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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
For the fiscal year ended August 31, 1999
Commission file number 000-29820
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-119(c) or Section
230.14a-12
Argosy Education Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 142-6(I)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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Argosy Education Group, Inc.
Two First National Plaza
20 South Clark Street, Third Floor
Chicago, Illinois 60603
December 28, 1999
Fellow Stockholders:
It is my pleasure to invite you to Argosy Education Group's 2000 Annual
Meeting of Stockholders.
Date: Friday, January 28, 2000
Time:1:00 p.m.
Place: The Northern Trust
50 South LaSalle Street
6th Floor Assembly Room
Chicago, IL 60675
At our Annual Meeting, you will have the opportunity to vote to:
.Elect directors; and
.Ratify the appointment of Arthur Andersen LLP as the Company's independent
certified public accountants for the fiscal year ending August 31, 2000.
In addition to the formal items of business, we will review the major
developments of 1999 and answer any questions that you may have about the
Company or its activities.
This letter is your notice of the Annual Meeting and is being sent to
stockholders of record as of the close of business on December 17, 1999, who
are the only holders entitled to notice of and to vote at the Annual Meeting
and any adjournments or postponements thereof.
It is important that your shares be represented at the meeting. Please sign,
date and return the enclosed proxy card in the enclosed envelope, even if you
plan to attend the meeting. If you do attend the meeting, you may personally
vote, which will revoke your signed proxy. You may also revoke your proxy at
any time before the meeting by following the instructions in the proxy
statement.
We look forward to seeing you at the meeting.
Sincerely,
Michael C. Markovitz
Chairman of the Board
<PAGE>
PROXY STATEMENT FOR
ARGOSY EDUCATION GROUP, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Where Can I Get More Information?.......................................... 1
PROXY STATEMENT FOR ARGOSY EDUCATION GROUP, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS...................................... 2
Information About the Annual Meeting and Voting............................ 2
*About this Proxy Statement.............................................. 2
*Number of Votes......................................................... 2
*The Quorum Requirement.................................................. 2
*Voting By Proxy......................................................... 2
*Revoking Your Proxy..................................................... 3
*Voting in Person........................................................ 3
*Approving the Proposals................................................. 3
--Proposal I........................................................... 3
--Proposal II.......................................................... 3
--The Effect of Broker Non-Votes....................................... 3
*The Cost of Soliciting Proxies.......................................... 3
Proposals.................................................................. 4
*Proposal I:Election of Directors........................................ 4
*Proposal II: Ratifying the Appointment of Arthur Andersen LLP as the
Company's Independent
Certified Public Accountants for the Fiscal Year Ending August
31, 2000................................................................ 4
The Board of Directors..................................................... 4
--Director Nominees.................................................... 5
*Committees of the Board................................................. 5
*Director Compensation................................................... 6
*Executive Officers...................................................... 6
*Certain Relationships and Related Transactions.......................... 6
--Management Agreement................................................. 6
--Note Receivable...................................................... 7
--Business Acquisition................................................. 7
--Distributions........................................................ 7
--Related Entity....................................................... 7
--Indemnification of Directors and Officers............................ 7
*Compliance with Section 16(a) Beneficial Ownership Reporting
Requirements............................................................ 7
Security Ownership of Management and Principal Stockholders................ 8
Executive Compensation and Certain Transactions............................ 9
*General................................................................. 9
*Summary Compensation Table.............................................. 9
*Option Grants in Last Fiscal Year....................................... 10
*Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Option Values........................................................... 10
--Stock Plans.......................................................... 10
The 1999 Stock Incentive Plan........................................ 10
Stock Purchase Plan.................................................. 11
401(k) Plan.......................................................... 12
Compensation Committee Report on Executive Compensation.................... 13
Performance Graph.......................................................... 14
Submission of Stockholders' Proposals and Additional Information........... 15
</TABLE>
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WHERE CAN I GET MORE INFORMATION?
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference facilities at
450 Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. You can also obtain copies of the
documents at prescribed rates by writing to the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
facilities.
Enclosed with this Proxy is a copy of Argosy Education Group's Annual Report
on Form 10-K for the fiscal year ended August 31, 1999, along with its
accompanying financial statements and schedules. If you would like copies of
any other recently filed documents, please direct your request to Summit
Consulting Group, Inc., 150 North Michigan Avenue, Suite 1000, Chicago,
Illinois 60601.
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PROXY STATEMENT FOR
ARGOSY EDUCATION GROUP, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
About this Proxy Statement
We have sent you this Proxy Statement and the enclosed proxy card because
Argosy Education Group's Board of Directors is soliciting your proxy to vote at
the 2000 Annual Meeting of Stockholders. This Proxy Statement summarizes the
information that you will need in order to vote intelligently at the Annual
Meeting. However, you need not attend the Annual Meeting in order to vote your
shares. You may instead simply complete, sign and return the enclosed proxy
card to register your vote.
We sent this Proxy Statement and the enclosed proxy card on December 28,
1999 to all stockholders who owned Argosy Education Group common stock at the
close of business on December 17, 1999, who are the only stockholders entitled
to vote at the Annual Meeting. For ten days prior to the Annual Meeting, a list
of Argosy Education Group's stockholders will be open for examination at Argosy
Education Group's headquarters by any stockholder for any reason relating to
the meeting. As of the record date, there were 6,952,185 shares of Argosy
Education Group common stock outstanding.
Number of Votes
Each share of Argosy Education Group class A common stock entitles you to
one vote on each proposal at the Annual Meeting. Each share of Argosy Education
Group class B common stock entitles you to ten votes on each proposal at the
Annual Meeting. As of the record date, there were 2,052,185 shares of class A
common stock outstanding and 4,900,000 shares of class B common stock
outstanding. The enclosed proxy card indicates the number of shares of Argosy
Education Group common stock that you own.
The Quorum Requirement
At the Annual Meeting, inspectors of election will determine whether there
is a quorum present. A quorum is required to conduct any business at the
meeting. For a quorum to be present, the holders of a majority of the
outstanding voting power of common stock must be present in person or by proxy.
If you mark your proxy card "abstain," or if your proxy is held in street name
by your broker and it is not voted on all proposals, your proxy will
nonetheless be counted as present for purposes of determining a quorum.
Voting By Proxy
Whether or not you plan to attend the Annual Meeting, please complete, sign
and date, and return the enclosed proxy card in the envelope provided.
Returning the proxy card will not affect your right to attend the Annual
Meeting and vote.
If you fill out your proxy card properly and return it in time to vote, your
proxy will vote your shares as you have directed. If you sign the proxy card
but do not make any specific indications of how you wish to vote, your proxy
will vote your shares
. ""FOR'' the election of the Directors;
. ""FOR'' ratifying the appointment of Arthur Andersen LLP as the Company's
independent certified public accountants for the fiscal year ending
August 31, 2000.
If any other matter is presented at the Annual Meeting, your proxy will vote
in accordance with his best judgement. We know of no matters to be addressed at
the Annual Meeting beyond those described in this Proxy Statement.
2
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Revoking Your Proxy
If you give a proxy, you may revoke it at any time before it is exercised.
You may revoke your proxy in the following ways:
. You may send in another proxy with a later date.
. You may notify Argosy Education Group's CFO in writing before the Annual
Meeting.
. You may attend the meeting and vote in person.
Voting In Person
If you plan to attend the Annual Meeting and vote in person, we will give
you a ballot when you arrive. However, if your shares are held in the name of
your broker, bank, or other nominee, you must bring an account statement or
letter from the nominee indicating that you are the beneficial owner of the
shares on December 17, 1999, the record date for voting.
Approving the Proposals
Proposal I: Election of Directors
At the Annual Meeting, the nominees for Director receiving the greatest
number of votes cast in person or by proxy will be elected. If you are present
and do not vote, or if you send in your proxy marked "withheld," your vote will
have no impact on the election of those directors as to whom you have withheld
votes.
Proposal II: Ratifying the Appointment of Arthur Andersen LLP as the
Company's Independent Certified Public Accountants for the Fiscal
Year Ending August 31, 2000
In order to be approved, all other matters to be voted on, including
ratifying the appointment of independent accountants, require the affirmative
vote of a majority of the shares entitled to vote at the meeting, cast either
in person or by proxy. If you attend the meeting but do not vote, or if you
send in your proxy marked "abstain," your abstention will have no impact on the
appointment of independent accountants.
The Effect of Broker Non-Votes
Under the rules of the Nasdaq Stock Market, if your broker holds your shares
in its name, the broker will be entitled to vote your shares on the Proposals
even if it does not receive instructions from you. If your broker does not vote
your shares on any of the proposals, such "broker non-votes" will not be
counted for purposes of determining whether the proposal has received enough
affirmative votes to be approved.
The Cost of Soliciting Proxies
Argosy Education Group will pay all of the costs of soliciting these
proxies. In addition to mailing proxy solicitation material, our directors and
employees may also solicit proxies in person, by telephone or by other
electronic means of communication. Argosy Education Group will not compensate
these directors and employees additionally for this solicitation, but Argosy
Education Group may reimburse them for any out-of-pocket expenses which they
incur in the process of soliciting the proxies. We will arrange for brokers and
other custodians, nominees and fiduciaries to forward the solicitation
materials to their principals, and Argosy Education Group will reimburse them
for any out-of-pocket expenses which they reasonably incur in the process of
forwarding the materials.
3
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PROPOSALS
The Board of Directors is soliciting your vote with respect to each of the
following proposals. The Company does not expect any other matters to come
before the meeting; however, if another matter is voted upon, your proxy will
vote your shares in accordance with his best judgment. The Board of Directors
recommends that you vote "FOR" each of the following proposals:
Proposal I: Election of Directors
The Board has nominated Michael C. Markovitz, Harold J. O'Donnell, Theodore
J. Herst, Karen M. Knab, Michael W. Mercer, Kalman K. Shiner and Leslie M.
Simmons as directors to be elected at the 2000 Annual Meeting. Each nominee is
currently serving as one of our directors. Certain information regarding these
nominees and each of the other directors is set forth below under the caption
"The Board of Directors." If you re-elect them, they will hold office until the
Annual Meeting in 2001 or until their successors have been elected.
We know of no reason why any of these nominees may be unable to serve as a
director. If a nominee is unable to serve, your proxy may vote for another
nominee proposed by the Board. If any director resigns, dies or is otherwise
unable to serve out a complete term, or the Board increases the number of
directors, the Board may fill the vacancy through a majority vote of those
serving at that time.
Proposal II: Ratifying the Appointment of Arthur Andersen LLP as the Company's
Independent Certified Public Accountants for the Fiscal Year Ending
August 31, 2000
The Board has appointed Arthur Andersen LLP as the independent certified
public accountants for Argosy Education Group. If this appointment is approved,
Arthur Andersen LLP will audit the books and accounts for Argosy Education
Group for the year ending August 31, 2000. Arthur Andersen audited the
financial statements of Argosy Education Group for the year ended August 31,
1999. We expect representatives of Arthur Andersen LLP to attend the Annual
Meeting, where they will have the opportunity to make a statement if they wish,
and where they will be available to answer any relevant questions that you may
have.
If the appointment of Arthur Andersen LLP as independent accountants for
fiscal 2000 is not ratified by stockholders, the adverse vote will be
considered a direction to the Board to consider other accountants for next
year. However, because of the difficulty in making any substitution of auditors
so long after the beginning of the current year, the appointment for fiscal
2000 will stand unless the Board finds other good reason for making the change.
THE BOARD OF DIRECTORS
The Board of Directors of Argosy Education Group oversees the business and
other affairs of Argosy Education Group and monitors the performance of
management. In accordance with corporate governance principles, the Board does
not involve itself in the day-to-day operations of Argosy Education Group. The
directors keep themselves informed through discussions with the Chairman, other
key executives and our principal external advisors (such as legal counsel,
independent accountants, investment bankers, and other consultants), by reading
reports and other materials that we send them and by participating in Board
meetings.
There are currently seven directors on Argosy Education Group's Board. The
Directors are all in one class with a one-year term of service expiring
annually.
The Board held four meetings in fiscal 1999. All of the directors attended
75% or more of the Board meetings during their period of service.
4
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Director Nominees
Michael C. Markovitz, age 49, Ph.D., has served as Chairman of the Board of
the Company since its inception. In 1976, Dr. Markovitz co-founded the Illinois
School of Professional Psychology and, during the developmental years of the
school, also served as President. After purchasing the interests of the co-
founders of the Illinois School of Professional Psychology, Dr. Markovitz
oversaw the growth of the original single campus school into the multi-campus
American Schools of Professional Psychology. From 1978 to 1986, Dr. Markovitz
was a lecturer in Management at Northwestern University and is the author of
the "BBP Guide to Human Resource Management" (1982), a textbook regarding
personnel management. Dr. Markovitz received his doctoral degree in psychology
from the University of Chicago and has been an active member of the American
Psychological Association and the National Council of Schools of Professional
Psychology.
Harold J. O'Donnell, age 69, Ph.D., has served as President of the Company
since 1992 and has been a Director since February 1999. Dr. O'Donnell announced
that he will retire as President of the Company in February 2000, however, he
will retain his position as Director. From 1976 to 1991, Dr. O'Donnell served
in a series of management positions with Apollo Group, Inc., a for-profit
education company, including Director of the Southern California Program of
Institute for Professional Development (1976 to 1979), Executive Vice President
of Institute for Professional Development (1979 to 1982), Executive Vice
President of University of Phoenix (1979 to 1987) and Provost of University of
Phoenix (1987 to 1992). From 1974 to 1976, Dr. O'Donnell served as Deputy
Manpower Director for the Long Beach Commission on Economic Opportunity. Dr.
O'Donnell has served as an adviser to colleges and universities in California,
Indiana, Illinois and Florida involving developmental and regional
accreditation issues with accrediting bodies such as NCA, SACS and the Western
Association of Schools and Colleges. Dr. O'Donnell received his doctoral degree
in educational administration from the University of Notre Dame and his
master's degree in English literature from Catholic University of America. He
continued his postdoctoral training in programs at Stanford University, the
University of California at Los Angeles and the University of San Francisco.
Theodore J. Herst, age 75, has been a Director of the Company since its
inception. Mr. Herst is a co-founder of the Illinois School of Professional
Psychology and past Chairman of the Board of the Illinois School of
Professional Psychology. Since 1988, Mr. Herst has been retired from the
practice of law.
Karen M. Knab, age 51, has been a Director of the Company since 1986. Ms.
Knab has been a member of the Board of Directors of U of S since 1995. Since
January 1996, Ms. Knab has been the Executive Officer of the law firm of
Sutherland, Asbill and Brennan. From 1993 to 1996, she was the Managing Partner
of the Washington, D.C. office of The Peers Group, a consulting firm.
Michael W. Mercer, age 48, Ph.D., has been a Director of the Company since
1986. Dr. Mercer is currently in private practice as a psychologist and is the
author of several books on psychology. He is the past President of the Illinois
Psychological Association.
Kalman K. Shiner, C.P.A., age 57, has been a Director of the Company since
June 1998. Mr. Shiner is currently the Managing Director of the accounting firm
of Ostrow, Reisin, Berk & Abrams, Ltd.
Leslie M. Simmons, age 70, has been a Director of the Company since 1981.
Mr. Simmons has been a member of the Board of Directors of U of S since 1995.
Mr. Simmons is Chairman of the Board of Directors of Apollo Steel Corporation,
a manufacturing company.
Committees of the Board
The Board of Directors currently has three standing committees--a
Compensation Committee, an Audit Committee and an Investment Committee. A
majority of the members of each of these committees are independent directors.
5
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The Compensation Committee recommends action to the Board regarding the
salaries and incentive compensation of elected officers of the Company and
administers the Company's bonus plans and Stock Plans. The Compensation
Committee is currently comprised of Michael C. Markovitz (Chairman), Karen M.
Knab and Leslie M. Simmons. The Compensation Committee met two times following
its formation during fiscal 1999.
The Audit Committee makes recommendations to the Board regarding the
selection, retention and termination of the Company's independent auditors and
reviews the annual financial statements of the Company and the Company's
internal controls. Arthur Andersen LLP currently serves as Argosy Education
Group's independent accountants. The Audit Committee is currently comprised of
Michael C. Markovitz (Chairman), Theodore J. Herst and Kalman K. Shiner.
The Investment Committee makes recommendations to the Board regarding the
acquisition of additional schools. The Investment Committee is currently
comprised of Michael C. Markovitz (Chairman), Michael W. Mercer and Kalman K.
Shiner.
Argosy Education Group has no nominating committee. The entire Board is
responsible for filling vacancies which occur on the Board and for recommending
candidates for election as directors at the Annual Meeting.
Director Compensation
The Company pays Directors $1,000 for attending each Board meeting. Under
the Company's 1999 Stock Incentive Plan, each Director has been granted options
to purchase 4,000 shares of Class A Common Stock at the fair market value
thereof on the date of grant. Additionally, Directors of the University of
Sarasota, the Medical Institutes of Minnesota and PrimeTech are compensated in
the form of annual grants of options to purchase 1,000 shares of Class A Common
Stock at the fair market value thereof on the date of grant. All directors are
reimbursed for all travel-related expenses incurred in connection with their
activities as directors.
Executive Officers
In addition to Michael C. Markovitz and Harold J. O'Donnell, Charles T.
Gradowski is an officer of the company but not a director.
Charles T. Gradowski, C.P.A., age 50, has served as Chief Financial Officer
of the Company since 1995. Mr. Gradowski served as Controller at Clipper
Exxpress, a freight forwarder, from 1988 to 1995. Mr. Gradowski received his
bachelor's degree and a master's in business administration from the University
of Illinois.
The Board of Directors elects officers annually and such officers serve at
the discretion of the Board of Directors.
Certain Relationships and Related Transactions
Management Agreement
The Company has historically paid certain management fees from time to time
to MCM Management Corp., a company wholly owned by Michael C. Markovitz, the
Company's Chairman, for services rendered. Dr. Markovitz is the sole
shareholder and employee of MCM Management Corp. Prior to the initial public
offering, he did not receive any compensation for services rendered to the
Company, other than through the management fee the Company paid MCM Management
Corp. Through MCM Management Corp., Dr. Markovitz provided services
characteristic of a principal executive officer, including strategic direction
and oversight for the Company, daily management oversight, consultation on
business acquisitions and other corporate business matters. Such amounts
totaled $0.7 million during fiscal 1999. These amounts represent the only
business transactions between the Company and MCM Management Corp. during such
time period.
6
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Note Receivable
On August 30, 1998, Dr. Markovitz issued a note to the Company in the form
of a capital contribution totaling $6,000,000, secured by his stock in the
Company, which bore interest at a rate of 4.33% and was due upon demand. The
note and accrued interest thereon were repaid in full as of December 10, 1998.
As of August 31, 1998, the Company had loaned approximately $165,000 to
Prime Tech, an entity then one-third owned by Dr. Markovitz. The note is
unsecured and bears interest at 8.0%. The Company purchased 100% of Prime Tech
on November 30, 1998.
Business Acquisition
On November 30, 1998, the Company completed the acquisition of PrimeTech.
Dr. Markovitz initially acquired a one-third interest in PrimeTech in November
1995 and, together with the other owners, sold his interest to the Company. The
aggregate purchase price was determined by arms-length negotiations between the
other owners on behalf of themselves and Dr. Markovitz, on the one hand, and
representatives of the Company (other than Dr. Markovitz), on the other hand.
Distributions
The Company made distributions to Dr. Markovitz in the amount of $14.2
million in fiscal 1999.
Related Entity
Dr. Markovitz indirectly owned and operated Illinois Alternatives, Inc.
("Illinois Alternatives One"), a company formed by him in 1994 to provide
social work case management on behalf of the Illinois Department of Children
and Family Services for children in need of psychological treatment. Effective
December 31, 1997, the business of Illinois Alternatives One was transferred to
IA Acquisition Corporation, which assumed the name "Illinois Alternatives,
Inc." ("Illinois Alternatives Two"), 30% of the stock of which is owned by Dr.
Markovitz. The Company has historically paid certain administrative and other
expenses on behalf of Illinois Alternatives Two. The total amount owed to the
Company from Illinois Alternatives Two for such advances was approximately
$49,000 August 31, 1999. The largest amount of these advances outstanding at
any one time in fiscal 1999 was approximately $155,000. Illinois Alternatives
Two paid a management fee to the Company of approximately $72,000 fiscal 1999
related to such services.
Indemnification of Directors and Officers
Argosy Education Group has agreed to provide indemnification for its
directors and executive officers beyond the indemnification provided for in
Argosy Education Group's Amended and Restated Certificate of Incorporation and
By-laws.
Compliance With Section 16(a) Beneficial Ownership Reporting Requirements
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors, executive officers, and greater-than-10% stockholders to file
reports with the SEC regarding changes in their beneficial ownership of Argosy
Education Group common stock and to provide Argosy Education Group with copies
of the reports. Based on our review of these reports and of certifications
furnished to us, we believe that all of these reporting persons complied with
their filing requirements for 1999. Except that Harold J. O'Donnell and Kalman
K. Shiner purchased shares and filed late Form 5s with respect to such
purchases.
7
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SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The table below sets forth certain information regarding the equity
ownership of the Company as of August 31, 1999 by (i) each person or entity
known to the Company who beneficially owns five percent or more of a class of
Common Stock of the Company, (ii) each Director and Named Executive Officer of
the Company and (iii) all Directors and executive officers of the Company as a
group. Unless otherwise stated, each of the persons named in the table has sole
voting and investment power with respect to the securities beneficially owned
by him or her as set forth opposite his or her name.
<TABLE>
<CAPTION>
Shares of Common Stock(a)
--------------------------
Percent
Number Number of of
of Class Class Voting
Name A Shares B Shares Power
- ---- -------- --------- -------
<S> <C> <C> <C>
5% STOCKHOLDERS
Michael C. Markovitz (b)............................ 4,000 4,900,000 96.1
State Retirement and Pension System of Maryland (c). 306,000 1.0
DIRECTORS AND OFFICERS
Michael C. Markovitz................................ 4,000 4,900,000 96.1
Harold J. O'Donnell................................. 22,000 *
Charles T. Gradowski................................ 21,000 *
Theodore J. Herst................................... 4,000 *
Karen M. Knab....................................... 5,000 *
Michael W. Mercer................................... 4,000 *
Kalman K. Shiner.................................... 6,800 *
Leslie M. Simmons................................... 5,000 *
All executive officers and directors as a group
(eight persons).................................... 71,800 4,900,000 96.2
</TABLE>
- --------
*represents less than 1% of the total.
(a) Calculation of percentage of beneficial ownership assumes the exercise of
all warrants and options exercisable within 60 days of the date hereof only
by the respective named stockholder.
(b) The address of such person is 20 South Clark Street, Third Floor, Chicago,
Illinois 60603.
(c) The address of State Retirement and Pension System of Maryland is 301 West
Preston Street, Room 901A, Baltimore, MD 21201.
8
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EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS
General
Executive officers of the Company are elected by and serve at the discretion
of the Board. The following table sets forth in summary form information
concerning the compensation awarded to Michael C. Markovitz, Harold J.
O'Donnell and Charles T. Gradowski (collectively, the "Named Executive
Officers") for all services rendered in all capacities to the Company and its
subsidiaries for the fiscal year ended August 31, 1999. No other executive
officer of the Company earned more than $100,000 in total compensation for
fiscal 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------- Securities
Name and Principal Other Annual Underlying
Position Year Salary (a) Bonus Compensation (c) Options
- ------------------ ---- ---------- ------ ---------------- -----------
<S> <C> <C> <C> <C> <C>
Michael C. Markovitz..... 1999 $ 97,180 -- 14,888,300 (b) --
Chairman
Harold J. O'Donnell...... 1999 150,000 75,000 13,500 63,000
President
Charles T. Gradowski..... 1999 110,000 35,000 8,700 63,000
Chief Financial Officer
</TABLE>
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(a) May include amounts earned in a fiscal year but deferred at the named
executive officer's election pursuant to the Company's 401(k) Plan.
(b) Dr. Markovitz, as the Company's sole shareholder, received other annual
compensation of $14,214,620 from the Company in fiscal 1999 in the form of
cash distributions out of the Company's accumulated earnings and profits.
In addition, MCM Management Corp., an affiliate of Dr. Markovitz, received
payments of $667,849 in fiscal 1999 for services performed by Dr.
Markovitz. Dr. Markovitz is the sole shareholder and employee of MCM
Management Corp. Prior to the initial public offering, he did not receive
any compensation for services rendered to the Company, other than through
this management fee through MCM Management Corp. Dr. Markovitz provided
strategic direction and oversight for the Company, daily management
oversight, consultation on business acquisitions and other corporate
business matters in addition to services characteristic of a principal
executive officer. Upon completion of the Offering, the relationship with
MCM Management Corp. was terminated, and Dr. Markovitz has become an
employee of the Company. Dr. Markovitz has entered into an employment
agreement which provides for an initial annual base salary from the Company
of $200,000 plus performance-based compensation, which is currently
intended to be in the form of stock options.
(c) Includes matching contributions made by the Company under its 401(k) Plan.
9
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Option Grants in Last Fiscal Year
The following table shows information regarding stock options granted by the
Company to the Named Executives during the Company's last fiscal year:
<TABLE>
<CAPTION>
Potential Realizable Value at
Number of % of Total Market Assumed Annual Rates of Stock
Securities Option Price Price Appreciation
Underlying Granted in Exercise or on Date for Option Term (b)
Options Fiscal Base Price of Expiration -------------------------------
Name Granted Year ($/Share) Grant Date (a) 0% 5% 10%
- ---- ---------- ---------- ----------- ------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael C. Markovitz.... -- --% $14.00 $12.375 3/19/09 $-- $ -- $ --
Harold J. O'Donnell..... 63,000 11.3 14.00 12.375 3/19/09 -- 387,927 1,140,146
Charles T. Gradowski.... 63,000 11.3 14.00 12.375 3/19/09 -- 387,927 1,140,146
</TABLE>
- --------
(a) Options may expire earlier pursuant to the terms of the 1999 Stock
Incentive Plan.
(b) Amounts reflect certain assumed rates of appreciation set forth in the
SEC's executive compensation disclosure rules. Actual gains, if any, on
stock option exercises depend on future performance of the Company's stock
and overall market conditions. At an annual rate of appreciation of 5% per
year for the option term, the price of the common stock would be
approximately $20.16 per share at the Expiration Date. At an annual rate of
appreciation of 10% per year for the option term, the price of the common
stock would be approximately $32.10 per share at the Expiration Date.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table shows information for the Named Executives concerning
stock option exercises during the Company's last fiscal year and options
outstanding at the end of the last fiscal year:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options at FY-
Shares Acquired Options at FY-End End (a)
Name on Exercise Value Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ---- --------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Michael C. Markovitz.... 0 $ 0 0/0 $0/0
Harold J. O'Donnell..... 0 0 21,000/42,000 0/0
Charles T. Gradowski.... 0 0 21,000/42,000 0/0
</TABLE>
- --------
(a) Assumes a fair market value of the common stock at August 31, 1999 equal to
$7.50 per share.
Stock Plans
The 1999 Stock Incentive Plan. Argosy Education Group's 1999 Stock Plan
provides for the issuance of the following types of incentive awards: stock
options, stock appreciation rights, restricted stock, performance grants and
other types of awards that the Compensation Committee deems consistent with the
purposes of the 1999 Stock Plan. The 1999 Stock Plan is administered by the
Compensation Committee. Certain employees, directors, officers, advisors and
consultants of the Company will be eligible to participate in the 1999 Stock
Plan ("Participants"). The Compensation Committee is authorized under the 1999
Stock Plan to select the Participants and determine the terms and conditions of
the awards under the 1999 Stock Plan. An aggregate of 750,000 shares of Class A
Common Stock of the Company was reserved for issuance under the 1999 Stock
Plan.
Options granted under the 1999 Stock Plan may be either incentive stock
options ("ISOs") or such other forms of non-qualified stock options ("NQOs") as
the Compensation Committee may determine. ISOs are
10
<PAGE>
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Code. The exercise price of (i) an ISO granted to an individual who
owns shares possessing more than 10% of the total combined voting power of all
classes of stock of the Company (a "10% Owner") will be at least 110% of the
fair market value of a share of Class A Common Stock on the date of grant and
(ii) an ISO granted to an individual other than a 10% Owner and an NQO will be
at least 100% of the fair market value of a share of Class A Common Stock on
the date of grant.
Options granted under the 1999 Stock Plan may be subject to time vesting and
certain other restrictions at the sole discretion of the Compensation
Committee. Subject to certain exceptions, the right to exercise an option
generally will terminate at the earlier of (i) the first date on which the
initial grantee of such option is not employed by the Company for any reason
other than termination without cause, death or permanent disability or (ii) the
expiration date of the option. If the holder of an option dies or suffers a
permanent disability while still employed by the Company, the right to exercise
all unexpired installments of such option shall be accelerated and shall vest
as of the latest of the date of such death, the date of such permanent
disability and the date of the discovery of such permanent disability, and such
option shall be exercisable, subject to certain exceptions, for 180 days after
such date. If the holder of an option is terminated without cause, to the
extent the option has vested, such option will be exercisable for 30 days after
such date.
All outstanding awards under the 1999 Stock Plan will terminate immediately
prior to consummation of a liquidation or dissolution of the Company, unless
otherwise provided by the Board. In the event of the sale of all or
substantially all of the assets of the Company or the merger of the Company
with another corporation, all restrictions on any outstanding awards will
terminate and Participants will be entitled to the full benefit of their awards
immediately prior to the closing date of such sale or merger, unless otherwise
provided by the Board.
The Board generally will have the power and authority to amend the 1999
Stock Plan at any time without approval of the Company's stockholders, subject
to applicable federal securities and tax laws limitations (including
regulations of the Nasdaq National Market).
Stock Purchase Plan. The Argosy Education Group, Inc. Stock Purchase Plan is
intended to give employees a convenient means of purchasing shares of Class A
Common Stock through payroll deductions. The Stock Purchase Plan is intended to
provide an incentive to participate by permitting purchases at a discounted
price. The Company believes that ownership of stock by employees will foster
greater employee interest in the success, growth and development of the
Company.
Subject to certain restrictions, each employee of the Company who is a U.S.
resident or a U.S. citizen temporarily on location at a facility outside of the
United States will be eligible to participate in the Stock Purchase Plan if he
or she has been employed by the Company for more than one year. Participation
will be discretionary for eligible employees. The Company has reserved 375,000
shares of Class A Common Stock for issuance in connection with the Stock
Purchase Plan. Employees may elect to participate and purchase stock on a
quarterly basis. Each participating employee contributes to the Stock Purchase
Plan by choosing a payroll deduction in any specified amount, with a specified
minimum deduction per payroll period. A participating employee may increase or
decrease the amount of such employee's payroll deduction, including a change to
a zero deduction, as of the beginning of any month. Elected contributions will
be credited to participants' accounts at the end of each calendar quarter.
The Company uses each participating employee's contributions to purchase
shares for the employee's share account as promptly as practicable after each
calendar quarter. The cost per share will be 90% of the lowest closing price of
the Class A Common Stock on the Nasdaq National Market during the quarter. The
number of shares purchased on each employee's behalf and deposited in his/her
share account will be based on the amount accumulated in such participant's
cash account and the purchase price for shares with respect to any calendar
quarter. Shares purchased under the Stock Purchase Plan will carry full rights
to receive dividends declared from time to time. A participating employee will
have full ownership of all shares in such employee's share account and may
withdraw them for sale or otherwise by written request to the Compensation
Committee
11
<PAGE>
following the close of each calendar quarter. Subject to applicable federal
securities and tax laws, the Board will have the right to amend or to terminate
the Stock Purchase Plan. Amendments to the Stock Purchase Plan will not affect
a participating employee's right to the benefit of the contributions made by
such employee prior to the date of any such amendment. In the event the Stock
Purchase Plan is terminated, the Compensation Committee will be required to
distribute all shares held in each participating employee's share account plus
an amount of cash equal to the balance in each participating employee's cash
account.
401(k) Plan. The Company has a tax-qualified employee savings and retirement
plan (the "401(k) Plan") covering all of the Company's full-time employees.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation up to the statutorily prescribed annual limit ($10,000 in 1999)
and have the amount of such reduction contributed to the 401(k) Plan. The
401(k) Plan provides for contributions to the 401(k) Plan by the Company on
behalf of all participants. The Company contributes an amount equal to 6% of an
eligible employee's annual earnings on a discretionary basis. The 401(k) Plan
is intended to qualify under Section 401 of the Code so that contributions by
employees or by the Company to the 401(k) Plan, and income earned on plan
contributions, are not taxable to employees until withdrawn, and so that
contributions by the Company will be deductible by the Company when made. The
trustees under the 401(k) Plan, at the direction of each participant, invest
such participant's assets in the 401(k) Plan in selected investment options.
12
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under the rules of the SEC, this Compensation Committee report is not deemed
to be incorporated by reference by any general statement incorporating this
Proxy Statement by reference into any filings with the SEC.
The following report has been submitted by the Compensation Committee of the
Board:
The Compensation Committee was established by the Board in connection with
the Company's initial public offering. The Compensation Committee is currently
comprised of Michael C. Markovitz, Karen M. Knab and Leslie M. Simmons.
The Compensation Committee is responsible (i) for reviewing the
recommendations of the Company's Chief Executive Officer on compensation levels
of all other officers of the Company and (ii) adopting and changing
compensation policies and practices of the Company and reporting its
recommendations to the full Board. In addition, the Compensation Committee is
responsible for the administration of the Company's stock plans. In reviewing
the Company's compensation programs, the Compensation Committee intends to
adhere to a compensation philosophy that (i) attracts and retains qualified
executives who will add to the long-term success of the Company, (ii)
contributes to the achievement of operational and strategic objectives, and
(iii) is commensurate with each executive's performance, level of
responsibility and overall contribution to the success of the Company. In
making its recommendations to the full Board concerning adjustments to
compensation levels, the Compensation Committee intends to consider the
financial condition and operational performance of the Company during the prior
year. The Compensation Committee expects the Company's executive compensation
program to consist of three principal components: (i) base salary; (ii) annual
bonus; and (iii) long-term equity incentives. The Committee has set forth below
a discussion as to how such compensation was determined.
Base Salary. The base salary for Fiscal 1999 for each of the executive
officers of the Company was determined based on the expected level of
responsibility of each and competitive market conditions. Such salaries were
initially established by the Chief Executive Officer and the President and
subsequently approved by the full Board.
Annual Bonus. Each of the executive officers of the Company were and are
eligible to earn a bonus based upon their performance during the applicable
period and the Company's performance generally.
Long-Term Equity Incentives. Prior to the completion of the IPO, the Company
adopted the 1999 Stock Incentive Plan. Under the 1999 Stock Incentive Plan, the
Compensation Committee was granted broad authority to award equity-based
compensation arrangements to any eligible employee, director, officer, advisor
or consultant of the Company. As of August 31, 1999, the Board had awarded
options to purchase an aggregate of 556,500 shares of common stock under the
1999 Stock Incentive Plan.
The foregoing report has been approved by all members of the Compensation
Committee.
Michael C. Markovitz (Chairman)
Karen M. Knab
Leslie M. Simmons
13
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return for Argosy Education Group, the NASDAQ Stock Market Index and an index
of peer companies selected by Argosy Education Group, since the common stock
became publicly traded on March 9, 1999. The graph assumes that the value of
the investment in the Company's common stock at its initial public offering
price of $14.00 per share and each index was $100.00 on March 9, 1999. The
companies in the peer group, all of which are education companies, are weighted
according to their market capitalization as of the end of each period for which
a return is indicated. Included in the peer group are Apollo Group Inc., ITT
Educational Services, Inc., DeVry, Inc., Education Management Corporation and
Strayer Education, Inc.
Comparison of the Cumulative Total Return Among Argosy Education Group, Inc.
the NASDAQ Stock Market (U.S.) Index and the peer companies selected
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
March 9, 1999 August 31, 1999
----------------- ---------------
<S> <C> <C>
Argosy Education Group, Inc. $100 $ 56
NASDAQ Stock Market (U.S.) $100 $114
Peer Index $100 $ 65
</TABLE>
- --------
(1) The closing sale price of the common stock on August 31, 1999 was $7.50 per
share, as reported by the Nasdaq National Market.
14
<PAGE>
SUBMISSION OF STOCKHOLDERS' PROPOSALS AND ADDITIONAL INFORMATION
Proposals of stockholders intended to be eligible for inclusion in the
Company's proxy statement and proxy card relating to the 2001 annual meeting of
stockholders of the Company must be received by the Company on or before the
close of business November 15, 2000. Such proposals should be submitted by
certified mail, return receipt requested.
The By-Laws provide that a stockholder wishing to present a nomination for
election of a director or to bring any other matter before an annual meeting of
stockholders must give written notice to the Company's Secretary not less than
60 days nor more than 90 days prior to the meeting and that such notice must
meet certain other requirements. Any stockholder interested in making such a
nomination or proposal should request a copy of the provisions of the By-Laws
from the Secretary of the Company.
15
<PAGE>
ARGOSY EDUCATION GROUP, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JANUARY 28, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Michael C. Markovitz and Harold
J. O'Donnell, and each or any of them, proxies of the undersigned, with full
power of substitution, to vote all of the shares of Argosy Education Group, Inc.
an Illinois corporation (the "Company") which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at The
Northern Trust Company, 50 South LaSalle Street, 6th Floor Assembly Room,
Chicago, Illinois, 60675 on Friday, January 28, 2000 at 1:00 p.m. (Central time)
or at any adjournment or postponement thereof, as shown on the voting side of
this card.
------------------------
See Reverse Side
------------------------
<PAGE>
[X] Please mark your votes as in this example.
This proxy will be voted as specified. If a choice is not specified, this
proxy will be voted FOR the nominees for Directors and FOR Proposal 2.
1. Election of All Nominees for Directors Listed Hereon.
Nominees: Michael C. Markovitz
Harold J. O'Donnell
Theodore J. Herst
Karen M. Knab
Michael W. Mercer
Kalman K. Shiner
Leslie M. Simmons
FOR WITHHELD
[_] [_]
For all nominees listed hereon, except vote withheld from the following
nominee(s):
_____________________________________________________________
2. Ratify the appointment of Arthur Andersen LLP as the independent
accountants of the Company for the 2000 fiscal year.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment
or postponement thereof.
This proxy should be dated, signed by the stockholder exactly as the
stockholder's name appears hereon and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate.
Please sign exactly as name(s) appear hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
_________________________________________
_________________________________________
Signature(s) Date
