The following table summarizes the value of the termination payments and benefits that our named executive officers would receive upon:
In each case, the amounts are determined as if the trigger event occurred on December 31, 20152018 and equity is valued based on the closing stock price of $1.99$3.20 on December 31, 2015.2018. This table excludes vested account balances under our 401(k) plan, which is generally available to all of our employees. The terms of the benefits are set forth in the employment agreements with each of theour named executive officers as described immediately following the table.
(1) | Since Ms. Ramentol’s last day of employment with the Company was February 1, 2018, the table only reflects termination payments to Messrs. Shaw, Meyers and Buchenot. |
(1)As Ms. Jameson and Messrs. McAlmont and Swisstack are no longer employed by the Company, the table only reflects termination payments to Messrs. Shaw and Meyers.(2) | All outstanding stock options, restricted stock and performance-based restricted stock granted by the Company to the named executive officers will become fully vested and immediately exercisable upon (i) a Change in Control (as defined below), (ii) an Involuntary Termination (as defined below) or (iii) upon the executive’s death or disability. |
(2)All outstanding stock options, restricted stock and performance-based restricted stock granted by the Company to the named executive officers will become fully vested and immediately exercisable upon (i) a Change in Control (as defined below), (ii) an Involuntary Termination (as defined below) or (iii) upon the executive’s death or disability. Vesting of the performance-based restricted stock upon a Change in Control is contingent upon the Company attaining the threshold operating income margin target.
(3) | Includes a cash payment equal to the Company’s estimate of the employer portions of the premiums that would be necessary to continue the executive’s health care benefits coverage until the first anniversary of the executive’s date of termination. |
(3)Includes a cash payment equal to the Company’s estimate of the employer portions of the premiums that would be necessary to continue the executive’s health care benefits coverage until the first anniversary of the executive’s date of termination.
(4)Includes an annual incentive compensation award for the year of termination based upon attainment of target levels.(4) | Consists of a lump sum payment equal to two times the sum of Mr. Shaw’s 2018 base salary and the target amount of his annual performance bonus for 2018. |
(5) | Includes an annual incentive compensation award under the MIC Plan for the year of termination based upon attainment of target levels. |
(6) | Consists of a lump sum payment equal to one and three-quarters times the sum of Mr. Meyer’s 2018 base salary and the target amount of his annual performance bonus for 2018. |
(7) | Consists of a lump sum payment equal to the sum of one and one-half times Mr. Buchenot’s 2018 base salary and the target amount of his annual performance bonus for 2018. Mr. Buchenot would also receive a lump sum payment of $18,495, which is the estimated employer portion of the premiums that would be needed to continue his health care coverage until December 31, 2019. |
Employment Agreements
The Company is party to employment agreements with each of our named executive officers.Messrs. Shaw, Meyers and Buchenot.
Employment Agreement dated November 7, 2018 with Scott M. Shaw
Employment Period. The agreement provides that Mr. Shaw will serve as our President and Chief Executive Officer through December 31, 2016.2020.
Compensation and Benefits. Mr. Shaw will receive a minimum annual base salary of $500,000, will be eligible to participate in the MIC Plan and, to the extent eligible, in all of our employee benefit plans, programs and arrangements that are established for, or made available to, our senior executives. The Company provides to Mr. Shaw a vehicle for his business and personal use and pays the associated costs, including automobile insurance, parking and fuel; Mr. Shaw is responsible for all taxes related to this benefit.
Involuntary Termination. In the event of an “Involuntary Termination” (as defined below) of Mr. Shaw’s employment, in addition to Mr. Shaw’s right to receive payment of all accrued and unpaid compensation and benefits due to him through the date of termination or resignation of employment, including any accrued unpaid bonuses for a completed year, we will pay him: (1) two times the sum of (a) his base salary, as is then in effect; and (b) the target amount of the annual performance bonus for him in the year in which the termination occurs; (2) two timesunreimbursed expenses for reasonable travel and other business expenses incurred by him through the averagedate of his annual incentive compensation award over the prior two years;termination; and (3) a cash amount equal to the Company’s estimate of theestimated employer portion of the premiums that would be necessary to continue his health care benefitsMr. Shaw’s coverage forunder the earlierCompany’s healthcare plan until the first anniversary of (A) one year and (B) the date on which he is coveredof termination (subject to proration should Mr. Shaw become insured under another group health plan.a subsequent healthcare plan). Mr. Shaw would receive the sum of these amounts from us in a lump-sum payment 60 days following his Involuntary Termination. In addition, Mr. Shaw willwould receive a prorated annual award under the MIC Plan for the year in which the Involuntary Termination occurs based on actual performance, payable at the time that awards are generally paid to employees for the applicable year.
Termination for Cause; Resignation Other than for Good Reason. In the event that Mr. Shaw’s employment is terminated by us for Cause or Mr. Shaw resigns from his employment other than for “Good Reason” (as defined below), we will pay him his accrued but unpaid base salary, unreimbursed expenses and employee benefits earned through the date of his termination, including, without limitation, any MIC Plan award due but not yet paid for a completed calendar year.
Death or Disability. In the event that Mr. Shaw dies or his employment is terminated as a result of his disability, we will pay him (or his estate, if applicable) his accrued but unpaid base salary and employee benefits earned through the date of his termination, including, without limitation, any MIC Plan award due but not yet paid for a completed calendar year. In addition, (i) Mr. Shaw will receive a prorated target MIC Plan award for the year of termination and (ii) all of Mr. Shaw’s outstanding stock options and restricted stock shall become fully vested, and stock options shall become immediately exercisable and remain exercisable for one year (or until the option’s normal expiration date, if earlier).
Change in Control. Upon a “Change in Control” (as defined below), we (or our successor) will continue the employment of Mr. Shaw for a period of two years commencing on the date of the Change in Control and ending on the second anniversary thereof. In addition, all of Mr. Shaw’s restricted stock and stock options will vest in full and the stock options will become immediately exercisable on the date of the Change in Control.
In the event that any payment or distribution by us to or for the benefit of Mr. Shaw pursuant to the terms of the employment agreement or otherwise would be considered a “parachute payment” and the amount of the parachute payment, after deduction of all relevant taxes, including excise taxes imposed by Section 4999 of the Internal Revenue Code, is less than the amount Mr. Shaw would receive if he was paid three times his average “base amount” less $1.00, then the aggregate amounts constituting the parachute payment will be reduced (or returned by Mr. Shaw if already paid to him) to an amount that will equal three times his average “base amount” less $1.00.
Noncompetition. Mr. Shaw is subject to a noncompetition restrictive covenant during the term of his employment and for a period of two years thereafter, although the covenant will not apply if his employment is terminated due to an Involuntary Termination.
Nonsolicitation. Mr. Shaw is subject to a nonsolicitation restrictive covenant of clients, employees and key consultants during the term of his employment and for one year thereafter.
Confidentiality. Mr. Shaw is subject to a confidentiality restrictive covenant of unlimited duration.
Waiver and Release. Our obligations upon a termination of employment under Mr. Shaw’s employment agreement are subject to Mr. Shaw executing and delivering a waiver and release of claims against us.
Employment Agreement dated November 7, 2018 with Brian K. Meyers
The terms of the Company’s employment agreement for Mr. Meyers isare identical to those set forth in Mr. Shaw’s employment agreement described above, except that: (a) Mr. Meyers will serve as Executive Vice President, Chief Financial Officer and Treasurer, and will receive a minimum annual base salary of $301,337.$340,000 and (b) in the event of an Involuntary Termination, each shallMr. Meyers will be entitled to receive a payment of one and one halfthree-quarters times the sum of (1) his annual base salary and average(2) the target amount of the annual incentive compensation award (as opposed to two times).performance bonus for him in the year in which the termination of employment occurs.
Employment Agreement dated April 3, 2019 with Stephen M. Buchenot
The terms of the Company’s employment agreement for Mr. Buchenot are identical to those set forth in Mr. Shaw’s employment agreement described above, except that: (a) Mr. Buchenot will serve as Senior Vice President of Campus Operations and will receive a minimum annual base salary of $289,893, (b) in the event of an Involuntary Termination, Mr. Buchenot will be entitled to receive a payment of one and one-half times the sum of (1) his annual base salary and (2) the target amount of the annual performance bonus for him in the year in which the termination of employment occurs and (c) Mr. Buchenot is not provided the use of an automobile. The employment agreement supersedes and replaces a Change in Control Agreement dated November 7, 2018 between the Company and Mr. Buchenot.
“Involuntary Termination” generally means the termination of the executive’s employment by the executive for Good Reason or by the Company without Cause.
Prior to a “Change in Control” (as defined below), “Cause” generally means any of the following: (i) the executive’s willful failure to perform his duties in any material respect, (ii) malfeasance or gross negligence in the performance of his duties, (iii) the executive’s conviction of a felony, (iv) the executive’s intentional or reckless disclosure of confidential information, (v) the executive’s commission of an act of sexual harassment that would normally constitute grounds for termination, or (vi) any other act or omission by the executive which is materially injurious to the financial condition or business reputation of the Company or any of its affiliates. The definition also requires that the Executiveexecutive be given 30 days’ notice to cure a breach of (i) and (ii) above. After a Change in Control, Cause would not include (v) and (vi) above.
“Good Reason” generally means the occurrence of any of the following without the executive’s written consent: (i) a reduction in the executive’s base salary or target annual incentive compensation award; (ii) an adverse change in the executive’s title, authority, duties or responsibilities; (iii) the relocation of the executive’s principal place of employment to a location more than 10 miles from West Orange, New Jersey; (iv) a failure by the Company to pay material compensation when due; or (v) a material breach of the Employment Agreementexecutive’s employment agreement by the Company. The definition also requires that the Company be given 10 days’ notice to cure any Good Reason that is susceptible to cure.
“Change in Control” generally means any of the following: (i) when a person directly or indirectly becomes the beneficial owner of 25% or more of either (1) the then outstanding common stock or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (other than any acquisition directly from the Company, by the Company, or by an employee benefit plan sponsored by the Company); (ii) when, during any period of 24 consecutive months, the individuals who constitute the boardBoard of directorsDirectors of the Company cease to constitute at least a majority thereof; (iii) when the shareholders approve a reorganization, merger or consolidation of the Company without the consent or approval of a majority of the boardBoard of directors;Directors; (iv) when there is a consummation of a merger, amalgamation or consolidation of the Company with any other corporation, the issuance of voting securities of the Company in connection with such a transaction or the sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation(unlesscorporation (unless there is no significant change in the beneficial ownership of the common stock); or (v) a complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company.
Separation Agreement with Deborah M. Ramentol
In connection with the retirement of Ms. Ramentol, the Company’s former Senior Group President, on February 1, 2018, the Company and Ms. Ramentol entered into a Separation and Release Agreement dated January 24, 2018 (the “Separation Agreement”), pursuant to which, in consideration for a release of claims, Ms. Ramentol received a lump sum cash payment of $284,387.25, subject to withholding. In addition, pursuant to the Separation Agreement, the Company paid the employer-portion of the monthly premiums due for continuation of medical, dental and vision plan coverage for Ms. Ramentol and her family under COBRA through January 31, 2019 and 50,000 shares of restricted stock awarded by the Company to Ms. Ramentol became fully vested on the effective date of Ms. Ramentol’s retirement from the Company.
The following chart summarizes the compensation of the Company’s non-employee directors during the fiscal year ended December 31, 2015.2018. Following the table is a discussion of material factors related to the information disclosed in the table.
Name | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($) (1) | | | Total ($) | |
Alvin O. Austin | | | 58,000 | | | | 55,000 | | | | 113,000 | |
Peter S. Burgess | | | 68,500 | | | | 55,000 | | | | 123,500 | |
James J. Burke, Jr. | | | 49,000 | | | | 55,000 | | | | 104,000 | |
Celia H. Currin | | | 56,000 | | | | 55,000 | | | | 111,000 | |
Ronald Harbour | | | 42,000 | | | | 55,000 | | | | 97,000 | |
J. Barry Morrow | | | 68,000 | | | | 55,000 | | | | 123,000 | |
Douglas Del Grosso (2) | | | 29,000 | | | | 55,000 | | | | 84,000 | |
Charles F. Kalmbach (2) | | | 39,000 | | | | 55,000 | | �� | | 94,000 | |
Alexis P. Michas (2) | | | 63,000 | | | | 95,000 | | | | 158,000 | |
DIRECTOR COMPENSATION
Name | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($) | | | Total ($) | |
| | | | | (1) |
| | | |
J. Barry Morrow | | | 105,500 | | | | 40,000 | | | | 145,500 | |
Alvin O. Austin | | | 65,000 | | | | - | | | | 65,000 | |
Peter S. Burgess | | | 85,000 | | | | - | | | | 85,000 | |
James J. Burke, Jr. | | | 67,000 | | | | - | | | | 67,000 | |
Celia H. Currin | | | 69,500 | | | | - | | | | 69,500 | |
Ronald E. Harbour | | | 56,500 | | | | - | | | | 56,500 | |
| (1) | Represents the grant date fair value of a restricted stock awardsaward granted on May 1, 2015.3, 2018. The fair valuesvalue of these grants werethis grant was determined in accordance with FASB ASC Topic 718 (excluding the effect of estimated forfeitures) as determined based on applying the assumptions used in the Company’s financial statements. See Note 1 to the audited consolidated financial statements in our Annual Report on Form 10-K10-K/A for the year ended December 31, 2015,2018, regarding assumptions underlying the valuation of equity awards. These grants vestThis grant vests on the first anniversary of the award date, May 1, 2016.3, 2019. |
| (2) | Mr. Del Grosso and Mr. Kalmbach resigned, and Mr. Michas retired during 2015. As a result of their departures, their respective shares awarded in 2015 were forfeited. |
Compensation of Directors
In 2015,2018, the Company paid each of its non-employee directors an annual retainer of $40,000 for services to the Company. In addition, each non-employee director received $1,500 per board meeting attended in person or by telephone. Non-employee directors on committees of the board each received an additional payment of $1,500 for each committee meeting attended on a day other than the day of a board meeting for which that director has been compensated. The Audit Committee ChairmanChair received an additional $15,000 annual retainer and the chairpersons of each of the Nominating and Corporate Governance Committee and the Compensation Committee each received an additional $10,000 annual retainer.
J. Barry Morrow, our Non-Executive Chairman, received an additional annual retainer of $10,000. Mr. Morrow also received 24,123 shares of restricted common stock on May 1, 2015. The restricted stock will vest in full on May 1, 2016, the first anniversary of the grant date.
Alexis P. Michas, our former Non-Executive Chairman, received an additional annual retainer of $30,000. Mr. Michas also received 41,667 shares of restricted common stock on May 1, 2015, all of which shares were forfeited by him and cancelled upon his retirement from the board of directors on June 30, 2015.
Non-employee directors are also eligible to receive awards of shares of restricted common stock under the Amended and Restated 2005 Non-Employee Directors Restricted Stock Plan (the “Restricted Stock Plan”) as compensation for their services as directors.
Annual Grants of Restricted Stock. On the date of each annual meeting, each non-employee director shall automatically receivereceives an award of shares of restricted common stock equal to $55,000 (based on the fair market value of a share of the Company’s common stock on the date of grant) for service as a director of the Company, provided that such non-employee director continues to serve as a director of the Company immediately after such annual meeting. On May 1, 2015, 24,123
In 2018, the non-employee directors advised the full board that they believed it was in the best interests of the Company that they forgo the 2018 annual award of shares of restricted stock for the financial benefit of the Company. The restricted stock awards would otherwise have been awarded in May 2018 with vesting on the anniversary date of the grants. As a result, on May 3, 2018 only Mr. Morrow, our Non-Executive Chairman, received an award of 21,622 shares of restricted common stock, were awarded to each of our six non-employee directors.which will vest in full on May 3, 2019. The per share fair market value of a share of the Company’s common stock on May 1, 20153, 2018 was $2.28.$1.85.
All awards of common stock under the Amended and Restated 2005 Non-Employee Directors Restricted Stock Plan granted since 2010 vest on the first anniversary of the grant date. There is no vesting period on the right to vote or the right to receive dividends on these shares.
Audit Committee ReportAUDIT COMMITTEE REPORT
The Audit Committee assists the boardBoard of directorsDirectors in fulfilling its oversight responsibilities with respect to the Company’s financial reporting process, by monitoring, among other matters, the quality and integrity of the Company’s financial statements, the independence and performance of Deloitte & Touche LLP, (“D&T”), the Company’s independent registered public accounting firm, and the performance of the Company’s internal auditors. Management has primary responsibility for preparing the financial statements and for the reporting processes, including the design and maintenance of the Company’s system of internal controls. The independent registered public accounting firm is responsible for auditing the Company’s consolidated financial statements and opining upon the effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”). The Audit Committee is solely responsible for the compensation, appointment and oversight of the Company’s independent registered public accounting firm.
In this context, the Audit Committee has met and held discussions with management, the independent registered public accounting firm and the internal auditors, separately and together, with and without management present, regarding the Company’s audited consolidated financial statements as of December 31, 2015,2018, and for the year then ended and regarding the Company’s internal controls. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles in the U.S. The Audit Committee also discussed with the independent registered public accounting firm the matters required to be discussed by PCAOB Interim Auditing Standard No. 16 (Communications(Communications with Audit Committees)Committees). Further, the Audit Committee discussed with the internal auditors the Company’s plans for and scope of internal audits, identification of audit risks and results of audit activities.
The Audit Committee reviewed and discussed with the independent registered public accounting firm the auditor’s independence from the Company and its management. As part of that review, the Company’s independent registered public accounting firm submitted to the Audit Committee the written disclosures and the letter required by PCAOB Rule 3526 (Independence Discussions with Audit Committees) in which D&TDeloitte & Touche LLP affirmed its independence from the Company. Further, the Audit Committee discussed with D&TDeloitte & Touche LLP the firm’s independence and considered whether D&T’sthe firm’s provision of non-audit services to the Company was compatible with maintaining D&T’sthe firm’s independence. The Audit Committee concluded that D&TDeloitte & Touche LLP is independent from the Company and its management.
Based upon the considerations described above and subject to the limitations upon the role and responsibilities of the Audit Committee as set forth in the Audit Committee’s charter, the Audit Committee recommended to the boardBoard of directorsDirectors that the audited consolidated financial statements for the year ended December 31, 2015,2018, be included in the Company’s 20152018 Annual Report on Form 10-K.Report.
| AUDIT COMMITTEE |
| Peter S. Burgess, ChairmanChair |
| Celia H. Currin |
| Ronald E. Harbour |
| |
PROPOSAL 2:
NON-BINDING ADVISORY VOTE ON THE COMPANY’S COMPENSATION
COMPENSATION OF NAMED EXECUTIVE OFFICERS
Pursuant to the rules of the Securities and Exchange Commission adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we are providing shareholders with a non-binding advisory “say-on-pay” vote to approve the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis and tabular and narrative disclosures of this proxy statement.
We encourage shareholders to read the Compensation Discussion and Analysis beginning on page 1011 of this proxy statement, which describes how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative which provide detailed information on the compensation of our named executive officers. The Compensation Committee and the boardBoard of directorsDirectors believe that the policies and procedures articulated in this proxy statement are effective in achieving our goals.
The board unanimously recommends a vote for the following resolution:
“RESOLVED, that the shareholders hereby approve the compensation of the named executive officers as disclosed pursuant to Item 402 of Regulation S-K under the Securities Act of 1933, as amended, including the Compensation Discussion and Analysis, the accompanying compensation disclosure tables and any related narrative disclosure in this proxy statement.”
Although the vote on this Proposal 2 is advisory and non-binding, the Compensation Committee and the boardBoard of Directors will review the voting results on the proposal and will consider shareholder views in connection with our executive compensation program. At the 2018 Annual Meeting, approximately 99% of the votes cast on the say-on-pay proposal voted in favor of our NEO’s compensation.
Required Vote
A majority of the votes cast at the annual meetingAnnual Meeting will be required to approve on a non-binding advisory basis, the compensation of the Company’s Named Executive Officers.named executive officers.
Our boardBoard of directorsDirectors unanimously recommends a vote FOR the proposal to approve the compensation of the named executive officers described in this proxy statement. Proxies that are executed and returned will be voted FOR that proposal, except to the extent that particular proxies contain instructions to vote against, or to abstain from voting with regard to, that proposal.
PROPOSAL 3: APPROVAL OF THE COMPANY’S AMENDED AND RESTATED
2005 NON-EMPLOYEE DIRECTORS RESTRICTED STOCK PLAN
At its February 26, 2016 meeting, the board of directors unanimously approved, subject to shareholder approval, amending the Company’s 2005 Non-Employee Directors Restricted Stock Plan (the “Directors Plan”) to increase the aggregate number of shares of common stock available under the Plan from 700,000 shares to 1,000,000 shares (an increase of 300,000 shares). The Directors Plan was initially adopted in 2005 and amended in each of 2009, 2013 and 2015.
As described in greater detail below, the Directors Plan provides each non-employee director with an annual grant of restricted stock valued at $55,000 on the date of each annual meeting. The Non-Executive Chairman receives an additional annual grant of restricted stock valued at $40,000 on the date of each annual meeting (or $95,000 in total). The restricted stock grants represent approximately 50% of the total compensation paid to our non-employee directors as set forth above under “Director Compensation.”
Shareholder approval of the Directors Plan is required under the rules of NASDAQ.
As of March 18, 2016, there were only 41,854 shares of common stock available for issuance under the Directors Plan. The Company estimates that approximately 125,000 shares of common stock would be granted to our non-employee directors pursuant to the terms of the Plan upon the 2016 Annual Meeting (based upon a stock price of $3.00). Accordingly, without this amendment, there will not be a sufficient number of shares under the Directors Plan for all issuances at the 2016 Annual Meeting.
Summary of the Non-Employee Directors Restricted Stock Plan
The following is a summary of the principal provisions of the Directors Plan, but is not intended to be a complete description of all of its terms and provisions. This description is qualified by reference to the Plan document, which is attached to this proxy statement as Annex A.
Administration
The Directors Plan is administered by our Compensation Committee or such other committee appointed by our board. Our Compensation Committee has the authority to interpret and construe the provisions of the Directors Plan and to make all administrative rules, procedures and determinations with respect to the Directors Plan in accordance with the terms of the Plan. Our Compensation Committee may designate one or more of our employees to carry out the day-to-day aspects of our Compensation Committee's responsibilities under the Directors Plan.
Eligibility
Only directors who are not employees of our Company or any of our subsidiaries may participate in the Plan. As of the date of this proxy statement, we have six non-employee directors.
Number of Shares Available for Issuance
If amended pursuant to this proposal, the maximum number of shares of our common stock that may be issued for all purposes under the Directors Plan will be increased to an aggregate of 1,000,000 shares. Shares of our common stock issued under the Directors Plan may be either treasury shares or authorized and unissued shares.
Types of Awards
An award of restricted stock or restricted stock units may be made to a non-employee director under the Plan. Awards made under the Plan are granted for no consideration other than the provision of services or for such other consideration as our Compensation Committee may determine or as may be required by applicable law.
Restricted Stock Awards
As of the date of each annual meeting of our shareholders, each non-employee director will automatically receive an award of restricted shares of our common stock equal to $55,000 (based on the fair market value of a share of common stock on the date of grant). If a non-employee director (i) will not continue to serve as a director on our board immediately after the relevant annual meeting or (ii) became a director on our board within 60 days or less of the relevant annual meeting, then such non-employee director will not receive any annual award of restricted stock for such year.
Unless otherwise set forth in an award document, an award of restricted stock vests on the first anniversary of the date of grant, subject to our compensation committee's authority to accelerate the vesting of the award upon a Change in Control (as defined in the “Change in Control” section of Proposal 3). Restricted stock will not be transferable until the later of the date on which it becomes vested (other than by the laws of descent and distribution) and six months following the date of grant. A non-employee director will have the right to vote and receive dividends upon receiving an award of restricted stock.
Deferral Election; Restricted Stock Unit Awards
A non-employee director may be given the opportunity to make an irrevocable election to defer receipt of all or any portion of an award of restricted stock otherwise receivable by him or her. Any such election to defer must be made by the non-employee director within the time specified by our compensation committee no later than December 31st of the taxable year prior to the year in which the applicable award of restricted stock would otherwise be made to such director (except for the first year in which a Non-Employee Director becomes eligible to participate in the Plan, in which such Non-Employee Director must make a Deferral Election within 30 days after the date he or she becomes eligible to participate in the Plan). If a non-employee director makes such a deferral election, he will receive a number of restricted stock units in lieu of, and equal to, the number of shares of restricted stock that is subject to the deferral election. The restricted stock units will have substantially the same terms as the restricted stock.
No shares of common stock will be issued to the non-employee director upon vesting of the award of restricted stock units. Instead, the restricted stock units will be credited to the non-employee director's account under our deferral plan on the applicable vesting date. Any restricted stock units credited to the deferral plan will be held as restricted stock units until such time as they are settled through the delivery of shares of common stock. In addition, following vesting the non-employee director will be entitled to have any dividend equivalents earned as of the applicable vesting date that correspond to such restricted stock units distributed in whole shares of our common stock. Restricted stock units will not be transferable (other than by the laws of descent and distribution). A non-employee director will have no rights as a shareholder in our Company with respect to restricted stock units held by him until shares of our common stock underlying such units are distributed.
Currently, the Company does not provide non-employee directors with the opportunity to defer receipt of their restricted stock.
Termination of Service
In the event that a non-employee director's service on our board terminates, our compensation committee has the authority to accelerate the vesting of an award, which action may be taken at the time of grant or at a subsequent time. In the absence of any action by our compensation committee to the contrary, upon such termination of service, such non-employee director's award will, to the extent unvested, be immediately forfeited as of such date of termination.
Amendment and Termination; Term
Our board may, at any time, terminate, amend, modify or suspend the directors' plan, except that no amendment may be made (i) where required by applicable law or exchange rules, unless shareholder approval is obtained, or (ii) that adversely alters or affects the rights of a non-employee director with respect to any award outstanding without such director's consent. Unless terminated earlier, the directors' plan will terminate on the tenth anniversary of the date on which shareholders’ approval is obtained (May 1, 2025), except with respect to awards that are then outstanding.
Other Provisions
Adjustments or Changes in Capitalization. In the event of a stock split, reverse stock split, stock dividend, extraordinary cash dividends, recapitalization, reorganization, liquidation, merger or other similar corporate event or distribution of stock or property affecting the shares of Company common stock, the aggregate number of shares of available for issuance under the Plan, the various Plan limits, and the number of shares subject to, and exercise or grant price of, outstanding awards will be appropriately adjusted by the Compensation Committee in order to preserve the benefits or potential benefits intended to be made available to the participants.
Limited Transferability. Unless the Compensation Committee determines otherwise, restricted stock shall not be transferable other than by the laws of descent and distribution until such restricted stock has vested, but, in no event, prior to the expiration of a period of six (6) months from the grant date. Unless the Compensation Committee determines otherwise, restricted stock units shall not be transferable other than by the laws of descent and distribution.
Plan Benefits
The table below shows restricted stock that will be granted to all non-employee directors granted at the 2016 Annual Meeting on May 3, 2016 if Proposal 3 is approved by our shareholders. The number of shares will equal the dollar value of the award set forth below divided by the closing price of our common stock on the day prior to the grant date. If this Proposal 3 is not approved by our shareholders, the directors will receive a prorated grant based on the number of shares remaining eligible for issuance and the Company may be required to adjust the director compensation program for future years.
Name | | Dollar Value ($) | |
James J. Burke, Jr. | | $ | 55,000 | |
Peter S. Burgess | | $ | 55,000 | |
J. Barry Morrow | | $ | 95,000 | |
Celia H. Currin | | $ | 55,000 | |
Alvin O. Austin | | $ | 55,000 | |
Ronald E. Harbour | | $ | 55,000 | |
Non-Employee Director Group | | $ | 370,000 | |
U.S. Federal Tax Consequences
The following is a brief description of the federal income tax consequences generally arising with respect to certain awards that may be granted under the Directors Plan based on current tax laws. The summary does not include any state, local or foreign tax laws. This discussion is intended for the information of shareholders considering how to vote at the 2016 Annual Meeting and not as tax guidance to individuals who participate in the Plan.
Restricted Stock. A non-employee director will not recognize taxable income upon the grant of restricted stock. The non-employee director will recognize ordinary income at the time of vesting of the restricted stock equal to the fair market value of the shares received. Any subsequent gain or loss will be capital gain or loss, long-term if the shares have been held for more than one year. The non-employee director may instead elect to be taxed at the time of grant. If the non-employee director makes such an election, the one year long-term capital gains holding period begins on the date of grant. The Company generally will receive a deduction for any ordinary income recognized by a non-employee director with respect to an award.
Restricted Stock Units. PROPOSAL 3:A non-employee director will not recognize taxable income upon the grant of restricted stock units. The non-employee director will recognize ordinary income at the time the shares of common stock are delivered equal to the fair market value of the shares received. Any subsequent gain or loss will be capital gain or loss, long-term if the shares have been held for more than one year.
Other Information. The Company generally will receive a deduction for any ordinary income recognized by a non-employee director with respect to an award. As of March 14, 2016, the closing price of a share of our common stock was $2.84.
Required Vote
A majority of the votes cast at the annual meeting will be required to approve the amendment to the Company’s 2005 Non-Employee Directors Restricted Stock Plan.
Our board of directors unanimously recommends a vote FOR the proposal to approve the amendment to the Company’s 2005 Non-Employee Directors Restricted Stock Plan. Proxies that are executed and returned will be voted FOR that proposal, except to the extent that particular proxies contain instructions to vote against, or to abstain from voting with regard to, that proposal.
PROPOSAL 4: RATIFICATION OF APPOINTMENT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Deloitte & Touche LLP, which has served as the Company’s independent registered public accounting firm since 1999, to be the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016.2019. Deloitte & Touche LLP has advised the Company that it does not have any direct or indirect financial interest in the Company. Representatives of Deloitte & Touche LLP are expected to attend the annual meetingAnnual Meeting and will be given the opportunity to make a statement if they choose to do so. They will also be available to respond to appropriate questions.
Before appointing Deloitte & Touche LLP, the Audit Committee carefully considered Deloitte & Touche LLP’s qualifications, including the firm’s performance as independent registered public accounting firm for the Company in prior years and its reputation for integrity and competence in the fields of accounting and auditing. The Audit Committee also considered whether Deloitte & Touche LLP’s provision of non-audit services to the Company is compatible with its independence from the Company.
Shareholders will be asked at the annual meetingAnnual Meeting to ratify the appointment of Deloitte & Touche LLP. If the shareholders ratify the appointment, the Audit Committee may still, in its discretion, appoint a different independent registered public accounting firm at any time during the year 20162019 if it concludes that such a change would be in the best interests of the Company. If the shareholders fail to ratify the appointment, the Audit Committee will reconsider, but not necessarily rescind, the appointment of Deloitte & Touche LLP.
Fees Billed by Independent Registered Public Accounting Firm
As more fully described below, all services to be provided by Deloitte & Touche LLP are pre-approved by the Audit Committee, including audit services, tax services and certain other services.
The SEC requires disclosure of fees billed by the Company’s independent registered public accounting firm for certain services. The following table sets forth the aggregate fees billed and expected to be billed by Deloitte & Touche LLP duringfor professional services rendered for each of the years ended December 31, 2015 and 2014:past two years:
Fee Category | | 2015 | | | 2014 | | | 2018 | | | 2017 | |
Audit and Audit Related Fees | | $ | 1,091,778 | | | $ | 864,212 | | | $ | 1,033,500 | | | $ | 1,017,000 | |
Tax Fees | | | 160,190 | | | | 185,522 | | | | 158,000 | | | | 150,000 | |
All Other Fees | | | 7,880 | | | | 7,880 | | | | 8,280 | | | | 8,280 | |
| | | | | | | | | | | | | | | | |
Total Fees | | $ | 1,259,848 | | | $ | 1,057,614 | | | $ | 1,199,780 | | | $ | 1,175,280 | |
Audit and Audit Related Fees consisted principally of audit services of our consolidated financial statements, review of our quarterly financial statements, services that are normally provided by the independent auditors in connection with statutory and regulatory filings and the audit of the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002.
Tax Fees consisted principally of professional services rendered by Deloitte & Touche LLP in connection with the Company’s tax compliance activities, including technical and tax advice related to the preparation of tax returns.
All Other Fees primarily consisted of professional services rendered in connection with the Company’s employee benefit plan.
Audit Committee Pre-Approval Policy
The Audit Committee approves, prior to engagement, all audit and non-audit services provided by Deloitte & Touche LLP and all fees to be paid for such services. All services are considered and approved on an individual basis. In its pre-approval and review of non-audit service fees, the Audit Committee considers, among other factors, the possible effect of the performance of such services on the auditors’ independence.
Required Vote
A majority of the votes cast at the annual meetingAnnual Meeting will be required to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2016.2019.
Our boardBoard of directorsDirectors recommends a vote FOR the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2016.the fiscal year ending December 31, 2019.
ANNUAL REPORT AND FINANCIAL STATEMENTS AND COMMITTEE AND
CORPORATE GOVERNANCE MATERIALS OF THE COMPANY
Copies of the Company’s Annual Report filed with the SEC on Form 10-K for the year ended December 31, 2015,2018, including the Company’s consolidated financial statements and financial statement schedule, will be mailed to interested shareholders, without charge, upon written request. Exhibits to the Form 10-Kour Annual Report will be provided upon written request and payment to the Company of the cost of preparing and distributing those materials. The current charters of the board’s Audit, Compensation, Nominating and Corporate Governance Committees, along with the Company’s Integrity Assurance Program – A Code of Business Ethics and Conduct, and Integrity Assurance Program, are available to interested shareholders upon request and are posted on our website at www.lincolnedu.com. www.lincolntech.edu. Written requests should be sent to Lincoln Educational Services Corporation, 200 Executive Drive, Suite 340, West Orange, New Jersey 07052, Attention: Investor Relations.
CORPORATE GOVERNANCE GUIDELINES AND CODE OF ETHICS
The boardCompany’s Board of directorsDirectors has adopted corporate governance guidelines, which include guidelines for determining director independence, director responsibilities, director access to management and independent advisors, succession planning, director retirement and director stock ownership guidelines.ownership.
The boardOur Board of directorsDirectors has also adopted an Integrity Assurance Program – A Code of Business Ethics and Conduct (the “Code of Conduct”) that applies to all directors, officers and employees and that is intended, among other things, to comply with Section 406 of the Sarbanes-Oxley Act of 2002 and related SEC and NASDAQ Marketplace Rulesrules requiring a code of ethics for a company’s directors, officers and employees. The Code of Conduct prohibits our directors, executive officers and senior management from holding the Company’s securities in a margin account or otherwise pledging the Company’s securities as collateral for a loan and under certain circumstances involving an accounting restatement requires the claw back of bonus or incentive compensation paid to officers of the Company.
A copy of the Integrity Assurance Program – A Code of Business Ethics and Conduct is posted on our website at www.lincolntech.eduwww.lincolnedu.. comThe Audit Committee must approve any requests for amendments to or waivers from the Integrity Assurance ProgramCode of Conduct with respect to directors and executive officers and the Company intends to report such amendments or waivers that are required to be reported pursuant to the rules of the SEC and the NASDAQ Global Select Market on the Company’s website.
TRANSACTIONS WITH RELATED PERSONS
The Company recognizes that related person transactions present a heightened risk of conflicts of interest. As a general matter, it is the preference of the Company to avoid related person transactions. The term “related person transaction” refers to a transaction required to be disclosed pursuant to Item 404 of Regulation S-K, under the Securities Act of 1933, as amended.
Nevertheless, the Company recognizes that there are situations where related person transactions may be in, or may not be inconsistent with, the best interests of the Company and its shareholders. As a result, pursuant to the Company’s Audit Committee written charter, the Audit Committee is charged with the responsibility to review and approve all related person transactions on an ongoing basis. All such transactions must be approved in advance by the Audit Committee.
In addition, the Company’s Code of Business Ethics and Conduct (the “Code of Conduct”) contains policies and procedures with respect to conflicts of interest and related person transactions. The Code of Conduct requires that all directors, officers, employees and certain other persons subject to the Code of Conduct, adhere to it and prohibits certain arrangements that may be relevant to related person transactions including, but not limited to, prohibitions against: obtaining a substantial interest in any entity which does or seeks to do business with, or is a competitor of, the Company; entering into various arrangements (including family or other relationships) which might dissuade such director, officer, employee or other person from acting in the best interest of the Company; entering into a financial transaction or relationship with a student, prospect, vendor, agent or competitor of the Company; benefiting, or seeking to benefit, (directly or indirectly) from such person’s position with the Company from any sale, purchase or other activity of the Company; using Company property or information for personal gain; obtaining loans or guarantees for personal obligationobligations from the Company; and competing with the Company.
The Company is a party to an agreement (the “Matco Agreement”) with Matco Tools Corporation (“Matco”), a tool distributor for the automotive and other industries, which provides to Matco the exclusive right to offer for sale its products to the students and instructors at 12 of the Company’s campuses, which exclusivity includes, but is not limited to, all other tool manufacturers and tool distributors. The Matco Agreement also provides to the Company, on an advance commission basis, credits based on tool purchases by the Company’s students, which credits are redeemable in Matco-branded tools, tool storage, equipment, and diagnostics products over the term of the Matco Agreement. The aggregate amount of the Company’s purchases under the Matco Agreement were $1.8 million and $2.4 million for the years ended December 31, 2018 and 2017, respectively.
Matco is a subsidiary of Fortive Corporation, a NYSE-listed company (“Fortive”). James A. Lico, the President and Chief Executive Officer of Fortive, is the brother-in-law of Ronald Harbour, who is a director of the Company and a member of the Audit Committee. As the President and Chief Executive Officer of Fortive, Mr. Lico’s compensation and bonuses are based, in part, upon the financial performance of Fortis and its consolidated subsidiaries, including Matco. The Audit Committee has determined that the terms of the Matco Agreement are arm’s length and comparable to those available to third parties. Mr. Harbour was recused from all discussions and decisions of the Audit Committee in that regard. The Matco Agreement remains in effect until July 31, 2019.
SHAREHOLDER PROPOSALS FOR THE 20172020 ANNUAL MEETING OF SHAREHOLDERS
Shareholder proposals that are intended to be presented at the 20172020 Annual Meeting of Shareholders pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, must be received by the Secretary of the Company, in writing, no later than November 24, 2016,December 31, 2019, in order to be considered for inclusion in the Company’s proxy materials for that annual meeting. Shareholder proposals and shareholder nominations for election to the boardBoard of directorsDirectors must also comply with the current advance notice and other requirements set forth in the Company’s bylaws to be eligible to be presented at an annual meeting. These requirements include, in part, the requirement that any such proposal or nomination must, with certain exceptions if the date of the annual meeting is advanced or delayed more than 30 days from that of the first anniversary of this year’s annual meeting, be submitted to the Secretary of the Company at least 120 and not more than 150 days prior to the first anniversary of the date of mailing of the notice for this year’s annual meeting (or between October 25, 2016,December 1, 2019, and November 24, 2016,December 31, 2019, based on this year’s notice mailing date of March 23, 2016)April 30, 2019).
COMMUNICATING WITH THE BOARD OF DIRECTORS
You may contact any non-employee director, or the entire board,Board of Directors, at any time. Your communication shouldmay be sent to the Lincoln Educational Services Corporation Board of Directors – Non-Employee Directors, c/o Corporate Secretary, Lincoln Educational Services Corporation, 200 Executive Drive, Suite 340, West Orange, New Jersey 07052.
Communications are distributed to the board,Board of Directors, or any board memberdirector as appropriate, depending on the facts and circumstances outlined in the communication. Certain items that are unrelated to the duties and responsibilities of the boardBoard of Directors will be excluded, such as spam and other junk mail, resumes and other job inquiries, surveys and business solicitations or advertisements.
Material that is unduly hostile, threatening, illegal or similarly unsuitable will also be excluded. We will make available to any non-employee director any communication that is filtered in accordance with the process described above, at that director’s request.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
Some banks, brokers and other nominee record holders may participate in the practice of “householding” proxy statements and annual reports. This means that unless shareholders give contrary instructions, only one copy of our proxy statement or annual report may be sent to multiple shareholders in each household who share an address. We will promptly deliver a separate copy of either document to you if you call or write to us at the following address or telephone number: Lincoln Educational Services Corporation, c/o Corporate Secretary, 200 Executive Drive, Suite 340, West Orange, New Jersey 07052, Telephone07052; telephone (973) 736-9340. If you wantwish to receive separate copies of our proxy statement or annual report in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you shouldplease contact your bank, broker or other record holder, or you may contact us at the above address or telephone number.
Proxy authorizations submitted via the Internet must be received by 7:0011:59 p.m. (Eastern Time) on May 2, 2016.June 12, 2019. To give your proxy authorization via the Internet, please read the instructions accompanying the enclosed proxy card. Costs associated with electronic access, such as from access providers, will be borne by the shareholder.
| By Order of the Board of Directors |
| |
| Alexandra M. Luster |
| Corporate Secretary |
West Orange, New Jersey | |
March 23, 2016April 30, 2019 | |
Annex AYOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY. Vote by Internet – QUICK EASY IMMEDIATE – 24 Hours a Day, 7 Days a Week or by Mail LINCOLN EDUCATIONAL SERVICES CORPORATION
AMENDED AND RESTATED 2005 NON-EMPLOYEE
DIRECTORS RESTRICTED STOCK PLAN
(Amended by the Board on February 26, 2016, subject to shareholder approval)
The Plan is intended to encourage ownership of Common Stock by Non-Employee Directors of the Company, upon whose judgment and interest the Company is dependent for its successful operation and growth, in order to increase their proprietary interest in the Company’s success and to encourage them to serve as directors of the Company.
2. | Definitions and Rules of Construction |
(a) Definitions. For purposes of the Plan, the following capitalized words shall have the meanings set forth below:
“Annual Meeting” means an annual meeting of the Company’s stockholders.
“Award” means an award of Restricted Stock or Restricted Stock Units made pursuant to the terms of the Plan.
“Award Document” means an agreement, certificate or other type or form of document or documentation approved by the Committee which sets forth the terms and conditions of an Award. An Award Document may be in written, electronic or other media, may be limited to a notation on the books and records of the Company and, unless the Committee requires otherwise, need not be signed by a representative of the Company or a Non-Employee Director.
“Board” means the Board of Directors of the Company, including any directors who may be participants in the Plan.
“Change in Control” means
(i) when a “person” (as defined in Section 3(a)(9) of the Exchange Act), including a “group” (as defined in Section 13(d) and 14(d) of the Exchange Act), either directly or indirectly becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of 25% or more of either (i) the then outstanding Common Stock, or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company; (2) any acquisition by the Company; or (3) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company;
(ii) when, during any period of 24 consecutive months of service, the individuals who, at the beginning of such period, constitute the Board (the “Company Incumbent Directors”) cease for any reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to be a Company Incumbent Director if such director was elected by, or on the recommendation of or with the approval of at least two-thirds of the directors of the Company, who then qualified as Company Incumbent Directors;
(iii) consummation of a merger, amalgamation or consolidation of the Company with any other corporation, the issuance of voting securities of the Company in connection with a merger, amalgamation or consolidation of the Company or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation (each, a “ Business Combination”), unless, in each case of a Business Combination, immediately following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock outstanding immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock and 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Common Stock; or
(iv) a complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company.
“Code” means the Internal Revenue Code of 1986, as amended, and the applicable rulings and regulations thereunder.
“Committee” means the Compensation Committee of the Board or such other committee appointed by the Board to administer the Plan.
“Common Stock” means the common stock of the Company, no par value per share, or such other class of share or other securities as may be applicable under Section 9(b) hereof.
“Company” means Lincoln Education Services Corporation, or any successor to substantially all of its business.
“Date of Grant” means the date on which a Non-Employee Director is granted an Award.
“Deferral Election” means a Non-Employee Director’s irrevocable, written election to defer his Award of Restricted Stock in accordance with Section 8 hereof.
“Deferral Plan” means the Company’s 2005 Deferred Compensation Plan or any successor plan thereto.
“Effective Date” means the date on which the Plan, as amended and restated, is approved by the stockholders of the Company.
“Exchange Act” means the Securities and Exchange Act of 1934, as amended, and the rules and regulations thereunder.
“Fair Market Value” means (i) if the Common Stock is listed on a securities exchange or is traded over the Nasdaq Stock Market, the closing sales price on such exchange or over such system on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported, or (ii) if the Common Stock is not listed on a securities exchange or traded over the Nasdaq Stock Market, the mean between the bid and offered prices as quoted by the Nasdaq Stock Market for such date, provided that if it is determined that the fair market value is not properly reflected by such Nasdaq Stock Market quotations, Fair Market Value shall be determined by such other method as the Committee determines in good faith to be reasonable.
“Non-Employee Director” means a director of the Company who is not an officer or employee of the Company or any Subsidiary.
“Plan” means this Lincoln Educational Services Corporation Amended and Restated Non-Employee Directors Restricted Stock Plan, as described herein.
“Plan Limit” has the meaning assigned to such term in Section 5 hereof.
“Restricted Stock” means restricted shares of Common Stock granted to a Non-Employee Director pursuant to Section 7 hereof. One share of Restricted Stock corresponds to one share of Common Stock.
“Restricted Stock Units” mean a contractual right to receive shares of Common Stock at a subsequent date upon satisfaction of the conditions to vesting and settlement pursuant to Section 8 hereof. One Restricted Stock Unit corresponds to one share of Common Stock.
“Subsidiary” means (i) a corporation or other entity with respect to which the Company, directly or indirectly, has the power, whether through the ownership of voting securities, by contract or otherwise, to elect at least a majority of the members of such corporation’s board of directors or analogous governing body, or (ii) any other corporation or other entity in which the Company, directly or indirectly, has an equity or similar interest and which the Committee designates as a Subsidiary for purposes of the Plan. For purposes of determining eligibility for the grant of Incentive Stock Options under the Plan, the term “Subsidiary” shall be defined in the manner required by Section 424(f) of the Code.
“Vesting Date” has the meaning assigned to such term in Section 8(c) hereof.
(b) Rules of Construction. The masculine pronoun shall be deemed to include the feminine pronoun and the singular form of a word shall be deemed to include the plural form, unless the context requires otherwise. Unless the text indicates otherwise, references to sections are to sections of the Plan.
(a) Authority. Subject to the provisions of Section 12 hereof, the Committee shall have authority to (i) construe and interpret the provisions of the Plan and any Award Document, (ii) to establish such rules and procedures as may be necessary or advisable to administer the Plan, (iii) to make all determinations necessary or advisable for the administration of the Plan, including, without limitation, factual and legal determinations, (iv) to employ such legal counsel, independent auditors and consultants as it deems desirable for the administration of the Plan and to rely upon any opinion or computations received therefrom and (v) to correct any defects, supply any omission or reconcile any inconsistency in any Award Document or the Plan; provided, however, that no such interpretation or determination shall change or affect the selection of persons eligible to receive an Award under the Plan, the number of shares authorized under the Plan or the terms and conditions thereof. The interpretation and construction by the Committee of any provision of the Plan or of any Award Document shall made in the Committee’s sole discretion and shall be final, binding and conclusive for all purposes and upon all persons interested herein.
(b) Delegation. To the extent not prohibited by applicable laws, rules and regulations, the Committee may, from time to time, delegate some or all of its authority under the Plan to a subcommittee or subcommittees thereof or other persons or groups of persons as it deems necessary, appropriate or advisable under such conditions or limitations as it may set at the time of such delegation or thereafter.
(c) Liability of Committee and its Delegates. Subject to applicable laws, rules and regulations: (i) no member of the Board or Committee (or its delegates) shall be liable for any good faith action, omission or determination made in connection with the operation, administration or interpretation of the Plan and (ii) the members of the Board or the Committee (and its delegates) shall be entitled to indemnification and reimbursement in the manner provided in the Company’s Certificate of Incorporation as it may be amended from time to time. In the performance of its responsibilities with respect to the Plan, the Committee shall be entitled to rely upon information and advice furnished by the Company’s officers or employees, the Company’s accountants, the Company’s counsel and any other party the Committee deems necessary, and no member of the Committee shall be liable for any action taken or not taken in reliance upon any such information or advice.
Awards under the Plan shall be granted pursuant to the provisions hereof to persons who are Non-Employee Directors.
5. | Common Stock Subject to the Plan |
(a) Plan Limit. Subject to Section 9(b) hereof, the Company is authorized to issue up to 1,000,000 shares of Common Stock under the Plan (the “Plan Limit”). Such shares may be authorized but unissued shares of Common Stock or reacquired shares of Common Stock held in the treasury of the Company.
(b) Rules Applicable to Determining Shares Available for Issuance. The number of shares of Common Stock remaining available for issuance will be reduced by the number of shares of Common Stock subject to outstanding Awards and, for Awards that are not denominated by shares, by the number of shares actually delivered upon settlement or payment of the Award. For purposes of determining the number of shares of Common Stock that remain available for issuance under the Plan, the number of shares that are tendered by a participant or withheld by the Company to pay the exercise price of an Award or to satisfy the participant’s tax withholding obligations in connection with the vesting, exercise or settlement of an Award will not be added back to the Plan Limit. In addition, for purposes of determining the number of shares that remain available for issuance under the Plan, the number of shares corresponding to Awards under the Plan that are forfeited or cancelled or otherwise expire for any reason without having been exercised or settled or that is settled through the issuance of consideration other than shares (including, without limitation, cash) shall be added back to the Plan Limit and again be available for the grant of Awards.
(a) General. The terms and conditions of each Award shall be set forth in an Award Document, which shall contain terms and conditions not inconsistent with the Plan. Each Award made to a Non-Employee Director under the Plan shall be granted for no consideration other than the provision of services (or such minimum payment as may be required under applicable law) or for such other consideration as the Committee may determine.
(b) Effect of Termination of Service. Notwithstanding any provision of the Plan to the contrary, in the event that a Non-Employee Director’s service on the Board terminates, the Committee shall have full authority and discretion to accelerate the vesting of an Award, which provisions may be specified in the applicable Award Document or determined at a subsequent time. In the absence of any action by the Committee to the contrary, upon such termination of service, the Non-Employee Director’s Award shall, to the extent unvested, be immediately forfeited as of such date of termination of service. The date of a Non-Employee Director’s termination of service from the Board for any reason shall be determined in the sole discretion of the Committee.
7. | Terms and Conditions of Restricted Stock Awards |
The terms of this Section 7 are subject to the terms and provisions set forth above in Section 6.
(a ) Annual Grants of Restricted Stock. Subject to the provisions of Sections 7 and 8, on the date of each Annual Meeting, each Non-Employee Director shall automatically receive an Award of shares of Restricted Stock equal to $55,000 (based on the Fair Market Value of a share of Common Stock on the Date of Grant) for service as a director of the Company, provided that such Non-Employee Director shall continue to serve as a director of the Company immediately after such Annual Meeting.
(b) Vesting. Unless otherwise set forth in an Award Document, an Award of Restricted Stock shall vest and become nonforfeitable on the first anniversary of the Date of Grant (subject to early vesting, if so provided by the Committee in its sole discretion in the applicable Award Document or at a subsequent time, upon a Change in Control of the Company).
(c) Issuance of Shares. A certificate representing the whole shares of Common Stock covered by an Award of Restricted Stock shall be issued in the Non-Employee Director’s name, subject to the terms and conditions of the Plan and the applicable Award Document, promptly after the Date of Grant, and such a Non-Employee Director shall be deemed to own such number of whole shares of Common Stock, including, without limitation, for purposes of dividends and voting, as of the Date of Grant. The Board may require that the certificate evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Award of Restricted Stock, the Eligible Director shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award of Restricted Stock.
(d) Restrictions on Transfer of Restricted Stock. Unless the Committee determines otherwise, Restricted Stock shall not be transferable other than by the laws of descent and distribution until such Restricted Stock has vested pursuant to Section 7(b) but, in no event, prior to the expiration of a period of six (6) months from the Date of Grant.
8. | Deferral Election; Terms and Conditions of Restricted Stock Unit Awards |
The terms of this Section 8 are subject to the terms and provisions set forth above in Section 6.
(a) Deferral Election. Notwithstanding any provision of Section 7, each Non-Employee Director may, in the discretion of the Committee, be given the opportunity to irrevocably elect to defer under the Deferral Plan receipt of all or any portion of an Award of Restricted Stock otherwise receivable by him under paragraph (a) or (b) of Section 7 through a Deferral Election. Except for the year in which a Non-Employee Director becomes eligible to participate in the Plan, any Deferral Election must be made by a Non-Employee Director within the requisite time specified by the Committee, but in no event later than December 31st of the taxable year prior to the year in which the applicable Award of Restricted Stock is granted to such Non-Employee Director. For the first year in which a Non-Employee Director becomes eligible to participate in the Plan, a Non-Employee Director must make a Deferral Election within 30 days after the date he or she becomes eligible to participate in the Plan.
(b) Grant of Restricted Stock Units. When a Non-Employee Director makes a Deferral Election, he shall receive a number of Restricted Stock Units in lieu of, and equal to, the number of shares of Restricted Stock that is subject to such Deferral Election. The Non-Employee Director shall receive an Award of these Restricted Stock Units on the same date that the Award of Restricted Stock subject to the Deferral Election otherwise would have been granted to him under paragraph (a) or (b), as applicable, of Section 7. Except as otherwise provided by the Committee in any Award Document, the terms and conditions applicable to an Award of Restricted Stock Units are described in this Section 8.
(c) Vesting. Unless otherwise set forth in an Award Document, an Award of Restricted Stock Units shall vest and become nonforfeitable on the first anniversary of the Date of Grant (each, a “Vesting Date”) (subject to early vesting, if so provided by the Committee in its sole discretion in the applicable Award Document or at a subsequent time, including, without limitation, upon a Change in Control of the Company).
(d) No Issuance of Shares; Deferral. Subject to Section 8(f), upon an Award of Restricted Stock Units, or a portion thereof, becoming vested, no shares of Common Stock shall be issued to the Non-Employee Director. Instead, the Restricted Stock Units shall be credited, without any further action on the part of the Non-Employee Director, to the Non-Employee Director’s deferred compensation account under the Deferral Plan on the applicable Vesting Date. Any Restricted Stock Units credited to the Deferral Plan shall be held in the Deferral Plan as Restricted Stock Units until such time as they are settled through the delivery of shares of Common Stock in accordance with the terms and conditions of the Deferral Plan.
(e) Restrictions on Transfer of Restricted Stock Units. Unless the Committee determines otherwise, Restricted Stock Units shall not be transferable other than by the laws of descent and distribution.
(f) Dividend Equivalent Payments. Unless the Committee determines otherwise, if the Company pays any cash or other dividend or makes any other distribution in respect of the shares of Common Stock underlying an Award of Restricted Stock Units, or a portion thereof, before such Restricted Stock Units are credited to the Deferral Plan in accordance with the terms of Section 8(d), the Company shall maintain a bookkeeping record to which such amount of the dividend or distribution in respect of such shares of Common Stock shall be credited to an account for the Non-Employee Director and distributed in whole shares of Common Stock at the time the Award, or portion thereof is vested.
(g) No Rights as a Stockholder. Except as otherwise provided by the Committee in the applicable Award Document, a Non-Employee Director shall have no rights as a stockholder with respect to any Awards of Restricted Stock Units or any value thereof deferred under the Deferral Plan.
9. | No Restriction on Right of Company to Effect Corporate Changes |
(a) Authority of the Company and Stockholders. The existence of the Plan, the Award Documents and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the shares of Common Stock or the rights thereof or which are convertible into or exchangeable for shares of Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
(b) Change in Capitalization. Notwithstanding any provision of the Plan or any Award Document, the number and kind of shares authorized for issuance under Section 5 of the Plan shall be equitably adjusted in the manner deemed necessary by the Committee in the event of a stock split, reverse stock split, stock dividend, recapitalization, reorganization, partial or complete liquidation, reclassification, merger, consolidation, separation, extraordinary cash dividend, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase shares at a price substantially below Fair Market Value, or any other corporate event or distribution of stock or property of the Company affecting the shares of Common Stock in order to preserve, but not increase, the benefits or potential benefits intended to be made available under the Plan. In addition, upon the occurrence of any of the foregoing events, the number and kind of shares subject to any outstanding Award and the exercise price per share (or the grant price per share, as the case may be), if any, under any outstanding Award shall be equitably adjusted in the manner deemed necessary by the Committee (including by payment of cash to a participant) in order to preserve the benefits or potential benefits intended to be made available to participants. Unless otherwise determined by the Committee, such adjusted Awards shall be subject to the same restrictions and vesting or settlement schedule to which the underlying Award is subject.
(a) Tax Withholding. The Company or a Subsidiary, as appropriate, may require any individual entitled to receive a payment in respect of an Award to remit to the Company, prior to such payment, an amount sufficient to satisfy any applicable tax withholding requirements. In the case of an Award payable in shares of Common Stock, the Company or a Subsidiary, as appropriate, may permit or require such individual to satisfy, in whole or in part, such obligation to remit taxes by directing the Company to withhold shares that would otherwise be received by such individual or to repurchase shares that were issued to such individual to satisfy the minimum statutory withholding rates for any applicable tax withholding purposes, in accordance with all applicable laws and pursuant to such rules as the Committee may establish from time to time. The Company or a Subsidiary, as appropriate, shall also have the right to deduct from all cash payments made to a participant (whether or not such payment is made in connection with an Award) any applicable taxes required to be withheld with respect to such payments.
(b) No Right to Awards or Continued Directorship. Nothing in the Plan shall confer upon any Non-Employee Director the right to continue as a director of the Company or affect any right that the Company or any Non-Employee Director may have to terminate the service of such Non-Employee Director.
(c) Section 16(b) of the Exchange Act. The Plan is intended to comply in all respects with Section 16(b) of the Exchange Act.
(d) Securities Law Restrictions. An Award may not be exercised or settled, and no shares may be issued in connection with an Award, unless the issuance of such shares (i) has been registered under the Securities Act of 1933, as amended, (ii) has qualified under applicable state “blue sky” laws (or the Company has determined that an exemption from registration and from qualification under such state “blue sky” laws is available) and (iii) complies with all applicable foreign securities laws. The Committee may require each Non-Employee Director purchasing or acquiring shares of Common Stock pursuant to an Award under the Plan to represent to and agree with the Company in writing that such Non-Employee Director is acquiring the shares of Common Stock for investment purposes and not with a view to the distribution thereof. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any exchange upon which the shares of Common Stock are then listed, and any applicable securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
(e) Headings. The headings of sections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of the Plan.
(f) Satisfaction of Obligations. Subject to applicable law, the Company may apply any cash, Shares, securities or other consideration received upon exercise or settlement of an Award to any obligations a participant owes to the Company and the Subsidiaries in connection with the Plan or otherwise, including, without limitation, any tax obligations or obligations under a currency facility established in connection with the Plan.
(g) No Limitation on Corporate Actions. Nothing contained in the Plan shall be construed to prevent the Company or any Subsidiary from taking any corporate action, whether or not such action would have an adverse effect on any Awards made under the Plan. No participant, beneficiary or other person shall have any claim against the Company or any Subsidiary as a result of any such action.
(h) Successors. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
(i) Expenses. The cost and expenses of administering the Plan shall be borne by the Company.
(j) Governing Law. The Plan and all agreements entered into under the Plan shall be construed in accordance with and governed by the laws of the State of New York.
(k) Unfunded Plan. The Plan is intended to constitute an unfunded plan for incentive compensation. Prior to the issuance of Shares in connection with an Award, nothing contained herein shall give any participant any rights that are greater than those of a general unsecured creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Shares with respect to awards hereunder.
(l) Section 409A of the Code. To the extent that the Committee determines that any Award granted under the Plan is subject to Section 409A of the Code, the Award Document evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and Award Documents shall be interpreted in accordance with Section 409A of the Code and interpretive guidance issues thereunder. Notwithstanding any contrary provision in the Plan or an Award Document, if any provision of the Plan or an Award Document contravenes any regulations or guidance promulgated under Section 409A of the Code or would cause an Award to be subject to additional taxes, accelerated taxation, interest and/or penalties under Section 409A of the Code, such provision of the Plan or Award Document may be modified by the Committee without consent of the Participant in any manner the Committee deems reasonable or necessary. In making such modifications the Committee shall attempt, but shall not be obligated, to maintain, to the maximum extent practicable, the original intent of the applicable provision without contravening the provisions of Section 409A of the Code. Moreover, any discretionary authority that the Committee may have pursuant to the Plan shall not be applicable to an Award that is subject to Section 409A of the Code to the extent such discretionary authority would contravene Section 409A of the Code or the guidance promulgated thereunder.
Unless earlier terminated pursuant to Section 12 hereof, the Plan shall terminate on the tenth anniversary of the Effective Date, except with respect to Awards then outstanding.
12. | Amendment and Termination |
Notwithstanding anything herein to the contrary and subject to applicable laws, rules and regulations, the Board may, at any time, terminate or, from time to time, amend, modify or suspend the Plan; provided, however, that no termination, amendment, modification or suspension of the Plan (i) shall be effective without the approval of the stockholders of the Company if such approval is required under applicable laws, rules and regulations, including the rules of the NASDAQ Stock Market or (ii) shall materially and adversely alter or impair the rights of a participant in any Award previously made under the Plan without the consent of the holder thereof and no amendment which increases the Plan Limit shall be effective without stockholder approval (other than in connection with a transaction or event described in Section 9(b) of the Plan). Notwithstanding the foregoing, the Board shall have broad authority to amend the Plan or any Award under the Plan without the consent of a participant to the extent it deems necessary or desirable to (a) comply with, or take into account changes in or interpretation of applicable tax laws, securities laws, employment laws, accounting rules and other applicable laws, rules and regulations, (b) to take into account unusual or nonrecurring events or market conditions (including, without limitation, the events described in Section 9(b)), or (c) to take into account significant acquisitions or dispositions of assets or other property by the Company participant.
LINCOLN EDUCATIONAL SERVICES CORPORATION
VOTE BY INTERNET
QUICK ★ ★ ★EASY ★ ★ ★IMMEDIATE
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As a shareholder of Lincoln Educational Services Corporation, you have the option of voting your shares electronically through the Your Internet eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed dated and returned theyour proxy card. Votes submitted electronically over the Internet must be received by 7:0011:59 p.m., Eastern Time, on May 2, 2016June 12, 2019. INTERNET/MOBILE — www.cstproxyvote.com Use the Internet to vote your proxy. Have your proxy card available when you access the above website. Follow the prompts to vote your shares. MAIL — Mark, sign and date your proxy card and return it in the postage-paid envelope provided. PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY. ▲ FOLD HERE ● DO NOT SEPARATE ● INSERT IN ENVELOPE PROVIDED ▲ PROXY 1. Election of Directors 2. Advisory vote to approve named executive officer compensation. 1. Alvin O. Austin5. Ronald E. Harbour 3. Ratification of the appointment of Deloitte & Touche LLP to serve as 2. Peter S. Burgess 6. J. Barry Morrow our independent registered public accounting firm for the fiscal year 3. James J. Burke, Jr. 7. Scott M. Shaw ending December 31, 2019. 4. Celia H. Currin To change the address on your account, please check the box at the right and indicate your new (To withhold authority to vote for any individual nominee(s), mark address in the space to the left. Please “FOR ALL EXCEPT” and fill in the box next to each nominee that you note that changes to the registered name(s) on wish to withhold authority as shown here) the account may not be submitted via this method. Check here if you plan to attend the meeting. CONTROL NUMBER Signature: Signature, if held jointly Date, 2019 Note: Please sign exactly as name appears hereon. When shares are held by joint owners, both should sign. When signing as attorney, executor, administrator, trustee, guardian, or corporate officer, please give title as such
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Vote Your Proxy on the Internet:
Go to www.cstproxyvote.com
Have your proxy card available when you access the above website. Follow the prompts to vote your shares.
| OR | Vote Your Proxy by mail:
Mark, sign and date your proxy card, then detach it, and return it in the postage-paid envelope provided.
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PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE
VOTING ELECTRONICALLY
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▼ FOLD AND DETACH HERE AND READ THE REVERSE SIDE ▼
| PROXY
| Please mark your votes like this | X |
1. Election of Directors: | | | | | | | | 3. To approve the Amended and Restated 2005 Non- Employee Directors Restricted Stock Plan |
| | | | FOR ALL | | WITHHOLD | | FOR ALLEXCEPT
| | o FOR o AGAINST o ABSTAIN |
o 01. Alvin O. Austin
| | o 06. J. Barry Morrow
| | NOMINEES | | AUTHORITY | | (See instructions
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o 02. Peter S. Burgess
| | o 07. Scott M. Shaw
| | | | | | below) | | |
o 03. James J. Burke, Jr.o 04. Celia H. Currin
| | | | o | | o | | o | | 4. Ratification of the appointment of Deloitte & Touche LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2016.
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| | | | | | | | | | o FOR o AGAINST o ABSTAIN
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(To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the box next to each nominee that you wish to withhold authority as shown here) | | | | | | | To change the address on your account, please check the box at the right and indicate your new address in the address space to the left. Please note that changes to the registered name(s) on the account may not be submitted via this method. | o |
2. Advisory vote to approve named executive officer compensation.
o FOR o AGAINST o ABSTAIN
| | | | | Check here if you plan to attend the meeting
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Signature | | Signature | | Date | | , 2016. |
ANNUAL MEETING OF SHAREHOLDERS OF
LINCOLN EDUCATIONAL SERVICES CORPORATION
June 13, 2019
MAY 3, 2016The 2019 Proxy Statement and the 2018 Annual Report to
Shareholders are available at:
www.lincolntech.edu/proxy
Please date, sign and mail your proxy card in the
envelope provided as soon as possible.
▼▲ FOLD AND DETACH HERE AND READ THE REVERSE SIDE ▼
● DO NOT SEPARATE ● INSERT IN ENVELOPE PROVIDED ▲
PROXY
LINCOLN EDUCATIONAL SERVICES CORPORATION
Proxy For Annual Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Lincoln Educational Services Corporation, a New Jersey corporation (the “Company”), hereby appoints Scott M. Shaw and Brian K. Meyers, and each of them, as proxies for the undersigned, with full power of substitution in each of them, to attend the Annual Meeting of Shareholders of the Company to be held on Tuesday, May 3, 2016,Thursday, June 13, 2019, at 9:00 a.m., local time, at the Wilshire Grand Hotel, 350 Pleasant Valley Way, West Orange, NJ 07052, and any adjournment(s) or postponement(s) thereof, to cast on behalf of the undersigned all votes that the undersigned is entitled to cast at such meeting and otherwise to represent the undersigned at the meeting, with the same effect as if the undersigned were present. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and the accompanying Proxy Statement and revokes any proxy previously given with respect to such shares.
THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST IN ACCORDANCE WITH THE SPECIFICATIONS MADE BY THE UNDERSIGNED. IF THIS PROXY IS EXECUTED, BUT NO SPECIFICATION IS MADE BY THE UNDERSIGNED, THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST “FOR” ALL NOMINEES AND “FOR” PROPOSALS 2 3 AND 4 AND3, OTHERWISE IN THE DISCRETION OF THE PROXIES AT THE ANNUAL MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.
(Continued, and to be marked, dated and signed, on reversethe other side)