finance and 1988
Administration of Wawa, Inc.
A. J. Clegg 59 Chairman of Board of Directors, President 1992
and Chief Executive Officer of the
Company
Peter H. Havens 44 Executive Vice President of Bryn Mawr 1991
Bank Corporation
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Continuing Directors with a term expiring in 2000 (Class I Directors):
<S> <C> <C> <C>
John R. Frock 55 Executive Vice President - Corporate 1992
Development and Assistant Secretary of the
Company
Janet L. Katz 52 Curriculum Coordinator of Upper Saddle 1994
River Schools and Building Administrator
of Bogart School
Eugene G. Monaco 70 Judge, Delaware County Court (retired) 1995
Retiring Director
John H. Martinson 50 Managing Partner of Edison Venture Fund 1994
</TABLE>
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 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 the
Company). Mr. Frock served as the Chairman and Chief Executive Officer of Avant
8
<PAGE>
Guarde Enterprises, Ltd. from March 1992 through August 1996. Prior to that, Mr.
Frock was 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 curriculum coordinator for
Upper Saddle River Schools, Upper Saddle River, New Jersey and the building
administrator at Bogert School in Upper Saddle 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.
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.
William L. Walton. Mr. Walton has been President, Chairman and Chief Executive
Officer of Allied Capital Corporation since 1997 and is Chairman of Business
Mortgage Investors, Inc. Mr. Walton was chief executive officer of Success Lab,
Inc., which engages in children's educational services, from 1993 to 1996; chief
executive officer of Language Odyssey, which engages in educational publishing
and services from 1992 to 1996; and managing director of Butler Capital
Corporation from 1987 to 1991.
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. William Walton serves on the Board as the designee of
Allied Capital Corporation, the holder of all of the Series D Convertible
Preferred Stock and a $10,000,000 Subordinated Promissory Note.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED ABOVE.
9
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held a total of seven meetings during
the fiscal year ended December 31, 1997 and six meetings during the fiscal year
June 30, 1998. In addition, the Board of Directors adopted resolutions by
unanimous consent three times during the 1997 fiscal year and one time during
the 1998 fiscal year. Each member of the Board of Directors attended at least
75% of the aggregate of the number of meetings of the Board and Board Committees
of which he or she was a member during each of fiscal 1997 and fiscal 1998,
except Janet Katz who did not attend two of the meetings of the Board of
Directors in each of fiscal 1997 and fiscal 1998 and John Martinson who did not
attend two of the meetings of the Board of Directors in fiscal 1998.
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 five meetings during 1997 and three
meetings during Fiscal 1998. 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 two times during 1997 and one time during Fiscal
1998.
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 candidates for possible election by the stockholders.
The Nominating Committee did not meet in 1997 or fiscal 1998, but the entire
Board has considered new nominations to the Board. 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, as amended, provides that as of the
date 90 days following the closing of each fiscal year that the Plan is in
effect, each individual serving as a director of the Company who is not an
officer or employee of the Company will be granted a nonqualified stock option
to purchase 2,000 shares of Common Stock if the individual served as a director
for the entire fiscal year then ended and the Company's pre-tax income for such
fiscal year increased at least 20% from the prior fiscal year. Pursuant to the
Plan (as in effect prior to its
10
<PAGE>
amendment in September 1997), 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. No options were awarded in March 1998 or for Fiscal 1998.
11
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Item 2 on Proxy Card)
The Board of Directors has selected PricewaterhouseCoopers L.L.P.,
independent accountants, to audit the consolidated financial statements of the
Company for its 1999 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 PricewaterhouseCoopers, 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.
12
<PAGE>
PROPOSAL 3
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
(Item 3 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 First to the
Certificate of Incorporation to change the name of the Company to "NOBEL
LEARNING COMMUNITIES, INC."
The Company believes that the name "Nobel Learning Communities, Inc." is more
appropriate to the Company's mission of building a nationwide network of locally
oriented learning communities. The new name also has a "school" image versus a
corporate image and reflects the broadening of the Company's mission to include
schools for learning challenged children and the Company's tutoring programs.
The proposed amendment to the Certificate of Incorporation which would be
adopted if Proposal 3 is approved is as follows:
Resolved, that the Certificate of Incorporation of the Company, as amended, be
further amended by amending Article First to read in its entirety as follows:
FIRST: The name of the Corporation is Nobel Learning Communities, Inc.
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 3.
13
<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). Executive officers'
compensation generally consists of base salary (which comprises a significant
portion of total compensation), bonus (which is 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 1997 and Fiscal 1998, the Compensation Committee was involved in setting
the compensation of the Chairman and Chief Executive Officer, Executive Vice
President - Development, Vice President/Chief Financial Officer, Vice Presidents
- - Operations East and West, Vice President - Real Estate Development, Vice
President - Finance and Administration, Vice President - Education, General
Counsel, Vice President - Marketing and Human Resources Manager.
In 1995, a salary structure for executive positions was established, based on
a survey performed in May 1995 by Towers and Perrin. Towers and 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. Since 1995, the Compensation
Committee has established the executive officers' salaries based on the results
of this survey, by reviewing other current data as to salary levels for similar
positions of direct competitors, and by evaluating the performance of both the
executive and the Company during the current year and over time. The
Compensation Committee believes that the salaries of the executive officers are
within the salary ranges of the companies reviewed.
The Chairman and Chief Executive Officer's compensation commencing in March
1998 included an annual base salary of $______, 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 ________ 199_ and customary fringe benefits. Mr.
Clegg's salary reflected a $_____ increase over the prior year. The increase
was based on the performance of the Company.
In 1997 and Fiscal 1998, bonuses for all executive officers were based on
criteria which included (1) the Company's performance as compared to plan and
(2) in some cases, satisfaction of specific
14
<PAGE>
objectives based on the executive's individual areas of responsibility. The
Chairman's bonus was based on attaining the net income in the 1997 business
plan. The Vice President - Eastern Operations's bonus was based on Eastern
operations attaining the operating profit in the goal in the 1997 business plan.
The bonuses of the Executive Vice President - Development, Vice President/Chief
Financial Officer, Vice President- Real Estate Development, Vice President -
Education, Vice President -Marketing, Vice President - Finance and
Administration and General Counsel were based on both the Company's achieving
certain pretax or income goals defined in the 1997 Business Plan and specific
goals relating to their individual areas of responsibility.
In 1997, the Company did not achieve the financial goals set in the 1997
Business Plan. Current executives whose bonuses were based on specific
performance goals agreed to forgo amounts payable under their bonus plan. No
bonuses were paid to current executives in 1997.
Compensation Committee
Mr. Edward Chambers
Mr. Peter Havens
Mr. Eugene Monaco
15
<PAGE>
COMPENSATION TABLES
The following tables contain compensation data for the Chief Executive Officer
and the four next most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
----------------------------------------------------------------
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND COMPENS STOCK OPTIONS/ COMPENS-
PRINCIPAL POSITION YEAR/1/ SALARY BONUS/2/ ATION/3/ AWARDS SARS/4/ ATION/5/
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A.J. CLEGG /6/ 1998 20,000
Chairman, President and 1997 $231,778 $ 0 0 40,000 $3,217
Chief Executive Officer 1996 208,465 0 0 0 3,332
1995 160,014 96,000 0 45,000 2,052
- ------------------------------------------------------------------------------------------------------------------
JOHN R. FROCK 1998 12,682
Executive Vice President 1997 $119,530 $ 0 $13,690 0 40,000 $1,645
1996 112,119 0 13,560 /7/ 0 1,587
1995 98,082 33,750 13,549 0 /7/ 746
- ------------------------------------------------------------------------------------------------------------------
B. ROBIN EGLIN /8/ 1998 13,900
Executive Vice President - 1997 $108,106 $ 0 $13,988 0 20,000 $1,067
Real Estate Development 1996 101,018 0 13,841 0 0 1,086
1995 72,322 19,500 10,380 0 3,000 756
- ------------------------------------------------------------------------------------------------------------------
BARBARA PRESSEISEN /8/ 1998 14,500
Vice President - Education 1997 8,000
1996 2,000
- -----------------------------------------------------------------------------------------------------------------
BARRY S. SWIRSKY /8/ 1998 12,175
General Counsel 1997 15,000
1996 0
1995 5,000
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The 1998 fiscal year consisted of the six months ended June 30, 1998.
(2) Bonuses are reported with respect to the fiscal year earned, although paid
in the following year.
(3) The amounts reported for John R. Frock consisted of $7,800 for automobile
expenses in each year, and $_____, $5,890, $5,760 and $5,511 for health
insurance in fiscal 1998, 1997, 1996 and 1995, respectively. The amounts
reported for B. Robin Eglin consisted of $_____, $7,800, $7,800 and $5,850
for automobile expenses in fiscal 1998, 1997, 1996 and 1995, respectively,
and $_____, $6,188, $6,041 and $4,530 for health insurance in fiscal 1998,
1997, 1996 and 1995, respectively. While other named executives enjoy
certain similar perquisites, for fiscal year 1998, perquisites and other
personal benefits for such executive officers did not exceed the lesser of
$50,000 or
16
<PAGE>
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.
(4) Options granted to A.J. Clegg, B. Robin Eglin and Barry S. Swirsky were
granted on December 18, 1995, January 2, 1997 and January 2, 1998; options
granted to John R. Frock were granted on January 2, 1997 and January 2,
1998; options granted to Barbara Presseisen were granted on June 17, 1996,
January 2, 1997 and January 2, 1998. 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 (except that Mr. Frock's
options granted in 1997 vested one-third each on July 3, 1997, December 1,
1997 and December 1, 1998). See also footnote 7 for disclosure regarding
certain options granted to John Frock which were subsequently canceled.
(5) Other compensation in fiscal 1998: for A.J. Clegg consisted of $_____ for
life insurance and $_____ for employer matching 401(k) plan contributions;
for John R. Frock consisted of $_____ for life insurance and $_____ for
employer matching 401(k) plan contributions; for B. Robin Eglin consisted of
$_____ for life insurance and $_____ for employer matching 401(k) plan
contributions; for Barbara Presseisen consisted of $_____ for employer
matching 401(k) plan contributions; and for Barry S. Swirsky consisted
$_____ for life insurance and $_____ for employer matching 401(k) plan
contributions.
(6) 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"). During 1995, the Company paid fees to JBS approved
by the Board totaling $8,289 for the consulting services of JBS personnel.
(7) 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.
(8) B. Robin Eglin joined the Company in April 1995; Barbara Presseisen joined
the Company in June 1996; Barry S. Swirsky joined the Company in September
1995.
17
<PAGE>
OPTIONS/STOCK APPRECIATION RIGHTS GRANTED IN FISCAL 1997 AND FISCAL 1998
<TABLE>
<CAPTION>
FISCAL 1997
POTENTIAL REALIZED VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM (10 YRS) /1/
----------------------------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED AT 0% AT 5%
OPTION/ TO ALL EXERCISE OR ANNUAL ANNUAL
NAME OF SARS EMPLOYEES BASE PRICE EXPIRATION GROWTH GROWTH AT 10% ANNUAL
EXECUTIVE GRANTED/ 2/ 1997 /3/ PER SHARE DATE RATE RATE GROWTH RATE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A. J. Clegg 40,000 20.70% $10.375 1/2/07 $0 $260,991 $661,403
John R. Frock 40,000 20.70% $10.375 1/2/07 $0 $260,991 $661,403
B. Robin Eglin 20,000 10.35% $10.375 1/2/07 $0 $130,496 $330,702
Barbara Presseisen 8,000 4.14% $10.375 1/2/07 $0 $ 52,198 $132,281
Barry S. Swirsky 15,000 7.76% $10.375 1/2/07 $0 $ 97,872 $248,026
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1998
POTENTIAL REALIZED VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM (10 YRS) /1/
----------------------------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED AT 0% AT 5%
OPTION/ TO ALL EXERCISE OR ANNUAL ANNUAL
NAME OF SARS EMPLOYEES BASE PRICE EXPIRATION GROWTH GROWTH AT 10% ANNUAL
EXECUTIVE GRANTED/ 2/ IN F 1998/3/ PER SHARE DATE RATE RATE GROWTH RATE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A. J. Clegg 20,000 14.16% $5.0625 1/2/08 $0 $63,676 $161,366
John R. Frock 12,682 8.98% $5.0625 1/2/08 $0 $40,377 $102,322
B. Robin Eglin 13,900 9.84% $5.0625 1/2/08 $0 $44,255 $112,150
Barbara Presseisen 14,500 10.27% $5.0625 1/2/08 $0 $46,165 $116,991
Barry S. Swirsky 12,175 8.62% $5.0625 1/2/08 $0 $38,763 $ 98,232
</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 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 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 (except options granted to Mr. Frock in 1997, which vested one-
third each on July 3, 1997, December 1, 1997 and December 1, 1998).
(3) During 1997, the Company granted to employees options to purchase an
aggregate of 193,200 shares of Common Stock. During 1998, the Company
granted to employees options to purchase an aggregate of 141,257 shares of
Common Stock.
18
<PAGE>
AGGREGATED OPTION/STOCK APPRECIATION RIGHTS EXERCISED IN FISCAL 1997 AND FISCAL
1998 AND VALUE OF OPTIONS AT JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
EXERCISED IN 1997 NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
FISCAL 1998 OPTIONS AT JUNE 30, 1998 JUNE 30, 1998
-------------------------------------------------------------------------------------
SHARES
ACQUIRED ON VALUE
NAME OF EXECUTIVE EXERCISE REALIZED EXERCISABLE UNEXERCISEABLE EXERCISABLE UNEXERCISEABLE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A. J. Clegg 0 0 43,333 61,667 $0 $78,750
John R. Frock 0 0 13,333 39,349 $0 $49,935
B. Robin Eglin 0 0 8,667 28,233 $0 $54,731
Barbara Presseisen 0 0 4,000 20,500 $0 $57,094
Barry S. Swirsky 0 0 8,333 23,842 $0 $47,939
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
None of the above named executive officers held any stock appreciation rights at
June 30, 1998.
EXECUTIVE SEVERANCE PLAN
In March 1997, the Company adopted an Executive Severance Pay Plan (the
"Severance Plan"). The Severance Plan covers each of the five executive officers
named in the table on page 16, as well as five 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 Severance Plan, if the employment of an Eligible
Executive with the Company terminates following a Change in Control (as defined
in the Severance Plan) of the Company, under specified circumstances, the
Eligible Executive will be entitled to receive the severance benefit specified
in the Severance 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 $170,000 if the termination date is 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
19
<PAGE>
agreement) or (ii) Mr. Frock resigns following a Change in 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.
20
<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 Nasdaq Stock Market
(U.S. Companies) and an index of peer group companies for the period December
31, 1992 through June 30, 1998 as calculated by the Center for Research in
Security Prices (CRSP). The graph assumes that the value of the investment in
the Company's Common Stock and each index was $100 at December 31, 1992 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>
12/92 12/93 12/94 12/95 12/96 12/97 6/98
<S> <C> <C> <C> <C> <C> <C> <C>
Nobel Education Dynamics, Inc. 100.0 87.5 112.5 425.0 250.0 126.6
Nasdaq Stock Market
(U.S. Companies) 100.0 114.8 112.2 158.7 195.2 239.5
Self-Determined Peer Group 100.0 150.2 157.3 240.2 399.3 484.3
</TABLE>
The self determined peer group includes Children's Discovery Centers of America,
Inc.; ITT Educational Services, Inc.; La Petite Academy, Inc.; Youth Services
International, Inc., DeVry Inc.; Kindercare Learning Centers, Inc.; and Sylvan
Learning Systems, Inc.
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization of the
previous trading day.
C. If the monthly interval, used on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. No trading activity recorded for Nobel Education Dynamics, Inc. from 6-9-92
to 7-16-93.
21
<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, 1997 through June 30, 1998, all
applicable Section 16(a) filing requirements were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1997 and 1998, 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 were $35,509 in 1997 and $_______
in the six month fiscal year ended June 30, 1998. The Company expects this firm
to continue to provide such services in Fiscal 1999.
22
<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 fiscal year ended December 31, 1997 and the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, 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 1999 Annual of Meeting of Stockholders
must be received by the Company no later than July 22, 1999 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 1999
Annual Meeting must give the Company advance notice by September 5, 1999 (or, if
the date of the 1999 Annual Meeting is before October 30, 1999 or after December
9, 1999, 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
October 1, 1998
23
<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, Yvonne DeAngelo and Barry S.
Swirsky 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 September 25, 1998, at the
1998 Annual Meeting of Stockholders of Nobel Education Dynamics, Inc. (the
"Company") on November 19, 1998, 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.
1. ELECTION OF TWO DIRECTORS TO SERVE FOR A THREE YEAR TERM (UNTIL THE ANNUAL
MEETING OF STOCKHOLDERS IN THE YEAR 2001)
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary below): all nominees listed below
Morgan R. Jones William L. Walton
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 PRICEWATERHOUSECOOPERS L.L.P. AS THE
COMPANY'S INDEPENDENT AUDITORS FOR FISCAL YEAR 1999.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued and to be SIGNED on Reverse Side)
<PAGE>
3. APPROVAL OF AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO CHANGE THE NAME OF THE COMPANY TO "NOBEL LEARNING
COMMUNITIES, INC.":
[_] 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 PRICEWATERHOUSECOOPERS L.L.P AS
AUDITORS FOR THE COMPANY'S 1999 FISCAL YEAR, AND "FOR" THE PROPOSAL TO AMEND
THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
---------------------------------------
---------------------------------------
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.
Dated: _________________________ , 1998
