Whitman Education Group, Inc.
RICHARD C. PFENNIGER, JR.
Chief Executive Officer
July 15, 2002
Dear Fellow Shareholder:
You are cordially invited to attend the 2002 annual meeting of Shareholders
of Whitman Education Group, Inc. (the "Company"). The meeting will be held at
10:00 a.m. on August 15, 2002, 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 nominated to serve
until the 2003 annual meeting of shareholders.
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 2002 Annual Report to Shareholders is also
enclosed.
Sincerely,
/s/Richard C. Pfenniger, Jr.
Richard C. Pfenniger, Jr.
Whitman Education Group, Inc.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 15, 2002
To the Shareholders of
Whitman Education Group, Inc.:
The 2002 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 15, 2002, at 10:00 a.m. local time,
for the following purposes:
(1) to elect nine directors to serve until the 2003 annual meeting of
shareholders; and
(2) to transact such other business as may properly come before the Annual
Meeting.
Only shareholders of record at the close of business on June 28, 2002 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
/s/Fernando L. Fernandez
Fernando L. Fernandez
Secretary
Miami, Florida
July 15, 2002
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 15, 2002 (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 15, 2002.
Record holders of the Company's Common Stock, no par value per share (the
"Common Stock"), at the close of business on June 28, 2002 (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, 13,934,620 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 2003 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 nominees for director.
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. 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.
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
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 Vice Chairman of the Board
Director since 1994 since 2000. Dr. Borsting is a Professor of Business
Age 73 Administration and Dean Emeritus at the University
of Southern California. From 1988 to 1994,
Dr. Borsting was Dean of the University of Southern
California School of Business Administration, and
from 1994 to 2001 E. Morgan Stanley Professor
of Business Administration and Executive Director
of the Center of Telecommunication Management.
Dr. Borsting, a former Assistant Secretary of Defense
(Controller), is a director of IVAX Diagnostics, Inc.
(laboratory instruments) and a trustee of the
Institute for Defense Analysis, the Rose Hill
Foundation, the Los Angeles Orthopedic Hospital
Foundation and Met Life Investors.
2
NEIL FLANZRAICH In 1998, Mr. Flanzraich became Vice Chairman and
Director since 1997 President of IVAX Corporation (pharmaceuticals). In
Age 58 March 2001, Mr.Flanzraich became a member of the
Board of Directors of IVAX Diagnostics, Inc.
(laboratory instruments) and Continucare Corporation
(integrated healthcare). 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 Chairman of the Board of Directors
Director since 1992 since 1992. Dr. Frost has been Chairman of the Board
Age 65 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. (laboratory instruments).
He is also director of Northrup Grumman Corporation
(aerospace) and Ladenburg Thalman Financial Services,
Inc.(investment banking and brokerage company). He is
Chairman of the Board of Trustees of the University
of Miami and a member of the Board of Governors of
the American Stock Exchange.
3
PETER S. KNIGHT Mr. Knight is a Managing Director of MetWest
Director since 1994 Financial, a Los Angeles based financial services
Age 51 company. Mr. Knight started his career with the
Antitrust Division of the Department of Justice.
From 1977 to 1989, Mr.Knight served as Chief of Staff
to Al Gore when Mr. Gore was a member of the U.S.
House of Representatives and later the U.S. Senate.
Mr. Knight served as the General Counsel of Medicis
Pharmaceutical Corporation from 1989 to 1991 and then
established his law practice representing numerous
Fortune 500 companies as named partner in a
Washington, D.C. law firm. In 2000, he started Sage
Venture Partners, an investment firm focusing on the
technology and biotechnology sector. Mr. Knight has
held senior positions in the last four presidential
campaigns including services as campaign manager for
the successful 1996 re-election campaign of President
Clinton. Mr. Knight serves on the Board of Directors
of Medicis Pharmaceutical Corporation, the Schroder
Family of Mutual Funds and Hedge Funds Pharmaceutical
Resources Inc. and EntreMed. He also serves on the
Board of Duke University's Terry Sanford Institute
of Public Policy.
RICHARD M. KRASNO, PH.D In 1999, Dr. Krasno became Executive Director of the
Director since 1996 William R. Kenan, Jr. Charitable Trust and President
Age 60 of the four William R. Kenan, Jr. funds. From 1998
to 1999, Dr. Krasno was president of the Monterey
Institute of International Studies in Monterey,
California. From 1983 to 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, Dr. Lipsett
Age 68 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.
4
RICHARD C. PFENNIGER, JR. Mr. Pfenniger has been Chief Executive Officer and
Director since 1992 Vice Chairman of the Company since 1997. Mr.Pfenniger
Age 46 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. Mr. Pfenniger is
also a director of IVAX Corporation and a director of
Continucare Corporation (integrated healthcare).
PERCY A. PIERRE, PH.D. Dr. Pierre has been Professor of Electrical
Director since 1997 Engineering at the College of Engineering of Michigan
Age 63 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), Fifth-Third
Bank (Western Michigan), and is a Trustee of the
University of Notre Dame.
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. He
Age 68 has practiced in the field of public accountancy
in Colorado for more than 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
AutoTradeCenter.Com, Inc., and a member of the Board
of Trustees of the Colorado Springs Fine Arts Center
Foundation, and the Sam S. Bloom Foundation. He also
presently serves on the Community Advisory Panels of
Western National Bank and Intel Corporation.
Mr. Strait previously served as the Chairman of the
Board of Directors of the American Institute of
Certified Public Accountants (AICPA), as President
of the Colorado Society of Certified Public
Accountants and the Colorado State Board of
Accountancy, and serves as a permanent member of
the AICPA Governing Council.
5
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
lieu of both the retainer and the meeting attendance fees, each director who was
not employed by the Company may elect to receive 7,500 options to purchase
shares of Common Stock, to be 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.
In addition, pursuant to the formula grant provision contained in the
Company's Amended and Restated 1996 Stock Option 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 2002,
pursuant to that formula grant provision, options at an exercise price of $3.40
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, Dr. Pierre and Messrs. Flanzraich and Strait also received
options to purchase an additional 7,500 shares at $3.40 per share in fiscal 2002
in lieu of their retainer and meeting attendance fees as discussed above. The
Compensation Committee of the Board of Directors also approved a grant of
options to purchase 20,000 shares at $3.40 per share to Dr. Borsting, the Vice
Chairman of the Board.
Meetings and Committees of the Board of Directors
The Board of Directors held four meetings during fiscal 2002 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.
For fiscal 2002, the members of the Executive Committee were Mr. Pfenniger, Dr.
Frost, Dr. Borsting and Mr. Flanzraich. The Executive Committee held no meetings
during fiscal 2002.
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 auditors, 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 Audit Committee operates under a written
charter adopted by the Board of Directors. For fiscal 2002, members of the Audit
Committee were Dr. Borsting, Mr. Knight, Dr. Lipsett, Dr. Pierre and A. Marvin
Strait, C.P.A. The Audit Committee held four meetings during fiscal 2002.
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. For fiscal 2002, the
members of the Compensation Committee were Dr. Frost, Dr. Krasno and Neil
Flanzraich. The Compensation Committee held four meetings during fiscal 2002 and
acted once by written consent.
6
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 officer of the Company who is not a nominee for director.
Fernando L. Fernandez. Mr. Fernandez, age 41, 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 Pricewaterhouse Coopers LLP (formerly Coopers & Lybrand) in Miami.
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 2002 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 approximately 13,849 square feet of
administrative offices in Miami, Florida which are owned by IVAX Corporation.
The lease between the Company and IVAX may be terminated on 180 days notice and
provides for an annual rental of $302,827. Dr. Frost, the Chairman of the Board
and a principal shareholder 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. Mr.
Pfenniger, the Company's Chief Executive Officer and a director, is also a
director of IVAX.
Stock Ownership by Principal Security Holders and Management
The following table sets forth certain information as of June 1, 2002
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.
7
Shares Beneficially Percentage
Name of Beneficial Holder Owned (1) Owned
------------------------- ------------------- ----------
Bedford Oak Partners, L.P. 1,126,700 (2) 8.2
Samstock, LLC 1,124,000 (3) 8.4
Jack R. Borsting, Ph.D. 157,600 (4) 1.1
Neil Flanzraich 86,875 (4) *
Phillip Frost, M.D. 4,351,028 (5) 30.4
Peter S. Knight 102,500 (4) *
Richard M. Krasno, Ph.D. 82,500 (4) *
Lois F. Lipsett, Ph.D. 82,700 (4) *
Richard C. Pfenniger, Jr. 613,049 (4) 4.3
Percy A. Pierre, Ph.D. 73,225 (4) *
A. Marvin Strait, C.P.A. 105,028 (4) *
Randy S. Proto (6) 702,176 (4) 4.8
Fernando L. Fernandez 223,404 (4) 1.6
All directors and executive officers
as a group (11 persons) 6,580,085 (7) 40.6
_____________________
* 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) Based on information contained in a schedule 13G dated February 12, 2002.
As reported therein, Bedford Oak Advisors, LLC ("BOA") in its capacity as
investment manager of Bedford Oak Partners, L.P., and Harvey Eisen, in his
capacity as managing member of BOA, are also deemed to have beneficial
ownership of the 1,126,700 shares.
(3) Based on information contained in a Schedule 13G dated March 14, 2001.
(4) Includes shares which may be acquired pursuant to stock options exercisable
within 60 days of June 1, 2002: Dr. Borsting (150,000); Mr. Knight
(102,500); Dr. Krasno (82,500); Mr. Flanzraich (86,875); Dr. Lipsett
(82,500); Dr. Pierre (70,625); Mr. Strait (67,500); Mr. Pfenniger
(435,000); Mr. Proto (615,000); and Mr. Fernandez (207,500).
(5) Includes (a) 370,000 shares which may be acquired pursuant to stock options
held by Dr. Frost exercisable within 60 days of June 1, 2002, and (b)
3,971,028 shares held by Frost-Nevada, Limited Partnership, ("FNLP"). Dr.
Frost is one of two limited partners of FNLP and the sole shareholder of
the sole 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.
(6) Mr. Proto resigned as the Company's President and Chief Operating Officer
in November 2001.
(7) Includes shares described in footnotes (4) and (5) as beneficially owned.
8
Executive Compensation
The following table contains certain information regarding aggregate
compensation paid or accrued by the Company during fiscal 2002 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 2002 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. Pfenniger, Jr. 2002 291,000 150,000 0 4,337
Chief Executive Officer 2001 291,000 0 0 3,100
2000 291,000 0 30,000 4,800
Fernando L. Fernandez 2002 138,000 70,000 0 4,025
Vice President - Finance, 2001 138,000 0 0 3,100
Chief Financial Officer, 2000 138,000 0 10,000 4,516
Secretary and Treasurer
Randy S. Proto (2) 2002 122,000 0 0 64,500 (3)
Former President and 2001 183,000 0 0 3,100
Chief Operating Officer 2000 183,000 0 20,000 4,800
________________________
(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.
(2) Mr. Proto resigned as the Company's President and Chief Operating Officer
in November 2001.
(3) Included in the "All Other Compensation" column is payments made under a
consulting agreement in the amount of $61,000.
During the fiscal year ended March 31, 2002, no stock options were granted
to the executive officers named in the "Summary Compensation Table." However,
stock options were granted to the executive officers named in the "Summary
Compensation Table" in June 2002 in connection with their performance in fiscal
2002. The stock options were granted at an exercise price of $6.20 per share,
the fair market value of the Company's Common Stock on the date of grant, and
have a seven-year term.
The following table sets forth information concerning stock option
exercises during fiscal 2002 by each of the executive officers named in the
"Summary Compensation Table" above and the fiscal year-end value of unexercised
options held by each of the executive officers named in the "Summary
Compensation Table" above.
9
Aggregated Stock Option Exercises in
Fiscal 2002 And Fiscal Year-End Option Values
Securities Underlying
Number of Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year End at Fiscal Year End
----------------------- -----------------------
Shares
Acquired Value Un- Un-
on Exercise Realized Exercisable exercisable Exercisable exercisable
------------ -------- ----------- ----------- ----------- -----------
(#) ($) (#) (#) ($) (1) ($) (1)
Richard C. 10,000 6,500 408,750 33,750 323,734 28,003
Pfenniger
Chief
Executive
Officer
Fernando L. 0 0 207,500 2,500 398,138 8,262
Fernandez
Vice
President-
Finance,
Chief
Financial
Officer,
Secretary
and
Treasurer
Randy S.
Proto (2) 0 0 615,000 0 2,172,050 0
Former
President
and Chief
Operating
Officer
__________________
(1) The value of unexercised in-the-money options represents the number of
options held at March 31, 2002 multiplied by the difference between the
exercise price and $5.92, the closing price of the Common Stock at March
29, 2002 (the last trading day in fiscal 2002).
(2) Mr. Proto resigned as the Company's President and Chief Operating Officer
in November 2001.
10
Performance Graph
The graph and table set forth below compares the cumulative total
shareholder return on the Common Stock for fiscal 1998 through fiscal 2002 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., 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 Industry Group
includes all of the peer issuers in the industry group used for former periods,
except that Argosy Education Group, Inc., has been excluded because it is no
longer a publicly traded company (the "Former Industry Group"). The graph and
table assume an investment of $100 in the Common Stock and each index on March
31, 1997 (the last trading day in fiscal 1997), and the reinvestment of all
dividends.
PERFORMANCE GRAPH HERE
Fiscal Year Ended March 31,
March 31, ------------------------------------------
1997 1998 1999 2000 2001 2002
-------- ------ ------ ------ ------- -------
Whitman 100 108 71 43 57 113
Industry Peer Group Index 100 172 218 178 283 403
S&P 500 Index 100 148 175 207 162 162
11
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 two 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 Company's 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 and align the
financial interests of the Company's executive officers with those of its
shareholders. In attracting and retaining executives, the Committee recognizes
that the Company must compete for the services of executives with many other
companies, many of 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.
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 long-term incentive compensation in the form
of stock options both at the time the executive joins the Company and
periodically thereafter. The Committee believes that providing executives with
opportunities to acquire significant stakes in the future growth and prosperity
of the Company through the grant of stock options creates an entrepreneurial
atmosphere and helps motivate executives to perform to their full potential. The
Committee believes that utilizing stock option grants for a significant portion
of executive compensation assists the Company in more closely aligning the
executives' interests with those of the Company's shareholders, since the
ultimate value of such compensation is directly dependent on the Company's stock
price.
Accordingly, the Committee designs the compensation of executive officers
to consist of a reasonable annual salary with long-term incentive compensation
in the form of stock options. In certain circumstances, the Company may pay cash
bonuses to its executive officers to recognize those officers whose individual
performance in particular years was outstanding. The 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.
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. 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 with
any modifications deemed appropriate.
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Stock options are intended to represent a significant portion of total
compensation for the Company's executive officers. 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 (with any
modifications deemed appropriate) 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.
Chief Executive Officer. For fiscal 2003, after discussions with Mr.
Pfenniger and a review of his performance in fiscal 2002, the Committee set Mr.
Pfenniger's base salary in fiscal 2003 at $305,000, awarded a performance bonus
of $150,000 and awarded him stock options to purchase 30,000 shares of the
Company's Common Stock at $6.20 per share, the fair market value of the
Company's Common Stock on the date of grant. The stock options have a seven-year
term and vest ratably over four years. In setting Mr. Pfenniger's salary and
awarding the performance bonus and the stock options for fiscal 2003, the
Committee considered the Company's financial performance in fiscal 2002 and Mr.
Pfenniger's contribution to the Company's improved financial performance over
fiscal 2001, the quality of his services and the salaries paid to similarly
situated chief executive officers. 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.
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.
The Compensation Committee of the Board of Directors
Phillip Frost, Chairman Richard M. Krasno
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Compensation Committee Interlocks and Insider Participation
During fiscal 2002, the following directors served on the Compensation
Committee of the Board of Directors: Dr. Frost, Mr. Flanzraich and Dr. Krasno.
Dr. Frost is an executive officer and Chairman of the Board of Directors of IVAX
Corporation, and Mr. Flanzraich is an executive officer and director of IVAX.
Richard C. Pfenniger, Jr. is the Company's Chief Executive Officer and Vice
Chairman and a director of the Company and is also a director of IVAX.
INDEPENDENT AUDITORS
Ernst & Young, LLP, independent auditors, was appointed by the Board of
Directors to audit the Company's financial statements for fiscal 2002. This firm
has acted as independent auditors 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 2002, 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 $167,500.
Financial Information Systems Design and Implementation Fees
There were no professional services rendered by Ernst & Young, LLP in the
year ended March 31, 2002 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, 2002 were approximately $24,800, including
audit related services of $9,800 and non-audit services of $15,000. Audit
related services generally include fees for assistance with new accounting
pronouncements. Non-audit services include a review of the federal income tax
return and other tax consulting services.
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.
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Report of the Audit Committee of the Board of Directors
The following report of the Company's Audit 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 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.
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 accounting principles generally accepted in the United
States of America. Our responsibility is to independently monitor and review
these processes. We must rely, without independent verification, on the
information provided to us and on the representations made by management and the
independent auditors. Accordingly, although we consult with and discuss these
matters and our questions and concerns with management and our independent
auditors, our oversight can 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 can 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 accounting principles generally accepted in the
United States of America or that the Company's auditors are in fact
"independent."
In this context, we held four meetings during fiscal 2002. 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, 2002 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). Our discussion also included a discussion
of the background and experience of the Ernst & Young audit personnel assigned
to the Company and the quality control procedures established by Ernst & Young.
15
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 both separately and in the aggregate.
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,
2002 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 2003 Annual Meeting
Any shareholder proposals intended to be presented at the Company's 2003
annual meeting of shareholders must be received by the Secretary, Whitman
Education Group, Inc., 4400 Biscayne Boulevard, Miami, Florida 33137, no later
than March 18, 2003, 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 2003 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.
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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.
/s/Fernando L. Fernandez
Fernando L. Fernandez
Secretary
July 15, 2002
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