SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Nobel Learning Communities, Inc.
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[LOGO] NOBEL
LEARNING
COMMUNITIES
Notice of Annual Meeting of Stockholders
November 15, 2001
To the Stockholders:
The 2001 Annual Meeting of Stockholders of Nobel Learning Communities, Inc.
will be held at 10:00 a.m. on November 15, 2001 at the Adams Mark-Philadelphia
Hotel, City Avenue and Monument Road, Philadelphia, PA 19131 (telephone: (215)
581-5000) for the following purposes:
1. To elect two directors to serve for a three-year term.
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ending June 30, 2002.
3. 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 October 11, 2001
will be entitled to notice of, and to vote at, the Meeting and any adjournment
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, we urge you 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,
/s/ Yvonne DeAngelo
Yvonne DeAngelo
Secretary
Media, PA
October 16, 2001
NOBEL LEARNING COMMUNITIES, INC.
PROXY STATEMENT
SOLICITATION OF PROXY, REVOCABILITY AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of Nobel
Learning Communities, Inc., a Delaware corporation (the "Company"), for use at
the 2001 Annual Meeting of Stockholders (the "Meeting") to be held at 10:00 a.m.
on November 15, 2001 at the Adams Mark-Philadelphia Hotel, City Avenue and
Monument Road, Philadelphia, PA 19131. Only stockholders of record on October
11, 2001 will be entitled to notice of, and to vote at, the Meeting or any
adjournment thereof. Each share of the Company's common stock ("Common Stock")
outstanding on the record date is entitled to one vote on each matter to be
considered; and each share of the Company's preferred stock ("Preferred Stock")
outstanding on the record date is entitled, as to each matter to be considered,
to that number of votes as is 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 October 11, 2001, the Company had outstanding
6,345,561 shares of Common Stock, 1,023,694 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.
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 16, 2001.
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 Common Stock and Preferred Stock present at the
Meeting in person or by proxy and entitled to vote. 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 non-votes" (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 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 an approval of a majority of the votes
represented by the shares of stock present and entitled to vote thereon.
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.
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 Proposal 2.
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 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 $3,500 for these services.
2
SECURITY OWNERSHIP
Common Stock
The following table shows information concerning the beneficial ownership of
the Common Stock as of October 1, 2001 by each director and nominee, by each
executive officer named in the Summary Compensation Table appearing elsewhere in
this proxy statement and employed by the Company as of October 1, 2001, 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 Common
Stock. The number of shares beneficially owned by each person is determined
under the rules of the Securities and Exchange Commission (the "SEC") 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 after October 1,
2001 through the exercise of any stock option or right or conversion of any
convertible security or otherwise. As of October 1, 2001, the only persons or
group of persons known to the Company to beneficially own more than 5% of the
outstanding Common Stock were the following: A. J. Clegg; Allied Capital
Corporation and its affiliates; Dimensional Fund Advisors Inc.; Edison Venture
Fund II, L.P.; and KU Learning, L.L.C. The address of each such holder of more
than 5% of the outstanding Common Stock is set forth in the footnote relating to
its holdings.
Number of Shares of
Common Stock Percent of
Name of Beneficial Owner Beneficially Owned Class (1)
------------------------ ------------------- ----------
William E. Bailey 49,400 (2) *
A. J. Clegg 704,573 (3) 10.72%
Edward H. Chambers 30,230 (4) *
Daryl A. Dixon 100,000 (5) 1.60%
John R. Frock 111,549 (6) 1.79%
Peter H. Havens 20,109 (7) *
Eugene G. Monaco 10,500 (8) *
Pamela S. Lewis 3,088 (9) *
William L. Walton 1,113,483 (10) 15.38%
Robert E. Zobel 15,265 (11) *
Daniel L. Russell 0 *
Barry S. Swirsky 50,725 (12) *
Allied Capital Corporation 1,106,256 (13) 15.26%
Dimensional Fund Advisors Inc. 352,500 (14) 5.74%
Edison Venture Fund II, L.P. 654,032 (15) 9.81%
KU Learning, L.L.C. 1,883,500 (16) 30.66%
All directors and executive 2,208,922 (17) 27.49%
officers as a group (12 persons)
* Less than 1%. (See notes on following page)
3
(1) The percentages of class set forth in the table reflect the percentage of
outstanding Common Stock currently owned by each holder listed or, in the
case of a holder who also owns Preferred Stock or options or warrants
exercisable within 60 days after October 1, 2001, the percentage of
outstanding Common Stock which would be owned by each such holder giving
effect to the conversion of all such shares of Preferred Stock and exercise
of all such options and warrants held by such holder, but not to such
conversion or exercise by any other person.
(2) Consists of 4,400 shares of Common Stock held by Mr. Bailey and 45,000
shares of Common Stock which Mr. Bailey has the right to purchase upon the
exercise of currently exercisable options.
(3) Consists of 275,048 shares of Common Stock currently outstanding, 140,385
shares of Common Stock issuable upon conversion of the Company's Series A
Preferred Stock, 100,806 shares of Common Stock issuable upon conversion of
the Company's Series C Preferred Stock, and 188,334 shares of Common Stock
issuable upon exercise of currently exercisable stock options. Of the
275,048 shares of Common Stock currently outstanding, Mr. Clegg's
beneficial ownership of 66,572 shares arises by virtue of his right to vote
shares held of record by his children and of 5,500 shares by virtue of
record ownership of shares by his spouse. Does not include shares owned by
Mr. Clegg's adult children with respect to which he has no voting rights,
as to which he disclaims beneficial ownership. Mr. Clegg's address is c/o
Nobel Learning Communities, Inc., Rose Tree Corporate Center II, 1400 North
Providence Road, Suite 3055, Media, Pennsylvania 19063.
(4) Consists of 11,510 shares of Common Stock held by Mr. Chambers, 1,470
shares of Common Stock issuable upon the conversion of the Company's Series
A Preferred Stock, and 17,250 shares of Common Stock which Mr. Chambers has
the right to purchase upon the exercise of currently exercisable options.
(5) Consists of 100,000 shares of Common Stock which Mr. Dixon has the right to
purchase upon the exercise of currently exercisable options.
(6) Consists of 17,500 shares of Common Stock held by Mr. Frock, 14,700 shares
of Common Stock issuable upon the conversion of the Company's Series A
Preferred Stock, and 79,349 shares of Common Stock which Mr. Frock has the
right to purchase upon the exercise of currently exercisable options.
(7) Consists of 2,125 shares of Common Stock held by Mr. Havens, 3,234 shares
of Common Stock issuable upon the conversion of the Company's Series A
Preferred Stock, and 14,750 shares of Common Stock which Mr. Havens has the
right to purchase upon the exercise of currently exercisable options.
(8) Consists of 3,000 shares of Common Stock held by Mr. Monaco and 7,500
shares of Common Stock which Mr. Monaco has the right to purchase upon the
exercise of currently exercisable options.
(9) Consists of 3,088 shares of Common Stock which Dr. Lewis has the right to
purchase upon the exercise of currently exercisable options.
(10) Mr. Walton owns 1,000 shares of Common Stock directly and has the right to
purchase 6,227 shares of Common Stock upon the exercise of currently
exercisable options. By virtue of his position as Chief Executive Officer
of Allied Capital Corporation, 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 13). Accordingly, these shares are also
reflected in the table as shares beneficially owned by Mr. Walton. Mr.
Walton disclaims beneficial ownership of such shares. Mr. Walton's address
is c/o Allied Capital Corporation, at the address indicated in footnote 13.
(11) Consists of 4,000 shares of Common Stock held by Mr. Zobel, 4,704 shares of
Common Stock issuable upon the conversion of shares of the Company's Series
A Preferred Stock held by a partnership of which Mr. Zobel is general
partner, and 6,561 shares of Common Stock which Mr. Zobel has the right to
purchase upon the exercise of currently exercisable options. Does not
include 1,000 shares of Common Stock held in a custodian account for Mr.
Zobel's children, of which Mr. Zobel's wife is custodian, as to which Mr.
Zobel disclaims beneficial ownership.
4
(12) Consists of 50,725 shares of Common Stock which Mr. Swirsky has the right
to purchase upon the exercise of currently exercisable options. Does not
include 500 shares of Common Stock held in a custodian account for Mr.
Swirsky's child, of which Mr. Swirsky's wife is custodian, as to which Mr.
Swirsky disclaims beneficial ownership.
(13) Consists 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 and Allied
Investment Corporation. Allied Capital Corporation and its affiliates have
their principal executive offices at 1666 K St., N.W., Suite 901,
Washington, DC 20006.
(14) Based on a Schedule 13G filed with the SEC on December 2, 2001. Dimensional
Fund Advisors Inc., an investment advisor registered under Section 203 of
the Investment Advisors Act of 1940, furnishes investment advice to four
investment companies registered under the Investment Company Act of 1940,
and serves as investment manager to certain other commingled group trusts
and separate accounts (collectively, the "Funds"). In its role as
investment adviser or manager, Dimensional Fund Advisors Inc. possesses
voting and/or investment power over the shares of Common Stock that are
owned the Funds. All such shares are owned by the Funds. Dimensional Fund
Advisors Inc. disclaims beneficial ownership of such shares.
(15) Based on information most recently reported to the Company. Consists of
129,839 shares of Common Stock held by Edison Venture Fund II, L.P. and
524,193 shares of Common Stock issuable upon the conversion of the
Company's Series C Preferred Stock. 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 13D filed with the SEC on January 16, 1998 and amended
on June 2, 1998 and November 10, 1999. 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.
(17) Consists of shares shown as beneficially held by all natural persons in
this table.
5
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 October 1, 2001 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 any series of Preferred Stock. Directors, nominees 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.
Number of Shares of
Name of Preferred Stock Percent
Security Name of Beneficial Owner (1) Beneficially Owned of Class
------------------------------------------------------------------------------------------
Series A Edward H. Chambers 5,000 0.49%
Preferred A. J. Clegg 477,500 46.64%
Stock John R. Frock 50,000 4.88%
Peter H. Havens 11,000 1.07%
Emanuel Shemin 101,487 9.91%
Robert E. Zobel 16,000 (2) 1.56%
All directors and executive 559,500 54.66%
officers as a group (12 persons)
------------------------------------------------------------------------------------------
Series C A. J. Clegg 403,226 16.13%
Preferred Edison Venture Fund II, L.P. 2,096,714 83.87%
Stock All directors and executive 403,226 16.13%
officers as a group (12 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 1,063,830 (3) 100.00%
officers as a group (12 persons)
------------------------------------------------------------------------------------------
(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 Learning Communities, Inc., Rose Tree Corporate Center
II, 1400 North Providence Road, Suite 3055, Media, Pennsylvania 19063.
Edison Venture Fund II, L.P. has its principal executive office at 997 Lenox
Drive #3, Lawrenceville, New Jersey 08648. Allied Capital Corporation and
affiliates have their principal executive offices at 1666 K St., N.W., Suite
901, Washington, DC 20006.
(2) By partnership of which Mr. Zobel is a general partner.
(3) Shares are owned by Allied Capital Corporation and Allied Investment
Corporation. Mr. Walton, a director of the Company, 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. Mr. Walton's address is c/o Allied Capital Corporation, at the
address indicated in footnote 1.
6
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, Pamela S. Lewis is currently a director and
Daniel L. Russell is a nominee. William L. Walton, who has been a director
since 1998, is retiring as of the date of the Meeting. Directors will be
elected by a plurality of the shares present and voting at the Meeting.
The names of the nominees and the continuing directors, and certain
information about them, are set forth below:
Name of Nominee Director
or Director Age Principal Occupation Since
--------------------------------------------------------------------------------------------------------------
Nominees for a term expiring in 2004 (Class II Directors):
Pamela S. Lewis 44 Dean of the McColl School of Business at 1999
Queens College
Daniel L. Russell 36 Principal, Private Finance Group, Allied
Capital Corporation
Continuing Directors with a term expiring in 2002 (Class III Directors):
Edward Chambers 64 Executive Vice President - Finance and 1988
Administration of Wawa, Inc.
A. J. Clegg 62 Chairman of Board of Directors and Chief 1992
Executive Officer of the Company
Peter H. Havens 47 Chairman of Baldwin Management, LLC 1991
7
Continuing Directors with a term expiring in 2003 (Class I Directors):
John R. Frock 58 Vice-Chairman and Chief Administrative 1992
Officer of the Company
Eugene G. Monaco 73 Judge, Delaware County Court (retired) 1995
Robert E. Zobel 53 Vice President and Chief Administrative 1998
Officer and Secretary of MARS, Inc.
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 in May 1992. Since 1996, Mr. Clegg has also served as a
member of the Board of Trustees of Drexel University. From June 1990 to
December 1997 (but involving immaterial amounts of time between 1994 and 1997),
Mr. Clegg served as the Chairman and CEO of JBS Investment Banking, Ltd., which
provided investment management and consulting services to businesses, including
the Company. 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. In August 2000, Mr. Clegg
was recognized as "Education Entrepreneur of the Year" by the Association of
Education Practitioners and Providers.
John R. Frock. Mr. Frock was named Vice-Chairman and Chief Administrative
Officer in November 2000. Previous to that, Mr. Frock was Executive Vice
President - Corporate Development. Mr. Frock was elected to the Board of
Directors of the Company in May 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 Guarde Enterprises, Ltd. from March 1992 through August 1996.
Prior to that,
8
Mr. Frock was President and Chief Operating Officer of SBF Communications
Graphics, a business forms printer located in Philadelphia, Pennsylvania;
President of Globe Ticket and Label Company; and President of the Graphics Group
of Empery Corporation.
Peter H. Havens. Mr. Havens is Chairman of Baldwin Management, LLC, an
investment management concern. Previously, he was the Executive Vice President
of Bryn Mawr Bank Corporation 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., a director of
Independence Seaport Museum and Lankenau Hospital Foundation, and a Trustee
Emeritus of Ursinus College.
Pamela S. Lewis. Dr. Lewis currently serves as Professor of Management and
Dean of the McColl School of Business at Queens College in Charlotte, North
Carolina. Prior to joining the McColl School, Dr. Lewis served as Professor of
Management and Dean of the Bennett S. LeBow College of Business at Drexel
University from June 1997 to June 2000. From 1987 to 1997, Dr. Lewis was a
professor at the University of Central Florida, serving in a variety of
administrative positions. Her professional specialization is in the field of
strategic planning with a particular emphasis on competitive and marketing
strategy. She has written and lectured on these topics extensively. Dr. Lewis
also serves on the board of directors of C & D Technologies, Inc. and Charming
Shoppes, Inc.
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.
Daniel L. Russell. Mr. Russell is a Principal in the Private Finance Group
at Allied Capital Corporation. Prior to joining Allied Capital in 1998, Mr.
Russell served in the financial services practice of KPMG Peat Marwick LLP from
1991 to 1998, including serving as a Senior Manager from 1996 to 1998. Mr.
Russell is a director of The Hillman Group, SunSource Technology Services, Inc.
and HealthASPex. Mr. Russell is a Certified Public Accountant.
Robert E. Zobel. Since February 2001 Mr. Zobel has been Vice President,
Chief Administrative Officer and Secretary of MARS, Inc. Mr. Zobel was Vice
President of Finance, Chief Financial Officer, Treasurer and Secretary of MARS,
Inc. from February 1996 until February 2001. From 1974 through February 1996,
Mr. Zobel was associated with Deloitte & Touche LLP (formerly Touche Ross & Co.)
as an employee and since September 1981 as a partner. Mr. Zobel earned a B.A.
degree from Claremont McKenna College, a J.D. degree from Willamette University
College of law and a LLM degree in tax from Boston University.
William L. Walton has served on the Board of Directors, and Daniel L.
Russell has been nominated to the Board of Directors, as the designee of Allied
Capital Corporation, the holder of
9
all of the Series D Convertible Preferred Stock, a $10,000,000 subordinated
promissory note and warrants.
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 seven meetings during
the fiscal year ended June 30, 2001 (not including actions adopted by unanimous
consent). 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 the 2001 fiscal year.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee of the Board of Directors presently consists of Mr.
Chambers (Chairman), Mr. Havens and Mr. Zobel. It held five meetings during the
2001 fiscal year. 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. See "Report of the Audit Committee."
The Compensation Committee of the Board of Directors presently consists of
Mr. Chambers (Chairman), Mr. Walton and Mr. Zobel. 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 Compensation Committee met five times during the 2001 fiscal
year. See "Executive Compensation - Report of the Compensation Committee."
Compensation of Directors
The Company pays directors an annual retainer of $10,000 (except directors
who are also employees of the Company, who receive $6,000), which is paid
quarterly, and pays members of committees of the Board of Directors $750 per
meeting for each committee meeting attended. (Executive officers' compensation
reported in the Summary Compensation Table does not include these 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 5,000 shares of Common Stock if the Company's pre-tax income for
such fiscal year increased at least 20% from the prior fiscal year and if the
individual served as a director for the entire fiscal year then ended (or a
proportionate lesser number of shares if the individual served as a director for
less than the entire fiscal year). In the fiscal year ended June 30, 2001, no
shares were subject to annual grant, and, pursuant to the Plan, no director
received an option to purchase any shares of Common Stock.
10
PROPOSAL 2
Ratification of Appointment of Independent Accountants
(Item 2 on Proxy Card)
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
accountants, to audit the consolidated financial statements of the Company for
its 2002 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, LLP is expected to be present at the 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.
11
EXECUTIVE COMPENSATION
Report of the Compensation Committee
The Company's Compensation Committee is comprised of three outside
directors of the Company, currently Messrs. Chambers (Chairman), Walton and
Zobel. 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 Mr. Clegg
(Chairman) and Mr. Frock (Vice Chairman and Chief Administrative Officer).
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. Salary
changes are effective in October. Bonuses are distributed after the results of
the audit of the financial statements have been verified.
In 2000, the Company engaged William M. Mercer, Inc. ("Mercer") to perform
an updated compensation survey for the Company's executive positions. In
assessing the competitiveness of compensation for the Company's executives,
Mercer referenced compensation data for organizations of similar size in the
private education and professional/business services industries. Also, Mercer
met with the Company's executive management to learn about the Company's
executives' responsibilities.
The Chairman and Chief Executive Officer's compensation for the 2001 fiscal
year included an annual base salary of $320,000, a bonus plan based on the
Company's net income as compared to the annual plan submitted to and approved by
the Board of Directors in June 2000 and the Compensation Committee's subjective
evaluation of the Company's and the Chief Executive Officer's performance, and
customary fringe benefits. Mr. Clegg's salary reflected no increase over the
prior period. In November 1999, in order to provide additional incentive to Mr.
Clegg, the Compensation Committee entered into a Special Incentive Agreement
with Mr. Clegg which provides that on each of the first, second and third
anniversaries of the date of such agreement, if employed by the Company on such
anniversary date, Mr. Clegg will receive an incentive payment (apart from any
other compensation) in the amount of $137,333.
In the 2001 fiscal year the bonus plan of each executive officer included a
formula component, providing a bonus of up to 100% of base salary based on the
Company's performance as compared to the Company's Business Plan. Based on such
formula, no executive officer received a bonus. Further, at the discretion of
the Company's internal executive committee and the Compensation Committee
together, bonuses could be awarded based on accomplishments of individual goals,
which is in addition to the bonus percentage awarded under the formula
12
component, up to a maximum total bonus (together with the formula-based
component) of 100% of base salary. No discretionary bonuses were approved.
Compensation Committee
Mr. Edward H. Chambers
Mr. William L. Walton
Mr. Robert E. Zobel
13
Compensation Tables
The following tables contain compensation data for the Chief Executive
Officer and the Company's four other most highly compensated executive officers
(based on total annual salary and bonus for the fiscal year ended June 30,
2001).
Summary Compensation Table
---------------------------------------------------------------------------------------------
Long Term
Compensation
Annual Compensation Awards
------------------------------------------------------------------------------
Other Securities All Other
Name and Fiscal Annual Underlying Compensation/2/
Principal Position Year Salary Bonus Compensation/1/ Options/SARs
----------------------------------------------------------------------------------------------------------------------
A. J. Clegg 2001 $316,154 $ 0 - 0 $7,383
Chairman, President and 2000 314,007 141,477 - 110,000 6,391
Chief Executive Officer 1999 263,769 0 - 40,000 6,311
----------------------------------------------------------------------------------------------------------------------
William E. Bailey/3/ 2001 $136,885 $ 0 - 0 $ 232
Chief Financial Officer; 2000 140,979 68,659 - 0 445
Executive Vice President 1999 112,307 0 - 30,000 573
----------------------------------------------------------------------------------------------------------------------
Daryl A. Dixon/3/ 2001 $265,000 $ 0 $49,326 0 $ 312
President and Chief 2000 260,615 117,205 49,858 0 302
Operating Officer 1999 77,885 0 18,353 125,000 0
----------------------------------------------------------------------------------------------------------------------
John R. Frock 2001 $145,846 $ 0 $14,626 0 $2,073
Executive Vice President - 2000 141,846 66,636 - 0 2,676
Corporate Development 1999 129,156 0 15,017 40,000 3,754
----------------------------------------------------------------------------------------------------------------------
Barry S. Swirsky 2001 $120,000 $ 0 $12,825 0 $ 983
General Counsel 2000 122,770 24,273 12,566 0 781
1999 107,423 0 12,793 27,825 1,926
----------------------------------------------------------------------------------------------------------------------
(1) The amounts reported for Mr. Dixon consist of $34,100, $35,303 and $12,288
in respect of loan forgiveness in fiscal 2001, 2000 and 1999, respectively,
$8,400, $8,400 and $3,500 for automobile expenses in fiscal 2001, 2000 and
1999, respectively, and $6,826, $6,155 and $2,565 for health insurance in
fiscal 2001, 2000 and 1999, respectively. The amounts reported for Mr.
Swirsky consist of $6,000, $6,000 and $6,000 for automobile expenses in
fiscal 2001, 2000 and 1999, respectively, and $6,825, $6,566 and $6,793 for
health insurance in fiscal 2001, 2000 and 1999, respectively. The amounts
reported for Mr. Frock consist of $7,800, $7,800 and $3,900 for automobile
expenses in fiscal 2001, 2000 and 1999, respectively, and $6,826, $7,217
and $3,268 for health insurance in fiscal 2001, 2000 and 1999,
respectively. Perquisites and other personal benefits for Messrs. Clegg and
Bailey for all years and Mr. Frock in fiscal 2000 did not exceed 10% of the
executive officer's salary and bonus, and accordingly have been omitted
from the table as permitted by the rules of the SEC.
(2) Other compensation in fiscal 2001 for Messrs. Clegg, Bailey, Dixon, Frock
and Swirsky consisted of payments of (i) $6,539, $232, $312, $1,274 and
$232, respectively, in respect of life insurance and (ii) $844, $0, $0,
$799 and $751, respectively, in respect of Employer matching 401(k) plan
contributions.
(3) Mr. Bailey joined the Company in January 1998. Mr. Dixon joined the
Company in February 1999.
14
Options/Stock Appreciation Rights Granted in Fiscal 2001
------------------------------------------------------------------------------------------
Individual Grants Potential Realized Value at
----------------------------------------------------
% of Total Assumed Annual Rates of
Options/ Stock Price Appreciation for
Number of SARs Option Term (10 yrs)
Securities Granted to
------------------------------------
Underlying all Exercise
Option/ Employees or Base
SARs in Fiscal Price per Expiration At 5% Annual At 10% Annual
Name of Executive Granted 2001 Share Date Growth Rate Growth Rate
--------------------------------------------------------------------------------------------------------------
A. J. Clegg 0 0.00% n/a n/a $0 $0
William E. Bailey 0 0.00% n/a n/a $0 $0
Daryl A. Dixon 0 0.00% n/a n/a $0 $0
John R. Frock 0 0.00% n/a n/a $0 $0
Barry S. Swirsky 0 0.00% n/a n/a $0 $0
No grants of stock options or stock appreciation rights were made in the 2001
fiscal year to any of the above named executive officers.
Aggregated Option/Stock Appreciation Rights Exercised in Fiscal 2001
and Value of Options at June 30, 2001
Exercised Value of Unexercised
in Fiscal Number of Unexercised In-the-Money Options at
2001 Options at June 30, 2001 June 30, 2001
-------------------------------------------------------------------------------------------
Shares
Acquired on Value
Name of Executive Exercise Realized Exercisable Unexerciseable Exercisable Unexerciseable
----------------------------------------------------------------------------------------------------------------
A. J. Clegg 0 0 188,334 86,666 $127,017 $ 38,433
William E. Bailey 0 0 45,000 10,000 $ 57,650 $ 28,825
Daryl A. Dixon 0 0 100,000 50,000 $272,625 $136,313
John R. Frock 0 0 79,349 40,000 $108,667 $ 38,433
Barry Swirsky 0 0 50,725 9,275 $ 83,999 $ 26,735
None of the above named executive officers held any stock appreciation rights at
June 30, 2001.
15
Senior Executive Severance Plan
In February 2000, the Company adopted an amended Senior Executive Severance
Pay Plan (the "Executive Severance Pay Plan"), which replaced the Executive
Severance Pay Plan adopted in March 1997, for the Company's five executive
officers. Under the Senior Executive Severance Pay Plan, if the employment of an
Executive Officer with the Company terminates following a Change in Control (as
defined therein) of the Company, under specified circumstances, the Executive
Officer will be entitled to receive the severance benefit specified in the
Severance Pay Plan. The amount payable to an Eligible Executive would equal (a)
the Eligible Executive's salary for a period of months equal to (i) twelve plus
the number of years of service of the Eligible Executive as of the date of
termination if he has completed less than three years of services, (ii) twelve
plus two times the number of years of service, if he has completed three or four
years of service as of the termination date or (iii) twelve plus 2.99 times the
number of years of service, if he has completed at least five years of service
as of the termination date; but in no event more 35.99 months, 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.
Employment Agreements with Executive Officers
Daryl A. Dixon - President and Chief Operating Officer
The Company entered into a three-year employment agreement with Daryl Dixon
upon his commencement of employment in February 1999. Mr. Dixon's annual base
salary is $265,000, and will be reviewed annually. Beginning in the 2000 fiscal
year, Mr. Dixon became eligible to receive an annual bonus of up to 50% of his
base salary for achieving the Company's business plan and up to an additional
50% of his base salary for achieving above business plan targets. Pursuant to
his employment agreement, on his first day of employment, the Company granted
Mr. Dixon options to purchase 150,000 shares of Common Stock, vesting over a
three year period. The Company also agreed to provide Mr. Dixon with a $8,400
per year car allowance, term life insurance in the amount of $260,000 for his
benefit and other benefits provided to the Company's senior executives. Further,
upon commencement of his employment, the Company loaned Mr. Dixon the sum of
$90,000 (to repay a loan with his prior employer), accruing interest at a rate
of 8% per annum. Each month during Mr. Dixon's employment, the Company will
forgive 1/36 of the principal amount and associated interest of this loan. Mr.
Dixon has agreed not to compete against the Company during the term of his
employment and for two years thereafter.
If prior to February 18, 2002, the Company terminates Mr. Dixon's
employment other than for cause or his death or disability, the Company will pay
to Mr. Dixon, as severance, an amount equal to his base salary plus a pro rata
portion (based on the portion of the bonus period he was employed by the
Company) of the bonus which he would have received for the period had he
continued in the Company's employment. Also, the Company will forgive any
remaining balance on Mr. Dixon's loan from the Company. If upon termination, Mr.
Dixon is also entitled to payments under the Severance Pay Plan, the Company may
credit payments under the Severance Pay Plan against this contractual severance
obligation, but the Company must also continue to pay him his base salary and
bonuses until February 18, 2002 (taking credit for the other severance payments
and any compensation received by him from others for his services following the
date of termination and prior to February 18, 2002). In such circumstance, the
Company will also
16
continue Mr. Dixon's benefits as an executive of Nobel (until he receives a
comparable benefit from a new employer). Under certain circumstances, if Mr.
Dixon terminates his employment with the Company following a Change in Control
(as defined in the Severance Pay Plan), he will also receive these severance
benefits. If the Company terminates Mr. Dixon for cause, he is entitled to
receive his base salary only through the effective date of termination. If on or
after February 18, 2002, the Company terminates Mr. Dixon's employment other
than for cause or his death or disability, then the Company will pay to Mr.
Dixon, as a severance payment, an amount equal to his base salary plus a pro
rata portion (based on the portion of the bonus period he was employed by the
Company) of the bonus which he would have received for the period had he
continued in the Company's employment.
Other Agreements with Executive Officers
The Company and Mr. Clegg are parties to a Special Incentive Agreement
entered into November 20, 1999 which provides that on each of the first, second
and third anniversaries of the date of such agreement, if Mr. Clegg is employed
by the Company on such anniversary date, the Company will pay him an incentive
payment in the amount of $137,333. Such agreement also provides that if is a
Change in Control (as defined in the Agreement) of the Company, within 30 days
of the occurrence of such Change in Control, the Company will pay to Mr. Clegg
any such incentive payments which have not yet been paid (in lieu of making
payment on the applicable anniversary date).
The Company and Mr. Frock are parties to a Noncompete Agreement which
provides that the Company will make a payment to Mr. Frock of $255,000 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 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 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 in such amount. 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.
On August 29, 2001, the Company entered into Employment and Termination
Agreements with each of Mr. Clegg and Mr. Frock. These agreements provide, as
to each of these executives, that if the Company terminates the executive's
employment other than for cause or his death or disability, the Company will pay
to that executive, as severance, an amount equal to 2.99 times his average
earnings for the five full calendar years preceding such termination. In
addition, upon such termination, the Company will continue to provide, at its
cost, family health insurance coverage to the executive and his spouse for the
remainder of their lives or, in the event that the Company is unable under its
then-current group health insurance plan to provide such family health insurance
coverage, the Company will reimburse the executive and his spouse up to $24,000
per year for the cost of obtaining similar health insurance coverage. Upon such
termination, the Company will also provide the executive with two full, annual
scholarships per year for life to the Company school of his choice.
17
In the Employment and Termination Agreements, each executive also agrees
not to compete with the Company for a period of three years following
termination of his employment, in exchange for which the Company would, for each
such year, pay to Mr. Clegg the sum of $100,000, and to Mr. Frock the sum of
$50,000. In the event that the executive voluntarily terminates his employment
with the Company, the Company will provide the executive with a five-year
consulting contract, for which Mr. Clegg would be paid not less than $200,000
per year and Mr. Frock not less than $100,000 per year, and which would provide
each executive with the health insurance and scholarships described above.
Finally, the Company agrees to provide Mr. Clegg with a life insurance policy
with a benefit of $640,000, and Mr. Frock with a life insurance policy with a
benefit of $640,000.
The aggregate amount of payments and benefits provided under each
executive's Employment and Termination Agreement will be offset against the
aggregate amount of any payments or benefits owed to that executive under the
Company's Severance Pay Plan, but not, in the case of Mr. Frock, by any payments
or benefits under Mr. Frock's Noncompete Agreement or Contingent Severance
Agreement.
18
REPORT OF THE AUDIT COMMITTEE
Membership And Role Of The Audit Committee
The Audit Committee of the Company's Board of Directors (the "Audit
Committee") consists of three outside directors, currently Messrs. Chambers,
Havens and Zobel, appointed by the Board of Directors. Each member of the Audit
Committee is independent as defined under the National Association of Securities
Dealers' listing standards, and at least one member has past experience in
accounting or related financial management experience. The Audit Committee is
governed by a written charter adopted and approved by the Board of Directors, a
copy of which is attached to this Proxy Statement as Appendix A.
Review of The Company's Audited Financial Statements For The Fiscal Year Ended
June 30, 2001
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended June 30, 2001 with the
Company's management. The Audit Committee has discussed with
PricewaterhouseCoopers LLP, the Company's independent public accountants, the
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
The Audit Committee has also received the written disclosures and the
letter from PricewaterhouseCoopers LLP relating to their independence as
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and the Audit Committee has discussed with
PricewaterhouseCoopers LLP the independence of that firm.
The Audit Committee has also considered whether the provision of non-audit
services by PricewaterhouseCoopers LLP is compatible with maintaining
PricewaterhouseCoopers LLP's independence.
Based on the Audit Committee's reviews and discussions noted above, the
Audit Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 2001, for filing with the SEC.
Audit Committee
Mr. Edward H. Chambers
Mr. Peter H. Havens
Mr. Robert E. Zobel
19
Audit And Related Fees
Fees to Accountants for Services Rendered During Fiscal Year 2001
Audit Fees
The aggregate fees billed to the Company by PricewaterhouseCoopers LLP for
professional services for the audit of the Company's annual financial statements
for the fiscal year ended June 30, 2001 and the review of the Company's
financial statements included in the Company's quarterly reports on Form 10-Q
for the fiscal year ended June 30, 2001 totaled $135,550.
Financial Information Systems Design and Implementation Fees
The Company did not engage PricewaterhouseCoopers LLP to provide, during
the fiscal year ended June 30, 2001, any services for the Company regarding the
design or implementation of the Company's financial information systems, within
the meaning of Rule 2-01(c)(4)(ii) of Regulation S-X.
All Other Fees
Fees billed to the Company by PricewaterhouseCoopers LLP during the
Company's 2001 fiscal year for all other non-audit services rendered to the
Company, including tax related services, totaled $146,291.
20
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 June 30,
1996 through June 30, 2001 as calculated by the Center for Research in Security
Prices. The graphs assume that the value of the investment in the Company's
Common Stock and each index was $100 at June 30, 1996 and that all dividends
paid by the companies included in the indexes were reinvested.
[Chart Here]
Comparison of Five Year Cumulative Total Return
6/96 6/97 6/98 6/99 6/00 6/01
Nobel Learning Communities, Inc. 100.0 60.7 64.3 35.7 56.2 54.1
Nasdaq Stock Market 100.0 121.6 160.1 230.2 340.4 184.5
(U.S. Companies)
Self-Determined Peer Group 100.0 126.4 187.1 165.0 137.8 219.9
The self determined peer group includes: Bright Horizons Family Solutions,
Inc.; Childtime Learning Centers, Inc.; DeVry Inc.; ITT Educational Services,
Inc.; Sylvan Learning Systems, Inc. and Tesseract Group 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, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100 at 6/30/96.
21
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
Common Stock, to file with the SEC initial reports of ownership and reports of
changes in ownership of 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 July 1, 2000 through
June 30, 2001, except as set forth below, all applicable Section 16(a) filing
requirements were complied with.
Each of Messrs. Chambers, Havens, Monaco, Walton and Zobel failed to file a
Form 4 or a Form 5 reporting the grant of options, awarded on September 28,
2000, to purchase 5,000 shares of common stock, and Dr. Lewis failed to file a
Form 4 or a Form 5 reporting the grant of a stock option, awarded on September
28, 2000, to purchase 3,088 shares of Common Stock. Each of these failures was
inadvertent, and the appropriate Forms are now being filed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1998, the Company issued a $10,000,000 10% senior subordinated note
(the "Allied Note") to Allied Capital Corporation, of which William L. Walton, a
director of the Company, is President, Chairman and Chief Executive Officer, and
of which Daniel L. Russell, a nominee to become a director of the Company, is a
principal. Payments on the Allied Note are subordinate to the Company's senior
bank debt. In connection with the financing transaction, the Company also issued
to Allied Capital Corporation warrants to acquire 531,255 shares of Common Stock
and granted to Allied Capital Corporation certain rights to require the Company
to register the shares of Common Stock issuable upon exercise of the warrants
under the Securities Act of 1933.
In May 2001, the Company amended the Allied Note. Under the original Allied
Note, interest accrued at the rate of 10% until the Note had been repaid. The
amendments now provide that interest will accrue at the rate of 10% until
October 31, 2001; at the rate of 12% from November 1, 2001 through June 30,
2005, and at the rate of 13% from July 1, 2005 until the Note has been repaid.
In connection with the modification of the Allied Note, the Company paid to
Allied Capital Corporation a fee of $150,000. The entire principal of the Allied
Note is currently outstanding.
The Company loaned to Daryl Dixon, the Company's President and Chief
Operating Officer, the sum of $90,000 upon the commencement of his employment
(to repay a loan with his prior employer). The loan accrues interest at a rate
of 8% per annum. Each month during Mr. Dixon's employment, the Company forgives
1/36 of the principal amount and associated interest of this loan.
In June 2001, the Company sold a school property in Manalapan, New Jersey,
to Mr. Clegg and his wife, Stephanie Clegg, d/b/a Tiffany Leasing, a
Pennsylvania sole proprietorship,
22
in a transaction approved by the Board of Directors. The purchase price for the
property was $3,857,144, based on the appraised value of the property as
determined by an independent third party appraiser. Simultaneously with the
closing of the sale, the Company leased the property back from Tiffany Leasing
under a 20-year lease, with an initial annual rent of approximately $450,000 per
year. The lease is a triple net lease, pursuant to which the Company is
responsible for all costs of the property, including maintenance, taxes and
insurance. The lease is subject to increases every three years, based upon the
change in the Consumer Price Index, not to exceed 2% each year. The Company also
has two 5-year options to renew the lease at the end of the original lease term.
Apart from increasing the length of the original lease term, the terms and
conditions of the purchase and lease are substantially the same as the final
terms and conditions previously negotiated by the Company with a disinterested
third party which had been interested in buying and leasing the property, but
which did not ultimately consummate the transaction for reasons unrelated to the
Company or the proposed terms.
23
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 June 30, 2001, as filed
with the SEC, may do so by writing or calling Yvonne DeAngelo, Secretary, Nobel
Learning Communities, 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 nobel@educating.com.
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 2002 Annual of Meeting of Stockholders
must be received by the Company no later than June 14, 2002 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 2002
Annual Meeting must give the Company advance notice by September 1, 2002 (or, if
the date of the 2002 Annual Meeting is on or before October 25, 2002 or on or
after December 6, 2002, by the date ten days following the date that the Company
first mails to stockholders the Company's notice of the Annual Meeting), and
that notice must meet certain other requirements set forth in the Company's
Certificate of Incorporation. If such a proposal is not submitted by the date
prescribed by the foregoing sentence, management will have the authority to vote
proxies in its discretion as to such proposal.
By Order of the Board of Directors
Yvonne DeAngelo
Secretary
October 16, 2001
24
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF NOBEL LEARNING COMMUNITIES, INC.
June 10, 1999
1. The Audit Committee will assist the Board of Directors in fulfilling its
oversight responsibilities. The Committee shall be composed of three or more
outside directors who are independent of the management of the Company and
are free of any relationship that would interfere with their exercise of
independent judgment as a Committee member. At least one of the Committee
members should have accounting or related financial management experience.
The CFO of the Company should serve on the Committee on an ex-officio
position. The Committee should meet at least quarterly prior to filing
quarterly financial 10Q reports to the SEC and prior to the release of annual
financial information to the public.
2. The Audit Committee shall:
a) Recommend annually to the Board of Directors a firm of independent
certified public accountants for appointment as auditors of the Company
(the "Auditors");
b) Review the financial reporting process, the system of internal controls,
the audit process, and the Company's process for monitoring compliance
with laws and regulations.
c) Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements, and understand their impact on
the financial statements.
d) Meet with the Auditors and the Nobel financial management to review the
scope and results of each annual audit of the Company's financial records
and accounts.
e) Meet with the Auditors and the Nobel financial management to review the
management letter and the annual financial statements to determine whether
they are complete and consistent with the information known to Committee
members and to assess whether the financial statements reflect appropriate
accounting principles. Obtain explanations related to variances from
budget and for any significant or unusual accounting entries. Consider
management's handling of proposed audit adjustments identified by the
Auditors. If necessary, meet with Auditors independently to review
performance.
f) Insure that significant findings and recommendations made by the Auditors
are received and discussed on a timely basis.
g) Meet with the Auditors and the Nobel financial management to review the
interim financial information and the results of the interim review by the
Auditors and obtain explanations related to variances from budget and for
any significant or unusual accounting entries.
h) Review the results of the internal audits and the effectiveness of the
internal audit plan and process.
A-1
i) Review and confirm the independence of the external auditors by reviewing
the nonaudit services provided and the auditors' assertion of their
independence in accordance with professional standards.
j) Regularly update the Board of Directors about the Committee's activities,
apprising them of any significant issues or unusual transactions or
adjustments.
A-2
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
NOBEL LEARNING COMMUNITIES, INC.
The undersigned hereby appoints A.J. Clegg, Yvonne DeAngelo and William E.
Bailey proxies for the undersigned, each with power to appoint his or her
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 October 11, 2001, at
the 2001 Annual Meeting of Stockholders of Nobel Learning Communities, Inc.
(the "Company") on November 15, 2001, 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 2004)
[_] FOR all nominees listed below (except as marked to the contrary below):
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
Pamela S. Lewis Daniel L. Russell
INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name in the following space:
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2. Ratification of the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for fiscal year 2002.
[_] FOR [_] AGAINST [_] ABSTAIN
(OVER)
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 AND "FOR" RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP
AS AUDITORS FOR THE COMPANY'S FISCAL YEAR 2002.
Date: __________________________ , 2001
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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.
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE.