WHITMAN EDUCATION GROUP, INC.
RICHARD C. PFENNIGER, JR.
Chief Executive Officer
July ____, 2001
Dear Fellow Shareholder:
You are cordially invited to attend the 2001 annual meeting of Shareholders
of Whitman Education Group, Inc. (the "Company"). The meeting will be held at
10:00 a.m. on August 9, 2001, at the Company's executive offices located at 4400
Biscayne Boulevard, 14th Floor, Miami, Florida 33137.
The enclosed notice and proxy statement contain details concerning the
business to be considered at the meeting. The Board of Directors of the Company
recommends a vote "FOR" the election of the nine directors to serve until the
2002 annual meeting of shareholders and a vote "FOR" the increase in shares
subject to the Company's 1996 Stock Option Plan.
We sincerely hope that you will be present at the annual meeting. Whether
or not you plan to attend, please complete, sign, date and return the
accompanying proxy card in the enclosed envelope to ensure that your shares will
be represented at the meeting.
A copy of the Company's 2001 Annual Report to Shareholders is also
enclosed.
Sincerely,
____/s/________________
Richard C. Pfenniger, Jr.
1
WHITMAN EDUCATION GROUP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 9, 2001
To the Shareholders of
Whitman Education Group, Inc.:
The 2001 annual shareholders meeting (the "Annual Meeting") of Whitman
Education Group, Inc. (the "Company") will be held at 4400 Biscayne Boulevard,
14th Floor, Miami, Florida 33137 on August 9, 2001, at 10:00 a.m. local time,
for the following purposes:
(1) to elect nine directors to serve until the 2002 annual meeting of
shareholders;
(2) to consider approval of an increase in the number of shares of Common
Stock, no par value, reserved for issuance under the 1996 Whitman Education
Group, Inc. Stock Option Plan from 2,500,000 to 3,250,000; and
(3) to transact such other business as may properly come before the Annual
Meeting.
Only shareholders of record at the close of business on June 29, 2001 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. A list of such shareholders will be available for inspection during
normal business hours at the offices of the Company located at 4400 Biscayne
Boulevard, Miami, Florida 33137 during the 10 days preceding the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement for further
information regarding each proposal to be considered at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE TO
ASSURE REPRESENTATION OF YOUR SHARES AND A QUORUM AT THE MEETING. YOU MAY REVOKE
YOUR PROXY AT ANY TIME BEFORE IT IS VOTED BY PROVIDING WRITTEN NOTICE TO THE
COMPANY BEFORE THE MEETING OR BY ATTENDING THE ANNUAL MEETING AND VOTING.
By Order of the Board of Directors
Fernando L. Fernandez, Secretary
Miami, Florida
July__, 2001
2
WHITMAN EDUCATION GROUP, INC.
4400 Biscayne Boulevard
Miami, Florida 33137
(305) 575-6510
PROXY STATEMENT
This proxy statement is furnished by the Board of Directors of Whitman
Education Group, Inc., a Florida corporation (the "Company"), in connection with
the solicitation of proxies by the Company for use at the annual meeting of
shareholders to be held at 10:00 a.m. local time on August 9, 2001 (the "Annual
Meeting"), at the Company's executive offices located at 4400 Biscayne
Boulevard, 14th Floor, Miami, Florida 33137, and at any adjournments thereof.
Mailing of the proxy statement and the accompanying proxy card to shareholders
will commence on or about July ___, 2001.
Record holders of the Company's Common Stock, no par value per share (the
"Common Stock"), at the close of business on June 29, 2001 (the "Record Date")
are entitled to one vote for each share held on all matters to be considered at
the Annual Meeting. On the Record Date, __________ shares of Common Stock were
outstanding and entitled to vote.
VOTING
All properly executed proxies delivered and not revoked will be voted in
accordance with the directions given and, in connection with any other business
that may properly come before the Annual Meeting, in the discretion of the
persons named in the proxy. With respect to the proposal to elect nine directors
to serve until the 2002 annual meeting, shareholders may vote in favor of all
nominees or withhold their votes as to all or any specific nominees.
Shareholders should specify their choices on the enclosed proxy card. If no
specific instructions are given, the shares represented by the proxy will be
voted FOR the election of all directors and FOR the increase in the number of
shares of Common Stock reserved for issuance under the 1996 Whitman Education
Group, Inc. Stock Option Plan (the "1996 Plan") from 2,500,000 to 3,250,000.
A proxy delivered pursuant to this solicitation is revocable at any time
prior to its exercise by giving written notice to the Secretary of the Company,
by delivering a later-dated proxy, or by voting in person at the Annual Meeting.
Attendance at the Annual Meeting will not, in itself, constitute revocation of a
proxy.
A majority of the outstanding shares of Common Stock, represented in person
or by proxy, constitutes a quorum for transaction of business at the Annual
Meeting. The election of directors will require the affirmative vote of a
plurality of the shares of Common Stock voting in person or by proxy at the
Annual Meeting. The increase in the number of shares of Common Stock reserved
for issuance under the 1996 Plan will be approved if the number of votes cast in
favor of the proposal is greater than the number of votes cast against it. Votes
that are withheld and broker non-votes, relating to shares as to which a broker
or nominee indicates that it does not have discretionary authority to vote on a
proposal, will not affect the outcome of the election of directors or the
approval of the increase in the number of shares of Common Stock reserved for
issuance under the 1996 Plan.
3
COSTS AND MANNER OF SOLICITATION
The Company will bear the costs of solicitation of proxies from its
shareholders. Solicitation of proxies may be made in person, by mail or by
telephone by officers, directors and employees of the Company who will not be
specially compensated in such regard. Nominees, fiduciaries and other custodians
will be requested to forward solicitation materials to the beneficial owners and
secure their voting instructions, if necessary, and will be reimbursed for the
reasonable expenses incurred in sending proxy materials to the beneficial
owners.
ELECTION OF DIRECTORS
(Item No. 1)
Board of Directors
A Board of Directors consisting of nine directors will be elected at the
Annual Meeting to hold office for one year or until their successors are elected
and qualified. The persons named below were designated by the Board of Directors
as nominees. All of the nominees are incumbent directors. Although management
does not anticipate that any nominee will be unable or unwilling to serve as a
director, in the event of such an occurrence, proxies may be voted in the
discretion of the persons named in the proxy for a substitute designated by the
Board of Directors, unless the Board of Directors determines to reduce the
number of directors constituting the Board. The Board of Directors recommends a
vote "FOR" each of the nominees identified below.
JACK R. BORSTING, PH.D Dr. Borsting has been a director of the Company
Director since 1994 since 1994 and Vice Chairman of the Board since
Age 72 August 2000. Dr. Borsting is the E. Morgan Stanley
Professor of Business Administration at the
University of Southern California and Director of
its Center for Telecommunication Management. From
1988 to 1994, Dr. Borsting was Dean of the
University of Southern California School of
Business Administration, and from 1983 to 1988,
he was Dean of the University of Miami
School of Business Administration. Dr. Borsting,
a former Assistant Secretary of Defense (Controller)
is a director of Northrop Grumman Corporation
(aerospace), IVAX Diagnostics, Inc. (diagnostic
instruments) and Plato Learning, Inc. (proprietary
education). Dr. Borsting is a trustee of the
Institute for Defense Analysis, the Rose Hill
Foundation and the Los Angeles Orthopedic Hospital
Foundation.
4
NEIL FLANZRAICH In May 1998, Mr. Flanzraich became Vice Chairman
Director since 1997 and President of IVAX Corporation (pharmaceuticals).
Age 57 In March 2001, Mr. Flanzraich became a member
of the Board of Directors of IVAX Diagnostics,
Inc.(diagnostic instruments). From 1995 through
1998, Mr. Flanzraich was a shareholder and Chairman
of the Life Sciences Legal Practice Group of Heller
Ehrman White & McAuliffe, Palo Alto, California.
From 1981 to 1994, Mr. Flanzraich was Senior Vice
President, General Counsel and member of the
Corporate Executive Committee of Syntex Corporation,
an international pharmaceutical company that was
acquired by Roche Holdings Ltd.
PHILLIP FROST, M.D. Dr. Frost has been a director of the Company
Director since 1992 since April 1992 and Chairman of the Board of
Age 64 Directors since November 1992. Dr. Frost has been
Chairman of the Board of Directors and Chief
Executive Officer of IVAX Corporation
(pharmaceuticals) since 1987. Dr. Frost served as
President of IVAX Corporation from 1991 until
1995. Dr. Frost was Chairman of the Board of
Directors of Key Pharmaceuticals, Inc. from 1972
to 1986. Dr. Frost is Chairman of the Board of
Directors of IVAX Diagnostics, Inc. (diagnostic
instruments) and is Vice Chairman of the Board
of Directors of Continucare Corporation (managed
health care). He is also director of Northrup
Grumman Corp. He is a trustee of the University
of Miami and a member of the Board of
Governors of the American Stock Exchange.
PETER S. KNIGHT Mr. Knight is the President of Sage Venture Partners
Director since 1994 From 1991 to 1999, Mr. Knight was a partner in
Age 50 the law firm of Wunder, Knight, Levine, Thelen &
Forscey, in Washington, D.C. In 1996, Mr. Knight
took a leave of absence from his law firm to serve
as President Clinton's Campaign Manager for
Clinton/Gore '96. From 1989 to 1991, Mr. Knight was
General Counsel and Secretary of Medicis
Pharmaceutical Corporation (dermatological
pharmaceuticals). From 1977 to 1989, Mr. Knight
served as the Chief of Staff to Congressman, and
later Senator, Al Gore. Mr. Knight is a director of
Medicis Pharmaceutical Corporation, the Schroder
Mutual Fund Family and EntreMed(biopharmaceuticals).
5
RICHARD M. KRASNO, PH.D In October 1999, Dr. Krasno became Executive
Director since 1996 Director of the William R. Kenan, Jr. Charitable
Age 59 Trust and President of the four William R. Kenan,
Jr. funds. From 1998 to October 1999, Dr. Krasno
was president of the Monterey Institute of
International Studies in Monterey, California. From
1983 to February 1998, Dr. Krasno was President and
Chief Executive Officer of the Institute of
International Education (private not-for-profit
education organization), New York City, New York.
He served as its Executive Vice President and
Chief Operating Officer from 1981 to 1983.Dr. Krasno
was Deputy Assistant Secretary of Education with the
U.S. Department of Education from 1980 to 1981.
LOIS F. LIPSETT, PH.D Dr. Lipsett is the President of Health Education
Director since 1996 Associates, Washington, D.C. Since 1995,
Age 67 Dr. Lipsett has served as a consultant to
several companies, including the Robert Wood
Johnson Foundation. Dr. Lipsett was Vice President,
Scientific and Medical Affairs, of the American
Diabetes Association from 1992 to 1995. Prior to
1992, Dr. Lipsett founded and was Director of
the National Diabetes Information Clearinghouse and
was also Director for several training and career
development programs at the National Institutes of
Health.
RICHARD C. PFENNIGER, JR. Mr. Pfenniger has been Chief Executive Officer and
Director since 1992 Vice Chairman of the Company since 1997 and a
Age 45 director of the Company since 1992. Mr. Pfenniger
was Chief Operating Officer of IVAX Corporation
(pharmaceuticals) from 1994 to 1997. He served as
Senior Vice President -- Legal Affairs and General
Counsel of IVAX Corporation from 1989 to 1994. Prior
to joining IVAX Corporation, Mr. Pfenniger was
engaged in private law practice.
PERCY A. PIERRE, PH.D. Dr. Pierre has been Professor of Electrical
Director since 1997 Engineering at the College of Engineering of
Age 62 Michigan State University since 1995. Prior to
1995, he was the Vice President for Research
and Graduate Studies, as well as Professor of
Electrical Engineering at Michigan State University
from 1990 to 1995; President of Prairie View A & M
University from 1983 to 1989; Assistant Secretary
of the Army for Research, Development and
Acquisition, Department of the U.S. Army, from 1977
to 1981; and Dean of the School of Engineering at
Howard University from 1971 to 1977. Dr. Pierre
serves as a director of CMS Energy Corp.
(diversified energy company)and is a Trustee of the
University of Notre Dame.
6
A. MARVIN STRAIT, C.P. A. Mr. Strait presently practices as a Certified Public
Director since 1998 Accountant under the name A. Marvin Strait, CPA.
Age 67 He has practiced in the field of public
accountancy in Colorado for the past forty years.
Mr. Strait has served on the Board of Directors of
Colorado Technical University since 1986. He also
presently serves as a member of the Board of
Directors of Western National Bank, Colorado
Springs, Colorado and AutoTradeCenter.Com,
Inc. He also serves as a member of the Board of
Trustees for the Colorado Springs Fine Arts Center
Foundation, the Colorado Springs Symphony Orchestra
Foundation and the Colorado State Fair Authority.
Mr. Strait previously served as the Chairman of
the Board of Directors of the American Institute of
Certified Public Accountants, as President of the
Colorado Society of Certified Public Accountants and
the Colorado State Board of Accountancy.
DIRECTOR COMPENSATION
Each director who is not employed by the Company receives a retainer of
$4,800 per year for his or her service as a director, a meeting attendance fee
of $1,000 for each Board of Directors meeting attended in person, and is
reimbursed for expenses incurred in attending Board and committee meetings. In
fiscal 2001, in lieu of both the retainer and the meeting attendance fees, each
director who was not employed by the Company was permitted to elect to receive
10,000 options to purchase shares of Common Stock, that were granted on the
first business day after election at the annual meeting of shareholders at an
exercise price equal to the fair market value of the Common Stock on the date of
grant. On June 12, 2001, the Board of Directors elected to decrease the number
of options payable to directors in lieu of their retainer and meeting attendance
fees to 7,500 options beginning in fiscal 2002. The decrease will be effective
immediately following the 2001 annual meeting.
In addition, pursuant to the formula grant provision contained in the 1996
Plan, non-employee directors automatically are granted each year, on the first
business day following the Company's annual meeting of shareholders,
non-qualified stock options to purchase 7,500 shares (37,500 shares in the case
of the Chairman of the Board) of Common Stock at an exercise price equal to the
fair market value of Common Stock on the date of the grant, and having a term of
ten years. In fiscal 2001, pursuant to that formula grant provision, options at
an exercise price of $2.31 per share were automatically granted to Dr. Frost
(37,500 shares), and to Dr. Borsting, Mr. Flanzraich, Mr. Knight, Dr. Lipsett,
Dr. Krasno, Dr. Pierre and Mr. Strait (7,500 shares each). In addition,
Dr. Frost, Dr. Borsting, Dr. Lipsett, Dr. Krasno and Messrs. Flanzraich,
Knight and Strait also received options to purchase an additional 10,000
shares at $2.31 per share in fiscal 2001 in lieu of their retainer and meeting
attendance fees as discussed above. In connection with the appointment of
Dr. Borsting as Vice Chairman of the Board on August 4, 2000, the Compensation
Committee of the Board of Directors approved a grant of options to purchase
20,000 shares at $2.25 per share to Dr. Borsting.
On February 2, 2001 the Compensation Committee of the Board of Directors
approved a special one-time grant of options to each of the Company's
non-employee directors. Each non-employee director received immediately
exercisable options to acquire an additional 20,000 shares of common stock at a
price of $2.75 per share, the closing price of the Common Stock on the date of
the grant. The options have a term of ten years.
7
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during fiscal 2001 and acted once
by written consent. All directors attended at least 75% of the meetings of the
Board of Directors and committees of the Board of Directors on which they served
during the period in which they were a member of the Board of Directors or the
committee, as applicable. The Board of Directors has three standing committees,
described below. The Board of Directors does not have a nominating committee,
and the usual functions of such a committee are performed by the entire Board of
Directors.
Executive Committee. The Executive Committee of the Board of Directors acts
on certain matters during intervals between meetings of the Board of Directors.
The current members of the Executive Committee are Mr. Pfenniger, Dr. Frost, Dr.
Borsting and Mr. Flanzraich. The Executive Committee held no meetings during
fiscal 2001 but acted once by written consent.
Audit Committee. The principal functions of the Audit Committee include
reviewing the adequacy of the Company's internal systems of accounting controls,
recommending to the Board of Directors the appointment of independent auditors,
conferring with independent auditors concerning the scope of their examinations
of the books and records of the Company and their independence, reviewing the
fee arrangement of the Company's independent public accountants, reviewing the
financial statements of the Company, management's disclosures and the
independent auditor's report, reviewing the independent auditors' findings and
recommendations, and considering other appropriate matters regarding the
financial affairs of the Company. The current members of the Audit Committee are
Dr. Borsting, Mr. Knight, Dr. Lipsett, Dr. Pierre and A. Marvin Strait, C.P.A.
The Audit Committee held four meetings during fiscal 2001.
Compensation Committee. The principal functions of the Compensation
Committee are to approve or recommend to the Board of Directors remuneration
arrangements and compensation plans involving the Company's directors and
executive officers and to review with management the Company's employee and
stock benefit programs. The Compensation Committee also administers the
Company's stock option plans and makes grants thereunder. The current members of
the Compensation Committee are Dr. Frost, Dr. Krasno and Mr. Flanzraich. The
Compensation Committee held four meetings during fiscal 2001 and acted once by
written consent.
EXECUTIVE OFFICERS WHO ARE NOT NOMINEES
The Company's executive officers are elected annually at the first meeting
of the Board of Directors following each annual meeting of shareholders. Set
forth below is a summary of the background and business experience of the
executive officers of the Company who are not nominees for director.
Randy S. Proto. Mr. Proto, age 43, has been President of the Company since
1994. In March 1997, Mr. Proto also assumed the duties of Chief Operating
Officer. For seven years prior thereto, Mr. Proto was Chief Executive Officer
and had ownership interests in eleven proprietary schools in four states. For
eight years prior thereto, Mr. Proto was employed by Computer Processing
Institute. Among the positions he held at that institution were Vice President
and School Director, Director of Admissions and Marketing, Director of Finance
and Financial Aid, Director of Placement and Director of Education.
Fernando L. Fernandez. Mr. Fernandez, age 40, has served as Vice
President--Finance, Chief Financial Officer, Secretary and Treasurer of the
Company since 1996. Prior to joining the Company, Mr. Fernandez, a certified
public accountant, served as Chief Financial Officer of Frost Nevada, Limited
Partnership from 1991 to 1996. Previously, Mr. Fernandez served as Audit Manager
for Coopers & Lybrand in Miami.
8
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and 10% shareholders to file initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities with the Securities and Exchange Commission. Directors,
executive officers and 10% shareholders are required to furnish the Company with
copies of all Section 16(a) forms they file. Based on a review of the copies of
such reports furnished to the Company and written representations from the
Company's directors and executive officers that no other reports were required,
the Company believes that during fiscal 2001 the Company's directors, executive
officers and 10% shareholders complied with all Section 16(a) filing
requirements applicable to them.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company currently occupies administrative offices in Miami, Florida
which are owned by IVAX Corporation. The lease between the Company and IVAX
provides for an annual rental of $146,400. Dr. Frost, the Chairman of the Board
of the Company, is also the Chairman of the Board, Chief Executive Officer and a
principal shareholder of IVAX and Neil Flanzraich, a director of the Company, is
Vice Chairman and President of IVAX.
The Company purchases certain textbooks and materials for resale to its
students from an entity that is 40% owned by Randy S. Proto, the Company's Chief
Operating Officer. In the fiscal years ended March 31, 2001, 2000 and 1999, the
Company purchased $97,600, 148,800, and $120,300 in textbooks and materials from
that entity.
STOCK OWNERSHIP BY PRINCIPAL SECURITY HOLDERS AND MANAGEMENT
The following table sets forth certain information as of June 15, 2001
concerning the number of shares of Common Stock beneficially owned by (a) each
director, (b) each executive officer named below in the "Summary Compensation
Table", (c) all directors and executive officers as a group, and (d) each person
known to the Company to be the beneficial owner of more than 5% of the Common
Stock, and the percentage such shares represent of the total outstanding shares
of Common Stock. Unless otherwise indicated, all shares are owned directly by
the person indicated who holds sole voting and investment power.
Shares Beneficially Percent
Name of Beneficial Holder Owned (1) Of Class
------------------------- --------- --------
Jack R. Borsting, Ph.D. 122,600 (2) *
Neil Flanzraich 71,875 (2) *
Phillip Frost, M.D. 4,254,028 (3) 30.4
Peter S. Knight 95,000 (2) *
Richard M. Krasno, Ph.D. 67,500 (2) *
Lois F. Lipsett, Ph.D. 67,700 (2) *
Richard C. Pfenniger, Jr. 595,857 (2) 4.2
Percy A. Pierre, Ph.D. 58,225 (2) *
A. Marvin Strait, C.P.A. 102,028 (2) *
Randy S. Proto 701,416 (2) 4.9
Fernando L. Fernandez 215,029 (2) 1.5
All directors and executive
officers as a group (11 persons) 6,351,258 (4) 40.3
9
---------------------
* Represents beneficial ownership of less than one percent.
(1) For purposes of this table, beneficial ownership is computed pursuant
to Rule 13d-3 under the Securities Exchange Act of 1934; the inclusion of shares
as beneficially owned should not be construed as an admission that such shares
are beneficially owned for purposes of Section 16 of the Securities Exchange Act
of 1934.
(2) Includes shares which may be acquired pursuant to stock options
exercisable within 60 days of June 1, 2001: Dr. Borsting (115,000); Mr. Knight
(95,000); Dr. Krasno (67,500); Mr. Flanzraich (71,875); Dr. Lipsett (67,500);
Dr. Pierre (55,625); Mr. Strait (52,500); Mr. Pfenniger (418,750); Mr. Proto
(615,000); and Mr. Fernandez (210,000).
(3) Includes (a) 325,000 shares which may be acquired pursuant to stock
options held by Dr. Frost exercisable within 60 days of June 1, 2001, and (b)
3,337,628 shares held by Frost-Nevada, Limited Partnership, ("FNLP"). Dr. Frost
is the sole limited partner of FNLP and the sole shareholder of the general
partner of FNLP. FNLP's business address is 3500 Lakeside Court, Suite 200,
Reno, Nevada 89509. Dr. Frost's business address is 4400 Biscayne Blvd., Miami,
Florida 33137.
(4) Includes shares described in footnotes (1) through (3) as beneficially
owned.
EXECUTIVE COMPENSATION
The following table contains certain information regarding aggregate
compensation paid or accrued by the Company during fiscal 2001 to the Chief
Executive Officer of the Company and to each of the Company's other two
executive officers whose combined salary and bonus during fiscal 2001 exceeded
$100,000.
Summary Compensation Table
Long-Term All Other
Annual Compensation Compensation Compensation
------------------------ ------------- ------------
Name and Year Ended
Principal Position March 31, Salary Bonus Stock Options
------------------- ---------- ------ ----- -------------
($) ($) (#) ($)(1)
Richard C. 2001 291,000 0 0 3,100
Pfenniger, Jr. 2000 291,000 0 30,000 4,800
Chief Executive 1999 283,000 0 75,000 4,800
Officer
Randy S. Proto 2001 183,000 0 0 3,100
President and Chief 2000 183,000 0 20,000 4,800
Operating Officer 1999 175,000 0 40,000 4,800
Fernando L. 2001 138,000 0 0 3,100
Fernandez 2000 138,000 0 10,000 4,516
Vice President - 1999 134,000 0 20,000 3,990
Finance, Chief
Financial Officer,
Secretary and
Treasurer
10
------------------------
(1) The amounts included in the "All Other Compensation" column represent
matching contributions made by the Company under the Whitman Employee Retirement
Savings Plan maintained under Section 401 (k) of the Internal Revenue Code.
During the fiscal year ended March 31, 2001, no stock options were granted
to the executive officers named in the "Summary Compensation Table."
The following table sets forth information concerning stock option
exercises during fiscal 2001 by each of the executive officers named in the
"Summary Compensation Table" above and the fiscal year-end value of unexercised
options held by each of the executive officers named in the "Summary
Compensation Table" above.
Aggregated Stock Option Exercises in
Fiscal 2001 And Fiscal Year-End Option Values
Securities Underlying
Number of Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year End at Fiscal Year End
------------------------ -----------------------
Shares
Acquired
on Value Un- Un-
Exercise Realized Exercisable exercisable Exercisable exercisable
--------- --------- ----------- ------------ ----------- -----------
(#) ($) (#) (#) (#)(1) ($) (1)
Richard C.
Pfenniger
Chief
Executive
Officer 50,000 28,125 392,500 60,000 5,600 0
Randy S.
Proto
President
and Chief
Operating
Officer 0 0 593,750 41,250 481,250 0
Fernando L.
Fernandez
Vice
President -
Finance,
Chief
Financial
Officer,
Secretary
and
Treasurer 0 0 200,000 20,000 9,375 0
------------------
(1) The value of unexercised in-the-money options represents the number of
options held at March 31, 2001 multiplied by the difference between the exercise
price and $3.00, the closing price of the Common Stock at March 30, 2001 (the
last trading day in fiscal 2001).
11
PERFORMANCE GRAPH
The graph and table set forth below compares the cumulative total
shareholder return on the Common Stock for fiscal 1997 through fiscal 2001 with
the S&P 500 Index and an industry peer group index for the same period. The
industry peer group index is comprised of the following companies, each of which
was selected on the basis of the similarity of its business with that of the
Company: Apollo Group, Inc., Argosy Education Group, Inc., Career Education
Corp., Corinthian Colleges, Inc., DeVry, Inc., Education Management Corp, ITT
Educational Services, Inc., and Strayer Education, Inc. (the "Industry Group").
We believe that the Industry Group represents a significant portion of the
market value of publicly traded companies whose primary business is
postsecondary education. The number of publicly traded companies involved in
education has increased over the past few years, making the composition of the
Industry Group more representative of our industry than the peer issuers
previously included in our industry group index. The Industry Group includes all
of the peer issuers in the industry group used for former periods, except that
Argosy Education Group, Inc., Career Education Corp. and Corinthian Colleges,
Inc. have been added to replace Computer Learning Centers, Inc. and Quest
Education Corporation, which are no longer publicly traded companies (the
"Former Industry Group"). The graph and table assume an investment of $100 in
the Common Stock and each index on March 29, 1996 (the last trading day in
fiscal 1996), and the reinvestment of all dividends.
PERFORMANCE GRAPH HERE
Fiscal Year Ended March 31,
March 29, ---------------------------------
1996 1997 1998 1999 2000 2001
-------- ------ ------ ----- ----- ------
Whitman 100 92 100 66 40 53
Industry Peer Group Index 100 112 193 244 200 317
Former Industry Peer Group Index 100 112 193 243 197 289
S&P 500 Index 100 120 177 210 248 194
12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report of the Company's Compensation Committee shall not be
deemed to be soliciting material or incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates this information by reference,
and it shall not be otherwise deemed filed under such Acts.
TO THE COMPANY'S SHAREHOLDERS:
The Compensation Committee of the Company's Board of Directors, which is
composed of three non-employee directors, is charged with reviewing the
compensation of the Chief Executive Officer of the Company and making
recommendations with respect thereto to the Board of Directors. The Compensation
Committee also reviews and approves the compensation of the other executive
officers. The Committee's compensation policies are based on a desire to enhance
long-term shareholder value. To achieve this goal, the Committee recognizes that
it must adopt compensation policies which will attract, retain and motivate
qualified and experienced executive officers. In attracting and retaining
executives, the Committee recognizes that the Company must compete for the
services of executives with many other companies which possess significantly
greater financial resources than the Company and have available more
comprehensive compensation plans and arrangements than are presently utilized by
the Company. To adequately motivate executives in view of the goal of enhancing
shareholder value, the Committee recognizes that it must design compensation
policies which align the financial interests of the Company's executive officers
with those of its shareholders.
In light of these factors, the Committee believes that the best manner
presently available to the Company to attract, retain and motivate talented
executives is through the award of significant long-term compensation in the
form of stock options at the time the executive joins the Company and
periodically thereafter. The Compensation Committee believes that providing
executives with opportunities to acquire significant stakes in the growth and
prosperity of the Company through the grant of stock options will enable the
Company to attract and retain qualified and experienced executive officers. In
addition, the Compensation Committee believes that this approach to compensation
creates an entrepreneurial atmosphere which motivates executives to perform to
their full potential. The Compensation Committee believes that dependence on
stock options for a significant portion of executive compensation more closely
aligns the executives' interests with those of the Company's shareholders, since
the ultimate value of such compensation is directly dependent on the stock
price.
Accordingly, the Compensation Committee designs the compensation of
executive officers to consist of a reasonable annual salary with long-term
compensation in the form of stock options. The Compensation Committee has also
approved an incentive bonus plan for all employees of the Company with bonus
potential dependent upon the financial performance of the Company as a whole,
the financial performance of an employee's school or division and the
discretionary evaluation of each employee's performance during the fiscal year.
13
Executive Officers (other than the Chief Executive Officer). The Chief
Executive Officer, with the assistance of other executive officers, makes salary
recommendations to the Compensation Committee for the executive officers of the
Company other than the Chief Executive Officer. Such recommendations are
reviewed and approved by the Compensation Committee with any modifications
deemed appropriate. In reviewing and approving salary recommendations, the
Compensation Committee considers several factors, including individual
performance, the executive's responsibilities, compensation offered by
competitors, the cost of living, and the financial performance of the Company.
The Company has not, however, established specific performance goals or tied
executive compensation to the achievement of specific performance goals. The
compensation determination is largely subjective, and no specific weight is
given to any particular factor. For fiscal 2002, after discussions with Mr.
Pfenniger, a review of the performance of the executive officers and considering
the Company's fiscal 2001 financial performance, the Compensation Committee
decided not to make any increases to the base salaries of the executive
officers. The Compensation Committee may, in certain circumstances, recommend
that a cash bonus be paid to executives whose individual performance during a
particular year was outstanding. The amount of any bonus is based upon the
recommendation of the Chief Executive Officer. No cash bonuses were paid to
executive officers for fiscal 2001.
Stock options represent a significant portion of total compensation for the
Company's executive officers. Options are generally awarded to executive
officers at the time that they join the Company and periodically thereafter.
Stock options are granted at the prevailing market price on the date of grant,
and will only have value if the value of the Company's stock price increases
from that date. Generally, grants vest in equal amounts over a four-year period
and have seven-year terms. Executives generally must be employed by the Company
at the time of vesting in order to exercise the options. Grants of stock options
to executive officers are generally made upon the recommendation of the Chief
Executive Officer based on the level of the executive's position with the
Company, an evaluation of the executive's past and expected performance, the
number of outstanding and previously granted options, and discussions with the
executive. The determination of the timing and number of stock options granted
to the executive officers is made by the Compensation Committee on a subjective
basis, with no specific weight given to any particular factor. While the
Company's executive officers each hold options to acquire the Company's stock as
indicated under the "Executive Compensation", no additional options were granted
to the executive officers related to their fiscal 2001 performance.
Chief Executive Officer. For the past fiscal year, Mr. Pfenniger's base
salary was set at $291,000. After discussions with Mr. Pfenniger, a review of
his past performance and in light of the Company's fiscal 2001 financial
performance, it was decided not to increase his base salary for fiscal 2002. The
determination of Mr. Pfenniger's compensation package was subjective, with no
specific weight given to any particular factor. Mr. Pfenniger's compensation
package was reviewed by the Board of Directors who believe that the compensation
is fair and reasonable in light of the factors considered by the Compensation
Committee. No performance bonus award was made and no additional stock options
were granted to Mr. Pfenniger for fiscal 2001.
Tax Matters. Section 162(m) of the Internal Revenue Code of 1986, as
amended, generally disallows a deduction for federal income tax purposes to
public companies for compensation over $1 million paid in any taxable year to
the Company's Chief Executive Officer or to any of the four other most highly
compensated executive officers of the Company. Qualifying performance-based
compensation is not subject to the limitation if certain requirements are
satisfied. Based upon applicable regulations, the Company believes that
compensation expenses relating to options granted under its stock option plans
will not be subject to the Section 162(m) limitations.
The Compensation Committee continually evaluates the Company's compensation
policies and procedures with respect to its executive officers in light of the
overall financial performance of the Company and its effect on shareholder
value.
14
The Compensation Committee of the Board of Directors
Phillip Frost, Chairman Richard M. Krasno Neil Flanzraich
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2001, the following directors served on the Compensation
Committee of the Board of Directors: Dr. Frost, Mr. Flanzraich and Dr. Krasno.
No person serving as a member of the Committee during fiscal 2001 was an
executive officer of the Company at the time of service on the Committee, and no
interlocking relationships exist between such persons and any director or
executive officer of the Company.
AMENDMENT TO THE COMPANY'S 1996 STOCK OPTION PLAN
(Item No. 2)
DESCRIPTION OF THE 1996 PLAN
The 1996 Plan was adopted by the Board of Directors on July 31, 1996 and
approved by the shareholders of the Company on October 11, 1996. The purpose of
the 1996 Plan is to provide the Company with an effective means to attract and
retain highly qualified personnel as well as to provide additional incentive to
employees and others who provide services to the Company and who can contribute
significantly to the Company's success.
The Company intends that options granted under the 1996 Plan qualify for an
exception to the disallowance rule of Section 162(m) of the Internal Revenue
Code (the "Code"). An aggregate of 2,500,000 shares of Common Stock are
presently available for issuance under the 1996 Plan, of which approximately
35,000 remain available for grant. If the proposal to increase the number of
shares available for grant and/or the 1996 Plan is approved that number will be
increased to 3,250,000. No employee may receive stock options under the 1996
Plan in any given year to purchase a number of shares greater than one percent
of the number of shares of Common Stock outstanding as of the date the 1996 Plan
was adopted. If a stock option expires, terminates or becomes unexercisable for
any reason without being exercised in full, the unpurchased shares which were
subject to such stock option shall be available for further grant under the 1996
Plan. No options may be granted under the 1996 Plan after July 25, 2006.
The 1996 Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee"), which, under the terms of the 1996 Plan, must
consist of at least two directors who are "outside directors" as defined for
purposes of Section 162(m) of the Code. The Committee has the authority to
interpret the provisions of the 1996 Plan and to make all determinations deemed
necessary or advisable for its administration.
The 1996 Plan provides for the issuance of options intended to be incentive
stock options within the meaning of Section 422 of the Code and non-qualified
stock options not intended to meet the requirements of Section 422 of the Code.
Incentive stock options may be granted only to employees of the Company and its
subsidiaries, and non-qualified options may be granted to employees, directors,
independent contractors and agents of the Company and its subsidiaries. Subject
to the provisions of the 1996 Plan, the Committee determines the persons to whom
grants are made and the vesting, timing, amounts and other terms of such grants.
Incentive stock options which first become exercisable in any calendar year for
shares with a fair market value on the date of grant in excess of $100,000 are
treated as non-qualified stock options to the extent of such excess.
15
The exercise price of options may not be less than the fair market value of
the Common Stock on the date of grant, except with respect to substitute options
issued in connection with certain corporate transactions and except that the
exercise price of any incentive stock option granted to the holder of more than
10% of the outstanding Common Stock may not be less than 110% of the fair market
value of the Common Stock on the date of grant. The term of each option may not
exceed ten years, except the term of any incentive stock option granted to a
holder of more than 10% of the outstanding Common Stock may not exceed five
years. The option price may be paid in cash or by check or such other
consideration as the Committee shall determine. In general, all outstanding
options granted to an employee terminate twelve months after the optionee ceases
to be an employee, except that such options terminate (i) immediately (unless
otherwise determined by the Committee) if the optionee's employment is
terminated for deliberate, willful or gross misconduct and (ii) 36 months after
retirement. Options granted under the 1996 Plan are not assignable or
transferable other than by will or by the laws of descent and distribution, or,
in the case of non-qualified stock options, pursuant to a qualified domestic
relations order, and, during the optionee's lifetime, the options may be
exercised only by the optionee.
The 1996 Plan provides for an automatic grant of non-qualified stock
options to acquire 7,500 shares of Common Stock to non-employee directors of the
Company and 37,500 shares to the Chairman of the Board of Directors each year on
the first business day following the Company's annual meeting of shareholders.
The exercise price of such options is equal to the fair market value of the
Common Stock on the date of the grant, and such options have a term of ten
years. Additionally, on August 4, 2000, the Committee approved a grant of
options to purchase 20,000 shares at a price of $2.25 per share to Dr. Borsting
in connection with the appointment to Vice Chairman of the Board. On February 2,
2001 the Committee also approved a special one-time grant of options to purchase
20,000 shares of Common Stock at a price of $2.75 per share to each of the
Company's non-employee directors.
The number of shares of Common Stock covered by outstanding options, the
number of shares of Common Stock available for issuance under the 1996 Plan, the
number of shares of Common Stock to be granted to non-employee directors, the
maximum number of shares of Common Stock with respect to which options may be
granted to any employee in any given year, and the exercise price per share of
outstanding options, are proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split or
stock dividend.
The Committee may amend or terminate the 1996 Plan, except that shareholder
approval is required to increase the number of shares of Common Stock subject to
the 1996 Plan, to change the class of persons eligible to participate in the
1996 Plan, to materially increase the benefits accruing to participants under
the 1996 Plan, or to increase the maximum number of shares of Common Stock with
respect to which options may be granted to any employee in any year. No
amendment or termination of the 1996 Plan will affect previously granted awards
without the optionee's consent unless the Committee determines that such
amendment is in the best interest of the shareholders or optionees.
All employees, directors, independent contractors and agents of the Company
are eligible to receive stock options under the 1996 Plan. As of June 15, 2001,
the Company had eight non-employee directors and approximately 675 full-time
employees.
16
OPTIONS GRANTED UNDER THE 1996 PLAN
As of June 15, 2001, options to purchase approximately 2,459,575 shares of
Common Stock were outstanding under the 1996 Plan at exercise prices ranging
from $1.50 to $8.625 per share (in each case equal to the fair market value of
the Common Stock as of the dates of grant), and options to purchase
approximately 1,712,595 shares of Common Stock were exercisable at prices
ranging from $1.50 to $8.625 per share. Except for options granted under the
1996 Plan to non-employee directors, which have a ten year term and vest
immediately, and options granted to independent contractors and agents of the
Company and its subsidiaries, which have different vesting schedules, all
options granted under the 1996 Plan have terms of seven years and vest in equal
portions over four years. As of June 15 2001, the closing price of the Common
Stock as reported on the American Stock Exchange composite tape was $2.60.
As described below, the Committee has discretion to determine the persons
to whom grants of options are to be made, the number of options to be granted
and the terms and conditions of any grant. Accordingly, except for the automatic
grants to non-employee directors of the Company, it is not possible to identify
the persons who will receive options under the 1996 Plan, the actual number of
options to be granted to any individual under the 1996 Plan, or the terms and
conditions of any option to be granted.
The table below indicates, as of June 15, 2001, the aggregate number of
options granted under the 1996 Plan since its inception to the persons and
groups indicated (all of which remain outstanding).
Name of Individual or Group Options Granted under 1996 Plan
Jack R. Borsting, Ph.D. 95,000
Neil Flanzraich 71,875
Phillip Frost, M.D. 225,000
Peter S. Knight 75,000
Richard M. Krasno, Ph.D. 67,500
Lois F. Lipsett, Ph.D. 67,500
Richard C. Pfenniger, Jr. 227,500
Percy A. Pierre, Ph.D. 55,625
A. Marvin Strait, C.P.A. 52,500
Randy S. Proto 85,000
Fernando L. Fernandez 40,000
All current Executive officers 352,500
All current Directors 937,500
All Current Employees (other than Current
Executive Officers) 1,060,050
FEDERAL INCOME TAX CONSEQUENCES
The following summary is for general information only and is not a
comprehensive analysis of applicable federal income tax laws. This discussion is
based on the Code and other relevant authority in effect as of the date of this
proxy statement. This summary does not discuss all aspects of federal income
taxation that may be relevant to the 1996 Plan or any particular participant in
light of his or her own circumstances. Furthermore, no information is provided
with respect to tax consequences under foreign, state or local laws. This
discussion is not intended as a substitute for careful tax planning. The federal
income tax laws are complex and individual circumstances may affect their
application. In addition, this discussion is only applicable to participants who
are subject to the United States federal income tax laws.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO INCENTIVE STOCK OPTIONS.
Certain options granted under the 1996 Plan are intended to qualify as
incentive stock options within the meaning of Section 422 of the Code. Set forth
below is a general summary of certain of the principal federal income tax
consequences to participants and the Company of incentive stock options granted
under the 1996 Plan.
17
The grant of an incentive stock option has no immediate federal income tax
consequences to the optionee or the Company. The exercise of an incentive stock
option while the optionee is an employee or within three months after
termination of employment generally has no immediate federal income tax
consequences to the optionee or to the Company. The exercise of an incentive
stock option will, however, result in an increase in the optionee's alternative
minimum taxable income in the year of exercise equal to the excess of the fair
market value of the shares at the time of exercise over the exercise price.
In order to obtain incentive stock option treatment for federal income tax
purposes upon the subsequent sale (or other disposition) by the optionee of the
shares of Common Stock received upon exercise of the option, the sale (or other
disposition) must not occur within two years from the date of the grant of the
option nor within one year after the date of issuance of such shares upon
exercise of the option (the "ISO holding period requirements"). If the ISO
holding period requirements are satisfied, on the subsequent sale (or other
disposition) by the optionee of the shares of Common Stock received upon the
exercise of an option, the optionee generally will recognize capital gain or
loss in the amount equal to the difference between the proceeds realized from
the sale (or other disposition) and the amount paid as the exercise price of the
option. In such a case, the Company is not entitled to a deduction in connection
with the grant or exercise of the incentive stock option or the sale of shares
acquired pursuant to such exercise. If the optionee holds the shares of Common
Stock received upon the exercise of the option for more than 12 months, the
maximum rate of tax on any gain is 20%. On the other hand, if the ISO holding
period requirements are not satisfied or an optionee exercises an incentive
stock option more than three months after termination of employment other than
by reason of death or disability of the optionee, on the subsequent sale (or
other disposition) by the optionee of the shares of Common Stock received upon
the exercise of the option, the optionee generally will recognize ordinary
income equal to the excess of the fair market value of the shares on the date of
exercise (or the proceeds realized from the sale or other disposition, if less)
over the exercise price, and the Company is entitled to a corresponding
deduction subject to applicable rules governing deductibility of compensation.
If the amount realized upon such a sale or other disposition exceeds the fair
market value of the shares on the date of exercise, the excess generally would
be treated as capital gain.
The tax basis of the shares of Common Stock received by the optionee upon
exercise will be equal to the amount paid as the exercise price plus the amount,
if any, recognized as ordinary income by the optionee, and the optionee's
holding period will begin on the date the shares are issued to the optionee.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO NONQUALIFIED STOCK OPTIONS.
Certain options granted under the 1996 Plan are not intended to qualify as
incentive stock options within the meaning of Section 422 of the Code and are
referred to as nonqualified stock options. Set forth below is a general summary
of certain of the principal federal income tax consequences to participants and
the Company of nonqualified options granted under the 1996 Plan.
The grant of a nonqualified stock option has no immediate federal income
tax consequences to the optionee or the Company. Upon the exercise of a
nonqualified stock option, the optionee recognizes ordinary income (subject to
wage withholding and employment taxes) in an amount equal to the excess of the
fair market value of the shares on the date of exercise over the exercise price,
and the Company is entitled to a corresponding deduction subject to applicable
rules governing deductibility of compensation. The optionee's tax basis in the
shares is the exercise price plus the amount of ordinary income recognized by
the optionee, and the optionee's holding period will commence on the date the
shares are issued to the optionee. Upon a subsequent sale of the shares, any
difference between the optionee's tax basis in the shares and the amount
realized on the sale generally is treated as capital gain or loss.
18
AMENDMENT TO THE 1996 PLAN AND PURPOSE OF THE AMENDMENT
On June 12, 2001, the Committee approved an amendment to the 1996 Plan,
subject to the approval of shareholders, to increase the number of shares
issuable pursuant to the Plan to 3,250,000 shares. The purpose for increasing
the number of shares available for issuance under the 1996 Plan is to ensure
that the Company will continue to be able to grant options as incentives to
those individuals upon whose efforts the Company relies for the continued
success and development of its business. Without the increase in the number of
shares available for issuance under the 1996 Plan, the Company will have
approximately 35,000 shares remaining available to be granted under the 1996
Plan.
The Board of Directors recommends that shareholders vote "FOR" the approval
of the amendment to the 1996 Plan.
INDEPENDENT AUDITORS
Ernst & Young, LLP, independent public accountants, was appointed by the
Board of Directors to audit the Company's financial statements for fiscal 2001.
This firm has acted as independent public accountants for the Company since
1992. Representatives of Ernst & Young are expected to attend the Annual Meeting
and will have an opportunity to make a statement if they desire and to respond
to appropriate questions raised by shareholders.
AUDIT FEES
For fiscal year 2001, the aggregate fees for professional services rendered
by Ernst & Young, LLP in connection with their audit of the Company's financial
statements and their reviews of the Company's quarterly reports on Form 10-Q
were approximately $142,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no professional services rendered by Ernst & Young, LLP in the
year ended March 31, 2001 relating to financial information systems design and
implementation.
ALL OTHER FEES
The aggregate fees billed for all other services rendered by Ernst & Young,
LLP during the year ended March 31, 2001 were approximately $73,000, including
audit related services of $63,000 and non-audit services of $10,000. Audit
related services generally include fees for statutory audits, Department of
Education compliance audits and Securities and Exchange Commission accounting
consultations. Non-audit services include a review of the federal income tax
return.
The Company's Audit Committee approves all audit and non-audit services
provided by Ernst & Young, LLP and considers whether the provision of non-audit
services is compatible with maintaining the auditor's independence.
19
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
To the Company's Shareholders:
The Audit Committee of the Board of Directors is responsible for monitoring
the integrity of the Company's financial statements, its system of internal
controls and the independence and performance of its independent auditors. The
Audit Committee is composed of five non-employee directors and operates under a
written charter adopted and approved by the Board of Directors. The Board of
Directors, in its business judgment, has determined that each Audit Committee
member is "independent" as such term is defined by the American Stock Exchange's
listing standards. A copy of the Audit Committee Charter is attached to this
Proxy Statement as Appendix A.
The Company's management is responsible for the preparation, presentation
and integrity of the Company's financial statements, the Company's accounting
and financial reporting process, including the system of internal control, and
procedures to assure compliance with applicable accounting standards and
applicable laws and regulations. The Company's independent auditors are
responsible for auditing those financial statements and expressing an opinion as
to their conformity with generally accepted accounting principles. Our
responsibility is to independently monitor and review these processes. We rely,
without independent verification, on the information provided to us and on the
representations made by management and the independent auditors. Accordingly,
our oversight does not provide an independent basis to determine that management
has maintained appropriate accounting and financial reporting principles or
appropriate internal control and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, our
considerations and discussions do not assure that the audit of the Company's
financial statements has been carried out in accordance with generally accepted
auditing standards, that the financial statements are presented in accordance
with generally accepted accounting principles or that the Company's auditors are
in fact "independent."
In this context, we held four meetings during fiscal 2001. The meetings
were designed, among other things, to facilitate and encourage communication
among the Audit Committee, management, and the Company's independent auditors,
Ernst & Young, LLP. We discussed with the Company's independent auditors, with
and without management present, the results of their examinations and their
evaluations of the Company's internal controls.
We have reviewed and discussed the audited financial statements for the
fiscal year ended March 31, 2001 with management and Ernst & Young, as well as
the matters required to be discussed with audit committees under generally
accepted auditing standards, including, among other things, matters related to
the conduct of the audit of the Company's financial statements and the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended
(Communication with Audit Committees.)
Ernst & Young also provided to us the written disclosures and the letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and we discussed with the independent
auditors their independence from the Company. When considering Ernst & Young's
independence, we considered whether their provision of services to the Company
beyond those rendered in connection with their audit and review of the Company's
financial statements was compatible with maintaining their independence. We also
reviewed, among other things, the amount of fees paid to Ernst & Young for their
audit and non-audit services.
20
Based on our review and these meetings, discussions and reports, and
subject to the limitations on our role and responsibilities referred to above
and in the Audit Committee Charter, we recommended to the Board of Directors
that the Company's audited financial statements for the year ended March 31,
2001 be included in the Company's Annual Report on Form 10-K.
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Jack R. Borsting, Ph.D. Peter S. Knight Lois F. Lipsett, Ph.D
Percy A. Pierre, Ph.D. A. Marvin Strait, C.P.A.
OTHER INFORMATION
Shareholder Proposals for 2002 Annual Meeting
Any shareholder proposals intended to be presented at the Company's
2002 annual meeting of shareholders must be received by the Secretary, Whitman
Education Group, Inc., 4400 Biscayne Boulevard, Miami, Florida 33137, no later
than March ___, 2002, in order to be considered for inclusion in the Company's
proxy statement and form of proxy card relating to such meeting.
Shareholders who do not present proposals for inclusion in the Proxy
Statement but who still intend to submit a proposal at the 2002 Annual Meeting
must, in accordance with the Company's Bylaws, provide timely notice of the
matter to the Secretary of the Company. To be timely, written notice must be
received by the Secretary no less than 60 days nor more than 90 days prior to
the annual meeting. If less than 70 days' notice or prior public disclosure of
the date of the scheduled annual meeting is given, then notice of the proposed
business matter must be received by the Secretary not later than the close of
business on the tenth day following the day on which such notice of the date of
the scheduled annual meeting was mailed or the day on which such public
disclosure was made. Any notice to the Secretary must include as to each matter
the shareholder proposes to bring before the meeting: (a) a brief description of
the proposal desired to be brought before the meeting and the reason for
conducting such business at the annual meeting, (b) the shareholder's name and
address, as they appear on the Company's books, (c) the class and number of
shares of the Company which are beneficially owned by the shareholder, (d) any
material interest of the shareholder in such business and (e) any other
information that is required to be provided by the shareholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934 in his or her capacity
as a proponent of the shareholder proposal.
OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors knows of no
business to be presented at the Annual Meeting other than as set forth in this
proxy statement. If other matters properly come before the meeting, the persons
named as proxies will vote on such matters in their discretion.
Fernando L. Fernandez, Secretary
July __, 2001
21
APPENDIX A
WHITMAN EDUCATION GROUP
Audit Committee
Charter
ORGANIZATION
This charter governs the operations of the audit committee. The committee
shall review and reassess the charter at least annually and obtain the approval
of the board of directors. The committee shall be appointed by the board of
directors and shall comprise at least three directors, each of whom are
independent of management and the Company. Members of the committee shall be
considered independent if they have no relationship that may interfere with the
exercise of their independence from management and the Company. All committee
members shall be financially literate, or shall become financially literate
within a reasonable period of time after appointment to the committee, and at
least one member shall have accounting or related financial management
expertise.
STATEMENT OF POLICY
The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the shareholders, relating to the
Company's financial statements and the financial reporting process, the systems
of internal accounting and financial controls, the annual independent audit of
the Company's financial statements, and the legal compliance and ethics programs
as established by management and the board. In so doing, it is the
responsibility of the committee to maintain free and open communication between
the committee, independent auditors, and management of the Company. In
discharging its oversight role, the committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities, and personnel of the Company and the power to retain outside
counsel, or other experts for this purpose.
GOVERNANCE
The audit committee shall maintain complete records of its proceedings. At
least fifty percent (50%) of the members of the committee shall be necessary to
constitute a quorum for the conduct of business. The affirmative vote of a
majority of a quorum shall be necessary to approve any action. As permitted by
applicable law, the audit committee may hold meetings by conference call. The
audit committee may approve actions by written consent if all of the members of
the audit committee execute the consent. The chairman of the audit committee
shall be appointed by the board of directors. Notice of meetings of the audit
committee shall be in accordance with the notice provision of the bylaws with
respect to meetings of the board of directors of the Company.
1
MEETING FREQUENCY
The audit committee shall meet as necessary. Generally, meetings shall be
held immediately prior to each regular meeting of the board of directors, or as
called by the chief executive officer, the chairman of the audit committee or
any two members of the audit committee.
RESPONSIBILITIES AND PROCESSES
The primary responsibility of the audit committee is to oversee the
Company's financial reporting process on behalf of the board and report the
results of their activities to the board. Management is responsible for
preparing the Company's financial statements, and the independent auditors are
responsible for auditing those financial statements. The committee in carrying
out its responsibilities believes its policies and procedures should remain
flexible, in order to best react to changing conditions and circumstances. The
committee should take the appropriate actions to set the overall corporate
"tone" for quality financial reporting, sound business risk practices, and
ethical behavior.
The following shall be the principal recurring processes of the audit
committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with the understanding that the committee may supplement them
as appropriate.
o The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately accountable to
the board and the audit committee, as representatives of the Company's
shareholders. The committee shall have the ultimate authority and responsibility
to evaluate and, where appropriate, recommend the replacement of the independent
auditors. The committee shall discuss with the auditors their independence from
management and the Company and the matters included in the written disclosure
required by the Independence Standards Board. Annually, the committee shall
review and recommend to the board the selection of the Company's independent
auditors.
o The committee shall discuss with the independent auditors the overall
scope and plans for their respective audits including the adequacy of staffing
and compensation. Also, the committee shall discuss with management and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's system to monitor and manage
business risk, and legal and ethical compliance programs.
o The committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on Form
10-K (or the annual report to shareholders if distributed prior to the filing of
Form 10-K), including their judgment about the quality, not just acceptability,
of accounting principles, the reasonableness of significant judgments, and the
clarity of the disclosures in the financial statements. Also, the committee
shall discuss the results of the annual audit and any other matters required to
be communicated to the committee by the independent auditors under generally
accepted auditing standards.
2